2. Business

The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company’s corporate office is located in Pasadena, California.

The Company’s product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers. The Company believes that inhibitors of protein phosphatases have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases. The Company is directing its efforts on clinical development of a specific protein phosphatase inhibitor, referred to as LB-100, which has been shown to have clinical anti-cancer activity at doses that produce little or no toxicity.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, does not have positive cash flows from operations, relies on stock-based compensation for a substantial portion of employee and consultant compensation, and is dependent on periodic infusions of equity capital to fund its operating requirements.

Sale of Common Stock, Pre-Funded Common Stock Purchase Warrants, and Common Stock Purchase Warrants; Exercise of Pre-Funded Common Stock Purchase Warrants

Subsequent to June 30, 2023, on July 20, 2023, in a registered direct offering to an institutional investor, the Company sold 180,000 shares of common stock at a purchase price of $6.00 per share and pre-funded warrants to purchase 403,334 shares of common stock at a purchase price of $5.9999 per pre-funded warrant. Each pre-funded warrant had an exercise price of $0.0001 per share, was immediately exercisable upon issuance, and was valid and exercisable until all pre-funded warrants are exercised in full.

In a concurrent private placement to the institutional investor, the Company also sold warrants to purchase 583,334 shares of common stock. Each common warrant had an initial exercise price of $6.00 per share, was immediately exercisable upon issuance, and expires five years thereafter on July 20, 2028. The common warrants and the shares of common stock issuable upon exercise of the common warrants were not registered under the Securities Act of 1933, as amended (the “Securities Act”) and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder.

The registered direct offering and the concurrent private placement generated gross proceeds of approximately $3,500,000. The total cash costs of the registered direct offering and the private placement were approximately $375,000, resulting in net proceeds of approximately $3,125,000. Pursuant to the placement agent agreement, the Company granted to the placement agent warrants to purchase 35,000 shares of common stock at an exercise price of $6.60 per share and expiring on July 20, 2028.

During the period from July 24, 2023 through August 7, 2023, the 403,334 pre-funded warrants exercisable at $0.0001 per share were exercised for total cash proceeds of $40, resulting in the issuance of 403,334 shares of common stock.

Going Concern

At June 30, 2023, the Company had cash of $2,912,920 available to fund its operations. Because the Company is currently engaged in various early-stage clinical trials, it is expected that it will take a significant amount of time and resources to develop any product or intellectual property capable of generating sustainable revenues. Accordingly, the Company’s business is unlikely to generate any sustainable operating revenues in the next several years and may never do so. Even if the Company is able to generate revenues through licensing its technology, product sales or other commercial activities, there can be no assurance that the Company will be able to achieve and maintain positive earnings and operating cash flows. At June 30, 2023, the Company’s remaining contractual commitments pursuant to clinical trial agreements and clinical trial monitoring agreements not yet incurred aggregated $6,389,000 (see Note 9), which are currently scheduled to be incurred through approximately December 31, 2025.

The Company’s consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no recurring source of revenue and has experienced negative operating cash flows since inception. The Company has financed its working capital requirements through the recurring sale of its equity securities.

Based on the foregoing, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying interim condensed consolidated financial statements are being issued. The Company’s interim condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional equity capital to fund its research and development activities and to ultimately achieve sustainable operating revenues and profitability. The amount and timing of future cash requirements depends on the pace, design and results of the Company’s clinical trial program, which, in turn, depends on the availability of operating capital to fund such activities.

Based on current operating plans, the Company estimates that existing cash resources, together with the proceeds from the July 20, 2023 registered direct offering and concurrent private placement, will provide sufficient working capital to fund the current clinical trial program with respect to the development of the Company’s lead anti-cancer clinical compound LB-100 through approximately December 31, 2024. However, existing cash resources will not be sufficient to complete the development of and obtain regulatory approval for the Company’s product candidate, which will require that the Company raise significant additional capital. The Company estimates that it will need to raise additional capital to fund its operations, including its various clinical trial commitments, no later than the latter half of the fiscal year ending December 31, 2024. However, the Company’s operating plans may change as a result of many factors that are currently unknown and/or outside of the control of the Company, and additional funds may be needed sooner than planned.

As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurance that the Company will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations.

If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its clinical trial program, as well as its licensing and patent prosecution efforts and its technology and product development efforts, or obtain funds, if available, through strategic alliances or joint ventures that could require the Company to relinquish rights to and/or control of LB-100, or to discontinue operations entirely.