Set forth below and
elsewhere in this report and in other documents we file with the SEC are risks and uncertainties that could cause actual results
to differ materially from the results contemplated by the forward-looking statements contained in this report. The descriptions
below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed
in “Part II, Item 1A. Risk Factors” of the Annual Report.
Risks Related to Our Liquidity and Need
for Financing
Before
giving effect to any potential sales of our securities, we estimate that our existing capital resources, coupled with the receipt
of the second Lee’s payment, will only be sufficient to fund our operations through August 2012.
We
are focusing our current efforts on the development of RGN-259 for ophthalmic indications. We recently completed a Phase 2 clinical
trial to evaluate RGN-259 in patients suffering from dry eye syndrome, and we intend to pursue partnering opportunities for RGN-259
based on the data from this trial. We have also supported a small physician-sponsored Phase 2 study of RGN-259 in severe dry eye
which was concluded in June 2012. We have completed enrolling 30 patients in our Phase 2 trial for RGN-137 in EB patients. We had
intended to commence patient enrollment in a Phase 2 clinical trial of RGN-352 for AMI patients near the end of the first quarter
of 2011, but this trial was placed on clinical hold by the FDA. The AMI trial remains on hold pending resolution of regulatory
issues and our access to sufficient capital resources. Depending on our capital resources, and if regulatory and manufacturing
issues with RGN-352 are resolved, we may also continue to support a proposed physician-sponsored Phase 1/2 clinical trial to evaluate
the therapeutic potential of RGN-352 in patients with multiple sclerosis.
Even
with the change in our clinical development priorities during 2011, we currently do not have sufficient capital resources to fund
our ongoing research and development activities, and we will not be able to sponsor any clinical trials in 2012 without additional
funding. We project that our existing capital resources, including the $200,000 received from Lee’s in July 2012, will only
be adequate to fund our operations through August 2012. If our stock price increases from its current level, we may, however, make
additional sales of common stock under our committed equity facility with Lincoln Park Capital, as described below, which would
extend our resources, but our ability to use the committed equity facility depends upon our share price and trading volume. However,
even if we are able to sell shares of our common stock under the LPC facility, based on our current stock price the amount of proceeds
we would be able to raise, doing so would not extend our capital resources significantly beyond the third quarter of 2012 and,
accordingly, we will also need to seek other sources of capital.
Our
forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking
statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the
factors discussed elsewhere in this report. We have based this estimate on assumptions that may prove to be wrong, and we could
use our available capital resources sooner than we currently expect.
We are not currently
able to access the LPC committed equity facility and, if we are able to do so in the future, we may not be able to access the full
amount available under the
facility
.
In
January 2011, we entered into a committed equity facility with Lincoln Park Capital, or LPC, under which we may direct LPC to purchase
up to $11,000,000 worth of shares of our common stock through October 2013, generally in amounts of up to 200,000 shares every
two business days. The amount we can sell under the facility may be increased to 400,000 shares every two business days, as long
as the closing sale price of our common stock is not below $0.35 per share on the purchase date. However, the extent to which we
will rely on the facility as a source of funding will depend on a number of factors, including the prevailing market price of our
common stock and volume of trading and the extent to which we are able to secure working capital from other sources. Specifically,
LPC does not have the obligation to purchase any shares of our common stock on any business day that the price of our common stock
is less than $0.15 per share. As of the date of this report, we have sold a total of 1.5 million shares to LPC for gross proceeds
of approximately $350,000.
Depending
on the prevailing market price of our common stock, we may not be able to sell shares to LPC for the maximum $11,000,000 over the
term of the facility. At the minimum price of $0.15 per share, we would be able to sell 200,000 shares for proceeds of $30,000
on each purchase date. Assuming that we sold shares to LPC ten times each month, we would receive $300,000 in proceeds per month,
up to the maximum amount available over the remaining term of the facility. In the event that we make less frequent sales to LPC,
the aggregate proceeds available to us will be even less.
Currently,
we have only registered for resale 12,541,667 additional shares of our common stock that we may sell to LPC. These shares, if and
when issued to LPC, would be a combination of shares purchased at the price per share set forth in our purchase agreement with
LPC and shares issued as additional pro rata commitment shares for no additional consideration, based on the formula set forth
in the agreement. However, because the registration statement related to those shares has ceased to be effective under the Securities
Act, we would need to prepare and file a post-effective amendment to the registration statement and have that post-effective amendment
declared effective by the SEC before we can sell any of these shares to LPC. Assuming a purchase price of $0.20 per share, we would
generate net cash proceeds of approximately $2.5 million. In the event we elect to issue more than the originally registered 15,000,000
shares, we would be required to file a new registration statement and have it declared effective by the SEC before selling such
additional shares.
As
described elsewhere in this report, we do not currently expect that funding from LPC will be sufficient to extend our operations
beyond the third quarter of 2012, and we will need to secure another source of funding in order to satisfy our near term working
capital needs. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when
we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and
prospects.
In addition to
our current development objectives, we will need substantial additional capital for the continued development of product candidates
through marketing approval and for our longer-term future operations.
Beyond
our current liquidity needs, we anticipate that substantial new capital resources will be required to continue our longer-term
independent product development efforts, including any and all follow-on trials that will result from our current clinical programs
beyond those currently contemplated, and to scale up manufacturing processes for our product candidates. We may be able to obtain
funding under the committed equity facility with LPC in order to further some of these efforts. However, the actual amount of funds
that we will need will be determined by many factors, some of which are beyond our control. These factors include, without limitation:
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the scope of our clinical trials, which is significantly
influenced by the quality of clinical data achieved as trials are completed and the requirements established by regulatory authorities;
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the speed with which we complete our clinical trials,
which depends on our ability to attract and enroll qualifying patients and the quality of the work performed by our clinical investigators
and contract research organizations chosen to conduct the studies;
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the time required to prosecute, enforce and defend our
intellectual property rights, which depends on evolving legal regimes and infringement claims that may arise between us and third
parties;
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the ability to manufacture at scales sufficient to supply
commercial quantities of any of our product candidates that receive regulatory approval, which may require levels of effort not
currently anticipated; and
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the successful commercialization of our product candidates,
which will depend on our ability to either create or partner with an effective commercialization organization and which could
be delayed or prevented by the emergence of equal or more effective therapies.
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Emerging
biotechnology companies like us may raise capital through corporate collaborations and by licensing intellectual property rights
to other biotechnology or pharmaceutical enterprises. We intend to pursue this strategy, but there can be no assurance that we
will be able to license our intellectual property or product development programs on commercially reasonable terms, if at all.
There are substantial challenges and risks that will make it difficult to successfully implement any of these alternatives. If
we are successful in raising additional capital through such a license or collaboration, we may have to give up valuable rights
to our intellectual property. In addition, the business priorities of a strategic partner may change over time, which creates the
possibility that the interests of the strategic partner in developing our technology may diminish and could have a potentially
material negative impact on the value of our interest in the licensed intellectual property or product candidates.
Further,
if we raise additional funds by selling shares of our common stock or securities convertible into our common stock, including under
our committed equity facility with LPC, the ownership interest of our existing stockholders may be significantly diluted. If additional
funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences
and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants or the granting
of security interests in our assets.
Our
failure to successfully address both our short-term and long-term liquidity requirements would have a material negative impact
on our business, including the possibility of surrendering our rights to some technologies or product opportunities, delaying our
clinical trials or ceasing our operations.
We have incurred
losses since inception and expect to incur significant losses in the foreseeable future and may never become profitable.
We
have not commercialized any product candidates to date and incurred net operating losses every year since our inception in 1982.
We believe these losses will continue for the foreseeable future, and may increase, as we pursue our product development efforts
related to Tß4. As of June 30, 2012, our accumulated deficit totaled approximately $96 million.
As
we expand our research and development efforts and seek to obtain regulatory approval of our product candidates to make them commercially
viable, we anticipate substantial and increasing operating losses. Our ability to generate revenues and to become profitable will
depend largely on our ability, alone or through the efforts of third-party licensees and collaborators, to efficiently and successfully
complete the development of our product candidates, obtain necessary regulatory approvals for commercialization, scale-up commercial
quantity manufacturing capabilities either internally or through third-party suppliers, and market our product candidates. There
can be no assurance that we will achieve any of these objectives or that we will ever become profitable or be able to maintain
profitability. Even if we do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over
an extended period of time and are not otherwise able to raise necessary funds to continue our development efforts and maintain
our operations, we may be forced to cease operations.
Our common stock
is quoted on the over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity
of our common stock.
Our
common stock is traded over-the-counter on the OTC Bulletin Board. Over-the-counter markets are generally considered to be less
efficient than, and not as broad as, a stock exchange. There may be a limited market for our stock now that it is quoted on the
OTC Bulletin Board, trading in our stock may become more difficult and our share price could decrease. Specifically, you may not
be able to resell your shares of common stock at or above the price you paid for such shares or at all.
In
addition, our ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets.
While we cannot guarantee that we would be able to complete an equity financing on acceptable terms, or at all, we believe that
dilution from any equity financing while our shares are quoted on an over-the-counter market would likely be substantially greater
than if we were to complete a financing while our common stock is traded on a national securities exchange. Further, we are unable
to use short-form registration statements on Form S-3 for the registration of our securities, which could impair our ability to
raise additional capital as needed.
Our
common stock is also subject to penny stock rules, which impose additional sales practice requirements on broker-dealers who sell
our common stock. The SEC generally defines “penny stock” as an equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. The ability of broker-dealers to sell our common stock and the ability of our stockholders
to sell their shares in the secondary market will be limited and, as a result, the market liquidity for our common stock will likely
be adversely affected. We cannot assure you that trading in our securities will not be subject to these or other regulations in
the future.
The report of
our independent registered public accounting firm contains explanatory language that substantial doubt exists about our ability
to continue as a going concern.
The
report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2011
contains explanatory language that substantial doubt exists about our ability to continue as a going concern, without raising additional
capital. As described in this report, we estimate that our existing capital resources, without giving effect to potential additional
sales of common stock under our committed equity facility with LPC, will be adequate to fund our operations through August 2012.
We continue to seek other sources of capital, but if we are unable to obtain sufficient financing in the near term, then we would,
in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we
may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.
Risks Related to Our Business
and Operations
Our pending Phase
2 clinical trial of RGN-352 was placed on clinical hold by the FDA in March 2011 and we are unsure when, if ever, we will be able
to resume this trial.
In
the second half of 2010, we implemented the development plans for our phase 2 clinical trial to evaluate RGN-352 in patients who
have suffered an acute myocardial infarction, or AMI. We had planned to begin enrolling patients near the end of the first quarter
of 2011. However, in March 2011, we were notified by the FDA that the trial was placed on clinical hold as a result of our contract
manufacturer’s alleged failure to comply with current Good Manufacturing Practices. The FDA has prohibited us from using
any of the active drug or placebo manufactured by this manufacturer in human trials, which will require us to identify a cGMP-compliant
manufacturer and to have new material produced in the event that we seek to resume this trial. We have also learned that the contract
manufacturer has closed its manufacturing facility and has filed for bankruptcy protection. Significant preparatory time and procedures
will be required before any new suitable manufacturer would be able to manufacture RGN-352 for the AMI trial. Since we are unable
to estimate the length of time that the trial will be on clinical hold, we have elected to cease activities on this trial until
the FDA clinical hold is resolved and the requisite funding might be secured. Consequently, there can be no assurance that we will
be able to timely resume or complete this trial, if at all.
All of our drug
candidates are based on a single compound.
Our
current primary business focus is the development of Tß4, and its analogues, derivatives and fragments, for the regeneration
and accelerated repair of damaged tissue from non-healing dermal and corneal wounds, cardiac injury, central/peripheral nervous
system diseases and other conditions, as well as an improvement in various functions, such as, but not limited to, cardiac and
neurological. Unlike many pharmaceutical companies that have a number of unique chemical entities in development, we are dependent
on a single molecule, formulated for different routes of administration and different clinical indications, for our potential commercial
success. As a result, any common safety or efficacy concerns for Tß4-based products that cross formulations would have a
much greater impact on our business prospects than if our product pipeline were more diversified.
We may never
be able to commercialize our product candidates.
Although
Tß4 has shown biological activity in
in vitro
and animal models and we observed some efficacy in our recent RGN-259
phase 2a trial and earlier Phase 2 dermal trials, we cannot assure you that our product candidates will exhibit activity or importance
in humans in large-scale trials. Our drug candidates are still in research and development, and we do not expect them to be commercially
available for the foreseeable future, if at all. Only a small number of research and development programs ultimately result in
commercially successful drugs. Potential products that appear to be promising at early stages of development may not reach the
market for a number of reasons. These include the possibility that the potential products may:
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be found ineffective or cause harmful side effects during
preclinical studies or clinical trials;
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fail to receive necessary regulatory approvals;
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be precluded from commercialization by proprietary rights
of third parties;
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be difficult to manufacture on a large scale; or
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be uneconomical or otherwise fail to achieve market acceptance.
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If
any of these potential problems occurs, we may never successfully market Tß4-based products.
We are subject
to intense government regulation, and we may not receive regulatory approvals for our drug candidates.
Our
product candidates will require regulatory approvals prior to sale. In particular, therapeutic agents are subject to stringent
approval processes, prior to commercial marketing, by the FDA and by comparable agencies in most foreign countries. The process
of obtaining FDA and corresponding foreign approvals is costly and time-consuming, and we cannot assure you that such approvals
will be granted. Also, the regulations we are subject to change frequently and such changes could cause delays in the development
of our product candidates.
Three
of our drug candidates are currently in the clinical development stage, and we cannot be certain that we or our collaborators will
successfully complete the clinical trials necessary to receive regulatory product approvals. The regulatory approval process is
lengthy, unpredictable and expensive. To obtain regulatory approvals in the United States, we or a collaborator must ultimately
demonstrate to the satisfaction of the FDA that our product candidates are sufficiently safe and effective for their proposed administration
to humans. Many factors, known and unknown, can adversely impact clinical trials and the ability to evaluate a product candidate’s
safety and efficacy, including:
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the FDA or other health regulatory authorities, or institutional
review boards, or IRBs, do not approve a clinical trial protocol or place a clinical trial on hold;
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suitable patients do not enroll in a clinical trial in
sufficient numbers or at the expected rate, for reasons such as the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the perceptions of investigators and patients regarding safety, and
the availability of other treatment options;
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clinical trial data is adversely affected by trial conduct
or patient withdrawal prior to completion of the trial;
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there may be competition with ongoing clinical trials
and scheduling conflicts with participating clinicians;
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patients experience serious adverse events, including
adverse side effects of our drug candidates, for a variety of reasons that may or may not be related to our product candidates,
including the advanced stage of their disease and other medical problems;
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patients in the placebo or untreated control group exhibit
greater than expected improvements or fewer than expected adverse events;
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third-party clinical investigators do not perform the
clinical trials on the anticipated schedule or consistent with the clinical trial protocol and good clinical practices, or other
third-party organizations do not perform data collection and analysis in a timely or accurate manner;
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service providers, collaborators or co-sponsors do not
adequately perform their obligations in relation to the clinical trial or cause the trial to be delayed or terminated;
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we are unable to obtain a sufficient supply of manufactured
clinical trial materials;
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regulatory inspections of manufacturing facilities, which
may, among other things, require us or a co-sponsor to undertake corrective action or suspend the clinical trials, such as the
clinical hold with respect to our Phase 2 clinical trial of RGN-352;
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the interim results of the clinical trial are inconclusive
or negative;
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the clinical trial, although approved and completed,
generates data that is not considered by the FDA or others to be clinically relevant or sufficient to demonstrate safety and efficacy;
and
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changes in governmental regulations or administrative
actions affect the conduct of the clinical trial or the interpretation of its results.
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There
can be no assurance that our clinical trials will in fact demonstrate, to the satisfaction of the FDA and others, that our product
candidates are sufficiently safe or effective. The FDA or we may also restrict or suspend our clinical trials at any time if either
believes that we are exposing the subjects participating in the trials to unacceptable health risks.
Clinical
trials for product candidates such as ours are often conducted with patients who have more advanced forms of a particular condition
or other unrelated conditions. For example, in clinical trials for our product candidate RGN-137, we have studied patients who
are not only suffering from chronic epidermal wounds but who are also older and much more likely to have other serious adverse
conditions. During the course of treatment with our product candidates, patients could die or suffer other adverse events for reasons
that may or may not be related to the drug candidate being tested. Further, and as a consequence that all of our drug candidates
are based on Tß4, crossover risk exists such that a patient in one trial may be adversely impacted by one drug candidate,
and that adverse event may have implications for our other trials and other drug candidates. However, even if unrelated to our
product candidates, such adverse events can nevertheless negatively impact our clinical trials, and our business prospects would
suffer.
These
factors, many of which may be outside of our control, may have a negative impact on our business by making it difficult to advance
product candidates or by reducing or eliminating their potential or perceived value. As a consequence, we may need to perform more
or larger clinical trials than planned. Further, if we are forced to contribute greater financial and clinical resources to a study,
valuable resources will be diverted from other areas of our business. If we fail to complete or if we experience material delays
in completing our clinical trials as currently planned, or we otherwise fail to commence or complete, or experience delays in,
any of our other present or planned clinical trials, including as a result of the actions of third parties upon which we rely for
these functions, our ability to conduct our business as currently planned could materially suffer.
We may not successfully
establish and maintain development and testing relationships with third-party service providers and collaborators, which could
adversely affect our ability to develop our product candidates.
We
have only limited resources, experience with and capacity to conduct requisite testing and clinical trials of our drug candidates.
As a result, we rely and expect to continue to rely on third-party service providers and collaborators, including corporate partners,
licensors and contract research organizations, or CROs, to perform a number of activities relating to the development of our drug
candidates, including the design and conduct of clinical trials, and potentially the obtaining of regulatory approvals. For example,
we currently rely on several third-party contractors to manufacture and formulate Tß4 into the product candidates used in
our clinical trials, develop assays to assess Tß4’s effectiveness in complex biological systems, recruit clinical investigators
and sites to participate in our trials, manage the clinical trial process and collect, evaluate and report clinical results.
We
may not be able to maintain or expand our current arrangements with these third parties or maintain such relationships on favorable
terms. Our agreements with these third parties may also contain provisions that restrict our ability to develop and test our product
candidates or that give third parties rights to control aspects of our product development and clinical programs. In addition,
conflicts may arise with our collaborators, such as conflicts concerning the interpretation of clinical data, the achievement of
milestones, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration.
If any conflicts arise with our existing or future collaborators, they may act in their self-interest, which may be adverse to
our best interests. Any failure to maintain our collaborative agreements and any conflicts with our collaborators could delay or
prevent us from developing our product candidates. We and our collaborators may fail to develop products covered by our present
and future collaborations if, among other things:
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we do not achieve our objectives under our collaboration
agreements;
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we or our collaborators are unable to obtain patent protection
for the products or proprietary technologies we develop in our collaborations;
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we are unable to manage multiple simultaneous product
development collaborations;
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our collaborators become competitors of ours or enter
into agreements with our competitors;
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we or our collaborators encounter regulatory hurdles
that prevent commercialization of our product candidates; or
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we develop products and processes or enter into additional
collaborations that conflict with the business objectives of our other collaborators.
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We
also have less control over the timing and other aspects of our clinical trials than if we conducted the monitoring and supervision
entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or
consistent with a clinical trial protocol or applicable regulations. We also rely on clinical research organizations to perform
much of our data management and analysis. They may not provide these services as required or in a timely manner. If any of these
parties do not meet deadlines or follow proper procedures, including procedures required by law, the preclinical studies and clinical
trials may take longer than expected, may be delayed or may be terminated, which would have a materially negative impact on our
product development efforts. If we were forced to find a replacement entity to perform any of our preclinical studies or clinical
trials, we may not be able to find a suitable entity on favorable terms or at all. Even if we were able to find a replacement,
resulting delays in the tests or trials may result in significant additional expenditures and delays in obtaining regulatory approval
for drug candidates, which could have a material adverse impact on our results of operations and business prospects.
We are subject
to intense competition from companies with greater resources and more mature products, which may result in our competitors developing
or commercializing products before or more successfully than we do.
We
are engaged in a business that is highly competitive. Research and development activities for the development of drugs to treat
indications within our focus are being sponsored or conducted by private and public research institutions and by major pharmaceutical
companies located in the United States and a number of foreign countries. Most of these companies and institutions have financial
and human resources that are substantially greater than our own and they have extensive experience in conducting research and development
activities and clinical trials and in obtaining the regulatory approvals necessary to market pharmaceutical products that we do
not have. As a result, they may develop competing products more rapidly that are safer, more effective, or have fewer side effects,
or are less expensive, or they may develop and commercialize products that render our product candidates non-competitive or obsolete.
With
respect to our product candidate RGN-259, there are also numerous ophthalmic companies developing drugs for corneal wound healing
and other outside-of-the-eye diseases and injuries. Amniotic membranes have been successfully used to treat corneal wounds in certain
cases, as have topical steroids and antibacterial agents.
We
have initially targeted our product candidate RGN-352 for cardiovascular indications. Most large pharmaceutical companies and many
smaller biomedical companies are vigorously pursuing the development of therapeutics to treat patients after heart attacks and
for other cardiovascular indications.
With
respect to our product candidate RGN-137 for wound healing, Johnson & Johnson has previously marketed Regranex™ for this
purpose in patients with diabetic foot ulcers. Other companies, such as Novartis, are developing and marketing artificial skins,
which we believe could also compete with RGN-137. Moreover, wound healing is a large and highly fragmented marketplace attracting
many companies, large and small, to develop products for treating acute and chronic wounds, including, for example, honey-based
ointments, hyperbaric oxygen therapy, and low frequency cavitational ultrasound.
We
are also developing potential cosmeceutical products, which are loosely defined as products that bridge the gap between cosmetics
and pharmaceuticals, for example, by improving skin texture and reducing the appearance of aging. This industry is intensely competitive,
with potential competitors ranging from large multinational companies to very small specialty companies. New cosmeceutical products
often have a short product life and are frequently replaced with newer products developed to address the latest trends in appearance
and fashion. We may not be able to adapt to changes in the industry as quickly as larger and more experienced cosmeceutical companies.
Further, larger cosmetics companies have the financial and marketing resources to effectively compete with smaller companies like
us in order to sell products aimed at larger markets.
Even if approved
for marketing, our technologies and product candidates are unproven and they may fail to gain market acceptance.
Our
product candidates, all of which are based on the molecule Tß4, are new and unproven and there is no guarantee that health
care providers or patients will be interested in our product candidates, even if they are approved for use. If any of our product
candidates are approved by the FDA, our success will depend in part on our ability to demonstrate sufficient clinical benefits,
reliability, safety, and cost effectiveness of our product candidates relative to other approaches, as well as on our ability to
continue to develop our product candidates to respond to competitive and technological changes. If the market does not accept our
product candidates, when and if we are able to commercialize them, then we may never become profitable. Factors that could delay,
inhibit or prevent market acceptance of our product candidates may include:
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the timing and receipt of marketing approvals;
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the safety and efficacy of the products;
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the emergence of equivalent or superior products;
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the cost-effectiveness of the products; and
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It
is difficult to predict the future growth of our business, if any, and the size of the market for our product candidates because
the markets are continually evolving. There can be no assurance that our product candidates will prove superior to products that
may currently be available or may become available in the future or that our research and development activities will result in
any commercially profitable products.
We have no marketing
experience, sales force or distribution capabilities. If our product candidates are approved, and we are unable to recruit key
personnel to perform these functions, we may not be able to commercialize them successfully.
Although
we do not currently have any marketable products, our ability to produce revenues ultimately depends on our ability to sell our
product candidates if and when they are approved by the FDA and other regulatory authorities. We currently have no experience in
marketing or selling pharmaceutical products, and we do not have a marketing and sales staff or distribution capabilities. Developing
a marketing and sales force is also time-consuming and could delay the launch of new products or expansion of existing product
sales. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations.
If we fail to establish successful marketing and sales capabilities or fail to enter into successful marketing arrangements with
third parties, our ability to generate revenues will suffer.
If we enter markets
outside the United States our business will be subject to political, economic, legal and social risks in those markets, which could
adversely affect our business.
There
are significant regulatory and legal barriers to entering markets outside the United States that we must overcome if we seek regulatory
approval to market our product candidates in countries other than the United States. We would be subject to the burden of complying
with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience
difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would
be subject to political, economic and social uncertainties including, among others:
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changes and limits in import and export controls;
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increases in custom duties and tariffs;
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changes in currency exchange rates;
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economic and political instability;
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changes in government regulations and laws;
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absence in some jurisdictions of effective laws to protect
our intellectual property rights; and
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currency transfer and other restrictions and regulations
that may limit our ability to sell certain product candidates or repatriate profits to the United States.
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Any
changes related to these and other factors could adversely affect our business if and to the extent we enter markets outside the
United States.
Governmental
and third-party payors may subject any product candidates we develop to sales and pharmaceutical pricing controls that could limit
our product revenues and delay profitability.
The
successful commercialization of our product candidates, if they are approved by the FDA, will likely depend on our ability to obtain
reimbursement for the cost of the product and treatment. Government authorities, private health insurers and other organizations,
such as health maintenance organizations, are increasingly seeking to lower the prices charged for medical products and services.
Also, the trend toward managed health care in the United States, the growth of healthcare maintenance organizations, and recently
enacted legislation reforming healthcare and proposals to reform government insurance programs could have a significant influence
on the purchase of healthcare services and products, resulting in lower prices and reducing demand for our product candidates.
The cost containment measures that healthcare providers are instituting and any healthcare reform could reduce our ability to sell
our product candidates and may have a material adverse effect on our operations. We cannot assure you that reimbursement in the
United States or foreign countries will be available for any of our product candidates, and that any reimbursement granted will
be maintained, or that limits on reimbursement available from third-party payors will not reduce the demand for, or the price of,
our product candidates. The lack or inadequacy of third-party reimbursements for our product candidates would decrease the potential
profitability of our operations. We cannot forecast what additional legislation or regulation relating to the healthcare industry
or third-party coverage and reimbursement may be enacted in the future, or what effect the legislation or regulation would have
on our business.
We have no manufacturing
or formulation capabilities and are dependent upon third-party suppliers to provide us with our product candidates. If these suppliers
do not manufacture our product candidates in sufficient quantities, at acceptable quality levels and at acceptable cost, or if
we are unable to identify suitable replacement suppliers if needed, our clinical development efforts could be delayed, prevented
or impaired.
We
do not own or operate manufacturing facilities and have little experience in manufacturing pharmaceutical products. We currently
rely, and expect to continue to rely, primarily on peptide manufacturers to supply us with Tß4 for further formulation into
our product candidates. We have historically engaged three separate smaller drug formulation contractors for the formulation of
clinical grade product candidates, one for each of our three product candidates in clinical development, although, as described
in this report, the contractor we engaged for RGN-352 has filed for bankruptcy and closed its manufacturing facility, and our clinical
trials involving RGN-352 have been placed on clinical hold. We currently do not have an alternative source of supply for either
Tß4 or the individual drug candidates. If these suppliers, together or individually, are not able to supply us with either
Tß4 or individual product candidates on a timely basis, in sufficient quantities, at acceptable levels of quality and at
a competitive price, or if we are unable to identify a replacement manufacturer to perform these functions on acceptable terms
as needed, our development programs could be seriously jeopardized.
The
clinical hold on our RGN-352 trial will require us to have new material manufactured by a new manufacturer in the event that we
seek to resume this trial. Significant preparatory time and procedures will be required before any new manufacturer would be able
to manufacture RGN-352 for the AMI trial, due to the time required for revalidation of processes and assays related to such production
that were already in place with the original manufacturer. Since we are unable to estimate the length of time that the trial will
be on clinical hold, we have elected to cease activities on this trial until the FDA clinical hold is resolved and the requisite
funding might be secured.
Other
risks of relying solely on single suppliers for each of our product candidates include:
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the possibility that our other manufacturers, and any
new manufacturer that we may identify for RGN-352, may not be able to ensure quality and compliance with regulations relating
to the manufacture of pharmaceuticals;
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their manufacturing capacity may not be sufficient or
available to produce the required quantities of our product candidates based on our planned clinical development schedule, if
at all;
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they may not have access to the capital necessary to
expand their manufacturing facilities in response to our needs;
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commissioning replacement suppliers would be difficult
and time-consuming;
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individual suppliers may have used substantial proprietary
know-how relating to the manufacture of our product candidates and, in the event we must find a replacement or supplemental supplier,
our ability to transfer this know-how to the new supplier could be an expensive and/or time-consuming process;
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an individual supplier may experience events, such as
a fire or natural disaster, that force it to stop or curtail production for an extended period;
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an individual supplier could encounter significant increases
in labor, capital or other costs that would make it difficult for them to produce our products cost-effectively; or
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an individual supplier may not be able to obtain the
raw materials or validated drug containers in sufficient quantities, at acceptable costs or in sufficient time to complete the
manufacture, formulation and delivery of our product candidates.
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Our suppliers
may use hazardous and biological materials in their businesses. Any claims relating to improper handling, storage or disposal of
these materials could be time-consuming and costly to us, and we are not insured against such claims.
Our
product candidates and processes involve the controlled storage, use and disposal by our suppliers of certain hazardous and biological
materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations
governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these suppliers
and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from
hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for any damages that
result, and we do not carry insurance for this type of claim. We may also incur significant costs to comply with current or future
environmental laws and regulations.
We face the risk
of product liability claims, which could adversely affect our business and financial condition.
We
may be subject to product liability claims as a result of our testing, manufacturing, and marketing of drugs. In addition, the
use of our product candidates, when and if developed and sold, will expose us to the risk of product liability claims. Product
liability may result from harm to patients using our product candidates, such as a complication that was either not communicated
as a potential side effect or was more extreme than anticipated. We require all patients enrolled in our clinical trials to sign
consents, which explain various risks involved with participating in the trial. However, patient consents provide only a limited
level of protection, and it may be alleged that the consent did not address or did not adequately address a risk that the patient
suffered. Additionally, we will generally be required to indemnify our clinical product manufacturers, clinical trial centers,
medical professionals and other parties conducting related activities in connection with losses they may incur through their involvement
in the clinical trials.
Our
ability to reduce our liability exposure for human clinical trials and commercial sales, if any, of Tß4 is dependent in part
on our ability to obtain sufficient product liability insurance or to collaborate with third parties that have adequate insurance.
Although we intend to obtain and maintain product liability insurance coverage if we gain approval to market any of our product
candidates, we cannot guarantee that product liability insurance will continue to be available to us on acceptable terms, or at
all, or that its coverage will be sufficient to cover all claims against us. A product liability claim, even one without merit
or for which we have substantial coverage, could result in significant legal defense costs, thereby potentially exposing us to
expenses significantly in excess of our revenues, as well as harm to our reputation and distraction of our management.
If any of our
key employees discontinue their services with us, our efforts to develop our business may be delayed.
We
are highly dependent on the principal members of our management team. The loss of our chairman and chief scientific advisor, Allan
Goldstein, our chief executive officer, J.J. Finkelstein or David Crockford, our VP of Clinical and Regulatory Affairs, could prevent
or significantly delay the achievement of our goals. In December 2011, we terminated our employment agreements with Dr. Goldstein,
Mr. Finkelstein and Mr. Crockford, who are currently engaged only as part-time employees. And substantially all of our employees
are now working only part-time schedules. We cannot assure you that Dr. Goldstein, Mr. Finkelstein or Mr. Crockford, or any other
key employees, will not elect to terminate their employment. We do not currently have a full-time chief financial officer. In addition,
we do not maintain a key man life insurance policy with respect to any of our management personnel. In the future, we anticipate
that we will also need to add additional management and other personnel. Competition for qualified personnel in our industry is
intense, and our success will depend in part on our ability to attract and retain highly skilled personnel. We cannot assure you
that our efforts to attract or retain such personnel will be successful.
Mauro Bove, a
member of our Board, is also a director and officer of entities affiliated with Sigma-Tau and a director of Lee’s Pharmaceuticals,
relationships which could give rise to a conflict of interest involving Mr. Bove.
Mauro
Bove, a member of our Board of Directors, is also a director and officer of entities affiliated with Sigma-Tau, which collectively
make up our largest stockholder group. Sigma-Tau has provided us with significant funding, may continue doing so in the future,
and is also our strategic partner in Europe with respect to the development of certain of our drug candidates. We have issued shares
of common stock and common stock warrants to Sigma-Tau in several private placement financing transactions, including as recently
as January 2011, but we retained the right to repurchase some of these shares under certain circumstances.
We
have licensed certain rights to our product candidates generally for the treatment of dermal and internal wounds to Sigma-Tau.
Under the license agreement, upon the completion of a Phase 2 clinical trial of either of these product candidates that yields
positive results in terms of clinical efficacy and safety, Sigma-Tau is obligated to either make a $5 million milestone payment
to us or to initiate and fund a pivotal Phase 3 clinical trial of the product candidate. In 2009, we completed two Phase 2 clinical
trials of RGN-137, but these trials were not sufficient to trigger the milestone obligation. There can be no assurance that we
will ever receive this payment or be able to initiate a pivotal Phase 3 clinical trial of RGN-137 that would be funded by Sigma-Tau.
As a result of Mr. Bove’s relationship with Sigma-Tau, there could be a conflict of interest between Sigma-Tau and our
other stockholders with respect to these and other agreements and circumstances that may require the exercise of the Board’s
discretion with respect to Sigma-Tau. Any decision in the best interests of Sigma-Tau may not be in the best interest of our other
stockholders.
Additionally,
Mr. Bove is a non-executive director of Lee’s Pharmaceuticals, in which affiliates of Sigma-Tau have a significant equity
interest. In March 2012, we entered into a license agreement for TB4 in any pharmaceutical form, including our RGN-259, RGN-352
and RGN-137 product candidates for development in China, Hong Kong, Macau and Taiwan. There can be no assurance that we will ever
receive any further payments from Lee’s under the agreement. As a result of Mr. Bove’s relationship with Lee’s
and Sigma-Tau, Mr. Bove may be subject to a conflict of interest in fulfilling his duties to Lee’s, Sigma-Tau and us, in
connection with these and other agreements and circumstances that may require the exercise of the Board’s discretion with
respect to Lee’s. These conflicts could potentially result in decisions that may not be in the best interest of our other
stockholders.
Risks Related To Our Intellectual
Property
We are heavily
reliant on our license from the National Institutes of Health for the rights to Tß4, and any loss of these rights would adversely
affect our business.
We
have received an exclusive worldwide license to intellectual property discovered at the National Institutes of Health, or NIH,
pertaining to the use of Tß4 in wound healing and tissue repair. The intellectual property rights from this license form
the basis for our current commercial development focus with Tß4. This license terminates upon the last to expire of the patent
applications that are filed, or any patents that may issue from such applications, in connection with the license. This license
requires us to pay a minimum annual royalty to the NIH, regardless of the success of our product development efforts, plus certain
other royalties upon the sale of products created by the intellectual property granted under the license. This license may be terminated
for a number of reasons, including our non-payment of the royalty or lack of continued product development, among others. While
to date we believe that we have complied with all requirements to maintain the license, the loss of this license would have a material
adverse effect on our business and business prospects and may require us to cease development of our current line of Tß4-based
product candidates.
If we are not
able to maintain adequate patent protection for our product candidates, we may be unable to prevent our competitors from using
our technology or technology that we license.
Our
success will depend in substantial part on our ability to obtain, defend and enforce patents, maintain trade secrets and operate
without infringing upon the proprietary rights of others, both in the United States and abroad. Pursuant to an exclusive worldwide
license from the NIH, we have exclusive rights to use Tß4 in the treatment of non-healing wounds. While patents covering
our use of Tß4 have issued in some countries, we cannot guarantee whether or when corresponding patents will be issued, or
the scope of any patents that may be issued, in other countries. We have attempted to create a substantial intellectual property
portfolio, submitting patent applications for various compositions of matter, methods of use and fragments and derivatives of Tß4.
We have also in-licensed other intellectual property rights from third parties that could be subject to the same risks as our own
patents. If any of these patent applications do not issue, or do not issue in certain countries, or are not enforceable, the ability
to commercialize Tß4 in various medical indications could be substantially limited or eliminated.
In
addition, the patent positions of the products being developed by us and our collaborators involve complex legal and factual uncertainties.
As a result, we cannot assure you that any patent applications filed by us, or by others under which we have rights, will result
in patents being issued in the United States or foreign countries. In addition, there can be no assurance that any patents will
be issued from any pending or future patent applications of ours or our collaborators, that the scope of any patent protection
will be sufficient to provide us with competitive advantages, that any patents obtained by us or our collaborators will be held
valid if subsequently challenged or that others will not claim rights in or ownership of the patents and other proprietary rights
we or our collaborators may hold. Unauthorized parties may try to copy aspects of our product candidates and technologies or obtain
and use information we consider proprietary. Policing the unauthorized use of our proprietary rights is difficult. We cannot guarantee
that no harm or threat will be made to our or our collaborators’ intellectual property. In addition, changes in, or different
interpretations of, patent laws in the United States and other countries may also adversely affect the scope of our patent protection
and our competitive situation.
Due
to the significant time lag between the filing of patent applications and the publication of such patents, we cannot be certain
that our licensors were the first to file the patent applications we license or, even if they were the first to file, also were
the first to invent, particularly with regards to patent rights in the United States. In addition, a number of pharmaceutical and
biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received
patents on various technologies that may be related to our product candidates. Some of these technologies, applications or patents
may conflict with our or our licensors’ technologies or patent applications. A conflict could limit the scope of the patents,
if any, that we or our licensors may be able to obtain or result in denial of our or our licensors’ patent applications.
If patents that cover our activities are issued to other companies, we may not be able to develop or obtain alternative technology.
Additionally,
there is certain subject matter that is patentable in the United States but not generally patentable outside of the United States.
Differences in what constitutes patentable subject matter in various countries may limit the protection we can obtain outside of
the United States. For example, methods of treating humans are not patentable in many countries outside of the United States. These
and other issues may prevent us from obtaining patent protection outside of the United States, which would have a material adverse
effect on our business, financial condition and results of operations.
Changes to U.S.
patent laws could materially reduce any value our patent portfolio may have.
The
value of our patents depends in part on their duration. A shorter period of patent protection could lessen the value of our rights
under any patents that may be obtained and may decrease revenues derived from its patents. For example, the U.S. patent laws were
previously amended to change the term of patent protection from 17 years following patent issuance to 20 years from the
earliest effective filing date of the application. Because the time from filing to issuance of biotechnology applications may be
more than three years depending on the subject matter, a 20-year patent term from the filing date may result in substantially shorter
patent protection. Future changes to patent laws could shorten our period of patent exclusivity and may decrease the revenues that
we might derive from the patents and the value of our patent portfolio.
We may not have
adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.
In
addition to our patents, we also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities
to develop and maintain our competitive position. However, others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets or disclose our technology. To protect our trade secrets,
we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, we may not have
such agreements in place with all such parties and, where we do, these agreements may not provide meaningful protection of our
trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information. Also, our trade secrets
or know-how may become known through other means or be independently discovered by our competitors. Any of these events could prevent
us from developing or commercializing our product candidates.
We may be subject
to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of former employers.
As
is commonplace in the biotechnology industry, we employ now, and may hire in the future, individuals who were previously employed
at other biotechnology or pharmaceutical companies, including competitors or potential competitors. Although there are no claims
currently pending against us, we may be subject to claims that we or certain employees have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and would be
a significant distraction to management.
Risks Related To Our Securities
Our common stock
price is volatile, our stock is highly illiquid, and any investment in our securities could decline substantially in value.
For
the period from January 1, 2012 through August 6, 2012, the closing price of our common stock has ranged from $0.11 to $0.22,
with an average daily trading volume of approximately 42,000 shares. In light of our small size and limited resources, as well
as the uncertainties and risks that can affect our business and industry, our stock price is expected to continue to be highly
volatile and can be subject to substantial drops, with or even in the absence of news affecting our business. The following factors,
in addition to the other risk factors described in this report, and the potentially low volume of trades in our common stock since
it is not listed on a national securities exchange, may have a significant impact on the market price of our common stock, some
of which are beyond our control:
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results of pre-clinical studies and clinical trials;
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commercial success of approved products;
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corporate partnerships;
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technological innovations by us or competitors;
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changes in laws and government regulations both in the
U.S. and overseas;
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changes in key personnel at our company;
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developments concerning proprietary rights, including
patents and litigation matters;
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public perception relating to the commercial value or
safety of any of our product candidates;
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future sales of our common stock, including to LPC under
our committed equity facility;
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other issuances of our common stock, or securities convertible
into or exercisable for our common stock, causing dilution;
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anticipated or unanticipated changes in our financial
performance;
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general trends related to the biopharmaceutical and biotechnological
industries; and
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general conditions in the stock market.
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The
stock market in general has recently experienced relatively large price and volume fluctuations. In particular, the market prices
of securities of smaller biotechnology companies have experienced dramatic fluctuations that often have been unrelated or disproportionate
to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our
common stock, which could cause a decline in its value. You should also be aware that price volatility may be worse if the trading
volume of the common stock remains limited or declines.
Our principal
stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.
Our
officers, directors and principal stockholders together control approximately 42% of our outstanding common stock. Included in
this group is Sigma-Tau and its affiliates, which together hold outstanding shares representing approximately 37% of our outstanding
common stock. A portion of the shares of common stock currently held by Sigma-Tau and its affiliates are subject to voting agreements
under which our Board controls the voting power of such stock. We cannot assure you that such voting agreements would prevent Sigma-Tau
and its affiliates from taking actions not in your best interests and effectively exercising control over us. These voting agreements
expire periodically through September 2012. After their expiration, we will have no control over the voting of these shares
controlled by Sigma-Tau, including with respect to the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the
market price of our common stock, and therefore may not be in the best interest of our other stockholders.
If securities
or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our common
stock and other securities and their trading volume could decline.
The
trading market for our common stock and other securities will depend in part on the research and reports that securities or industry
analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry
analysts. If securities or industry analysts do not commence or maintain coverage of us, the trading price for our common stock
and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more
of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these
analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease,
which could cause the price of our common stock and other securities and their trading volume to decline.
The exercise
of options and warrants and other issuances of shares of common stock or securities convertible into common stock will dilute your
interest.
As
of June 30, 2012, there were outstanding options to purchase an aggregate of 6,004,599 shares of our common stock at exercise prices
ranging from $0.14 per share to $3.82 per share and outstanding warrants to purchase 11,332,059 shares of our common stock at a
weighted average exercise price of $0.67 per share. The exercise of options and warrants at prices below the market price of our
common stock could adversely affect the price of shares of our common stock. Additional dilution may result from the issuance of
shares of our capital stock in connection with collaborations or manufacturing arrangements or in connection with other financing
efforts, including our committed equity facility with LPC.
Any
issuance of our common stock that is not made solely to then-existing stockholders proportionate to their interests, such as in
the case of a stock dividend or stock split, will result in dilution to each stockholder by reducing his, her or its percentage
ownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase our common stock in the future
and those options or warrants are exercised or we issue restricted stock, stockholders may experience further dilution. Holders
of shares of our common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of shares
of any class or series.
In
addition, most of the outstanding warrants to purchase shares of our common stock have an exercise price above the current market
price for our common stock. As a result, these warrants may not be exercised prior to their expiration, in which case we would
not realize any proceeds from their exercise.
The sale of shares
of our common stock to LPC may cause substantial dilution to our existing stockholders and could cause the price of our common
stock to decline.
Under
our committed equity facility with LPC, we may sell to LPC, under certain circumstances, up to $11,000,000 of our common stock
through October 2013. Generally, we have the right, but no obligation, to direct LPC to periodically purchase up to $11,000,000
of our common stock in specific amounts under certain conditions, which periodic purchase amounts can be increased under specified
circumstances. Through the date of this report, we have sold approximately 1,500,000 shares to LPC for net proceeds of $348,200.
We
have also agreed to issue to LPC up to an aggregate of 1,916,666 shares of common stock as a fee for LPC’s commitment to
purchase our shares. Of these commitment shares, we issued one-half, or 958,333 shares, upon entering into the facility with LPC.
The remaining commitment shares are issuable to LPC on a pro rata basis as purchases are made under the facility. In connection
with the purchases made to date, we have issued 30,336 of the remaining commitment shares.
Depending
upon market liquidity at the time, sales of shares of our common stock to LPC may cause the trading price of our common stock to
decline. LPC may ultimately purchase all, some or no additional portion of the $11,000,000 of common stock, and after it has acquired
shares, LPC may sell all, some or none of those shares. Therefore, sales to LPC by us could result in substantial dilution to the
interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to LPC, or the anticipation
of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a
price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of
our shares to LPC, and we may terminate the facility at any time, in our discretion, without any cost to us.
Our certificate
of incorporation, our stockholder rights plan and Delaware law contain provisions that could discourage or prevent a takeover or
other change in control, even if such a transaction would be beneficial to our stockholders, which could affect our stock price
adversely and prevent attempts by our stockholders to replace or remove our current management.
Our
certificate of incorporation provides our Board with the power to issue shares of preferred stock without stockholder approval.
In addition, under our stockholder rights plan, our Board has the discretion to issue certain rights to purchase our capital stock
when a person acquires in excess of 25% of our outstanding common shares. Our Board has exempted purchases by Sigma-Tau to date
and purchases that may be made by LPC under the committed equity facility from the operation of our stockholder rights plan. The
stockholder rights plan may make it more difficult for stockholders to take corporate actions and may have the effect of delaying
or preventing a change in control, even if such actions or change in control would be in your best interests. In addition, we are
subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Subject to specified exceptions,
this section provides that a corporation may not engage in any business combination with any interested stockholder, as defined
in that statute, during the three-year period following the time that such stockholder becomes an interested stockholder. This
provision could also have the effect of delaying or preventing a change of control of our company. The foregoing factors could
reduce the price that investors or an acquirer might be willing to pay in the future for shares of our common stock.
We may become
involved in securities class action litigation that could divert management’s attention and harm our business and our insurance
coverage may not be sufficient to cover all costs and damages.
The
stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for
the common stock of pharmaceutical and biotechnology companies. These broad market fluctuations may cause the market price of our
common stock to decline. In the past, following periods of volatility in the market price of a particular company’s securities,
securities class action litigation has often been brought against that company. We may become involved in this type of litigation
in the future. Litigation often is expensive and diverts management’s attention and resources, which could hurt our business,
operating results and financial condition.
