Item 1A. Risk Factors.
In evaluating our business,
careful consideration should be given to the following risk factors, in addition to the other information set forth in this Annual Report
and in other documents that we file with the SEC. An investment in our securities involves a high degree of risk. You should carefully
consider the risks described below before making an investment decision. Our business, prospects, financial condition or operating results
could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The
trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. Certain
statements in this “Risk Factors” section are forward-looking statements. See “Cautionary Note Regarding Forward-Looking
Statements.”
Risks Related to our Business and Industry
We have incurred significant losses in every
year since our inception. We expect to continue to incur losses over the next several years and may never achieve or maintain profitability.
We are a clinical stage biopharmaceutical
company with a limited operating history, and we have incurred significant net losses since our inception in 2016. We incurred net losses
of approximately $19.9 million and $8.3 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025,
we had an accumulated deficit of approximately $90.8 million. We have funded our operations to date primarily with proceeds from the sale
of our equity securities in private financing transactions.
We have no products approved for commercial sale
and we are devoting, and expect to continue devoting, substantially all of our financial resources and efforts to R&D of our only
programmed CER-T cell product candidate, CER-1236, as well as to building out our manufacturing infrastructure, CDMO relationships and
CER-T cell programming technologies. Investment in biopharmaceutical product development, especially preclinical products, is highly speculative
because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will not successfully
undergo or complete necessary clinical trials, fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval
and become commercially viable.
We expect that it could take several years until
any of our product candidates, which at present is solely CER-1236, receive regulatory and marketing approval and are commercialized,
and we may never be successful in obtaining regulatory and marketing approval and commercializing product candidates. We expect to continue
to incur significant expenses and increasing operating losses for the foreseeable future. These net losses will adversely impact our stockholders’
equity and net assets and may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase
substantially as we:
● develop and refine the manufacturing process for our product candidates;
● develop, maintain, expand and protect our intellectual property portfolio;
● acquire or in-license other product candidates and technologies;
● hire clinical, quality control and manufacturing personnel;
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To become and remain profitable,
we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful
in a range of challenging activities, including completing preclinical studies and clinical trials for our product candidates, preparing
a satisfactory filing package for regulatory authorities, obtaining regulatory approval, manufacturing, marketing and selling any products
for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We may never succeed
in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.
Because of the numerous risks
and uncertainties associated with the development, manufacturing, delivery and commercialization of complex autologous cell therapies,
we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are
required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation
and completion of our clinical trials or the development of any of our product candidates, our expenses could increase and profitability
could be further delayed.
Even if we achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
depress the value of our securities and could impair our ability to raise capital, expand our business, maintain our R&D efforts or
continue our operations. A decline in the value of our securities could also cause you to lose all or part of your investment.
Nasdaq has delisted
our securities from trading on Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us
to additional trading restrictions.
On October 29, 2025, we received
the determination of the October 2025 Panel to deny our request to continue the listing of our shares of Common Stock on Nasdaq and that
the trading in our securities would be suspended at the open of trading on October 31, 2025. The Company’s shares of Common Stock
commenced trading on OTCQB as of December 2, 2025. On January 29, 2026, after considering the written record in this matter, the Nasdaq
Listing and Hearing Review Council issued its decision affirming the Panel’s decision to delist the Company’s securities from
Nasdaq.
The OTC Markets are a less
liquid market than Nasdaq, which may have a material adverse effect on the trading price and volume for the Common Stock. We are also
considering listing alternatives, including applying to list our shares of Common Stock on another securities exchange.
The delisting of our securities
by Nasdaq has adversely affected and is expected to continue to adversely affect the trading market for our securities, as price quotations
are not as readily obtainable, which has had and is expected to continue to have a material adverse effect on the market price of our
securities and the Company’s ability to raise additional capital.
Moreover, we can provide
no assurance that trading in our securities will continue over the counter or otherwise. As a result of the delisting, we could face significant
material adverse consequences, including:
● a limited availability of market quotations for our securities;
● reduced liquidity with respect to our securities;
● a limited amount of news and analyst coverage for our company; and
The National Securities Markets
Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which
are referred to as “covered securities.” Because they have been delisted, our securities would not be covered securities and
we would be subject to regulation in each state in which we offer our securities. This state level regulation introduces additional compliance
requirements for brokers to consider making markets in our securities and will further negatively impact any trading liquidity in our
securities.
There is substantial doubt as to our ability
to continue as a going concern.
As of December 31, 2025,
the Company reported $1.7 million of cash and cash equivalents, with an accumulated deficit of $90.8 million. Additional funds are necessary
to maintain current operations and to continue R&D activities. However, there can be no assurance that sufficient funding will be
available to allow the Company to successfully continue its R&D activities and planned regulatory filings with the FDA. If the Company
is unable to obtain the necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be
necessary. These actions would have a material adverse effect on the Company’s business, results of operations, and prospects. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these
accompanying financial statements are issued. In its report on our financial statements for the year ended December 31, 2025, our independent
registered public accounting firm included an explanatory paragraph that expressed substantial doubt about our ability to continue as
a going concern. Our current cash level raises substantial doubt about our ability to continue as a going concern. In addition, our future
financial statements may include similar qualifications about our ability to continue as a going concern. Our financial statements were
prepared assuming that we will continue as a going concern and do not include any adjustments that may result from the outcome of this
uncertainty. If we are unable to meet our current operating costs, we will need to seek additional financing or modify or cease our operational
plans. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability
to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially
reasonable terms or at all.
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Our limited operating history makes it difficult
to evaluate our business and assess our future viability and prospects.
We are a clinical stage company
with a limited operating history. We commenced operations in 2016, and our operations to date have been limited to organizing and planning
our development efforts, raising capital, conducting discovery and research activities, filing patent applications, identifying potential
product candidates, undertaking preclinical studies, and establishing arrangements with third parties for the manufacture of initial quantities
of CER-1236 and component materials. We have not yet demonstrated our ability to successfully complete any clinical trials, obtain regulatory
approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales, marketing and
distribution activities necessary for successful product commercialization. Consequently, any predictions you make about our future success
or viability may not be as accurate as they could be if we had a longer operating history.
In addition, as a young business,
we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition
at some point from a company with a R&D focus to a company capable of supporting commercial activities. We may not be successful in
such a transition.
We expect our financial condition
and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many
of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of
future operating performance.
Our business is highly dependent on the
success of our lead product candidate. If we are unable to advance clinical development, obtain approval of and successfully commercialize
our lead product candidate for the treatment of patients in approved indications, our business would be significantly harmed.
Our business and future success
depends on our ability to advance clinical development, obtain regulatory approval of, and then successfully commercialize, CER-1236,
our lead product candidate. Because our CER-1236 product candidate will be among the first autologous T cell product candidates engineered
with cytotoxic and phagocytic potency to be evaluated in clinical trials, the failure of such product candidate, or the failure of other
autologous T cell therapies, including for reasons due to safety, efficacy or durability, may impede our ability to develop our product
candidates, and significantly influence physicians’ and regulators’ opinions with regard to the viability of our entire pipeline
of autologous T cell therapies.
All of our product candidates,
including our lead product candidate, will require additional preclinical, clinical and non-clinical development, regulatory review and
approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing
efforts before we can generate any revenue from product sales. In addition, because our other product candidates are based on similar
technology as our lead product candidate, if the lead product candidate encounters additional safety issues, efficacy problems, manufacturing
problems, developmental delays, regulatory issues or other problems, our development plans and business would be significantly harmed.
We have not generated any revenue and may never
be profitable.
Our ability to become profitable
depends upon our ability to generate revenue. To date, we have not generated any revenue. We do not expect to generate significant revenue
unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize,
our product candidates. We do not know when, or if, we will generate any revenue. We have initiated a clinical trial for our first product
candidate, CER-1236, in AML, are expanding to MDS and MF patients in the first half of 2026 with later plans to expand into ovarian cancer
and NSCLC, and the rest of our product candidates are in the preclinical stages of development. Our product candidates will require additional
preclinical studies, clinical development regulatory review and approval, substantial investment, access to sufficient commercial manufacturing
capacity and significant marketing efforts before we can generate any revenue from product sales. Our ability to generate revenue depends
on a number of factors, including, but not limited to, our ability to:
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● position our products to effectively compete with other therapies;
Many of the factors listed
above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or
commercializing our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability
soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our product candidates
or any future product candidates, we will be unable to continue operations without continued funding.
Our engineered CER-T cells represent a novel
approach to cancer treatment that creates significant challenges for us.
We are developing autologous
T-cell product candidates that are engineered from healthy donor T-cells to express chimeric engulfment receptors (“CERs”)
and are intended for use in patients with certain cancers. Advancing these novel product candidates creates significant challenges for
us, including:
Our current product candidates are in early
clinical or preclinical development and have never been tested in humans. One or all of our current product candidates may fail in clinical
development or suffer delays that materially and adversely affect their commercial viability.
Our current product candidates
are in early clinical and preclinical development and we are subject to the risks of failure inherent in the development of product candidates
based on novel approaches, targets and mechanisms of action. Although we have initiated our clinical trial for CER-1236 in AML, are expanding
to MDS and MF patients in the first half of 2026 with later plans to expand into ovarian cancer and NSCLC, there is no guarantee that
we will be able to proceed with clinical development of CER-1236 or any of our other product candidates as planned or that any product
candidate will demonstrate a clinical benefit once advanced to testing in patients. Accordingly, you should consider our prospects in
light of the costs, uncertainties, delays and difficulties frequently encountered by early clinical stage biotechnology companies such
as ours.
Success in preclinical studies or clinical
trials may not be indicative of results in future clinical trials.
Results from preclinical
studies are not necessarily predictive of future clinical trial results, and interim results of a clinical trial are not necessarily indicative
of final results. Our product candidates may ultimately fail to show the desired safety and efficacy in clinical settings despite positive
results in preclinical studies or having successfully advanced through initial clinical trials. This failure to establish sufficient efficacy
and safety could cause us to abandon clinical development of our product candidates.
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Manufacturing genetically engineered products
is complex and we, or our third-party manufacturers, may encounter difficulties in production. If we or any of our third-party manufacturers
encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients,
if approved, could be delayed or prevented.
Manufacturing genetically
engineered products is complex and may require the use of innovative technologies to handle living cells. Manufacturing these products
requires facilities specifically designed for and validated for this purpose and sophisticated quality assurance and quality control procedures
are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and
quality control and testing, may result in failures, product recalls or spoilage. When changes are made to the manufacturing process,
we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the
products before and after such changes. If microbial, viral or other contaminations are discovered at manufacturing facilities, such facilities
may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and
adversely harm our business. The use of biologically derived ingredients can also lead to allegations of harm, including infections or
allergic reactions, or closure of product facilities due to possible contamination.
In addition, there are risks
associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems
with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely
availability of raw materials. Even if we obtain marketing approval for any of our product candidates, there is no assurance that we or
our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA, the EMA or other comparable
foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of
the product or to meet potential future demand. If we or our manufacturers are unable to produce sufficient quantities for clinical trials
or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business,
financial condition, results of operations and growth prospects.
Genetic engineering of T cells to create
CER-T cells is a relatively new technology, and if we are unable to use this technology in our intended product candidates, our revenue
opportunities will be materially limited.
Our technology involves a
relatively new approach to T cell gene therapy. This technology may also not be shown to be effective in clinical studies that we may
conduct or may be associated with safety issues that may negatively affect the development of our product candidates. For instance, lentiviral
gene transduction may create unintended changes to the DNA such as a non-target site gene insertion, a large deletion, or a DNA translocation,
any of which could lead to oncogenesis.
We may not be successful in our efforts
to identify or discover additional product candidates.
The success of our business
depends primarily upon our ability to identify, develop and commercialize products based on our CER-T cell technology. Our research programs
may fail to identify other potential product candidates outside of CER-1236 for clinical development for a number of reasons. We may be
unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects
or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. Research programs
to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources
on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be forced to
abandon our research, development or commercialization efforts for a program or programs, which would have a material adverse effect on
our business and could potentially cause us to cease operations.
Even if we obtain regulatory approval of
a product candidate, the product may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others
in the medical community.
The use of engineered T cells
as a potential cancer treatment is nascent and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers
and others in the medical community. We expect physicians with expertise in immunotherapy to be particularly important to the market acceptance
of our products and we may not be able to educate them on the benefits of using our product candidates for many reasons. For example,
certain of the product candidates that we will be developing may result in unacceptable and unanticipated side effects, including death.
Additional factors will influence whether our product candidates are accepted in the market, including:
● the clinical indications for which our product candidates are approved;
● the prevalence and severity of any side effects;
● the cost of treatment in relation to alternative treatments;
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● the effectiveness of our sales and marketing efforts.
If our product candidates
are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical
community, we will not be able to generate significant revenue. Even if our products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products,
are more cost effective or render our products obsolete.
Data from our preclinical studies and clinical
trials is limited and may change as additional patient data become available or may not be validated in any future or advanced clinical
trial.
Data from preclinical studies
and any clinical trials that we may complete is subject to the risk that one or more of the clinical outcomes may materially change as
patient enrollment continues and more patient data becomes available. For example, preclinical and Phase 1 results are preliminary in
nature and should not be viewed as predictive of ultimate success. It is possible that such results will not continue or may not be repeated
in any clinical trial of our product candidates. For instance, our preclinical studies provide limited data and any clinical trials may
not validate such results. Additionally, manufacturing can impact clinical outcomes. Ultimately, if we cannot manufacture our product
candidates with consistent and reproducible product characteristics, our ability to develop and commercialize any product candidate would
be significantly impacted.
Preliminary data also remains
subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, initial, interim and preliminary data should be viewed with caution until the final data are available.
Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.
We may not be able to file INDs or IND amendments
to commence clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.
We have submitted INDs to
the FDA, and the FDA has cleared us to begin clinical trials for the treatment of AML, MDS and MF as well as the treatment of advanced
solid tumors, specifically NSCLC and ovarian cancer, but there are no assurances regarding the acceptance of any amendments or future
INDs, which may impact the timelines we expect. For example, we may experience manufacturing delays or other delays with future IND-enabling
studies. Moreover, there can be no assurances that once trials begin, issues will not arise that suspend or terminate such clinical trials.
Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND,
we cannot guarantee that such regulatory authorities will not change their requirements in the future. These considerations also apply
to new clinical trials we may submit as amendments to existing INDs.
Clinical trials are difficult to design
and implement, involve uncertain outcomes and may not be successful.
Human clinical trials are
difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The design of a clinical trial
can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent
until the clinical trial is well advanced. We may be unable to design and execute a clinical trial that will be successful to achieve
regulatory approval. There is a high failure rate for biological products proceeding through clinical trials, which may be higher for
our product candidates because they are based on new technology and engineered on a patient-by-patient basis. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in
preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many
factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively
impact our business, financial condition, results of operations and prospects.
We will depend on enrollment of patients
in our clinical trials for our product candidates. If we encounter difficulties enrolling patients in our clinical trials, our clinical
development activities could be delayed or otherwise adversely affected.
Identifying and qualifying
patients to participate in clinical trials of our product candidates will be critical to our success. We may experience difficulties in
patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their
protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.
The enrollment of patients depends on many factors, including:
● the patient eligibility criteria defined in the protocol;
● the number of patients with the disease or condition being studied;
● the perceived risks and benefits of the product candidate in the trial;
● the proximity of patients to study sites;
● the design of the clinical trial;
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● our ability to obtain and maintain patient consents;
In particular, some of our
clinical trials will look to enroll patients with characteristics which are found in a very small population. For example, our clinical
trial for CER-1236 is enrolling patients with hematologic malignancies and dysplasias, including AML, MDS, and MF. Other companies are
conducting clinical trials with their engineered T cell therapies in hematologic malignancies and seek to enroll patients in their studies
that may otherwise be eligible for our clinical trials, which could lead to slow recruitment and delays in our clinical trials. In addition,
since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical
trial sites that some of our competitors use, which could further reduce the number of patients who are available for our clinical trials
in these clinical trial sites.
Moreover, because our product
candidates represent a departure from more commonly used methods for cancer treatment, potential study participants and their doctors
may be inclined to use conventional therapies, such as chemotherapy and antibody therapy, rather than participate in our clinical trials.
Delays in patient enrollment
may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these
clinical trials and adversely affect our ability to advance the development of our product candidates. In addition, many of the factors
that may lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval
of our product candidates.
If the market opportunities for any of our
product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.
We are focused initially
on the development of treatments for cancers such as AML, and plan to eventually extend our treatments to other forms of cancer. Our internal
projections of addressable patient populations that have the potential to benefit from treatment with our product candidates are based
on estimates. If any of our estimates are inaccurate, the market opportunities for any of our product candidates could be significantly
diminished and have an adverse material impact on our business.
We currently have no marketing and sales
organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into
agreements with third parties to market and sell our product candidates, if licensed, we may not be able to generate product revenue.
We currently have no sales,
marketing or distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing organization
and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other
pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide
not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding the sales
and marketing of our product candidates following their approval. However, there can be no assurance that we will be able to establish
or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive
will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and
sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates
ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
There can be no assurance
that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators
to commercialize any product in the United States or overseas.
We face competition from companies that
have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing
novel therapies and platform technologies. If these companies develop platform technologies or product candidates more rapidly than we
do, if their platform technologies or product candidates are more effective or have fewer side effects, our ability to develop and successfully
commercialize product candidates may be adversely affected.
The development and commercialization
of cell and gene therapies is highly competitive. We compete with a variety of large pharmaceutical companies, multinational biopharmaceutical
companies, other biopharmaceutical companies and specialized biotechnology companies, as well as technology and/or therapeutics being
developed at universities and other research institutions. Our competitors are often larger and better funded than we are. Our competitors
have developed, are developing or will develop product candidates and processes competitive with ours. Competitive therapeutic treatments
include those that have already been approved and accepted by the medical community and any new treatments that are currently in development
or that enter the market. We believe that a significant number of product candidates are currently under development, and may become commercially
available in the future, for the treatment of conditions for which we may try to develop product candidates. There is intense and rapidly
evolving competition in the biotechnology and biopharmaceutical fields. We believe that while our T-cell based platform, its associated
intellectual property portfolio, the characteristics of our current and potential future product candidates and our scientific and technical
know-how together give us a competitive advantage in this space, competition from many sources remains.
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Many of our competitors have
significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If we successfully
obtain approval for any product candidate, we will face competition based on many different factors, including the safety and effectiveness
of our product candidates, the ease with which our product candidates can be administered, the timing and scope of regulatory approvals
for these product candidates, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage
and patent position. Competing products and product candidates could present superior treatment alternatives, including by being more
effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products and product
candidates may make any product we develop obsolete or noncompetitive before we recover the expense of developing and commercializing
such product. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability
to execute our business plan.
These competitors also compete
with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration
for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Our commercial opportunity
could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less
severe side effects, are more convenient or are less expensive or better reimbursed than any products that we may commercialize. Our competitors
also may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could
result in our competitors establishing a strong market position for either the product or a specific indication before we are able to
enter the market.
We are highly dependent on our key personnel,
including individuals with expertise in cell therapy development and manufacturing, and if we are not successful in attracting and retaining
highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in
the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial,
scientific and medical personnel. We are highly dependent on the expertise of our management, scientific and medical personnel, including
our chief executive officer (“Chief Executive Officer”), Chris Ehrlich, our chief development officer (“Chief Development
Officer”), Kristen Pierce, our chief financial officer (“Chief Financial Officer”), Andrew “Al” Kucharchuk
and the head of our scientific advisory board, Lawrence Corey. The loss of the services of any of our executive officers, other key employees,
and other scientific and medical advisors, and our inability to find suitable replacements could result in delays in product development
and harm our business.
We conduct substantially
all of our operations at our facilities in the South San Francisco area. The San Francisco Bay Area region is headquarters to many other
biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in our market is intense and
may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. Attrition may lead to higher costs
for hiring and retention, diversion of management time to address retention matters and disrupt the business.
To induce valuable employees
to remain at our company, in addition to salary and cash incentives, we have provided equity-based compensation for retention purposes.
Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment
with us on short notice. Although we have employment agreements or consulting agreements with our key employees, these agreements provide
for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not
maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees. Our
success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as
well as junior, mid-level and senior scientific and medical personnel.
We will need to continue to grow the size
of our organization, and we may experience difficulties in managing this growth.
As our development, manufacturing
and commercialization plans and strategies develop, we expect to add managerial, operational, sales, R&D, marketing, financial and
other personnel. Current and future growth imposes and will impose significant added responsibilities on members of management, including:
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Our future financial performance
and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage our growth, and our
management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial
amount of time to managing these growth activities.
We currently rely, and for
the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants. There
can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a
timely basis when needed, or that we can find qualified replacements. We may also be subject to penalties or other liabilities if we mis-classify
employees as consultants. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy
of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and
we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance
that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable
terms, or at all.
If we are not able to effectively
expand our organization by hiring and retaining employees and expanding our groups of consultants and contractors, we may not be able
to successfully implement the tasks necessary to further develop, manufacture and commercialize our product candidates and, accordingly,
may not achieve our research, development, manufacturing and commercialization goals. Conversely, if we expand ahead of our business progress,
we may take on unnecessary costs.
We may form or seek strategic alliances
or enter into licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
We may form or seek strategic
alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement
or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that
we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures,
issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition
in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful
in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed
to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having
the requisite potential to demonstrate safety and efficacy. Any delays in entering into strategic partnership agreements related to our
product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications,
which would harm our business prospects, financial condition and results of operations.
If we license products or
new technologies or acquire businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully
integrate them with our existing operations and company culture. For instance, certain of our agreements may require significant R&D
that may not result in the development and commercialization of product candidates. We cannot be certain that, following a strategic transaction
or license, we will achieve the results, revenue or specific net income that justifies such transaction.
We will need substantial additional financing
to develop our product candidates and implement our operating plans, which financing we may be unable to obtain, or unable to obtain on
acceptable terms. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our
product candidates.
We expect to spend a substantial
amount of capital in the development and manufacturing of our product candidates, and we will need substantial additional financing to
do so. In particular, we will require substantial additional financing to enable commercial production of our product candidates and initiate
and complete registrational trials for multiple products in multiple regions. Further, if approved, we will require significant additional
capital in order to launch and commercialize our product candidates.
As of December 31, 2025 and
2024, we had approximately $1.7 million and $3.3 million in cash and cash equivalents, respectively. Changing circumstances may 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. We may also need to raise additional capital sooner than we currently anticipate if we choose to
expand more rapidly than we presently plan. In any event, we will require additional capital for the further development and commercialization
of our product candidates, including funding our internal manufacturing capabilities.
We cannot be certain that
additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital. If we are unable
to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue
the development or commercialization of our product candidates or other R&D initiatives. We could be required to seek collaborators
for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise
be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek
to pursue development or commercialization ourselves.
Any of the above events could
significantly harm our business, prospects, financial condition and results of operations and cause the price of our Common Stock to decline.
Raising additional capital may cause dilution
to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.
Until such time, if ever,
as we can generate substantial revenue from the sale of our product candidates, we will need substantial additional financing to develop
our product candidates and implement our operating plans. To the extent that we raise additional capital through the sale of equity or
convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other
preferences that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available,
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.
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If we raise additional funds
through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required
to relinquish valuable rights to our research programs or product candidates or grant licenses on terms that may not be favorable to us
or that may be at less than the full potential value of such rights. If we are unable to raise additional funds through equity or debt
financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our drug development
or future commercialization efforts or grant rights to third parties to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
The issuance of shares of our Common Stock
upon conversion or exercise of our outstanding Preferred Shares and Common Warrants and other securities that we may issue in future financing
transactions may result in substantial dilution to our stockholders.
As of April 14, 2026, the
Company currently has outstanding: (i) 36,786,686 shares of Common Stock, (ii) 1,429 shares of Series A Preferred Stock with a stated
value of approximately $1.4 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided
by a current effective conversion price of $0.05 per share; (iii) no shares of Series B Preferred Stock; (iv) 7 shares of Series C Preferred
Stock with a stated value of $7,000, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided
by a conversion price of $0.05 per share; (v) Series A Warrants to purchase 306 shares of Common Stock at an exercise price of $2,780.00
per share; (vi) Series C Warrants to purchase 4,088 shares of Common Stock at an exercise price of $0.80 per share; (vii) December 2024
and January 2025 Common Warrants to purchase an aggregate of 12,396 shares of Common Stock at an exercise price ranging from $112.20 to
$116.40 per share, (viii) February 2025 Common Warrants to purchase an aggregate of 127,551 shares of Common Stock at an exercise price
of $39.20 per share, (ix) February 2025 Pre-Funded Warrants to purchase an aggregate of 10,787 shares of Common Stock at an exercise price
of $0.002 per share, (x) Public Warrants and Private Placement Warrants to purchase an aggregate of 4,596 shares of Common Stock at an
exercise price of $23,000.00 per share, (xi) 5,233 shares of Series D Preferred Stock with a stated value of approximately $5.2 million,
convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price
of $0.05 per share, (xii) 3,816 shares of Series E Preferred Stock with a stated value of approximately $3.8 million, convertible into
shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $4.1625 per
share and (xii) 50,000,000 shares of Common Stock issuable upon the conversion of the Convertible Notes issued to Keystone.
Although each of the conversion
price of most of the Preferred Shares and the exercise prices of the December 2024 Common Warrants, January 2025 Common Warrants, Series
A Warrants, Public and Private Placement Warrants, and February 2025 Common Warrants are at or above the trading price of our Common Stock
as of the date of this Annual Report, if such trading price increases, such conversion prices and exercise prices will not change as a
result thereof and could be below the trading price of our Common Stock as of the date of any future conversion or exercise thereof, resulting
in dilution to our stockholders. In addition, the terms of the Series A Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock contain certain penalties and adjustments to the amount included in determination of the conversion
rate following certain breaches of the Company’s obligations thereunder, including, among other things, as a result of a failure
to file or cause the SEC to declare one or more registration statements relating to the resale of the shares of Common Stock issuable
upon conversion thereof by specified deadlines, certain defaults under indebtedness of the Company or judgments against the Company and
failure to deliver shares of Common Stock upon conversion in a timely manner. For example, the penalties and adjustments include a 25%
premium added to the stated value for determining the conversion rate in connection with breaches other than the breach of the requirement
to redeem the shares of Series A Preferred Stock by August 31, 2025, which resulted in a 50% premium, and the addition to the stated value
of an amount equal to the value of the shares of Common Stock into which the Series A Preferred Stock would have been convertible if the
conversion price were equal to 80% of the lowest volume weighted average price during the five trading days immediately prior to conversion.
Such penalties and adjustments, which applied during the period when substantially all of the conversions since the Business Combination
occurred as a result of a failure to file and cause the SEC to declare a registration statement with respect to the resale of the underlying
shares in a timely manner, have resulted and may in the future result in the issuance of shares of Common Stock at an effective conversion
price below the trading price of our Common Stock at the time of such conversion.
We cannot assure you that
we will remain in compliance with all of the terms of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
or Series E Preferred Stock and that such penalties and adjustments will not apply in the future. In addition, we cannot assure you that
we will not issue additional convertible or other derivative securities with highly dilutive penalty or adjustment provisions. As described
elsewhere in this Annual Report, the Company needs to obtain financing to fund its research and development activities and clinical trials,
as well as other operations. Under challenging conditions in the equity capital markets, particularly for pre-commercialization biotech
companies, we may have no viable alternatives to agreeing to inclusion of such provisions in the terms of future financings.
If our security measures, or those of our
CROs, CDMOs, collaborators, contractors, consultants or other third parties upon whom we rely, are compromised or the security, confidentiality,
integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited
or fails, we could experience a material adverse impact.
In the ordinary course of
our business, we may collect, process, receive, store, use, generate, transfer, disclose, make accessible, protect, secure, dispose of,
transmit, and share (collectively processing) proprietary, confidential and sensitive information, including personal data (including
health information), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other
parties. We may also share or receive sensitive information with our partners, CROs, CDMOs, or other third parties. Our ability to monitor
these third parties’ information security practices is limited, and these third parties may not have adequate information security
measures in place. If we (or a third party upon whom we rely) experience a security incident or compromise, or are perceived to have experienced
a security incident or compromise, we may also experience adverse consequences.
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Our internal computer systems
and those of our CROs, CDMOs, collaborators, contractors, consultants or other third parties are vulnerable to damage from computer viruses,
unauthorized access, cybersecurity threats, and telecommunication and electrical failures. In addition, as many of our personnel work
from home at least part of the time and utilize network connections outside our premises, this poses increased risks to our information
technology systems and data. Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and are increasing
in their frequency, sophistication and intensity, and have become increasingly difficult to detect. These threats come from a variety
of sources, including traditional computer “hackers,” “hacktivists,” organized criminal threat actors, threat
actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage
and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and
in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, and the third parties
upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially
disrupt our systems and operations, supply chain, and ability to produce and distribute our product candidates. We and the third parties
upon which we rely are subject to a variety of evolving threats, including social-engineering attacks (including through phishing attacks),
malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service
(such as credential stuffing), credential harvesting, social engineering attacks (including through phishing attacks), viruses, ransomware,
supply chain attacks, personnel misconduct or error and other similar threats. We may also be the subject of software bugs, server malfunction,
software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures or other similar
issues. In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays,
or outages in our operations, disruptions to our clinical trials, loss of data (including data related to clinical trials), significant
expense to restore data or systems, reputational loss and the diversion of funds. Extortion payments may alleviate the negative impact
of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting
such payments. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and
infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result
in a breach to our information technology systems or the third-party information technology systems that support us and our services.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it
may be difficult to integrate companies into our information technology environment and security program.
Any of the previously identified
or similar threats could cause a security incident, compromise, or other interruption. A security incident, compromise, or other interruption
could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure
of, or access to our sensitive information. A security incident or other interruption could disrupt our ability (and that of third parties
upon whom we rely) to manufacture or deliver our product candidates.
We may expend significant
resources, or modify our business activities and operations, including our clinical trial activities, in an effort to protect against
security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures
or use industry-standard or reasonable security measures to protect our information technology systems and sensitive information.
Although we have implemented
security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We,
and the third parties on whom we rely, have experienced, and expect to continue to experience, threats to and attempts to compromise the
security of our information technology systems or otherwise cause a security incident. Such security incidents or compromises, if experienced,
could have an adverse impact on our business.
We may be unable to detect
vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in
nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and remediate exploitable
critical vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience
delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Any failure to prevent or
mitigate security incidents or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result
in significant liability under state, federal, and international law and may cause a material adverse impact to our reputation, affect
our ability to conduct our clinical trials and potentially disrupt our business.
Applicable data protection
laws, privacy policies and data protection obligations may require us to notify relevant stakeholders of security incidents or compromises.
Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If
we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may
also experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines,
penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information
(including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary
fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
Our contracts may not contain
limitations of liability, and even where they do, there can be no assurance that the limitations of liability in our contracts are sufficient
to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
We cannot be sure that our
insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities arising out of our privacy and
security practices, or that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage
will pay future claims.
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