Matinas BioPharma Holdings Inc
For the period ended Dec 31, 2024. Filed Apr 15, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 15, 2025
MTNB$1.19+2.6%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-27.
0001493152-24-011493
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-15.
0001641172-25-004882
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 167 current paragraphs.
132 unchanged; 16 reworded; 19 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 26 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Our business to date has been significantly dependent on the success of MAT2203, and we have decided to pause further development of MAT2203 and devote significant time and resources to identifying and evaluating strategic alternatives, which may not be successful.
Current report
To date, we have invested significant efforts and financial resources in the research and development of MAT2203, which was our lead product candidate in clinical trials. In October 2024, we announced that negotiations under a previously disclosed non-binding term sheet regarding global rights to MAT2203 have been terminated following notification from the prospective partner. As a result, we implemented an 80% workforce reduction effective as of October 31, 2024 and ceased all product development activities to conserve cash. We may retain an advisor to assist us with a potential transaction involving MAT2203, and will evaluate other strategic alternatives. There can be no assurance that efforts to identify and evaluate a potential buyer or partner for MAT2203 will result in any definitive offer to consummate a strategic transaction, or if made what the terms thereof will be or that any transaction will be approved or consummated. If any definitive offer to consummate a sale is received, there can be no assurance that a definitive agreement will be executed or that, if a definitive agreement is executed, the transaction will be consummated. In addition, there can be no assurance that any transaction, involving our company and/or assets, that is consummated would enhance shareholder value. There also can be no assurance that we will conduct further drug research or development activities in the future.
Current report
Any such strategic transaction may require us to incur non-recurring or other charges, may increase our near-and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our business.
Current report
If we do not successfully consummate a transaction involving MAT2203, our board of directors may decide to pursue a winddown or dissolution of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such dissolution as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
Current report
There can be no assurance that a transaction involving MAT2203 will be consummated, and previous efforts to do so have not been successful. If no transaction is completed, our board of directors may decide to pursue a winddown or dissolution. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such a decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our limited operations while we evaluate our options. In addition, if our board of directors were to approve and recommend, and our stockholders were to approve, a winddown or dissolution of our company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may include (i) obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of our company; (ii) potential litigation against us, and other various claims and legal actions arising in the ordinary course of business; and (iii) non-cancelable facility lease obligations. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a winddown or dissolution of our company. If a winddown or dissolution were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a winddown or dissolution of our company.
Current report
We have expressed substantial doubt about our ability to continue as a going concern and we have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.
Current report
As discussed in Note 2 to the consolidated financial statements for the fiscal year ended December 31, 2024, our consolidated financial statement for the fiscal year ended December 31, 2024 include an explanatory paragraph that such financial statements were prepared assuming that we will continue as a going concern. A going concern basis assumes that we will continue our operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.
Current report
Consequently, management is pursuing various financing alternatives to fund our operations so we can continue as a going concern. Management plans to secure the necessary financing through the issue of new equity or through a potential licensing partnership of MAT2203 and/or the entering into alternative strategic arrangements. However, our ability to raise capital could be affected by various risks and uncertainties. We may not be able to raise sufficient additional capital and there can be no assurance that these initiatives will be successful.
Current report
The financial statements do not give any effect to any adjustments in the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Some adjustments could be material.
Current report
Reductions in staffing and funding at FDA and other federal agencies could cause delays in the development and approval of our current and future product candidates.
Current report
Under the FDCA, our products cannot be investigated in humans or marketed without approval from FDA. In addition, companies developing new therapies routinely seek and receive guidance from FDA regarding their methods and plans for developing their products. We and companies like us may also benefit from FDA-administered programs like orphan drug designation and expedited development pathways, e.g., breakthrough designation. Any material reductions in the ability of FDA to perform these and other functions may delay development and approval of our product candidates. Recent actions by the United States federal government have caused concern in the industry that this may occur. For example, beginning on February 13, 2025, the Department of Health and Human Services began firing a large number of its probationary employees, a category that includes new federal employees and employees recently promoted or transferred to new positions or agencies. Larger layoffs may follow, according to a memorandum issued by the Office of Personnel Management on February 26, 2025. These terminations, if they withstand legal challenges, may significantly delay and impede our interactions with FDA. Similar results may stem from the recent confirmed resignations of some senior FDA employees with responsibility for regulation of drugs and biologics, as well as possible future layoffs and resignations. There are also reports that the United States federal government intends to request Congress to reduce FDA funding in upcoming budgets. Such funding cuts may also delay the development and approval of our products.
Current report
Moreover, our 2013 Equity Compensation expired in May 2024. While we expect to seek shareholder approval for a new equity compensation plan at our next annual meeting of shareholders, there can be no assurance that we will obtain shareholder approval for a new plan. If we are unable to grant equity awards to new and existing officers, employees and directors, our ability to attract and retain qualified individuals to run our Company may be inhibited, which could materially impair our business.
Current report
If we are unable to maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be adversely affected.
Current report
We have identified a material weakness in our internal control over financial reporting. If we are not able to remediate this material weakness and otherwise maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be adversely affected.
Current report
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of SOX, or Section 404, requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
Current report
Management assessed the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded as of December 31, 2024, our internal control over financial reporting was not effective, as management identified a deficiency in internal control over financial reporting that was determined to be a material weakness.
Current report
We did not maintain an effective internal control environment to ensure the processing of and reporting of non-routine transactions are complete, accurate and timely. Specifically, we did not have the accounting resources necessary to ensure the timely preparation and review of the Company’s annual indefinite lived assets impairment assessment.
Current report
If our steps are insufficient to successfully remediate the material weakness and otherwise establish and maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be materially and adversely affected. Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.
Current report
Moreover, we do not expect that disclosure controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could materially adversely impact us.
Removed paragraphs (4)
Previous report
A reverse-stock split of our common stock may not have the intended consequences.
Previous report
On November 1, 2023, our shareholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split at a ratio in the range of 1-for-2 to 1-for-50, to be determined at the discretion of the Board, and to reduce the total number of authorized shares of common stock from 500,000,000 to 250,000,000, which we refer to as the reverse stock split and authorized share reduction, respectively. We believe that the reverse stock split may result in an increase to the market price of our common stock, enhance the appeal of our common stock to the financial community, improve the trading liquidity of our common stock, make it possible for us to “up-list” our common stock to a higher tier stock exchange, and make us eligible for inclusion on certain biotechnology and pharmaceutical trading indices and exchange-traded funds.
Previous report
However, we cannot assure you that the reverse stock split, if implemented, will result in any anticipated benefits, including an increase of the market price of our common stock in proportion to the reduction in the number of shares of our common stock outstanding. Moreover, a reverse-stock split may have the effect of decreasing our overall market value. There can be no assurance that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds or improve the trading liquidity of our common stock.
Previous report
Moreover, the number of shares of our common stock available for issuance following the implementation of the reverse stock split would increase to the extent the reverse stock split reduces the number of outstanding shares of our common stock relative to the number of authorized shares. Such available shares may be used for future corporate purposes, including future acquisitions, investment opportunities, the establishment of collaboration or other strategic agreements, capital raising transactions involving equity or convertible debt securities, future at the market offerings of common stock, or issuance under current or future employee equity plans, and the issuance of equity securities in connection with such transactions may result in potentially significant dilution of our current stockholders’ ownership interests in us.
Reworded paragraphs (16)
Previous wording
We have incurred significant operating losses in every year since inception and expect to incur net operating losses for the foreseeable future. Our net loss was $22,942 thousand and $20,997 thousand for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $175,573 thousand. We do not know whether or when we will become profitable. To date, we have not generated any revenues from product sales and have financed our operations through private placements and public offerings of our equity securities and, to a lesser extent, through funding from the Cystic Fibrosis Foundation, or CFF, and the National Institutes of Health, or the NIH. We have devoted substantially all our financial resources and efforts to the research and development of potential product candidates. All our product candidates are in the development stage, and we have not completed development of any product candidate. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ deficit and working capital. We anticipate that our expenses will increase substantially if and as we:
Current wording
We have incurred significant operating losses in every year since inception and expect to incur net operating losses for the foreseeable future. Our net loss was $24.3 million and $22.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $199.8 million. We do not know whether or when we will become profitable. To date, we have not generated any revenues from product sales and have financed our operations through private placements and public offerings of our equity securities and, to a lesser extent, through funding from the Cystic Fibrosis Foundation, or CFF, and the National Institutes of Health, or the NIH. We have devoted substantially all our financial resources and efforts to the research and development of potential product candidates. All our product candidates are in the development stage, and we have not completed development of any product candidate. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ deficit and working capital. If we resume the development of MAT2203 or any other product candidates, we anticipate that our expenses will increase substantially as we:
Previous wording
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or the FDA, or comparable non-U.S. regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.
Current wording
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we resume development activities and are required by the U.S. Food and Drug Administration, or the FDA, or comparable non-U.S. regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.
Previous wording
We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct additional clinical studies of our product candidates, including the potential Phase 3 clinical trials of MAT2203, and conduct additional preclinical and clinical trials to further validate and expand our LNC Platform, continue research and development, initiate clinical trials and, if development succeeds, seek regulatory approval of our product candidates. Our expenses could further increase if we initiate new research and preclinical development efforts for other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution. Furthermore, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate our research and development programs or any future commercialization efforts.
Current wording
We expect our expenses to be lower during 2025 compared to 2024 until we secure additional funding, but generally we expect our expenses to increase over time if we resume the development of MAT2203. Our expenses could further increase if we initiate new research and preclinical development efforts for other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution. Furthermore, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with continued operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate our research and development programs or any future commercialization efforts.
Previous wording
We believe that our existing cash, cash equivalents and marketable debt securities, excluding restricted cash, of $13,756 thousand as of December 31, 2023 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2024, but not beyond. We have based this estimate on assumptions that may prove to be wrong in the future, and we could use our capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements, both short-term and long-term, will depend on many factors, including:
Current wording
We do not believe that our existing cash and cash equivalents, excluding restricted cash, of $7,284 thousand as of December 31, 2024 will enable us to fund our operating expenses beyond the next twelve months from the filing date of this Annual Report. We have based this estimate on assumptions that may prove to be wrong in the future, and we could use our capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements, both short-term and long-term, will depend on many factors, including, in the event we resume development activities:
Previous wording
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. We do not have any committed external source of funds other than limited grant funding from the NIH. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be materially diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.
Current wording
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be materially diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.
Previous wording
Our stockholders may be subject to substantial dilution by exercises of outstanding options.
Current wording
Our stockholders may be subject to substantial dilution by exercises of outstanding options and warrants.
Previous wording
As of December 31, 2023, we had outstanding options to purchase an aggregate of 46,707,934 shares of our common stock at a weighted average exercise price of $0.83 per share. The exercise of such outstanding options will result in dilution of the value of our shares.
Current wording
As of December 31, 2024, we had outstanding options to purchase an aggregate of 685,405 shares of our common stock at a weighted average exercise price of $46.70 per share and outstanding warrants to purchase an aggregate of 666,667 shares of our common stock at an exercise price of $17.50. On February 13, 2025, we issued warrants to purchase an aggregate of 5,631,404 shares of our common stock at an exercise price of $0.6446 per share, and we expect to issue warrants to purchase an additional 5,631,404 at an exercise price of $0.6446 per share in the near future. The exercise of such outstanding options and warrants will result in dilution of the value of our shares.
Previous wording
We expect to invest most of our capital in the development of our LNC Platform. Our ability to generate revenue related to product sales, which we do not expect will occur for at least the next several years, if ever, will depend on the successful development and regulatory approval of one or more of our product candidates. All our product candidates require regulatory review and approval prior to commercialization. Any delays in the regulatory review or approval of our product candidates would delay market launch, increase our cash requirements and result in additional operating losses. This failure to obtain regulatory approvals would prevent our product candidate from being marketed and would have a material and adverse effect on our business.
Current wording
We expect to invest most of our capital in maintaining the regulatory status of MAT2203 and prosecuting associated intellectual property while we look for a partner to continue clinical development of MAT2203. Our ability to generate revenue related to product sales, which we do not expect will occur for at least the next several years, if ever, will depend on the successful development and regulatory approval of one or more of our product candidates. All our product candidates require regulatory review and approval prior to commercialization. Any delays in the regulatory review or approval of our product candidates would delay market launch, increase our cash requirements and result in additional operating losses. This failure to obtain regulatory approvals would prevent our product candidate from being marketed and would have a material and adverse effect on our business.
Previous wording
If we are unable to successfully commercialize our products our ability to generate revenue will be limited.
Current wording
If we are unable to successfully commercialize our current or future product candidates our ability to generate revenue will be limited.
Previous wording
Even if we receive regulatory approval for MAT2203 or any other product candidates we may develop, we still may not be able to successfully commercialize such products and the revenue that we generate from its sales, if any, may be limited.
Current wording
Even if we receive regulatory approval for MAT2203 or any other future product candidates we may develop, we still may not be able to successfully commercialize such products and the revenue that we generate from its sales, if any, may be limited.
Previous wording
In conducting our research and development activities for MAT2203, we currently rely, and expect to continue to rely, on collaborative agreements with universities, governmental agencies, and not-for-profit organizations for both strategic and financial resources. Key among these agreements is our collaboration agreements with the NIH for the development of MAT2203. The loss of, or failure to perform by us or our partners under any applicable agreements or arrangements, or our failure to secure additional agreements for our product candidates, would substantially disrupt or delay our research and development activities, including our in-process and anticipated clinical trials. Any such loss would likely increase our expenses and materially harm our business, financial condition, and results of operation.
Current wording
In conducting our research and development activities for MAT2203, we currently rely, and expect to continue to rely, on collaborative agreements with universities, governmental agencies, and not-for-profit organizations for both strategic and financial resources. The loss of, or failure to perform by us or our partners under any applicable agreements or arrangements, or our failure to secure additional agreements for our product candidates, would substantially disrupt or delay our research and development activities, including our in-process and anticipated clinical trials. Any such loss would likely increase our expenses and materially harm our business, financial condition, and results of operation.
Previous wording
We have 32 employees as of March 18, 2024. As our development and commercialization plans and strategies develop, we will need to expand the size of our employee base for managerial, development, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate, and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize our product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.
Current wording
We have 3 employees as of March 31, 2025. If our development and commercialization plans and strategies develop, we may need to expand the size of our employee base for managerial, development, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate, and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize our product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.
Previous wording
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees, including Jerome D. Jabbour, our Chief Executive Officer and President, Theresa Matkovits, our Chief Development Officer, and Dr. Hui Liu, our Chief Technology Officer, would adversely impact our business prospects.
Current wording
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees, including Jerome D. Jabbour, our Chairman, Chief Executive Officer and President.
Previous wording
We face a potential risk of product liability because of the clinical testing of MAT2203 or any future product candidates and will face an even greater risk if we commercializeMAT2203 or any other future product. For example, we may be sued if any product we develop or any material that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of MAT2203. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
Current wording
We face a potential risk of product liability because of the clinical testing of MAT2203 or any future product candidates and will face an even greater risk if we commercialize MAT2203 or any other future product. For example, we may be sued if any product we develop or any material that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of MAT2203. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
Previous wording
Pursuant to the terms of the Certificate of Designations of Preferences, Rights and Limitations (the “Certificate of Designations”) for our Series A Preferred Stock, we are required to pay royalties of up to $35 million per year. If and when we obtain FDA or EMA approval of MAT2203 and/or MAT2501, which we do not expect to occur before 2027, if ever, and/or if we generate sales of such products, or we receive any proceeds from the licensing or other disposition of MAT2203 or MAT2501, we are required to pay to certain former holders of our Series A Preferred Stock, in aggregate, a royalty equal to (i) 4.5% of Net Sales (as defined in the Certificate of Designations), subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Certificate of Designations), subject in all cases to a cap of $10 million per calendar year. The Royalty Payment Rights will expire when the patents covering the applicable product expire, which is currently expected to be in 2033.
Current wording
Pursuant to the terms of the Certificate of Designations of Preferences, Rights and Limitations (the “Certificate of Designations”) for our Series A Preferred Stock, we are required to pay royalties of up to $35 million per year. If and when we obtain FDA or EMA approval of MAT2203, which we do not expect to occur before 2029, if ever, and/or if we generate sales of such products, or we receive any proceeds from the licensing or other disposition of MAT2203, we are required to pay to certain former holders of our Series A Preferred Stock, in aggregate, a royalty equal to (i) 4.5% of Net Sales (as defined in the Certificate of Designations), subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Certificate of Designations), subject in all cases to a cap of $10 million per calendar year. The Royalty Payment Rights will expire when the patents covering the applicable product expire, which is currently expected to be in 2033.
Previous wording
As a result of our merger with Aquarius Biotechnologies, Inc., our ability to utilize our U.S. federal net operating loss, carryforwards and U.S. federal tax credits may be limited under Sections 382 of the Internal Revenue Code of 1986, as amended. The limitations apply if an “ownership change,” as defined by Section 382 and Section 383, occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50 percentage points over their lowest ownership percentage at any time during the applicable testing period (typically three years). In addition, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change” and, consequently, Section 382 and Section 383 limitations. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, the Tax Act, among other things, imposes significant additional limitations on the deductibility of interest and limits net operating loss (NOL) deductions to 80% of net taxable income for losses arising in taxable years beginning after December 31, 2017.
Current wording
Our ability to utilize our U.S. federal net operating loss, carryforwards and U.S. federal tax credits may be limited under Sections 382 of the Internal Revenue Code of 1986, as amended. The limitations apply if an “ownership change,” as defined by Section 382 and Section 383, occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50 percentage points over their lowest ownership percentage at any time during the applicable testing period (typically three years). In addition, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change” and, consequently, Section 382 and Section 383 limitations. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, the Tax Act, among other things, imposes significant additional limitations on the deductibility of interest and limits net operating loss (NOL) deductions to 80% of net taxable income for losses arising in taxable years beginning after December 31, 2017.