# EDGAR Filing Document

**Accession Number:** 0001864607
**File Stem:** 0001493152-23-001659
**Filing Date:** 2023-1
**Character Count:** 868977
**Document Hash:** 77f9473e0a68698166df33d80bbc0870
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-23-001659.hdr.sgml**: 20230117

**ACCESSION NUMBER**: 0001493152-23-001659

**CONFORMED SUBMISSION TYPE**: S-1

**PUBLIC DOCUMENT COUNT**: 55

**FILED AS OF DATE**: 20230117

**DATE AS OF CHANGE**: 20230117

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Squarex Pharmaceutical Corp
- **CENTRAL INDEX KEY:** 0001864607
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **IRS NUMBER:** 455576357
- **STATE OF INCORPORATION:** DE

**FILING VALUES:**
- **FORM TYPE:** S-1
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-269269
- **FILM NUMBER:** 23532307

**BUSINESS ADDRESS:**
- **STREET 1:** 7460 PINEHURST ROAD
- **CITY:** SAINT PAUL
- **STATE:** MN
- **ZIP:** 55115
- **BUSINESS PHONE:** 5106982462

**MAIL ADDRESS:**
- **STREET 1:** 7460 PINEHURST ROAD
- **CITY:** SAINT PAUL
- **STATE:** MN
- **ZIP:** 55115

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Squarex, LLC
- **DATE OF NAME CHANGE:** 20210527

**As filed with the Securities and Exchange Commission on January 17, 2023**

**Registration No. 333 -_______** 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM S-1**

**REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933**

**SQUAREX PHARMACEUTICAL CORPORATION** 

*(Exact name of registrant as specified in its charter)*

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| | | |
|:---|:---|:---|
| **Delaware** | **2834** | **45-5576357** |
| *(State or other jurisdiction of* | *(Primary Standard Industrial* | *(I.R.S. Employer* |
| *incorporation or organization)* | *Classification Code Number)* | *Identification Number)* |

---

**1000 Westgate Drive**

**Suite 1010**

**Saint Paul, MN 55114**

**Telephone: 651-207-8270**

*(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)*

**Hugh McTavish** 

**Chief Executive Officer** 

**1000 Westgate Drive**

**Suite 1010**

**Saint Paul, MN 55114**

**Telephone: 651-207-8270**

*(Name, address, including zip code, and telephone number, including area code, of agent for service)*

***With copies to:***

---

| | |
|:---|:---|
| **Louis A. Brilleman, Esq.**<br> **1140 Avenue of the Americas, 9<sup>th</sup> Floor**<br> **New York, NY 10036**<br> **(212) 584-7805** | **Darrin M. Ocasio, Esq.**<br> **Sichenzia Ross Ference LLP**<br> **1185 Avenue of the Americas, 31st Floor**<br> **New York, NY 10036**<br> **(212) 930-9700** |

---

**Approximate date of commencement of proposed sale to the public:**

As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

**The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.**

**The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.**

---

| | | |
|:---|:---|:---|
| **PRELIMINARY PROSPECTUS** | **SUBJECT TO COMPLETION** | **DATED JANUARY 17, 2023** |

---

![](forms-1_001.jpg)

**Squarex Pharmaceutical Corporation** 

**____________ Shares of Common Stock** 

This is a firm commitment underwritten public offering of common stock, par value $0.0001 per share ("Common Stock") of Squarex Pharmaceutical Corporation, a Delaware corporation. We expect the public offering price of our Common Stock to be between $____ and $____ per share. We have applied to list our Common Stock on The Nasdaq Capital Market under the symbol "SQRX." Approval of our Nasdaq application is a condition to the completion of this Offering.

There is currently no trading market for our Common Stock. The offering price of the Common Stock will be determined between us and EF Hutton, division of Benchmark Investments, LLC, the representative of the underwriters in connection with this offering, taking into consideration our historical performance and capital structure, prevailing market conditions, and overall assessment of our business.

We are an "emerging growth company" under applicable Securities and Exchange Commission rules and, as such, we are subject to reduced public company reporting requirements.

**Investing in our securities involves a high degree of risk. Before buying any of our securities, you should carefully read the discussion of the material risks of investing in our securities under the heading "Risk Factors" beginning on page 7 of this prospectus.** 

**Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.**

---

| | | |
|:---|:---|:---|
|  | **Per Share** | **Total** |
| Public offering price | $| $|
| Underwriting discounts and commissions <sup>(1)</sup> | $| $|
| Proceeds to us, before expenses | $| $|

---

(1) At
 the closing of the Offering, we will also grant to the underwriter four and a half year warrants to purchase a number of shares of
 Common Stock equal to 5% of the shares of Common Stock sold in the Offering (including any Over-Allotment Options, as defined below)
 at an exercise price per share of Common Stock of 105% of the public offering price. In addition, we have agreed to pay the underwriter
 a non-accountable expense allowance equal to 1% of the gross proceeds of the Offering. We refer you to "*Underwriting*" beginning on page 83 of this prospectus for additional information regarding
 underwriting compensation.

We have granted the underwriters a 45-day option to purchase up to ____ additional shares, solely to cover over-allotments, if any (the "Over-Allotment Option"). If the underwriters exercise the Over-Allotment Option in full, the total underwriting discounts payable by us will be $_____ and the total proceeds to us, before expenses, will be $______.

The underwriters expect to deliver the securities against payment to the investors in this offering on or about _____, 2022.

*Sole Book-Running Manager*

**EF HUTTON**

division of Benchmark Investments, LLC

The date of this prospectus is ____________, 2022

**TABLE OF CONTENTS** 

---

| | |
|:---|:---|
|  | **Page** |
| [Prospectus Summary](#a_001) | 2 |
| [Risk Factors](#a_002) | 7 |
| [Cautionary Note Regarding Forward-Looking Statements and Industry Data](#Ha_001) | 41 |
| [Use of Proceeds](#Ha_002) | 42 |
| [Dividend Policy](#Ha_003) | 43 |
| [Capitalization](#Ha_004) | 43 |
| [Dilution](#Ha_005) | 44 |
| [Management's Discussion and Analysis of Financial Condition and Results of Operations](#Ha_006) | 45 |
| [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#Lin_001) | 55 |
| [Business](#ed_001) | 55 |
| [Management](#ed_002) | 73 |
| [Executive Compensation](#ed_003) | 77 |
| [Certain Relationships and Related Party Transactions](#ed_004) | 78 |
| [Security Ownership of Certain Beneficial Owners and Management](#ed_005) | 79 |
| [Description of Securities](#ed_006) | 79 |
| [Shares Eligible for Future Sale](#t_001) | 82 |
| [Underwriting](#ed_007) | 83 |
| [Experts](#ed_008) | 91 |
| [Legal Matters](#ed_009) | 91 |
| [Where You Can Find More Information](#ed_010) | 91 |
| [Glossary of Terms](#ed_011) | 92 |
| [Index to Financial Statements](#a_00000001) | F-1 |

---

You should rely only on the information contained in this prospectus or in any free writing prospectus that we may specifically authorize to be delivered or made available to you. We have not authorized anyone to provide you with any information other than that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus may only be used where it is legal to offer and sell our securities. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of these securities in any jurisdiction where the offer is not permitted.

**PROSPECTUS SUMMARY**

*This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Common Stock, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in each case included elsewhere in this prospectus.*

*Unless the context otherwise requires, references to the "Company," "we," "our," "us," or "Squarex" in this prospectus mean Squarex Pharmaceutical Corporation, a Delaware corporation.*

**Our Company** 

We are a late-clinical-stage pharmaceutical company developing a drug that is intended to improve immune function to reduce severity and incidence of infectious disease with an initial focus on oral herpes.

Our drug SQX770 has completed a Phase 1 and a Phase 2 placebo-controlled clinical trial and showed a statistically significant<sup>1</sup> effect in non-primary endpoints in both trials of delaying time to next herpes labialis or oral herpes (cold sore) outbreak (from day 1 to day 121 in the Phase 1 and from days 42 to 121 in the Phase 2) and reducing the number of outbreaks of cold sores (herpes labialis) in the period from 42 to 121 days after a single dose in persons with frequent outbreaks (in the Phase 2). (These were not the planned primary endpoints in either clinical trial and the results failed to meet the planned primary endpoints in each trial.) In a third exploratory clinical trial testing the mechanism of action of the drug without a defined primary endpoint, SQX770 was shown to alter the immune response against the herpes simplex virus of patients with frequent outbreaks to more closely match the immune response at the cellular level of persons who are infected with HSV-1 but have few or no oral herpes outbreaks. For instance, eight weeks after one dose of SQX770, expression of interferon gamma, a key anti-viral cytokine, by immune cells exposed to herpes simplex virus type 1 (HSV-1) in vitro was significantly increased. The same clinical trial showed that persons infected with HSV-1 with 0 to 2 outbreaks in the prior 12 months had significantly higher interferon gamma expression in the same test than persons with 6 or more outbreaks in the prior 12 months. The drug has been well tolerated in clinical trials with no serious adverse events. None of the data obtained in clinical trials to date would be accepted by the FDA as indicative of efficacy. The FDA will base any approval on the results of Phase 3 clinical trials, which have not been initiated.

The SQX770 drug is topically applied on a patient's arm, not the face or lip or a lesion. In the Phase 3 trials and commercially, we plan to dose patients once every three months.

The use of SQX770 was co-invented by the Company's founder and CEO, Hugh McTavish, who initially tested it on himself to prevent his own frequent cold sores. It almost eliminated his cold sores. This self-testing of the product candidate did not provide any data that the FDA or other regulators would accept as indicative of safety or efficacy.

**Our Competitive Strengths**

We believe that we possess a number of competitive strengths that position us to become a leading pharmaceutical company focused on oral and genital herpes, including:

● Patent protection with patent exclusivity in the U.S. under method of treatment patents until at least 2036 with a composition of matter patent expiring in 2028.

● Our SQX770 drug has shown a statistically significant effect of preventing oral herpes outbreaks in two of two clinical trials where outbreaks were counted, although the measurement showing significant efficacy (a significant difference between the treatment group and a placebo group) was not the measurement pre-specified as the primary endpoint in either case. SQX770 significantly altered the anti-herpes immune response of immune cells isolated from patients in a third clinical trial, where the alteration eight weeks after one dose of the drug made the immune characteristics of the patients with frequent outbreaks more similar to those of persons infected with HSV-1 but having few or no outbreaks.

● We have completed an End-of-Phase-2 Meeting with the U.S. Food and Drug Administration ("FDA").

● Oral herpes is a common condition, with about 15% of the U.S. and world populations having at least one outbreak each year.

● SQX770 would be the first drug approved for the indication of preventing oral herpes outbreaks.

● SQX770 is relatively inexpensive to manufacture.

**Our Business Strategy**

Our goal is to be the leader in preventing and treating both oral and genital herpes outbreaks and, potentially, develop drugs for other infectious diseases. Key elements of our strategy include:

● To obtain FDA approval of SQX770 for preventing herpes labialis outbreaks. We believe this to be a potentially enormous market.

● To obtain FDA approval for preventing genital herpes outbreaks. Clinical trials for that indication may be conducted in parallel with the trials for oral herpes. We believe that the genital herpes market potential is probably about the same size as the oral herpes market potential.

<sup>1</sup> Throughout this prospectus, the term "significant" when referring to clinical trial data describes the result of comparing measurements of one group to another, usually a treatment group compared to a placebo group, where the groups differ and the P value for the difference is less than 0.05. The P value is a statistical measurement indicating how likely it is that a difference between two groups could have arisen by chance. A P value of less than 0.01 means less than a 1% possibility that the difference arose by chance. Conventionally in statistics, P<0.05 is termed a "significant" difference and P<0.01 a "highly significant" difference. This prospectus follows that convention.

● To explore possible uses of SQX770 in other infectious diseases.

● Build out a commercialization organization and if approved, commercialize SQX770 in the United States

● Pursue commercial opportunities for SQX770 outside the United States.

**Recent Developments**

 *Phase 2 shows SQX770 reduces cold sore outbreaks*

We have completed a placebo-controlled multi-center Phase 2 clinical trial in 139 patients with 4 or more oral herpes outbreaks per year. SQX770 cut number of outbreaks by 2.6-fold in the period from 42 to 120 days after a single topical dose on the arm, compared to placebo (P<0.01, highly significant). The primary endpoint was the number of days until the subject reported first new herpes labialis episode following sensitization dose (day 1). This endpoint was not met. The number of days until the subject reported first new herpes labialis beginning from 21 days after the intensification dose (from day 42) was a secondary endpoint, and this endpoint was met.

*End-of-Phase-2 Meeting with U.S. FDA*

We completed an End-of-Phase-2 meeting with the FDA in which the agency agreed on a clear and achievable path for the remaining clinical trials and toxicology testing before we can file an NDA with the FDA for marketing approval of SQX770 that includes:

● two new toxicology studies in nonhuman animals;

● a bridging Phase 2 clinical trial in about 120 patients testing two dose levels in our planned commercial product of a dermal patch to deliver the drug solution; and

● two Phase 3 clinical trials, each with about 900 patients.

**Our Team**

We have assembled a highly experienced management team, board of directors (the "Board of Directors") and scientific advisory board to pursue innovative approaches to solving the problems of urgent and unmet medical needs. Squarex is led by an accomplished team with a deep legacy in multiple therapeutic areas and drug development.

Our Founder, Chairman and Chief Executive Officer, Hugh McTavish, PhD., is a biochemist and patent attorney and successful entrepreneur, focusing on advancing innovations in pharmaceuticals.

Our co-founder, Dr. Thomas D. Horn, is a leading dermatologist, former Executive Director of the American Board of Dermatology, and current adjunct professor at Harvard Medical School.

Dr. Arkadiusz Dudek, one of our board members, is a practicing oncologist at the Mayo Clinic and Professor of Medicine at the University of Minnesota. He is the founder and CEO of TTC Oncology, a company developing a novel breast cancer treatment.

Dr. Michael Myers, one of our board members, is Chairman and CEO of Quoin Pharmaceuticals Ltd., an Israeli Nasdaq traded clinical stage, emerging specialty pharmaceutical company, with headquarters in the US, focused on rare skin and orphan diseases for which there are no approved treatments or cures.

Dr. Mark Schwartz, one of our board members, serves as an advisor to several early-stage biotechnology companies and is a faculty member at San Jose State University with appointments in the Masters in Biotechnology Program, the Lucas School of Management in the Business College, and the department of Biology.

Wayne Danson, one of our board members, is a former partner in multiple Big 4 public accounting firms and accomplished C level executive, has over 35 years of experience in international and corporate taxation, financial advisory services including investment banking, and mergers and acquisitions, business strategy, and entrepreneurship.

**Implication of Being an Emerging Growth Company**

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"). We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (2) the last day of the fiscal year in which we have total annual gross revenues of at least $1.07 billion, (3) the date on which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of our most recently completed second fiscal quarter or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

● we may reduce our executive compensation disclosure;

● we may present only two years of audited financial statements, plus unaudited condensed financial statements for any interim period, and related Management's Discussion and Analysis of Financial Condition and Results of Operations in this Prospectus;

● we may avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and

● we may not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.

We have availed ourselves in this Prospectus of the reduced reporting requirements described above. As a result, the information that we provide stockholders may be less comprehensive than what you might receive from other public companies. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

**Smaller Reporting Company**

We are also currently a "smaller reporting company," meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and have a public float of less than $250 million or annual revenues of less than $100 million during the most recently completed fiscal year. In the event that we are still considered a "smaller reporting company," at such time as we cease being an "emerging growth company," the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth company" or a "smaller reporting company." Specifically, similar to "emerging growth companies," "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects.

**Summary of Risks Associated with Our Business**

Our business and an investment in our company is subject to numerous risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this prospectus summary. Some of these risks include:

● We are a pre-revenue company with a limited operating history Since inception, we have incurred significant operating losses. At September 30, 2022, we had an accumulated deficit of approximately $8,064,167;

● We will need substantial additional funding to finance our operations through regulatory approval of one or more of our product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts;

● We depend entirely on the success of our drug product candidate. If we are unable to obtain regulatory approval or commercialize this experimental treatment, or experience significant delays in doing so, our business will be materially harmed;

● We may not be able to successfully develop or commercialize our existing drug product candidate or develop new drug product candidates on a timely or cost-effective basis;

● We depend on one drug product candidate and our business could be materially adversely affected if our key drug product candidate does not perform as well as expected and does not receive regulatory approval;

● We may be in the future, a party to legal proceedings that could result in adverse outcomes;

● Our competitors and other third parties may allege that we are infringing their intellectual property, forcing us to expend substantial resources in resulting litigation, and any unfavorable outcome of such litigation could have a material adverse effect on our business;

● We may experience failures of or delays in clinical trials which could jeopardize or delay our ability to obtain regulatory approval and commence product commercialization;

● We face intense competition from both brand and generic companies who have significant financial resources which could limit our growth and adversely affect our financial results;

● Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could cause significant liability for us and harm our reputation;

● We will be competing against large existing well-funded pharmaceutical companies with existing and proposed competing products;

● We are subject to extensive governmental regulation and we face significant uncertainties and potentially significant costs associated with our efforts to comply with applicable regulations;

● We may not be able to develop or maintain our sales capabilities or effectively market or sell our products;

● Manufacturing or quality control problems may damage our reputation, require costly remedial activities or otherwise negatively impact our business;

● Our profitability may depend on coverage and reimbursement by third-party payors including government agencies, and healthcare reform and other future legislation may lead to reductions in coverage or reimbursement levels;

● We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, research activities and therefore our receipt of necessary regulatory approvals could be delayed or prevented;

● We may in the future need to, license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms;

● We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop, manufacture and market our products and product candidates;

● If we fail to comply with our obligations under any of our third-party agreements, we could lose license rights that are necessary to develop our product candidates;

● Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel; and

● After this offering, our directors, executive officers and certain stockholders will continue to own a majority of our common stock and, if they choose to act together, will be able to exert absolute control over matters subject to stockholder approval.

**Summary of the Offering**

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| | |
|:---|:---|
| ***Shares being Offered:*** | ________ shares, based upon an assumed public offering price of $ per share. |
| ***Common Stock Outstanding***<br> ***Before this Offering*** | <br> 7354502 |
| ***Common Stock Outstanding***<br> ***After this Offering*** | ____________ shares or shares if the underwriters exercises in full its option to purchase additional shares of common stock. |
| ***Use of Proceeds*** | We expect to receive net proceeds, after deducting underwriting discounts and commissions and estimated expenses payable by us, of approximately $______ million (or approximately $______ million if the underwriters exercise their option to purchase additional shares in full).<br>We intend to use substantially all of the net proceeds from this offering to continue to fund research and development of our SQX770, payment of accrued salaries, repayment of indebtedness to a related party and for working capital and other general corporate purposes. See "Use of Proceeds"<br>|
| ***Underwriters' over-allotment option*** | We have granted the underwriters a 45-day option from the date of this prospectus to purchase up to an additional _________ shares (15% of the total number of shares to be offered by us in the offering). |
| ***Trading Market for our Common***<br> ***Stock*** | We have applied to have our Common Stock listed for trading on the Nasdaq Capital Market. There can be no assurance that our Common Stock will be approved for trading on the Nasdaq. |
| ***Risk Factors*** | See "Risk Factors" beginning on page 7 of this prospectus and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in our securities. |
| ***Trading Symbol*** | We intend to apply to list our common stock on Nasdaq under the symbol "SQRX". We believe that upon completion of this offering, we will meet the standards for listing on Nasdaq, however, we cannot guarantee that we will be successful in listing our common stock on Nasdaq. We will not consummate this offering unless our common stock is approved for listed on Nasdaq. |

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The number of shares of our common stock to be outstanding after this offering (i) is based on 7,354,502 shares of our common stock outstanding as of ______________, 2022, (ii) includes __________ shares of common stock issuable upon the automatic conversion of outstanding SAFEs, or Simple Agreement for Future Equity Interests, on the date of the completion of this offering and (iii)) includes __________ shares of common stock issuable upon the automatic conversion of two convertible promissory notes in the aggregate principal amount of $50,000.

Except as otherwise indicated herein, all information in this prospectus assumes no exercise by the underwriters of their option to purchase an additional _____ shares of common stock, to cover over-allotments, if any.

**SUMMARY FINANCIAL DATA**

*You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus. We have derived the statement of operations data from our audited financial statements for the years ended December 31, 2021 and 2020, and from our unaudited interim condensed financial statements as of September 30, 2022, and 2021 and for the nine months then ended. Our historical results are not necessarily indicative of results that should be expected in any future period.* 

 

*Effective September 13, 2022, the Company converted from a Delaware limited liability company into a Delaware corporation. Pursuant to the statutory conversion, each outstanding membership unit outstanding on that date was converted into two shares of common stock of the Company (the "LLC Conversion").* 

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| | | | | |
|:---|:---|:---|:---|:---|
|  ***Years Ended December 31,*** |  ***2021*** |  ***2020*** | **** <br> ***Nine Months Ended September 30, 2022***  |  ***Nine Months Ended September 30, 2021*** |
| **Operating Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Research and development | $55388 | $150366 | $12975 | $8621 |
| &nbsp;&nbsp;&nbsp; Sales and marketing | 4150 | 5225 | -  | -  |
| &nbsp;&nbsp;&nbsp; General and administrative | 248434 | 219112 | 280056 | 44654 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | $307972 | $374703 | $293031 | 53275 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss from operations | $(307972) | $(374703) | $(293031 | 53275 |
| **Other Income (Expense):** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Interest expense, net | $(3250) | $(3250) | $(3475) | $(2392) |
| &nbsp;&nbsp;&nbsp; Interest expense- related party, net | (52957) | (20688) | (50277) | (37826) |
| &nbsp;&nbsp;&nbsp; Other expense | -  | -  | (17630  |  |
| &nbsp;&nbsp;&nbsp; Warrant re-pricing expenses | - | (282486) | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other income (expense), net | $(56207) | $(306424 | (71382 | $(40218 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss before income tax provision | $(364179) | $(681127) | $(364413 | $(93493 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Loss per Membership Unit basic and diluted | $(0.11) | $(0.20) | $- | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Loss per common share basic and diluted | $- | $- | $(0.05  | (0.01  |
| **Net Loss** | $**(364179)** | $**(681127)** | $**(364413**  | $**(93493**  |

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\* Amounts were calculated giving effect to the LLC conversion in September 2022 whereupon one member unit was exchanged for two shares of common stock. 

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| | | |
|:---|:---|:---|
|  | ***September 30, 2022*** | ***September 30, 2022*** |
|  | **Actual** | **As Adjusted<sup>(1)</sup>** |
| **Balance Sheet Data:** |  |  |
| Cash | $8079 | $|
| Working capital deficiency | $(339908) | $|
| Total assets | $35133 | $|
| Accounts payable and accrued expenses | $35787 | $|
| Accumulated deficit | $(8064167) | $|
| Stockholders' deficit | $(1168802) | $|

---

(1) As adjusted giving effect to (i) our issuance and sale
 of ___________ shares of our common stock in this offering at the assumed offering price of $__________per share, after deducting
 estimated underwriting discounts and commissions and estimated offering expenses payable by us, (ii) the automatic conversion
 into shares of our common stock of outstanding SAFES or Simple Agreement for Future Equity Interests, and (iii))
 includes __________ shares of common stock issuable upon the automatic conversion of two convertible promissory notes in the aggregate
 principal amount of $50,000 .

**RISK FACTORS**

*Any investment in our Common Stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our Common Stock. Our business, financial condition and results of operations could be materially adversely affected by these risks if any of them actually occur. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.*

**Risks Related to Our Financial Position and Need for Additional Capital**

***We are a late clinical stage pharmaceutical company with a limited operating history.***

We were established and began operations in 2012. Our operations to date have been limited to financing and staffing our company and conducting a Phase 1 and Phase 2 clinical trials of our SQX770 formulation to reduce outbreaks of oral herpes. We have not yet demonstrated the ability to successfully obtain marketing approval, manufacture a commercial scale product, arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially early clinical stage pharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to, among other things:

● successfully implement or execute our current business plan, and we cannot assure you that our business plan is sound;

● successfully manufacture our clinical product candidates and establish a commercial supply;

● successfully complete the clinical trials necessary to obtain regulatory approval for the marketing of our product candidates;

● secure market exclusivity and/or adequate intellectual property protection for our product candidates;

● attract and retain an experienced management and advisory team;

● secure acceptance of our product candidates in the medical community and with third-party payors and consumers;

● raise sufficient funds in the capital markets or otherwise to effectuate our business plan; and

● utilize the funds that we do have and/or raise in this offering or in the future to efficiently execute our business strategy.

If we cannot successfully execute any one of the foregoing, our business may fail and your investment will be adversely affected.

 ****

***We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability.***

We are a late clinical stage pharmaceutical company with a limited operating history and have incurred losses since our formation. We incurred net losses of approximately $364,179 and approximately $681,127 for the years ended December 31, 2021, and 2020, respectively. As of September 30, 2022, we had an accumulated loss of approximately $8,064,167. We have not commercialized any product candidates and have never generated revenue from the commercialization of any product. To date, we have devoted most of our financial resources to research and development, including our clinical work, and to intellectual property.

We expect to incur significant additional operating losses for the next several years, at least, as we advance SQX770 through clinical development, complete clinical trials, seek regulatory approval and commercialize our formula, if approved. The costs of advancing product candidates into each clinical phase tend to increase substantially over the duration of the clinical development process. Therefore, the total costs to advance any of our product candidates to marketing approval in even a single jurisdiction will be substantial. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to begin generating revenue from the commercialization of any products or achieve or maintain profitability. Our expenses will also increase substantially if and as we:

● are required by the FDA, to complete the various phases in human trials;

● establish a sales, marketing and distribution infrastructure to commercialize our drug, if approved, and for any other product candidates for which we may obtain marketing approval;

● maintain, expand and protect our intellectual property portfolio;

● hire additional clinical, scientific and commercial personnel;

● add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company; and

● acquire or in-license or invent other product candidates or technologies.

Furthermore, our ability to successfully develop, commercialize and license any product candidates and generate product revenue is subject to substantial additional risks and uncertainties, as described under "Risks Related to Development, Clinical Testing, Manufacturing and Regulatory Approval" and "Risks Related to Commercialization." As a result, we expect to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders' equity and working capital. The amount of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If we are unable to develop and commercialize one or more product candidates, either alone or through collaborations, or if revenues from any product that receives marketing approval are insufficient, we will not achieve profitability. Even if we do achieve profitability, we may not be able to sustain profitability or meet outside expectations for our profitability. If we are unable to achieve or sustain profitability or to meet outside expectations for our profitability, the value of our common stock will be materially and adversely affected.

***Even if this offering is successful, we will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our drugs.***

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to advance the clinical development of and launch and commercialize our product candidates if we receive regulatory approval. Following this offering, we will require additional capital for further research and development and next phase clinical trials of SQX770 may also need to raise additional funds sooner to pursue a more accelerated development of our formulas. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs, clinical trials or any future commercialization efforts.

We believe that the net proceeds from this offering will enable us to fund our operating expense requirements through 12 months if $20 million is raised following the closing of this offering. We have based this estimate on assumptions that may prove to be wrong, and we could deploy our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to the:

● progress, timing, costs and results of clinical trials, including patient enrollment in such trials, for SQX770 or any other future product candidates;

● various clinical development plans we establish for SQX770 and any other future product candidates;

● number and characteristics of product candidates that we discover or in-license and develop, if any;

● outcome, timing and cost of regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we planned for;

● costs of filing, prosecuting, defending and enforcing any patent claims and maintaining and enforcing other intellectual property rights;

● effects of competing technological and market developments;

● costs and timing of the implementation of commercial-scale manufacturing activities;

● costs and timing of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval; and

● cost associated with being a public company.

If we are unable to expand our operations or otherwise capitalize on our business opportunities due to a lack of capital, our ability to become profitable will be compromised.

***Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.***

Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. We do not currently have any committed external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future 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 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. 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 technologies, intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be, in hindsight, favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate product candidate development or future commercialization efforts.

 ****

***There is substantial doubt about our ability to continue as a going concern.***

Our independent public accounting firm in its report dated July 1, 2022, included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. As a result, our financial statements do not reflect any adjustment which would result from our failure to continue to operate as a going concern. Any such adjustment, if necessary, would materially affect the value of our assets.

**Risks Related to Development, Clinical Testing, Manufacturing and Regulatory Approval**

***Clinical trials are expensive, time-consuming and difficult to design and implement, and involve an uncertain outcome.***

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Because the results of early clinical trials are not necessarily predictive of future results, SQX770 may not have favorable results in future preclinical and clinical studies or receive regulatory approval. We may experience delays in initiating and completing any clinical trials that we intend to conduct, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, or at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

● the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;

● obtaining regulatory approval to commence a trial;

● reaching an agreement on acceptable terms with prospective contract research organizations ("CROs"), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

● obtaining Institutional Review Board ("IRB"), approval at each site, or Independent Ethics Committee ("IEC"), approval at sites outside the United States;

● recruiting suitable patients to participate in a trial in a timely manner and in sufficient numbers;

● having patients complete a trial or return for post-treatment follow-up;

● imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues or side effects or failure of trial sites to adhere to regulatory requirements or follow trial protocols;

● clinical sites deviating from trial protocol or dropping out of a trial;

● addressing patient safety concerns that arise during the course of a trial;

● adding a sufficient number of clinical trial sites; or

● manufacturing sufficient quantities of product candidate for use in clinical trials.

We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs or IECs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board ("DSMB") for such trial or the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, including clinical trial data collection, and, while we have agreements governing their committed activities, we have limited influence over their actual performance, as described in "Risks Related to Our Dependence on Third Parties".

***The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for SQX770 or any other product candidates, our business will be substantially harmed.***

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain regulatory approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that we will never obtain regulatory approval for SQX770 or any other product candidate. We are not permitted to market any of our product candidates in the United States until we receive regulatory approval of a New Drug Application ("NDA") from the FDA. Our product candidates could fail to receive regulatory approval for many reasons, including the following:

● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

● serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates, or other products containing the active ingredient in our product candidates;

● negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

● we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

● the data collected from clinical trials of our product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and we may be required to conduct additional clinical trials;

● the FDA or comparable foreign authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates;

● the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities.

The FDA or any foreign regulatory bodies can delay, limit or deny approval of our product candidates or require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:

● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

● the FDA or comparable foreign regulatory authorities may disagree with our safety interpretation of our product candidate;

● the FDA or comparable foreign regulatory authorities may disagree with our efficacy interpretation of our product candidate; and

● the FDA or comparable foreign regulatory authorities may regard our CMC package as inadequate.

Of the large number of drugs in development, only a small percentage successfully complete the regulatory approval processes and are commercialized. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market SQX770 or another product candidate, which would significantly harm our business, results of operations and prospects.

In addition, the FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

***Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.***

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. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including:

● the patient eligibility criteria defined in the protocol;

● the size of the patient population required for analysis of the trial's primary endpoints;

● the nature of the trial protocol;

● the existing body of safety and efficacy data with respect to the product candidate;

● the proximity of patients to clinical sites;

● our ability to recruit clinical trial investigators with the appropriate competencies and experience;

● clinicians' and patients' perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

● competing clinical trials being conducted by other companies or institutions;

● our ability to maintain patient consents; and

● the risk that patients enrolled in clinical trials will drop out of the trials before completion.

***We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented.***

We face risks related to health epidemics or outbreaks of communicable diseases. For example, the recent outbreak around the world, including in the United States, the European Union (the "EU") members, China and many other countries, of the highly transmissible and pathogenic COVID-19 and its Omicron variant. The outbreak of such communicable diseases could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries, which in the case of COVID-19 has occurred. In addition, the COVID-19 pandemic and its resulting lockdowns, and travel and other similar restrictions are having a severe effect on the clinical trials of many drug candidates. Some trials have been merely delayed, while others have been cancelled. The extent to which the COVID-19 pandemic may impact our clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration and geographic reach of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat COVID-19. The continued spread of COVID-19 globally could adversely impact our clinical trial operations, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. Disruptions or restrictions on our ability to travel to monitor data from our clinical trials, or to conduct clinical trials, or the ability of patients enrolled in our studies to travel, or the ability of staff at study sites to travel, as well as temporary closures of our facilities or the facilities of our clinical trial partners and their contract manufacturers, would negatively impact our clinical trial activities. In addition, we rely on independent clinical investigators, CROs and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, including the collection of data from our clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our preclinical trials could be delayed and/or disrupted by the COVID-19 pandemic. As a result, the expected timeline for data readouts of our preclinical studies and clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our financial results.

***Results of preclinical studies, early clinical trials or analyses may not be indicative of results obtained in later trials.***

The results of preclinical studies, early clinical trials or analyses of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. In addition, conclusions based on promising data from analyses of clinical results may be shown to be incorrect when implemented in prospective clinical trials. Even if our clinical trials for SQX770 are completed as planned, we cannot be certain that their results will support the safety and efficacy sufficient to obtain regulatory approval.

***Interim "top-line" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.***

From time to time, we may publish interim "top-line" or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or "top-line" data also remain 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, 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.

***Our product candidates may cause serious adverse events or undesirable side effects, which may delay or prevent marketing approval, or, if approved, require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.***

Serious adverse events or undesirable side effects caused by our products could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of any clinical trial we conduct could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Any clinical trials for our drug product candidates to date may fail to demonstrate acceptable levels of safety and efficacy which could prevent or significantly delay their regulatory approval or result in a more restrictive label by the FDA or other comparable foreign authorities.

If unacceptable side effects arise in the development of our product candidates, we, the FDA or the IRBs at the institutions in which our studies are conducted, or the DSMB, if constituted for our clinical trials, could recommend a suspension or termination of our clinical trials, or the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

● regulatory authorities may withdraw approvals of such product;

● regulatory authorities may require additional warnings on the label, such as a "black box" warning or contraindication;

● additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

● we may be required to implement a Risk Evaluation and Mitigation Strategy ("REMS") or create a medication guide outlining the risks of such side effects for distribution to patients;

● we could be sued and held liable for harm caused to patients;

● the product may become less competitive; and

● our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm our business, results of operations and prospects.

***The market opportunities for our products, if approved, may be smaller than we anticipate.***

We expect to initially seek approval for SQX770. Our estimates of market potential for these formulas have been derived from a variety of sources, including scientific literature, patient foundations, and market research, and may prove to be incorrect. Even if we obtain significant market share for any product candidate, if approved, if the potential target populations are smaller than we anticipate, we may never achieve profitability without obtaining marketing approval for additional indications.

***We have never obtained marketing approval for our product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our product candidates.***

We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not accept or approve our NDAs for our product candidates, it may require that we conduct additional clinical, preclinical, or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA that we submit may be delayed or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our product candidates, generating revenues, and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.

***Even if we obtain FDA approval for our product candidate in the United States, we may never obtain approval for or commercialize our product candidate in any other jurisdiction, which would limit our ability to realize their full market potential.***

To market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

***Even if we obtain regulatory approval for our product candidates, we will still face extensive and ongoing regulatory requirements and obligations and any product candidates, if approved, may face future development and regulatory difficulties.***

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice ("cGMP") requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and Good Clinical Practice ("GCP") requirements for any clinical trials that we conduct post-approval.

Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of our product candidates receive marketing approval, the accompanying label may limit the approved indicated use of the product candidate, which could limit sales of the product candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers' communications regarding off-label use, and if we market our products for uses beyond their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the FDCA relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, may yield various results, including:

● restrictions on manufacturing such products;

● restrictions on the labeling or marketing of products;

● restrictions on product distribution or use;

● requirements to conduct post-marketing studies or clinical trials;

● warning letters or untitled letters;

● withdrawal of the products from the market;

● refusal to approve pending applications or supplements to approved applications that we submit;

● recall of products;

● fines, restitution or disgorgement of profits or revenues;

● suspension or withdrawal of marketing approvals;

● refusal to permit the import or export of our products;

● product seizure; or

● injunctions or the imposition of civil or criminal penalties.

Further, the FDA's policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

***Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.***

The use of SQX770 or any other product candidates we may develop in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

● impairment of our business reputation and significant negative media attention;

● withdrawal of participants from our clinical trials;

● significant costs to defend the litigation;

● distraction of management's attention from our primary business;

● substantial monetary awards to patients or other claimants;

● inability to commercialize SQX770 or any other product candidate;

● product recalls, withdrawals, or labeling, marketing, or promotional restrictions;

● decreased market demand for any product; and

● loss of revenue.

**Risks Related to Commercialization**

***We face significant competition from other pharmaceutical companies and our operating results will suffer if we fail to compete effectively.***

The pharmaceutical industry is highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to acquire, develop, and obtain marketing approval for new products on a cost-effective basis and to market them successfully. We face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies in the United States and other jurisdictions. These organizations may have significantly greater resources than we do and may conduct similar research; seek patent protection; and establish collaborative arrangements for research, development, manufacturing and marketing of products that may compete with us.

Our competitors may, among other things:

● have significantly greater name recognition, financial, manufacturing, marketing, drug development, technical, and human resources than we do, and future mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors;

● develop and commercialize products that are safer, more effective, less expensive, more convenient, or easier to administer, or have fewer or less severe effects;

● obtain quicker regulatory approval;

● implement more effective approaches to sales and marketing; or

● form more advantageous strategic alliances.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel; establishing clinical trial sites and patient registration; and in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, or are more convenient or are less expensive than SQX770. Our competitors may also obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for SQX770, which could result in our competitors establishing or strengthening their market position before we are able to enter the market.

***The successful commercialization of SQX770 and any other product candidate we develop will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels, and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.***

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as SQX770, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our drug and any other product candidates we develop. Assuming we obtain coverage for our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar, or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and offer to reimburse patients only for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing drugs may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates and may not be able to obtain a satisfactory financial return on our product candidates.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.

We may also be subject to extensive governmental price controls and other market regulations outside of the United States, and we believe the increasing emphasis on cost-containment initiatives in other countries have and will continue to put pressure on the pricing and usage of medical products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits.

Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.

***Even if SQX770 or any product candidate we develop receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.***

If SQX770 or any product candidate we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant product revenues or become profitable. The degree of market acceptance of our product candidates, if approved, will depend on a number of factors, including but not limited to:

● the efficacy and potential advantages compared to alternative treatments;

● effectiveness of sales and marketing efforts;

● the cost of treatment in relation to alternative treatments, including any similar generic treatments;

● our ability to offer our products for sale at competitive prices;

● the convenience and ease of administration compared to alternative treatments;

● the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

● the strength of marketing and distribution support;

● the availability of third-party coverage and adequate reimbursement;

● the prevalence and severity of any side effects; and

● any restrictions on the use of our product together with other medications.

Because we expect sales of our product candidates, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of our product candidates to find market acceptance would harm our business and could require us to seek additional financing.

***If we are unable to establish sales, marketing, and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing SQX770, if approved.***

We do not have any infrastructure for the sales, marketing, or distribution of SQX770, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market and successfully commercialize our drug or any product candidate we develop, if approved, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We expect to build a focused sales, distribution and marketing infrastructure to market SQX770, if approved, in the United States and Europe. There are significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of that product. For example, if the commercial launch of SQX770 for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our product candidates on our own include:

● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

● the inability of sales personnel to obtain access to physicians or attain adequate numbers of physicians to prescribe our products; and

● unforeseen costs and expenses associated with creating an independent sales and marketing organization.

We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of our product candidates, if approved, in certain markets overseas. Therefore, our future success will depend, in part, on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator's strategic interest in a product and such collaborator's ability to successfully market and sell the product. We intend to pursue collaborative arrangements regarding the sale and marketing of SQX770, if approved, for certain markets overseas; however, we cannot assure you that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales forces. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.

If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of SQX770, we may be forced to delay the potential commercialization of the drug or reduce the scope of our sales or marketing activities. If we need to increase our expenditures to fund commercialization activities for SQX770 we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. We may also have to enter into collaborative arrangements for SQX770 at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to it or otherwise agree to terms unfavorable to us. Any of these occurrences may have an adverse effect on our business, operating results, and prospects.

If we are unable to establish adequate sales, marketing, and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates and may never become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

***A variety of risks associated with operating internationally could materially adversely affect our business.***

We currently have no international operations, but our business strategy includes potentially expanding internationally if any of our product candidates receive regulatory approval. Doing business internationally involves a number of risks, including but not limited to:

● multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

● failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;

● additional potentially relevant third-party patent rights;

● complexities and difficulties in obtaining protection and enforcing our intellectual property;

● difficulties in staffing and managing foreign operations;

● complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;

● limits in our ability to penetrate international markets;

● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;

● natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;

● certain expenses including, among others, expenses for travel, translation and insurance; and

● regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm any future international expansion and operations and, consequently, our results of operations.

**Risks Related to Our Dependence on Third Parties**

***Our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with development and commercialization, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.***

Our employees and independent contractors, including principal investigators, CROs, consultants, vendors and any third parties we may engage in connection with development and commercialization of our product candidates, could engage in misconduct, including intentional, reckless or negligent conduct or unauthorized activities that violate: the laws and regulations of the FDA or other similar regulatory requirements of other authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; manufacturing standards; data privacy, security, fraud and abuse and other healthcare laws and regulations; or laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

***We currently rely on third-party contract manufacturing organizations ("CMOs") for the production of clinical supplies of SQX770 and intend to rely on CMOs for the production of commercial supplies of SQX770, if approved. Our dependence on CMOs may impair or delay the development and commercialization of the drug, which would adversely impact our business and financial position.***

We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing. Instead, we rely on and expect to continue to rely on CMOs for the supply of cGMP grade clinical trial materials and commercial quantities of SQX770 and any product candidates we develop, if approved. Reliance on CMOs may expose us to more risk than if we were to manufacture our product candidates ourselves. We intend to have manufactured a sufficient clinical supply of SQX770 drug substance to enable us to complete our clinical trials, and we intend to engage a CMO to provide clinical and commercial supplies of the drug products.

The facilities used to manufacture our product candidates must be inspected by the FDA and comparable foreign authorities. While we provide oversight of manufacturing activities, we do not and will not control the execution of manufacturing activities by, and are or will be essentially dependent on, our CMOs for compliance with cGMP requirements for the manufacture of our product candidates. As a result, we are subject to the risk that our product candidates may have manufacturing defects that we have limited ability to prevent. If a CMO cannot successfully manufacture material that conforms to our specifications and the regulatory requirements, we will not be able to secure or maintain regulatory approval for the use of our product candidates in clinical trials, or for commercial distribution of our product candidates, if approved. In addition, we have limited control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval or finds deficiencies in the future, we may need to find alternative manufacturing facilities, which would delay our development program and significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacture of our product candidates or that obtained approvals could be revoked. Furthermore, CMOs may breach existing agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreement at a time that is costly or otherwise inconvenient for us. If we were unable to find an adequate CMO or another acceptable solution in time, our clinical trials could be delayed, or our commercial activities could be harmed.

We rely on and will continue to rely on CMOs to purchase from third-party suppliers the raw materials necessary to produce our product candidates. We do not and will not have control over the process or timing of the acquisition of these raw materials by our CMOs. Supplies of raw material could be interrupted from time to time and we cannot be certain that alternative supplies could be obtained within a reasonable timeframe, at an acceptable cost, or at all. In addition, a disruption in the supply of raw materials could delay the commercial launch of our product candidates, if approved, or result in a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates. Growth in the costs and expenses of raw materials may also impair our ability to cost effectively manufacture our product candidates. There are a limited number of suppliers for the raw materials that we may use to manufacture our product candidates and we may need to assess alternative suppliers to prevent a possible disruption of the manufacture of our product candidates. Although we generally have not begun and do not intend to begin a clinical trial unless we believe we have on hand, or will be able to obtain, a sufficient supply of our product candidates to complete the clinical trial, any significant delay in the supply of raw materials needed to produce our product candidates, could considerably delay conducting our clinical trials and potential regulatory approval of our product candidates.

Finding new CMOs or third-party suppliers involves additional cost and requires our management's time and focus. In addition, there is typically a transition period when a new CMO commences work.

As part of their manufacture of our product candidates, our CMOs and third-party suppliers are expected to comply with and respect the proprietary rights of others. If a CMO or third-party supplier fails to acquire the proper licenses or otherwise infringes the proprietary rights of others in the course of providing services to us, we may have to find alternative CMOs or third-party suppliers or defend against claims of infringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved.

***We intend to rely on third parties to conduct, supervise and monitor our clinical trials. If those third parties do not successfully carry out their contractual duties, or if they perform in an unsatisfactory manner, it may harm our business.***

We rely, and will continue to rely, on CROs, CRO-contracted vendors and clinical trial sites to ensure the proper and timely conduct of our clinical trials. Our reliance on CROs for clinical development activities limits our control over these activities, but we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards.

We and our CROs will be required to comply with the Good Laboratory Practice ("GLP") requirements for our preclinical studies and GCP requirements for our clinical trials, which are regulations and guidelines enforced by the FDA and are also required by comparable foreign regulatory authorities. Regulatory authorities enforce GCP requirements through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Accordingly, if our CROs fail to comply with these requirements, we may be required to repeat clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and we do not control whether or not they devote sufficient time and resources to our clinical trials. Our CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities, which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

If our relationship with any CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management's time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects. In addition:

● the number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers; and

● the loss of, or a disruption in our relationship with, any one or more collaborators could harm our business.

If any collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research and development funding or milestone or royalty payments under such collaborations. If we do not receive the funding we expect under these agreements, our continued development of our product candidates could be delayed, and we may need additional resources to develop additional product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of any collaborators and there can be no assurance that our collaborations will produce positive results or successful products on a timely basis or at all.

In addition, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination or otherwise changes its business priorities, the collaborator might deemphasize or terminate the development or commercialization of our product candidates. If a collaborator terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of our business and our stock price could be adversely affected.

We may in the future collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our programs, and our business may be materially and adversely affected.

**Risks Related to Healthcare Laws and Other Legal Compliance Matters**

***Current and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates, if approved, and may affect the prices we may set.***

In the United States and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively the "ACA") was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

● an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

● a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;

● new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting "transfers of value" made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;

● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

● a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and biologics that are inhaled, infused, instilled, implanted, or injected;

● extension of a manufacturer's Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

● expansion of eligibility criteria for Medicaid programs thereby potentially increasing a manufacturer's Medicaid rebate liability;

● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

● establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;

● expansion of the entities eligible for discounts under the Public Health Service program; and

● a licensure framework for follow-on biologic products.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, the Budget Control Act of 2011, resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the orphan drug tax credit was reduced as part of a broader tax reform. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our customers and accordingly, our financial operations.

In addition, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been Congressional inquiries and proposed federal and state legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

In markets outside of the United States, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

***Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.***

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:

● the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item, or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The U.S. federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand;

● the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act (the "FCA") which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. A claim includes "any request or demand" for money or property presented to the federal government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims;

● the U.S. federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 ("HITECH"), and their respective implementing regulations, which impose, among other things, specified requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions;

● the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

● the U.S. federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children's Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and

● analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities, including our consulting agreements and other relationships with physicians and other healthcare providers, some of whom might receive stock or stock options as compensation for their services, could be subject to challenge under one or more of such laws. Ensuring that our current and future internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

***Any clinical trial programs we conduct or research collaborations we enter into in the European Economic Area may subject us to the General Data Protection Regulation.***

If we conduct clinical trial programs or enter into research collaborations in the European Economic Area, we may be subject to the General Data Protection regulation ("GDPR"). The GDPR applies extraterritorially and implements stringent operational requirements for processors and controllers of personal data, including, for example, high standards for obtaining consent from individuals to process their personal data, robust disclosures to individuals, a comprehensive individual data rights regime, data export restrictions governing transfers of data from the European Union (the "EU") to other jurisdictions, short timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to health data, other special categories of personal data and coded data and additional obligations if we contract third-party processors in connection with the processing of personal data. The GDPR provides that EU member states may establish their own laws and regulations limiting the processing of personal data, including genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase. If our or our partners' or service providers' privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.

***We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.***

Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturers or our development efforts may be interrupted or delayed.

**Risks Related to Our Intellectual Property**

***If we are unable to obtain and maintain patent protection for our technology, products, and product candidates or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.***

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our drug development programs and product candidates. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to SQX770 and any future products and product candidates. We currently hold four U.S. patents as well as patents issued in foreign countries.

The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our patent rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. However, in certain instances, the laws of the United States are more restrictive than those of foreign countries. For example, a recent series of Supreme Court Cases has narrowed the types of subject matter considered eligible for patenting.

Accordingly, certain diagnostic methods are considered ineligible for patenting in the U.S. because they are directed to a "law of nature". Further, publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology, products, or product candidates, in whole or in part, or patents being issued which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated, held unenforceable, in whole or in part, or reduced patent term. Such a result could limit our ability to stop others from using or commercializing similar or identical technologies and products to ours. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. While various extensions may be available, the life of a patent is limited. Without patent protection for our current or future products, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from using or commercializing technologies or products similar or identical to ours.

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***We may become subject to third parties' claims alleging infringement of their patents and proprietary rights, or we may need to become involved in lawsuits to protect or enforce our patents, which could be costly, time consuming, delay or prevent the development and commercialization of our products and product candidates or put our patents and other proprietary rights at risk.***

Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our products and product candidates without alleged or actual infringement, misappropriation or other violation of the patents and proprietary rights of third parties. Litigation relating to infringement or misappropriation of patent and other intellectual property rights in the pharmaceutical and biotechnology industries is common, including patent infringement lawsuits, interferences, oppositions, reexamination, derivation and post-grant proceedings before the U.S. Patent and Trademark Office ("USPTO"), and corresponding foreign patent offices. The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including the biotechnology and pharmaceutical industries, have employed intellectual property litigation as a means to gain an advantage over their competitors. Numerous U.S., European and other foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products and product candidates. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our products and product candidates may be subject to claims of infringement of the intellectual property rights of third parties.

We may be subject to third-party claims including infringement, interference or derivation proceedings, post-grant review and inter parties review before the USPTO or similar adversarial proceedings or litigation in other jurisdictions. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our ability to commercialize the applicable product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. These proceedings may also result in our patent claims being invalidated, held unenforceable or narrowed in scope. Similarly, if our patents or patent applications are challenged during interference or derivation proceedings, a court may hold that a third-party is entitled to certain patent ownership rights instead of us. Further, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our compositions, formulations, methods of manufacture, or methods of treatment, prevention or use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable products and product candidates unless we obtained a license or until such patents expire or are finally determined to be invalid or unenforceable. In addition, defending such claims would cause us to incur substantial expenses and, if successful, could cause us to pay substantial damages, if we are found to be infringing a third party's patent rights. If we are found to have infringed such rights willfully, the damages may be enhanced and may include attorneys' fees. Further, if a patent infringement suit is brought against us or our third-party service providers, our development, manufacturing or sales activities relating to the product or product candidate that is the subject of the suit may be delayed or terminated. As a result of patent infringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the third party, which may require us to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if a license can be obtained on acceptable terms, the rights may be nonexclusive, which could give our competitors access to the same intellectual property rights. If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more of our products and product candidates, forced to modify such products and product candidates, or to cease some aspect of our business operations, which could harm our business significantly. Modifying our products and product candidates to design around third-party intellectual property rights may result in significant cost or delay to us and could prove to be technically infeasible. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business. In addition, if the breadth or strength of protection provided the patents and patent applications we own or in-license is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products and product candidates.

If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products and product candidates, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States and in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of eligibility, lack of written description, lack of novelty, obviousness or non-enablement. Third parties might allege unenforceability of our patents because someone connected with prosecution of the patent withheld relevant information, or made a misleading statement, during patent prosecution. The outcome of proceedings involving assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity of patents, for example, we cannot be certain that there is no invalidating prior art of which we or the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our products and product candidates. Furthermore, our patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectual property rights.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors view these announcements in a negative light, the price of common stock could be adversely affected.

Finally, even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors view these announcements in a negative light, the price of our common stock could be adversely affected. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.

***We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop, manufacture and market our products and product candidates.***

We cannot guarantee that any of our or our licensors' patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our products and product candidates in any jurisdiction. For example, in the United States, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States, Europe and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our future products and product candidates, or their manufacture or use may currently be unpublished. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our products and product candidates or the use thereof. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent's prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products and product candidates. We may incorrectly determine that our products and product candidates are not covered by a third-party patent or may incorrectly predict whether a third party's pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States, Europe or elsewhere that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our products and product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products and product candidates.

From time to time we may identify patents or applications in the same general area as our products and product candidates. We may determine these third-party patents are irrelevant to our business based on various factors including our interpretation of the scope of the patent claims and our interpretation of when those patents expire. If the patents are asserted against us, however, a court may disagree with our determinations. Further, while we may determine that the scope of claims that will issue from a patent application does not present a risk, it is difficult to accurately predict the scope of claims that will issue from a patent application, our determination may be incorrect, and the issuing patent may be asserted against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay monetary damages, we may be temporarily or permanently prohibited from commercializing our products and product candidates. We might, if possible, also be forced to redesign our products and product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

***Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products and product candidates.***

As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical and pharmaceutical industries involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical and pharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act, or the AIA, which was passed in September 2011, resulted in significant changes to the U.S. patent system.

An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a "first-to-file" system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.

Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent before the USPTO. This applies to all of our U.S. patents, even those effectively filed before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.

Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of our business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned and in-licensed patent applications and the enforcement or defense of our owned and in-licensed patents.

Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent laws has also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.

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***Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.***

Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO, European Patent Office ("EPO") and other foreign patent offices over the lifetime of a patent. In addition, the USPTO, EPO and other foreign patent office's require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent failure to make payment of such fees or to comply with such provisions can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which such noncompliance will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents within prescribed time limits. If we or our licensors fail to maintain the patents and patent applications covering our products and product candidates or if we or our licensors otherwise allow our owned or licensed patents or patent applications to be abandoned or lapse, our competitors might be able to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products and product candidates in any indication for which they are approved.

***We enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rights throughout the world.***

Filing, prosecuting and defending patents covering our products and product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our owned and in-licensed technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors have patent protection, but enforcement is not as strong as that in the United States or the Europe. These products may compete with our products and product candidates, and our owned or in-licensed patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

In addition, we may decide to abandon national and regional patent applications before grant. The grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our owned and in-licensed patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for and launch generic versions of our products. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.

Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired.

***If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of marketing exclusivity for our products, our business may be materially harmed.***

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our products are obtained, once the patent life has expired for a product, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from using or commercializing technologies or products similar or identical to ours.

Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, we may be able to extend the term of a patent covering each product candidate under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments and similar legislation in the EU. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent that is applicable to and covers an approved drug may be extended. Similar provisions are available in Europe, such as supplementary protection certificates, and in certain other non-United States jurisdictions to extend the term of a patent that covers an approved drug. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of a patent term extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced, possibly materially.

Further, under certain circumstances, the term of a patent covering our products may be extended for time spent during the pendency of the corresponding patent application in the USPTO (referred to as Patent Term Adjustment, or PTA). The laws and regulations underlying how the USPTO calculates the PTA is subject to change and any such PTA granted by the USPTO could be challenged by a third-party. If we do not prevail under such a challenge, the PTA may be reduced or eliminated, resulting in a shorter patent term, which may negatively impact our ability to exclude competitors.

Because PTA added to the term of patents covering pharmaceutical products has particular value, our business may be adversely affected if the PTA is successfully challenged by a third party and our ability to exclude competitors is reduced or eliminated.

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***Intellectual property rights do not address all potential threats to our competitive advantage.***

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

● others may be able to make products that are similar to SQX770 or our future products or product candidates but that are not covered by the claims of the patents that we own or license from others;

● others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights;

● we or any of our collaborators might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license;

● we or any of our collaborators might not have been the first to file patent applications covering certain technologies we or they own or have obtained a license, or will own or obtain a license;

● issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

● our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

● ownership and inventorship of our patents or patent applications may be challenged by third parties; and

● patents of third parties, or pending or future applications of third parties, if issued, may have an adverse effect on our business.

***Our reliance on third parties requires us to share our trade secrets, which increases the possibility that our trade secrets will be misappropriated or disclosed, and confidentiality agreements with employees and third parties may not adequately prevent disclosure of trade secrets and protect other proprietary information.***

We consider proprietary trade secrets or confidential know-how and unpatented know-how to be important to our business. We may rely on trade secrets or confidential know-how to protect our technology, especially where patent protection is believed by us to be of limited value. Because we expect to rely on third parties to manufacture SQX770 and any future products and product candidates, and we expect to collaborate with third parties on the development of SQX770 and any future products and product candidates, we must, at times, share trade secrets with them. We also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. However, trade secrets or confidential know-how can be difficult to maintain as confidential.

To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, collaborators, contractors and advisors to enter into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with us prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. However, current or former employees, consultants, collaborators, contractors and advisors may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. The need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations. Enforcing a claim that a third party obtained illegally and is using trade secrets or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.

In addition, these agreements typically restrict the ability of our employees, consultants, collaborators, contractors and advisors to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

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***If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.***

Our unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential collaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Over the long term, if we are unable to successfully register our trademarks and trade names and establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

***We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.***

A third party may hold intellectual property, including patent rights that are important or necessary for the development or commercialization of SQX770 or our future products or product candidates. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize SQX770 or our products or product candidates, in which case we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable terms, or at all, which could materially harm our business. At this time, we are unaware of any intellectual property that interferes with ours or is complementary and needed to commercialize SQX770.

***We may be subject to claims that our employees, consultants, collaborators contractors or advisors have wrongfully used or disclosed confidential information of their former employers or other third parties.***

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, consultants, collaborators, contractors, advisors and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us, we may be subject to claims that we or our employees, consultants, collaborators, contractors and advisors have inadvertently or otherwise used or disclosed confidential information of their former employers or other third parties. We may also be subject to claims that the former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

***Our proprietary information may be lost, or we may suffer security breaches.***

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, proprietary business information, personal data and personally identifiable information of our clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, significant regulatory penalties, disrupt our operations, damage our reputation and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

**Risks Related to Our Employees, Managing Our Growth and Our Operations**

***Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.***

We are, and will in the future be, highly dependent on the development, regulatory, commercialization and business development expertise of our senior management team, as well as the other principal members of our scientific and clinical teams. Although we have employment agreements, offer letters or consulting agreements with our executive officers, these agreements do not prevent them from terminating their services at any time.

If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop product candidates, gain regulatory approval, and commercialize new products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability to develop and commercialize product candidates will be limited.

***We expect to expand our development, regulatory, and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.***

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, sales and marketing and financial and systems operations. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities or acquire new facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

 ****

***We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.***

In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and nondisruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

***Our business and operations would suffer in the event of system failures.***

Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access including ransomware attacks, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of SQX770 or any other product candidate could be delayed.

***We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.***

Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of our information technology systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of this confidential, proprietary, or trade secret information is important to our competitive business position. While we will take steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, could enable others to produce competing products, use our proprietary technology or information, or adversely affect our business or financial condition. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations or cash flow.

**Risks Related to this Offering and Our Common Stock**

***Following this offering, our directors, executive officers and certain stockholders will continue to own a significant percentage of our common stock and, if they choose to act together, will be able to exert significant control over matters subject to stockholder approval.***

Upon the closing of this offering, our Chairman and Chief Executive Officer, and other members of our executive management will beneficially own approximately _______% of the voting power of our outstanding common stock, or approximately ______% if the underwriters exercise their over-allotment option in full. As a result, they will have absolute control over the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our certificate of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those entities and individuals. These individuals also have significant control over our business, policies and affairs as officers and directors of our company. Therefore, you should not invest in reliance on your ability to have any control over our company.

***Because we are a startup and a smaller reporting company, the market price of our common stock will likely be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.***

Because we a startup with a limited track record, the market price of our common stock will likely be highly volatile. The market price of our common stock may be subject to wide fluctuations in response to a variety of factors, including the following:

● any delay in the commencement, enrollment and ultimate completion of our clinical trials;

● any delay in submitting an NDA and any adverse development or perceived adverse development with respect to the FDA's review of that NDA;

● failure to successfully develop and commercialize SQR770 or any future product candidate;

● inability to obtain additional funding;

● regulatory or legal developments in the United States and other countries applicable to SQR770 or any other product candidate;

● adverse regulatory decisions;

● changes in the structure of healthcare payment systems;

● introduction of new products, services or technologies by our competitors;

● failure to meet or exceed financial projections we provide to the public;

● failure to meet or exceed the estimates and projections of the investment community;

● changes in the market valuations of companies similar to ours;

● market conditions in the pharmaceutical and biotechnology sectors, and the issuance of new or changed securities analysts' reports or recommendations;

● announcements of significant acquisitions, strategic collaborations, joint ventures, or capital commitments by us or our competitors;

● significant lawsuits, including patent or stockholder litigation, and disputes or other developments relating to our proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

● additions or departures of key scientific or management personnel;

● sales of our common stock by us or our stockholders in the future;

● trading volume of our common stock;

● general economic, industry and market conditions;

● health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented; and

● the other factors described in this "Risk Factors" section.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These price fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our common stock, regardless of our actual operating performance. The market price of our common stock may decline below the public offering price, and you may lose some or all of your investment. In particular, stock markets have experienced extreme volatility in 2020 and 2021 due to the ongoing COVID-19 pandemic, among other factors, and investor concerns and uncertainty related to the impact of the pandemic on the economies of countries worldwide.

***Our management has broad discretion in using the net proceeds from this offering.***

We have stated, in only a general manner, how we intend to use the net proceeds from this offering. See "Use of Proceeds." We cannot, with any assurance, be more specific at this time. We will have broad discretion in the timing of the expenditures and application of proceeds received in this offering. If we fail to apply the net proceeds effectively, we may not be successful in bringing our proposed products to market. You will not have the opportunity to evaluate all of the economic, financial or other information upon which we may base our decisions to use the net proceeds from this offering.

***We could be subject to securities class action litigation.***

In the past, securities class action litigation has often been brought against companies following a decline in the market price of their securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant share price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

***If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.***

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts may publish about us or our business. We do not have any control over these analysts. If our financial performance fails, or our drug development program and clinical trial results do not meet analyst expectations or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

***Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.***

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future. See "Dividend Policy" for additional information.

 ****

***If you purchase shares of our common stock in this offering, you will incur immediate dilution in the book value of your shares.***

The public offering price of our common stock will be substantially higher than the as adjusted net tangible book value per share of our common stock. Therefore, if you purchase our common stock in this offering, you will pay a price per share of our common stock that substantially exceeds the book value of our net tangible assets after subtracting our liabilities. Based on the assumed public offering price of $____________ per share, you will experience immediate dilution of $__________ per share, representing the difference between our net tangible book value per share, after giving effect to this offering, and the public offering price. Further, the future exercise of any outstanding options and/or warrants to purchase shares of our common stock will cause you to experience additional dilution. See "Dilution."

***We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.***

As a newly public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur previously. The Sarbanes-Oxley Act of 2002 ("SOX"), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our Board of Directors. In addition, these rules and regulations are often subject to varying interpretations, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Pursuant to Section 404 of SOX ("Section 404"), we will be required to furnish a report by our senior management on our internal control over financial reporting in our next annual filing.

While we remain a smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To prepare for eventual compliance with Section 404, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

***Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.***

Our certificate of incorporation, bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our Board of Directors. Our corporate governance documents include provisions:

● authorizing "blank check" preferred stock, which could be issued by our Board of Directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;

● limiting the liability of, and providing indemnification to, our directors and officers;

● controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings; and

● providing our Board of Directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which generally prevents stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

**CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS**

This prospectus, including the sections entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business," contains forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect" and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

● our lack of operating history;

● fluctuations in the trading price of our common stock;

● the expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital following this offering;

● our current and future capital requirements to support our development and commercialization efforts for our product candidates and our ability to satisfy our capital needs;

● our dependence on one product candidate, which is still in early stage of clinical development;

● our, or that of our third-party manufacturers, ability to manufacture cGMP quantities of our product candidates as required for pre-clinical and clinical trials and, subsequently, our ability to manufacture commercial quantities of our product candidates;

● our ability to complete required clinical trials for our product candidates and obtain approval from the FDA or other regulatory agencies in different jurisdictions;

● our lack of a sales and marketing organization and our ability to commercialize our product candidates if we obtain regulatory approval;

● our dependence on third-parties to manufacture our product candidates;

● our reliance on third-party CROs to conduct our clinical trials;

● our ability to maintain or protect the validity of our intellectual property;

● our ability to internally develop new inventions and intellectual property;

● interpretations of current laws and the passages of future laws;

● acceptance of our business model by investors;

● the accuracy of our estimates regarding expenses and capital requirements;

● our ability to adequately support organizational and business growth; and

● the continued spread of COVID-19 and the resulting global pandemic and its impact on our preclinical studies and clinical studies.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

**USE OF PROCEEDS**

We estimate that the net proceeds we will receive from the sale of our common stock in this offering, after deducting underwriting discounts and commissions and estimated expenses payable by us, will be approximately $______ million (or $______ million if the underwriters exercise their option to purchase additional shares in full), based on an assumed public offering price of $________ per share.

We currently expect to use the net proceeds from this offering for product development activities, including clinical and regulatory research and development for our product candidates and future clinical trials. Approximately $300,000 will be used to pay accrued salaries payable to our executives and employees. In addition, approximately $700,000 will be used to repay indebtedness owed to our Chief Executive Officer under a $1,000,000 line of credit entered into on December 19, 2019. Amounts outstanding under the line of credit from time to time accrue interest at the rate of 15% per annum. Under the line of credit agreement, we are obligated to repay an amount equal to 10% of the first $1 million in investment funds raised, 20% of the second $1 million raised, and 100% of amounts above $2 million until the debt is repaid in full. The entire amount must be repaid by December 31, 2024.

In addition to the amounts set forth above, we currently expect to use the net proceeds from this offering to be used for the following purposes:

● Approximately $3,600,000 for Phase 2 clinical trial;

● Approximately $540,000 for drug manufacturing and testing; and

the remainder for working capital and general corporate purposes including the associated costs of operating as a public company.

Based on our current projections, we believe the net proceeds of this offering will fund our operations for at least 12 months from the date of this prospectus.

We may also use a portion of the net proceeds of this offering for the acquisition or licensing, as the case may be, of additional technologies, other assets or businesses, or for other strategic investments or opportunities, although we currently have no understandings, agreements or commitments to do so.

Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including the results of our pre-clinical studies and planned clinical trials, our sales and marketing and commercialization efforts, demand for our products, our operating costs and the other factors described under "Risk Factors" in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.

The net proceeds from this offering, together with our cash and marketable securities, are not expected to be sufficient for us to fund our product candidate through regulatory approval, and we may need to raise additional capital to complete the development and commercialization of our product candidate. We estimate that the total amount needed to obtain regulatory approval and bringing our product candidate to market may be $75 million. Accordingly, following the completion of this offering, we will need to raise additional funds through public offerings and/or private placement of our equity or debt securities.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

**DIVIDEND POLICY**

We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Investors should not purchase our common stock with the expectation of receiving cash dividends. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors our Board of Directors deems relevant, and subject to the restrictions contained in any future financing instruments.

**CAPITALIZATION**

The following table sets forth our cash and our capitalization as of September 30, 2022:

● on an actual basis; and

● on an as adjusted basis, giving effect to (i) our issuance and sale of __________ shares of our common stock in this offering based on an assumed public offering price of $_______ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) _____________ shares of common stock issuable upon the automatic conversion of outstanding SAFEs, or Simple Agreement for Future Equity Interests, on the date of the completion of this offering and) includes __________ shares of common stock issuable upon the automatic conversion of two convertible promissory notes in the aggregate principal amount of $50,000.

The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with our financial statements and the related notes included elsewhere in this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Corporate Conversion" sections and other financial information contained in this prospectus.

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| | | |
|:---|:---|:---|
|  | **As of September 30, 2022** | **As of September 30, 2022** |
|  | **Actual** | **As<br> Adjusted** |
| Cash and cash equivalents | $8079 | $— |
| Non-Current Liabilities | 843876 |  |
| Stockholders' Equity |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.0001 par value per share: no shares authorized, issued and outstanding, actual; 250,000,000 shares authorized, pro forma and pro forma as adjusted; 7,354,502 shares issued and shares outstanding, pro forma; _______ shares issued and outstanding, pro forma as adjusted | 735 |  |
| &nbsp;&nbsp;&nbsp;Preferred stock, $0.0001 par value per share: no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, pro forma and pro forma as adjusted; no shares issued and shares outstanding, pro forma; no shares issued and outstanding, pro forma as adjusted |  |  |
| Additional paid-in capital | 6894630 |  |
| Accumulated deficit | (8064167) |  |
| &nbsp;&nbsp;&nbsp;Total equity | (1168802) |  |
| Total capitalization | $(324926) | $— |

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**DILUTION**

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering.

Dilution results from the fact that the public offering price per share is substantially in excess of the book value per share attributable to the existing stockholders for the presently outstanding shares of common stock. We calculate net tangible book value per share by dividing the net tangible book value (total tangible assets less total liabilities) by the number of outstanding shares of common stock.

Our net tangible book value as of September 30, 2022 was ($1,168,802), or ($0.16) per share of our common stock. Our historical net tangible book value is the amount of our total tangible assets less our total liabilities and our common stock. Historical net tangible book value per share represents our historical net tangible book value deficit divided by the 7,354,502 shares of our common stock outstanding as of September 30, 2022.

After giving effect to the receipt of the estimated net proceeds from our sale of shares of common stock in this offering, based on an assumed public offering price of $___________ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at September 30, 2022 would have been approximately $________, or $_____ per share. This represents an immediate increase in net tangible book value per share of $_______ to existing stockholders and an immediate decrease in net tangible book value per share of $______ to you. The following table illustrates this dilution on a per share basis to new investors:

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| |
|:---|
| Assumed public offering price per share |
| &nbsp;&nbsp;&nbsp;Pro forma net tangible book value deficit per share as of September 30, 2022 |
| &nbsp;&nbsp;&nbsp;Increase in net tangible book value per share attributable to this offering |
| As adjusted net tangible book value per share after this offering |
| Dilution per share to new investors purchasing common stock in this offering |

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If the underwriters' over-allotment option is exercised in full, our as adjusted net tangible book value per share after this offering would be $_______ and dilution per share to new investors purchasing common stock in this offering would be $_______.

The table above is based on 7,354,502 shares of our common stock outstanding as of September 30, 2022 and does not include the issuance of ____________ shares of common stock upon the automatic conversion of the outstanding SAFEs on the closing date of this offering or __________ shares of common stock issuable upon the automatic conversion of two convertible promissory notes in the aggregate principal amount of $50,000.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF<br> FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with "Prospectus Summary—Summary Financial Information," "Selected Financial Information" and the financial statements and the related notes thereto included elsewhere in this prospectus. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the section entitled "Risk Factors." This discussion and analysis are based upon the historical financial statements of Squarex Pharmaceutical Corporation included in this prospectus. All references to years, unless otherwise noted, refer to our fiscal years, which end on December 31.*

**Overview**

We are a pharmaceutical company developing a late-clinical-stage drug intended to improve immune function to reduce severity and incidence of infectious disease. The first indication for the drug is *preventing* outbreaks of herpes labialis—cold sores or oral herpes. We are developing a drug formulation code named SQX770 that contains the active ingredient squaric acid dibutyl ester (SADBE). We have completed three clinical trials for oral herpes. SQX770 had statistically significant effects in delaying or reducing the number of oral herpes outbreaks in patients with frequent outbreaks in two of the trials and caused statistically significant changes in measurements of immune characteristics in ways that correlated with persons with fewer oral herpes outbreaks. None of those significant results were in the pre-specified primary endpoints of the clinical trials. None of the data obtained in clinical trials to date would be accepted by the FDA as indicative of efficacy. The FDA will base any drug approval of SQX770 and conclusions of efficacy on the results of Phase 3 clinical trials, which have not been initiated.

We have an approved Investigational New Drug Application (IND) with the FDA, IND number 118615, that allows us to conduct all of our clinical trials of SQX770 for the indication of prevention of herpes labialis outbreaks.

We have also completed an End-of-Phase-2 meeting with the FDA with agreement on the remaining clinical trials and non-clinical work to be done prior to filing a New Drug Application with the FDA for marketing approval for the indication of preventing herpes labialis outbreaks.

Squarex was formed in June 2012 as a Delaware limited liability company. To date, we have raised a total of approximately $6,475,585 in debt and equity financing and used those funds to complete pre-clinical development, a Phase 1, a Phase 2, and a Phase 1 mechanism of action clinical trial in oral herpes and complete an End-of-Phase 2 meeting.

We expect to resume clinical trials in early 2023 with a Phase 2 bridging clinical trial and begin the pivotal Phase 3 trials in late 2023 or early 2024. Patients will be followed in the Phase 3 trials for 12 months.

We have incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. We have no products approved for commercial sale and have never generated any revenues from product sales. Through December 31, 2019, we have raised net cash proceeds of $5.75 million to fund operations through equity financings. From January 1, 2020, to December 31, 2021, we raised a further $450,000 in debt and $235,000 equity from a regulation crowdfunding offering. Our net loss was $681,127 and $364,179 for the years ended December 31, 2020 and 2021, respectively. As of December 31, 2021, we had an accumulated deficit of $7,699,755 and cash, cash equivalents and investments of $35,301. The Company has not generated any revenue to date. As of September 30, 2022, the Company had an accumulated deficit of $8,064,167 and a working capital deficit of $339,908. The net operating loss for the nine months ended September 30, 2022 was $293,031.

We expect our expenses and operating losses will increase substantially as we conduct our remaining planned clinical trials, continue our research and development activities, initiate commercial preparation activities, and seek regulatory approvals for our product candidates, as well as hire additional personnel, protect our intellectual property and continue to incur additional costs associated with being a public company. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensor from whom we have in-licensed a portion of the rights to our product candidate. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities.

We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which could take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Accordingly, until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

***License Agreement with Bioventures***

The original invention of a treatment that prevents oral herpes outbreaks that was the basis for Squarex was invented jointly by Hugh McTavish, who assigned his interest to Squarex, and Dr. Thomas D. Horn and Dr. Sandra M. Johnson, who were employees of the University of Arkansas for Medical Sciences. They assigned their rights to Bioventures, LLC, the licensing arm of The Board of Trustees of the University of Arkansas. That invention was the basis for U.S. Patent application no. 12/450,586, and continuations thereof, which are now U.S. Patent Numbers 9,205,065 and 10,744,084, and Korean Patent No. 10-2009-7023035.

Squarex has an exclusive license for the rights belonging to Bioventures, LLC, (the licensing arm of the Board of Trustees of the University of Arkansas) in U.S. Patent application no. 12/450,586, and continuations thereof, which are now U.S. Patent Numbers 9,205,065 and 10,744,084, and a Korean patent no. 10-2009-7023035.

***COVID-19 Outbreak***

 ****

On January 30, 2020, the World Health Organization announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 Outbreak") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally.

Although to date we have not been directly affected by the pandemic, with the proliferation of new variants of the virus, there is the chance that future shutdowns will have a material adverse impact on the Company's financial condition, liquidity, and future results of operations including our ability to conduct future clinical drug trials. Management is actively monitoring the possible impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce.

**Components of Results of Operations**

***Operating expenses***

*Research and development expenses*

Our research and development expenses consist primarily of direct costs associated with our clinical trials. Research and development costs are expensed as incurred. Clinical trial expenses comprised most of our research and development activities during 2020 and 2021 and during the nine months ended September 30, 2022.

*General and administrative expenses*

General and administrative expense consists primarily of professional fees for legal and accounting services as well as other operating expenses.

 

 *Sales and Marketing*

Sales and marketing costs are expensed as incurred and relate primarily to costs associated with developing our corporate website, investor relations and presentations, traditional and social media, corporate branding and messaging, and strategic communications and business development plans.

**Results of operations for the years ended December 31, 2020 and 2021**

The following table sets forth our statements of operations data for the following periods:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | | **Change** | **Change** |
| <br> **Years Ended December 31,** | **2021** | **2020** | **Dollars** | **Percentage** |
| **Operating Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Research and development | $55388 | $150366 | $(94978) | -63% |
| &nbsp;&nbsp;&nbsp; Sales and marketing | 4150 | 5225 | (1075) | -21% |
| &nbsp;&nbsp;&nbsp; General and administrative | 248434 | 219112 | 29322 | 13% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | $307972 | $374703 | $(66731) | -18% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss from operations | $(307972) | $(374703) | $66731 | 18% |
| **Other Income (Expense):** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Interest expense, net | $(3250) | $(3250) | $- | 0% |
| &nbsp;&nbsp;&nbsp; Interest expense- related party, net | (52957) | (20688) | (32269) | -156% |
| &nbsp;&nbsp;&nbsp; Warrant re-pricing expenses | - | (282486) | 282486 | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other income (expense), net | $(56207) | $(306424) | $250217 | 82% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss before income tax provision | $(364179) | $(681127) | $316948 | 47% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax provision | $- | $- | $- | 0% |
| **Net Loss** | $**(364179)** | $**(681127)** | $**316948** | **47%** |

---

***Operating expenses***

*Research and development expenses*

Research and development expenses relate primarily to preclinical and clinical development of our product candidates. Clinical trial expenses comprised most of our research and development activities during 2020 and 2021 and during the nine months ended September 30, 2022. Our research and development expenses include or could include:

● salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

● external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

● expenses related to drug formulation development and the production of nonclinical and clinical trial supplies, including fees paid to contract manufacturers;

● licensing milestone payments related to development, regulatory or commercialization events;

● expenses related to nonclinical studies;

● expenses related to compliance with drug development regulatory requirements; and

● other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

Research and development expenses decreased in 2021 compared to 2020 because the clinical trials we have conducted were completed in early 2020. Some expenses occurred in 2020 and there were few or no clinical trial expenses in 2021. Research and development expenses are expected to increase substantially after completion of this offering because the proceeds from this offering will allow us to resume our clinical trials.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue to further our clinical development pipeline. Product candidates in later stages of clinical development, as SQX770 is, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to be significant over the next few years as we increase personnel and compensation costs and further our development programs and prepare to seek regulatory approval for our product candidates. It is difficult to determine with certainty the duration and completion costs of any clinical trial we may conduct.

 

*General and administrative expenses*

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.

We expect that our general and administrative expenses will increase in the future as we expand our operating activities, increase headcount, as well as incur additional costs associated with being a publicly traded company and maintaining compliance with exchange listing and SEC requirements. These increases will likely include increased personnel expenses, legal fees, accounting fees, directors' and officers' liability insurance premiums and fees associated with investor relations and maintaining compliance with exchange listing and SEC requirements associated with operating as a public company.

We had $248,434 in general and administrative expenses in 2021 compared to $219,112 in 2020. The increase was primarily attributed to an increase in professional services to support increasing corporate compliance and administration.

*Sales and Marketing*

 

At this point we have only nominal sales and marketing expense since our lead product is in clinical trials and not FDA approved. We had $4,150 sales and marketing expense in 2021 and $5,225 in 2020. As we near regulatory approval we may incur significant marketing expenses and expenses associated with hiring a sales force.

 **Cash Flow Summary for the years ended December 31, 2020 and 2021**

The following table shows a summary of our cash flows for each of the periods shown below:

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| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **December 31,** <br> **2021**  | **December 31,** <br> **2020**  |
| Net cash used in operating activities | $(183001) | $(278528) |
| Net cash provided by financing activities | 213793 | 269000 |
| Net increase (decrease) in cash | $30792 | $(9528) |

---

 *Operating activities*

During the year ended December 31, 2021, cash used in operating activities was $183,001, primarily due to a net loss of $364,179, and an increase in prepaid expenses of $10,500. This was partially offset by non-cash interest expense to a related party of $56,208, an increase in accrued liabilities to a related party of $79,183, an increase in accounts payable of $53,745, an increase other accrued liabilities of $2,293, and an incremental payment on our operating lease of $249.

During the year ended December 31, 2020, cash used in operating activities was $278,528, primarily due to a net loss of $681,127 and an decrease in other current liabilities of $29,891. This was partially offset by a non-cash expense in the re-pricing of fair value of warrants of $282,486, non-cash interest expense to a related party of $23,937, an increase in accrued liabilities to a related party of $121,122, and depreciation expense of $4,945.

 *Investing activities*

During the years ended December 31, 2021 and December 31, 2020, there were no investing activities.

*Financing activities*

During the year ended December 31, 2021, $213,793 was provided by financing activities due to $159,793 from a line of credit provided by a related party and $54,000 provided by the exercise of outstanding warrants.

During the year ended December 31, 2020, $269,000 was provided by financing activities due entirely from a line of credit provided by a related party.

***Other (income) expenses***

*Interest expense*

Interest expense was $3,250 for the twelve months ended December 31, 2021, and $3,250 for the twelve months ended December 31, 2020. In addition, related party interest expense on our line of credit was $52,957 in 2021 and $20,688 in 2020.

*Warrant Expense*

For the twelve months ended Dec. 31, 2020, the Company re-priced its outstanding warrants to reflect a realized loss in value. The company took a write down of ($282,486). In the twelve months ended Dec. 31, 2021, the Company retired all outstanding warrants for a gain of $54,000. As of December 31, 2021, the Company had no outstanding warrants.

 

**Results of operations for the three months ended September 30, 2021 and 2022**

The following table sets forth our statements of operations data for the following periods:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months Ended September 30,** | **Three months Ended September 30,** | **Change** | **Change** |
|  |  ***Year 2022*** |  ***Year 2021*** |  ***Dollars*** |  ***Percentage*** |
| **Operating Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Research and development | $- | $4987 | $(4987) | -100% |
| &nbsp;&nbsp;&nbsp; General and administrative | 77933 | 18120 | 59813 | 330% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | $77933 | $23107 | $54826 | 237% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Loss from Operations** | $**(77933)** | $**(23107)** | $**(54826)** | **-237%** |
| **Other Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Interest expense, net | $(1202) | $(797) | $(405) | -51% |
| &nbsp;&nbsp;&nbsp; Interest expense- related party, net | (16842) | (13440) | (3402) | -25% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other expenses, net | $(18044) | $(14237) | $(3807) | -27% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss before income tax provision | $(95977) | $(37344) | $(58633) | -157% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax provision | $- | $- | $- |  |
| **Net Loss** | $**(95977)** | $**(37344)** | $**(58633)** | **-157%** |

---

***Operating expenses***

*Research and development expenses*

Research and development expenses decreased to $0 for the three months ended September 30, 2022 compared to $4,987 for the three months ended September 30, 2021 due to dormant research and development activities during the third quarter of 2022.

*General and administrative expenses*

General and administrative expenses increased to $77,933 for the three months ended September 30, 2022 compared to $18,120 for the three months ended September 30, 2021. The increase was primarily attributed to an increase in professional services to support increasing corporate compliance and administration.

***Other (income) expenses***

*Interest expense*

Interest expense was $1,202 for the three months ended September 30, 2022, and $797 for the three months ended September 30, 2021 due to a higher overall weighted principal balance on its outstanding loans. In addition, related party interest expense on our line of credit was $16,842 for the three months ended September 30, 2022 and $13,440 for the three months ended September 30, 2021 due to a higher overall weighted principal balance on its outstanding loans.

 

**Cash Flow Summary for the three months ended September 30, 2021 and 2022**

The following table shows a summary of our cash flows for each of the periods shown below:

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| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **September 30,** <br> **2022**  | **September 30,** <br> **2021**  |
| Net cash used in operating activities | $(76853) | $(25460) |
| Net cash provided by financing activities | 41130 | 35000 |
| Net increase (decrease) in cash | $(35723) | $9540 |

---

*Operating activities*

During the three months ended September 30, 2022, cash used in operating activities was $76,853, primarily due to a net loss of $95,977, a decrease in accounts payable of $13,220, and an increase in prepaid expenses of $4,996. This was partially offset by non-cash interest expense to a related party of $14,570, other non-cash interest expense of $3,475, an increase of $8,015 in related party liabilities, and stock compensation expense of $11,280.

During the nine months ended September 30, 2021, cash used in operating activities was $25,460, primarily due to a net loss of $37,344 and an decrease in accounts receivable from a related party of $4,150. This was partially offset by non-cash interest expense to a related party of $13,440, other non-cash interest expense of $1,595, and an increase of $1,000 in accounts payable.

*Investing activities*

During the nine months ended September 30, 2022 and September 30, 2021, there were no investing activities.

*Financing activities*

During the three months ended September 30, 2022, $41,130 was provided by financing activities due to $23,500 from a line of credit provided by a related party and $17,630 provided by the issuance of SAFE notes.

During the three months ended September 30, 2021, $35,000 was provided by financing activities from a line of credit provided by a related party.

 

**Results of operations for the nine months ended September 30, 2021 and 2022**

The following table sets forth our statements of operations data for the following periods:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine months ended September 30,** | **Nine months ended September 30,** | **Change** | **Change** |
|  |  ***2022*** |  ***2021*** |  ***Dollars*** |  ***Percentage*** |
| **Operating Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Research and development | 12975 | 8621 | 4354 | 51% |
| &nbsp;&nbsp;&nbsp; General and administrative | 280056 | 44654 | 235402 | 527% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | $293031 | $53275 | $239756 | 450% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Loss from Operations** | $**(293031)** | $**(53275)** | $**(239756)** | **-450%** |
| **Other Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Interest expense, net | $(3475) | $(2392) | $(1083) | -45% |
| &nbsp;&nbsp;&nbsp; Interest expense- related party, net | (50277) | (37826) | (12451) | -33% |
| &nbsp;&nbsp;&nbsp; Other expense  | (17630 ) | - | (17630 ) | -100% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other expenses, net | $(71382) | $(40218) | $(13534) | -34% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss before income tax provision | $(364413) | $(93493) | $(270920) | -290% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax provision | $- | $- | $- |  |
| **Net Loss** | $**(364413)** | $**(93493)** | $**(270920)** | **-290%** |

---

***Operating expenses***

*Research and development expenses*

Research and development expenses increased slightly to $12,975 for the nine months ended September 30, 2022 compared to $8,621 for the nine months ended September 30, 2021 due to increased support related to the Company's regulatory activities.

*General and administrative expenses*

General and administrative expenses increased to $280,056 for the nine months ended September 30, 2022 compared to $44,654 for the nine months ended September 30, 2021. The increase was primarily attributed to an increase in professional services to support increasing corporate compliance and administration.

***Other (income) expenses***

*Interest expense*

Interest expense was $3,475 for the nine months ended September 30, 2022, and $2,392 for the nine months ended September 30, 2021, due to outstanding loans. In addition, related party interest expense on our line of credit was $50,277 for the nine months ended September 30, 2022, and $37,826 for the nine months ended September 30, 2021 due outstanding loans. Other expense was $17,630 for the nine months ended September 30, 2022, and $0 for nine months ended September 30, 2021, due to the financing costs associated with the SAFE notes that were issued during the first quarter of 2022.

 

**Cash Flow Summary for the nine months ended September 30, 2021 and 2022**

The following table shows a summary of our cash flows for each of the periods shown below:

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| | | |
|:---|:---|:---|
|  | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,** <br> **2022**  | **September 30,** <br> **2021**  |
| Net cash used in operating activities | $(285789) | $(71926) |
| Net cash provided by financing activities | 258567 | 80000 |
| Net increase (decrease) in cash | $(27222) | $8074 |

---

*Operating activities*

During the nine months ended September 30, 2022, cash used in operating activities was $285,789, primarily due to a net loss of $364,413 and a decrease in accounts payable of $17,957. This was partially offset by non-cash interest expense to a related party of $50,277, other non-cash interest expense of $3,475, an increase of $26,045 in related party liabilities, stock compensation expense of $11,280, and a decrease in prepaid expenses of $5,504.

During the nine months ended September 30, 2021, cash used in operating activities was $71,926, primarily due to a net loss of $93,493, a decrease in accrued liabilities of $15,501, and an increase in accounts receivable from a related party of $4,150. This was partially offset by non-cash interest expense to a related party of $37,826, other non-cash interest expense of $2,392 and an increase in accounts payable of $1,000.

*Investing activities*

During the nine months ended September 30, 2022 and September 30, 2021, there were no investing activities.

*Financing activities*

During the nine months ended September 30, 2022, cash provided by financing activities was $258,567 due to $235,067 from the issuance of SAFE notes and $23,500 from a line of credit provided by a related party.

During the nine months ended September 30, 2021, $80,000 was provided by financing activities from a line of credit provided by a related party.

**Liquidity and Capital Resources**

We have generated no revenues, have incurred operating losses since inception, and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. We have an accumulated deficit of approximately $8,064,167 as of September 30, 2022, and future losses are anticipated. These factors, among others, raise substantial doubt as to our ability to obtain additional debt or equity financing and our ability to continue as a going concern. Until such time as we are able to establish a revenue stream from the sale of our therapeutic products, we are dependent upon obtaining necessary equity and/or debt financing to continue operations. We cannot make any assurances that sales of our drug products will commence in the near term or that additional financings will be available to us and, if available, on acceptable terms or at all.

There can be no assurance that we will be able to secure the necessary debt or equity financings to continue our drug development and clinical trial plans at all or on terms acceptable to us. This could negatively impact our business and operations and could also lead to the reduction of our business and drug development operations. Consequently, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, there are material risks and uncertainties that raise substantial doubt about our ability to continue as a going concern within one year from the date these financial statements are available to be issued. These financial statements do not include any adjustments relating to the recovery of recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

 

**Critical Accounting Policies and Significant Judgments and Estimates**

Our management's discussion and analysis of its financial condition and results of operations is based on its financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis. The most significant estimate relates to the valuation allowance of deferred tax assets resulting from net operating losses. We base our estimates and assumptions on current facts, historical experiences, and various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are more fully described in Note 1 to our audited financial statements, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

***Research and Development Expenses***

Research and development costs include costs incurred for internal and external research and development activities to develop drug candidates and are expensed as incurred in the accompanying statement of operations. Research and development costs consist of personnel costs, including, when applicable external laboratory supplies and facility costs, as well as fees paid to third party entities that conduct certain research and development activities on our behalf.

We record accrued liabilities for incurred cost of research and development activities conducted by service providers, which include activities under agreements with various Contract Research Organizations for preclinical and clinical studies and contract manufacturing activities. We record the costs of research and development activities based upon the number of services provided and includes these costs in accrued and other current liabilities in the accompanying balance sheet and within research and development expense in the accompanying interim condensed statement of operations.

**Net Loss per Share of Common Stock**

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be potentially dilutive securities. Because we have reported a net loss twelve-month period ending December 31, 2021, and have no dilutive common stock equivalents, diluted net loss per common share is the same as basic net loss per common share for these periods.

 ****

***Recently Issued Accounting Pronouncements***

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective is not expected to have a material impact on our financial position or results of operations upon adoption.

***Adopted***

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) : Simplifying the Accounting for Income Taxes. This guidance is intended to improve consistent application and simplify the accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. This standard is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual reporting periods, with early adoption permitted. We have adopted ASU No. 2019-12 in the interim financial statements with such adoption having no material impact on the interim financial statements.

***Not Yet Adopted***

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, *Leases* (Topic 842), with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize the liabilities related all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will be effective for public companies for annual and interim periods beginning after December 15, 2018. For all other entities, this standard is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted. We expect to adopt Topic 842 for its annual period ending December 31, 2022 and has not yet finalized the assessment of the impact that ASU 2016-02 will have on its financial statements or financial statement disclosures.

In August 2020, the FASB issued ASU No. 2020-06*, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity.* The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. We do not expect that the adoption of this new standard will have a material impact on our financial statements and related disclosures.

**CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON<br> ACCOUNTING AND FINANCIAL DISCLOSURE**

Effective December 8, 2022, our auditors, L&L CPAS, PA (the "Former Accountant"), resigned as our independent certified public accountant due to its decision to cease all audit assignments on behalf of public companies.

The Former Accountant's report on the financial statements for the fiscal year ended December 31, 2021 and 2020 was not subject to an adverse or qualified opinion or a disclaimer of opinion and was not modified as to uncertainty, audit scope or accounting principles for the fiscal years then ended, except that the Former Accountant's report on the financial statements as of December 31, 2021 and 2020 contained explanatory language that substantial doubt existed about the Company's ability to continue as a going concern due to an accumulated deficit, recurring losses, and the expectation of continuing future losses.

During the two most recent fiscal years and the subsequent interim period through the date of the resignation of the Former Accountant, there were no reportable events as the term is described in Item 304(a)(1)(v) of Regulation S-K.

During the two most recent fiscal years and the subsequent interim period through the date of resignation of the Former Accountant, there were no disagreements with the Former Accountant on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of the Former Accountant would have caused it to make reference to the subject matter of the disagreements in connection with its reports on these financial statements for those periods.

The Company has commenced a search for a new independent certified public accountant.

**BUSINESS**

**Summary**

We are a pharmaceutical company developing a late-clinical-stage drug that is intended to improve immune function to reduce severity and incidence of infectious disease. The first indication for the drug is preventing outbreaks of herpes labialis—cold sores or oral herpes. The drug formulation we are developing is code named SQX770 and contains the active ingredient squaric acid dibutyl ester (SADBE). We have completed three clinical trials of SQX770 for the prevention of oral herpes.

We have also completed an End-of-Phase-2 meeting with the U.S. FDA with agreement on the remaining clinical trials and non-clinical work to obtain NDA approval for the indication of preventing herpes labialis outbreaks.

We have an approved Investigational New Drug Application (IND) with the FDA, IND number 118615, that allows us to conduct all of our clinical trials of SQX770 for the indication of prevention of herpes labialis outbreaks.

We have completed three clinical trials and our development plans are to conduct the following clinical trials in order to obtain FDA approval:

● A Phase 2 bridging clinical trial in which we will test a dermal patch for delivering the drug formulation. The dermal patch will be part of a kit we plan for use in the commercial product. The Phase 2 bridging clinical trial will be placebo-controlled and involve recruiting 120 patients. We will administer doses on day one and at three months and follow the patients to six months.

● Two multi-center placebo-controlled Phase 3 trials conducted in parallel. Each will involve recruiting approximately 900 patients, dosing them at day one and at three, six and nine months. We will follow the patients for 12 months from day one. The Phase 3 trials will use our planned commercial product, which we expect will include the dermal patch as the delivery device.

We plan to complete the bridging Phase 2 trial approximately 9 to 12 months after this offering, and plan to begin the Phase 3 trials approximately 12 to 15 months after this offering.

**Recent Developments**

 *Phase 2 shows SQX770 reduces cold sore outbreaks*

We have completed a placebo-controlled multi-center Phase 2 clinical trial in 139 patients with 4 or more oral herpes outbreaks per year. SQX770 cut number of outbreaks by 2.6-fold in the period from 42 to 120 days after a single topical dose on the arm compared to placebo (P<0.01, highly significant).<sup>1</sup> SQX770 failed to meet the planned primary endpoint in this trial of extending time to next outbreak from day 1 after the topical dose to the arm. (It extended time to next outbreak from day 1 but the result was not statistically significant.)

*Successful End-of-Phase-2 Meeting with U.S. FDA*

We completed an End-of-Phase-2 meeting with the FDA in which the agency agreed on a clear and achievable path for the remaining clinical trials and toxicology testing before we can file an NDA with the FDA for marketing approval of SQX770 that would include only:

● two new toxicology studies in nonhuman animals;

● a bridging Phase 2 clinical trial in about 120 patients testing two dose levels in our planned commercial product of a dermal patch to deliver the drug solution; and

● two Phase 3 clinical trials, each with about 900 patients (600 on drug and 300 on placebo).

<sup>1</sup> The results of the clinical trial were published here: Chang ALS, Honari G, Guan L, Zhao L, Palli MA, Horn TD, Dudek AZ, McTavish H. A phase 2, multi-center, placebo-controlled study of single dose squaric acid dibutyl ester (SADBE) to reduce frequency of outbreaks in subjects with recurrent herpes labialis. *Journal of the American Academy of Dermatology* 2020 Dec;83(6):1807-1809.

Herpes labialis is a common condition characterized by blisters or erosions on the lips and skin around the mouth and nose<sup>2 3 4</sup>. Most cases are caused by herpes simplex virus type 1 (HSV-1), but 10-15% of cases are caused by HSV-2 with this percentage reportedly increasing<sup>3</sup>. In a population survey in the U.S., 76% of adults were positive for IgG antibodies against HSV-1<sup>5</sup>. A population survey of over 10,000 randomly selected adults in France found 15.1% had a herpes labialis episode in the previous 12 months, and of those with herpes labialis 14.2% had 6 or more occurrences in the last 12 months<sup>6</sup>, which is 2.1% of the entire population<sup>7</sup>.

Thus, in the U.S. with a population of 330 million, we estimate that 15% of the population, or 50 million individuals, have an oral herpes outbreak in a given year and seven million persons have six or more outbreaks each year.

The natural history of HSV-1 infection leading to herpes labialis is that typically HSV-1 initially infects oral mucosa, and then migrates to sensory neurons and establishes latency, typically in the trigeminal ganglion. The virus is later activated from latency by various events including fever, stress, cold or flu infection, immunosuppression, and sunlight. Upon activation, the virus migrates down sensory neurons to epithelial cells, typically on the vermillion border of the lip, and causes keratinocyte cell lysis and outbreaks as epidermal lesions<sup>8</sup>. Outbreaks usually last one to two weeks. The frequency and severity of outbreaks is thought to be dependent on the effectiveness of immune control of the virus<sup>9 10</sup>.

In the U.S., 11.9% of persons ages 14 to 49 have HSV-2 infection. There are an estimated 572,000 new genital herpes infections per year<sup>11</sup>.

**Our Solution**

We apply SQX770, a solution of squaric acid dibutyl ester (SADBE) in a dimethylsulfoxide (DMSO) carrier, to a penny-sized spot on the arm once every three months. It will be applied by a dermal patch, similar to a BAND-AID or nicotine patch, applied to the inner aspect of the upper arm. To date in our clinical trials SQX770 has been applied with a cotton swab to a spot on the inner aspect of the upper arm and the spot was then covered by TEGADERM. We plan that the commercial product and the product in our Phase 3 clinical trials will be the dermal patch and the Phase 2 bridging clinical trial will test the dermal patch.

SQX770 appears to act by altering the immune response to the herpes virus. Our clinical trial study of the mechanism of action of SQX770 found that a single dose to the arm of patients two months later caused a shift of the immune response from what is called a Type 2 immune response to a Type 1 response and from an antibody response to a T cell response. It caused significantly greater expression of interferon gamma in white blood cells that were stimulated by contact with herpes virus and caused significantly decrease expression of interleukin-5. Interferon gamma is a key anti-viral immune modulator. Both of those changes—high interferon gamma and low interleukin-5 expression—are also characteristic of people who are infected with HSV-1 but have few or no outbreaks: in other words, those who have good immune control of the virus.

<sup>2</sup> Woo, S. B., and S. J. Challacombe. 2007. Management of recurrent oral herpes simplex infections. *Oral Surg. Oral Med. Oral Pathol. Oral Radiol. Endod.* 103 Suppl:S12.e11-18.

<sup>3</sup> Sarnoff, D. S. 2014. Treatment of recurrent herpes labialis. J. Drugs Dermatol. 13:1016-1018.

<sup>4</sup> Opstelten, W., A. K. Neven, and J. Eekhof. 2008. Treatment and prevention of herpes labialis. *Can. Fam. Physician* 54:1683-1687.

<sup>5</sup> Parks, C.G., M. E. Andrew, L. A. Blanciforti, and M. I. Luster MI. 2007. Variation in the WBC differential count and other factors associated with reporting of herpes labialis: a population-based study of adults. *FEMS Immunol. Med. Microbiol.* 51:336-343.

<sup>6</sup> Lorette, G., A. Crochard, V. Mimaud, P. Wolkenstein, J. F. Stalder, A. El Hasnaoui. 2006. A survey on the prevalence of orofacial herpes in France: the INSTANT Study. J. Am. Acad. Dermatol. 55:225-232.

<sup>7</sup> Stalder, J.F. et al. Prevalence and Quality of Life of Patients Suffering from Herpes Labialis with in France – Instant Study. *Value in Health* 2013. Vol. 6, No. 6, p. 760. These are the best data we are aware of for the incidence of herpes labialis episodes, as opposed to HSV-1 infection. Most other studies, including CDC data, are of seroprevalence of HSV-1 infection, which the U.S. CDC reports is 47.8% of the U.S. population. (McQuillan G. et al. Prevalence of Herpes Simplex Virus Type 1 and Type 2 in Persons Aged 14–49: United States, 2015–2016, NCHS Data Brief No. 304, February 2018). Based on that high prevalence of HSV-1 infection in the U.S. we believe it is not likely that symptomatic illness differs dramatically from that in France.

<sup>8</sup> Nicoll, M.P., J. T. Proenca, and S. Efstathiou. 2012. The molecular basis of herpes simplex virus latency*. FEMS Microbiol. Rev*. 36:684-705.

<sup>9</sup> McKenna, D. B., W. A. Neill, and M. Norval. 2001. Herpes simplex virus-specific immune responses in subjects with frequent and infrequent orofacial recrudescences. *British J. Dermatology* 144:459-464.

<sup>10</sup> Daheshia, M., L. T. Feldman, and B. T. Rouse. 1998. Herpes simplex virus latency and the immune response. Curr. Opin. Microbiol. 1:430-436.

<sup>11</sup> Centers for Disease Control and Prevention, Genital Herpes – CDC Fact Sheet (Detailed)

**Summary of clinical trials**

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| | | | |
|:---|:---|:---|:---|
| **Clinical Trial** | **Phase 1.** Clinicaltrials.gov identifier NCT01971385 | **Phase 2.** ClinicalTrials.gov Identifier: NCT02965781 | **Phase 1 Mechanism of Action.** ClinicalTrials.gov Identifier: NCT03661541 |
| **Design** | Placebo-controlled, 28 patients on SQX770, 15 on Placebo | Placebo-controlled, 92 patients on SQX770, 37 on Placebo | 12 patients with 6 or more outbreaks per year, white blood cells collected and tested for response to HSV-1 virus in vitro prior to one dose of SQX770 and again 8 weeks after the dose. 24 comparator persons infected with HSV-1 having 0 to 2 outbreaks per year. |
| **Endpoints** | Time to next outbreak | <br> Primary endpoint: days to next outbreak after a single dose on day 1. <br> Secondary endpoint: <br>Number of outbreaks over days 42-121 after a single dose. | <br> (There were no planned primary endpoints. All the endpoints were exploratory.) <br>Expression of immune genes in white blood cells stimulated with HSV-1 in treated patients with 6 or more outbreaks and comparison group infected with HSV-1 but having only 0-2 outbreaks per year. |
| **Result Highlights** | Median time to next outbreak 40 days in placebo group vs. more than 122 days in SQX770 group, p<0.01, highly significant. | <br> Primary endpoint: Median time to next outbreak from day 1 in placebo group 84 days versus in SQX770 group 107 days. Difference not significant (p=0.9) <br>Secondary endpoints over days 42-121: <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ● 2.6-fold fewer outbreaks in SQX770 group than placebo (P<0.01). <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ● 2.4-fold longer time to next outbreak (P<0.05), and <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ● significantly less severe outbreaks (P<0.05).  | Altered immune response to herpes virus in patients with 6 or more outbreaks per year and made it more like that in persons infected HSV-1 but with few or no outbreaks. Significantly increased leukocyte interferon gamma expression, significantly decreased interleukin-5 expression, shifted immune response from type 2 antibody response to more effective type 1 cellular response. Significantly increased leukocyte proliferation against HSV-1. |

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| | | | |
|:---|:---|:---|:---|
| **Publication** | McTavish H, Kimball A, Horn TD. Immunotherapy of recurrent herpes labialis with squaric acid. *JAMA Dermatology* 2017;153:828-829. | Chang ALS, Honari G, Guan L, Zhao L, Palli MA, Horn TD, Dudek AZ, McTavish H. A phase 2, multi-center, placebo-controlled study of single dose squaric acid dibutyl ester (SADBE) to reduce frequency of outbreaks in subjects with recurrent herpes labialis. *Journal of the American Academy of Dermatology* 2020 Dec;83(6):1807-1809. | McTavish H, Zerebiec KW, Zeller JC, Shekels LL, Matson MA, Kren BT. Immune characteristics correlating with HSV-1 immune control and effect of squaric acid dibutyl ester on immune characteristics of subjects with frequent herpes labialis episodes. *Immunity Inflammation and Disease* 2019;7(1):22-40. |

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**Phase 1. Safety and Efficacy of Squaric Acid Dibutyl Ester for Treatment of Herpes Labialis.**

**Clinicaltrials.gov Identifier: NCT01971385**

The Phase 1 clinical trial was conducted at Massachusetts General Hospital in 43 patients who reported six or more herpes labialis episodes in the prior 12 months. Patients were randomized 2:1 to receive on a double-blind basis SQX770 [2% squaric acid dibutylester (SADBE) in dimethylsulfoxide (DMSO)] on the arm on day one and then a lower concentration of SADBE on the lip on the site of a lesion at their next outbreak occurring after day 15 or to receive placebo (DMSO only) on both occasions. The primary endpoints were safety and time to next outbreak after the last treatment dose on a lesion.

<u>Results</u>: The data was not significant for time to next outbreak after the last treatment dose on a lesion because 16 of 28 patients in the treatment group (receiving SQX770) did not experience an outbreak in the study and thus never received a treatment dose on the lesion. In that way we discovered in this trial that the second dose on the lesion was not necessary. Therefore, we analyzed time to next outbreak after the sensitization dose on the arm.

After a single dose to the arm, the patients receiving the placebo had an outbreak but most getting the drug did not experience an outbreak in the 124-day follow up period. Median time to next outbreak after the single dose on the arm was 40 days in the placebo group vs. greater than 124 days in the drug-treated group, a highly significant difference (P<0.01).

The study drug was well tolerated. Adverse events consisted primarily of reversible redness at the drug application site. There we no serious adverse events. In the treatment groups, 13 of 35 patients who enrolled experienced non-serious redness, swelling, or itching at the application site versus 2 of 19 in the placebo group. One subject in the treatment group and one in the placebo group experienced a different non-serious adverse event.

Details of and results of this clinical trial are posted at:

&nbsp;&nbsp;&nbsp;&nbsp;https://clinicaltrials.gov/ct2/show/NCT01971385?term=NCT01971385&draw=2&rank=1

**Mechanism of Action Phase 1. Immune Characteristics Correlating With HSV-1 Immune Control and Effect of Squaric Acid Dibutyl Ester on Immune Characteristics of Subjects With Frequent Herpes Labialis Episodes.**

**ClinicalTrials.gov Identifier: NCT03661541**

In this study, three groups of patients were recruited. All patients tested positive for antibodies against HSV-1:

● (A) 12 patients with six or more episodes of cold sores in the prior 12 months

● (B) 12 patients with one or two episodes in the prior 12 months

● (C) 12 patients with no episodes in 12 months

Blood was collected from these persons and white blood cells isolated and tested for proliferation in vitro when stimulated with HSV-1-infected cell extracts and free HSV-1 virus. RNA was also isolated from the peripheral blood mononuclear cells (PBMCs) after incubation in the three stimuli and expression of 41 immune-related genes quantified by quantitative real-time PCR. Also, serum anti-HSV-1 IgG levels were quantified.

After the blood collection on day one, the persons in group A (frequent cold sore sufferers) were treated with a single topical application of SQX770 (2% squaric acid dibutyl ester (SADBE) in DMSO), applied to the inner aspect of the upper arm. These subjects returned on days 15 and 57 for blood collection, and their PBMCs were tested again on those dates for proliferation in vitro against the same stimuli and for gene expression and for serum anti-HSV-1 IgG levels.

This was an exploratory study with no pre-specified primary endpoint.

Results:

<u>PBMC proliferation in vitro to HSV-1 and other stimuli.</u>

PBMC proliferation in response to all three stimuli showed the same trends of group C> B > A. In other words, PBMC from those with better immune control of HSV-1, proliferated more than those with worse immune control. The difference was not statistically significant for any one stimulus, but the response to all three stimuli taken together was significantly greater in group C than group A.

PBMC proliferation against HSV-1 of the group A subjects was significantly greater on day 57 than on day one prior to drug treatment. The PBMC proliferative response to all three stimuli taken together was also significantly greater on day 57 than day one in the group A subjects. Therefore, in terms of proliferative response, the group A subjects were more like the group C subjects with good immune control of HSV infection 56 days after SQX770 treatment than they had been on day 1 before drug treatment.

Figure. Proliferation (±Standard Error of the Mean) of PBMCs collected from frequent cold sore sufferers (Group A), infrequent cold sore sufferers (Group B), and persons with zero cold sores in the prior twelve months (Group C). (CPM is counts per minute.)

![](foms-1_005.jpg)

<u>Anti-HSV-1 IgG</u>

Groups C and B pooled together had significantly lower anti-HSV-1 IgG levels than group A. Among group A subjects, anti-HSV-1 IgG levels were lower on day 57 than on day one, although not significantly so.

Table Levels of anti-HSV1 IgG.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Units** | **Group and day** | **Group average (n=12)** | **Group St. Dev.** | **p value\*** | **Sample minus A1** | **Sample/A1** |
| IV | A1 | 8.32 | 1.90 |  |  |  |
| IV | A15 | 9.39 | 1.59 | 0.197 | 1.08 | 1.13 |
| IV | A57 | 7.58 | 1.56 | 0.158 | -0.73 | 0.91 |
| IV | B1 | 6.61 | 1.65 | 0.028 | -1.71 | 0.79 |
| IV | C1 | 7.16 | 1.90 | 0.151 | -1.15 | 0.86 |
| IV | C1+B1 | 6.88 | 1.84 | 0.038 | -1.43 | 0.83 |

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\*p values are from two-tailed unpaired t-test for groups B and C vs. A and from two-tailed paired t-test for days 15 and 57 vs. day 1 in group A. n=12 in each group, except n=24 for the pooled groups C+B.

<u>Immune gene expression</u>

For every immune-related gene where any differences were significant the direction of these changes match:

&nbsp;&nbsp;&nbsp;&nbsp;1. Expression
 in PBMCs upregulated (or downregulated) by HSV-1 (or other stimulus).

2. Same
 upregulated gene was more expressed in the presence of HSV-1 (or other stimulus) in group C and B subjects (those with zero or infrequent
 herpes labialis episodes) than group A subjects (those with frequent herpes labialis episodes). (If the gene was downregulated by
 the stimulus, then it was also found to be less expressed in groups C and B than group A.)

&nbsp;&nbsp;&nbsp;&nbsp;3. Same
 upregulated gene was more expressed in the presence of HSV-1 (or other stimulus) in group A subjects on day 57 after treatment with
 SQX770 than on day one before treatment. (If the gene was downregulated by the stimulus, then it was also found to be less expressed
 in group A on day 57 than day 1.)

Therefore, in every case where there was significant difference, the SQX770 treatment changed the group A subjects by day 57 to make them much more like the group B and C subjects who have better immune control of their HSV-1 infection than the group A subjects were on day one.

Interferon Gamma (IFNG a Th1 cytokine) was the gene (1) most consistently upregulated by a large amount in all three stimuli versus negative control, (2) most consistently increased by the greatest amount in its expression in groups B+C versus group A on day one in all three stimuli, and (3) most consistently increased in its expression by the greatest amount in group A on day 57 vs. day one in all three stimuli. Interleukin-5 (IL5 a Th2 cytokine) (1) was not upregulated by any of the three stimuli and (2) was less expressed in groups B+C than group A day 1 in both HSV-1 virus and HSV-1-infected cell extracts, and (3) was less expressed in group A on day 57 than day 1 in both HSV-1 virus and HSV-1-infected cell extracts.

The absolute gene expression levels of IFNG and IL5 in the presence of HSV stimulus is shown in the table below.

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| | | | | |
|:---|:---|:---|:---|:---|
| Gene expression as percentage of Group A day 1 | Gene expression as percentage of Group A day 1 | Gene expression as percentage of Group A day 1 | Gene expression as percentage of Group A day 1 | Gene expression as percentage of Group A day 1 |
| Group (Number of outbreaks) | Day | IFNG | IL5 | IFNG/IL5 ratio |
| A. 6+ | 1 | 100 | 100 | 100 |
| B. 1 or 2 | 1 | 355 | 50\* | 757\*\* |
| C. 0 | 1 | 302\* | 63\* | 515\*\* |
| A. 6+ | 56 | 1,106\*\* | 56\* | 2,528\*\* |
|  |  | \*significant (P<0.05) vs. Group A day 1 | \*significant (P<0.05) vs. Group A day 1 | \*significant (P<0.05) vs. Group A day 1 |
|  |  | \*\*highly significant (P<0.01) vs. Group A day 1 | \*\*highly significant (P<0.01) vs. Group A day 1 | \*\*highly significant (P<0.01) vs. Group A day 1 |

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A single dose of SQX770 applied to the persons with 6 or more outbreaks per year caused an 11-fold increase in interferon gamma expression and a 25-fold increase in the interferon-gamma to interleukin-5 ratio. Those numbers are not only a highly significant improvement but made the subjects significantly better in those measurements than the subjects who had few or no cold sore outbreaks.

The data indicate that cell-mediated immunity is more important than humoral immunity and a type 1 cell-mediated response more important than a type-2 response in control of HSV-1 infection and indicate that PBMC proliferation in vitro in response to the HSV-1 virus correlates with effective immune control. Interferon gamma (IFNG) was possibly found to be the gene whose expression in PBMCs is most correlated with effective immune control of HSV-1 and whose expression in PBMCs in the presence of HSV-1 virus was also significantly increased by SQX770 treatment of patients.

<u>Adverse events</u>:

Twelve subjects were treated once with SQX770 on the arm. No serious adverse events occurred. One reported nausea. Two reported a mild temporary skin reaction at the site of application involving redness or itching.

<u>Conclusion:</u>

In patients with six or more outbreaks in the prior 12 months, a single topical dose of 2% SQX770 applied to the arm on day 1 significantly improved immune response to HSV-1 by eight weeks later as compared to day zero in the same patients before the application of SQX770, especially in increasing interferon gamma expression and decreasing interleukin-5 expression, both of which correlated with fewer cold sore outbreaks.

Details and results of this clinical trial are published at: https://clinicaltrials.gov/ct2/show/NCT03661541?term=NCT03661541&draw=2&rank=1

**Phase 2. A PHASE 2, MULTI-CENTER, PLACEBO-CONTROLLED STUDY OF SQUARIC ACID DIBUTYL ESTER (SADBE) TREATMENT IN SUBJECTS WITH RECURRENT HERPES LABIALIS: ONE DOSE OF SADBE REDUCES FREQUENCY OF OUTBREAKS**

**ClinicalTrials.gov Identifier: NCT02965781**

<u>Background</u>: Herpes labialis is a common condition that causes painful blisters or sores around lips for which a proven remedy affecting the natural history of the infection has not been yet found. We have previously demonstrated in our Phase 1 clinical trial that SQX770 [2% squaric acid dibutyl ester (SADBE) in DMSO] can delay outbreaks of herpes infection compared to placebo. The present study was performed to determine if a topical application of SADBE to the upper arm could prevent herpes labialis reactivation or reduce the severity of outbreaks.

<u>Methods</u>: A multi-center vehicle-controlled double-blind randomized phase 2 clinical trial was conducted in subjects who reported four or more herpes labialis episodes in the previous 12 months. Subjects were randomized to receive either dimethylsulfoxide (DMSO) vehicle only on days 1 and 22, or 2% SADBE on day 1 and DMSO only on day 22 (one-dose group), or 2% SADBE on day 1 and a booster dose of 0.5% SADBE on day 22 (two-dose group).

<u>Results</u>: The primary endpoint was number of days until subject reported first new herpes labialis episode following sensitization dose on day 1 (Dose A). This endpoint was not met.

The other endpoints in order were (2) incidence of adverse events, (3) number of days until subject-reported first new herpes labialis episode following the intensification dose (Dose B, applied on day 22). This endpoint was not met. The next planned endpoint was number of days until subject-reported first new herpes labialis episode beginning from 21 days after the intensification dose (Dose B) (i.e., beginning from day 43). This endpoint was met. (P=0.024).

The 1-dose group was superior to the placebo group in time to next outbreak from day 43 to 121 (p=0.024) (Fig. 1), mean number of outbreaks in days 43-121 in 1-dose (0.231±0.125 standard error) vs. placebo (0.610±0.068) (p=0.011), and proportion of subjects with an outbreak in days 43-121 in 1-dose (9/39=23%) vs. placebo (19/41=46%) (p=0.036). Average number of moderate or severe outbreaks over days 43-121 was also reduced in subjects receiving 1 dose of SADBE (0.128±0.339) vs. placebo (0.390±0.703) (p=0.04), as well as over days 1-365 in 1-dose (0.641±0.931) vs. placebo (1.341±1.76) (p=0.04).

**Fig. 1.** Outbreak-free proportion by Kaplan-Meier method from day 43 to day 121 in the 1-dose group (n=41, 32 censored), pooled 1- and 2-dose groups (n=85, 61 censored), 2-dose group (n=44, 29 censored), and placebo group (n=43, 24 censored). 1-dose vs. placebo P=0.024, Hazard ratio with 95% confidence interval = 2.419 (1.094-5.351). Pooled 1- and 2-dose treatment groups vs. placebo P=0.049. Hazard ratio with 95% confidence interval = 1.814 (0.993-3.312) 2-dose vs. placebo P=0.29.

.

![](forms-1_005.jpg)

The drug-treated groups had fewer outbreaks than the vehicle group throughout a 12-month follow up, but the largest effect was in days 43-121. This suggests that the drug takes about six weeks to exert maximal effect on the immune system, and the effects begin to taper off at about four months after the first dose. That fits with the data from the mechanism of action clinical trial discussed above. The one-dose group was significantly superior to the placebo group in time to the next outbreak in days 43-121, average number of outbreaks in days 43-121, proportion of subjects with an outbreak in days 43-121, and average number of moderate or severe outbreaks over days 43-121 and over days 1-365. The 2-dose group was also superior to the placebo group in all of those measures, but not significantly. In addition to having fewer outbreaks, the one-dose group had outbreaks that were less severe than the placebo group (0.3 versus 1.4 on severity score scale of 0 to 3).

The 2-dose regimen (dosing with 2% SQX770 on day 1 and 0.5% on day 22) was apparently less effective than the 1-dose regimen (2% on day 1 and 0% placebo on day 22). The reason could be just randomness, since the differences between the two groups did not reach statistical significance. But we think it is likely that the second dose at a lower concentration downregulated the immune responses caused by the first dose at the higher concentration. In the Phase 3 trials we plan to dose with a single concentration of SQX770, probably 2%, every three months.

**Table I.** Adverse events (AEs) scored by investigators as definitely, probably, or possibly study-medication related. All AEs were grade 1 (n=49) or grade 2 (n=6), with no grade 3 or higher AEs.

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| | | |
|:---|:---|:---|
| **Adverse event** | **Placebo**<br> **N = 47 subjects** | **SADBE: 1- or 2-dose**<br> **N = 92 subjects** |
| Administration site conditions<br> Erythema<br> Itching or irritation<br> Tingling or stinging<br> Purpura<br> "Boil" | 4<br> 1<br> 4<br> 0<br> 0 | 15<br> 8<br> 0<br> 1<br> 1 |
| Subtotal | 9 | 25 |
| Tingling (not at administration site) | 3 | 2 |
| Flushing and burning sensation on face | 0 | 3 |
| Herpes lesion on genitals, anus, or spine | 1 | 2 |
| Dermatitis from bandage adhesive | 2 | 0 |
| Irritation or itching (not at administration site) | 0 | 2 |
| Rash (not at administration site) | 0 | 1 |
| Retention hyperkeratosis | 0 | 1 |
| Lightheadedness | 1 | 0 |
| Pimple | 0 | 1 |
| Papule on lip | 0 | 1 |
| Anemia | 1 | 0 |
| **Total** | **17** | **38** |

---

<u>Conclusion</u>: A single topical dose of SQX770 applied topically to the upper arm significantly extended time to next herpes labialis outbreak and reduced the frequency of outbreaks and frequency of severe outbreaks in the period from 42 to 120 days after the dose and was very well tolerated in this study of 140 subjects with frequent herpes labialis outbreaks. These results confirm a previous vehicle-controlled clinical trial that showed a single topical dose of SQX770 on the arm delayed time to next herpes labialis outbreak<sup>[11]</sup>, and a mechanism of action study that showed a single topical dose of SQX770 to the arm caused enhanced immune response to the HSV-1 virus<sup>[12]</sup>.

Details and results of this clinical trial are found at: https://clinicaltrials.gov/ct2/show/NCT02965781?term=NCT02965781&draw=2&rank=1

**License Agreement**

The original invention of a treatment that prevents oral herpes outbreaks that was the basis for Squarex was invented jointly by Hugh McTavish, who assigned his interest to Squarex, and Dr. Thomas D. Horn and Dr. Sandra M. Johnson, who were employees of the University of Arkansas for Medical Sciences. Dr. Horn and Dr. Johnson assigned their rights to Bioventures, LLC, the licensing arm of The Board of Trustees of the University of Arkansas. That invention was the basis for U.S. patent application no. 12/450,586, and continuations thereof, which are now U.S. Patents 9,205,065 and 10,744,084, and Korean Patent No. 10-2009-7023035.

We have an exclusive license for the rights belonging to Bioventures, LLC, (the licensing arm of the Board of Trustees of the University of Arkansas) in U.S. patent application no. 12/450,586, and continuations thereof, which are now U.S. Patents 9,205,065 and 10,744,084, and a Korean patent no. 10-2009-7023035. Under the terms of the license, Squarex will owe Bioventures (a) 5.5% of Net Sales by Squarex or its Affiliates (but not non-affiliated Sublicensees) during the Term and in the Territory of those three patents, and (b) 20% of all Sublicense Income based on a sublicense agreement executed before approval of a New Drug Application by the U.S. FDA sublicensing rights based on the two U.S. and one South Korean patents listed above (i.e., Sublicense Income received during the term of those patents and based on rights in the U.S. and South Korea) or 15% if the sublicense agreement is executed after approval of a New Drug Application by the U.S. FDA. "Sublicense Income" includes signing fees and royalties on sales and other consideration received from a non-affiliated sublicensee for a sublicense. The patents expire in April 2028. Bioventures was also issued 150,000 shares in Squarex, representing, as of the date of this prospectus, approximately 4.1% of the Company's issued and outstanding equity. No payments are due under the agreement for sales or events after the expiration of the patents.

We have the right to grant sublicenses consistent with the agreement. We were obligated to use reasonable commercial efforts to develop the Licensed Products or Processes, to deliver a business plan within 90 days, raise $200,000 within one year, develop a pharmaceutical composition within two years, and begin clinical trials within three years of the effective date of the agreement. We have met all of those obligations and met all of those milestones. Upon our failure to meet any of those obligations, Bioventures may give written notice of default and we have 45 days to cure the default.

In addition to the royalties listed above, we are obligated to pay Bioventures a Continuation Fee of $2,500 on each anniversary of the Effective Date. We have made seven such payments to date, totaling $17,500. In addition, we have reimbursed Bioventures for patent costs, totaling $42,912 to date. No development, regulatory, or commercial milestone payments are due to or have or will be paid to Bioventures under the agreement.

We have the right but not the obligation, at our own cost, to initiate patent infringement lawsuits and to defend the licensed patents against any challenges to their validity.

The license expires on a country-by-country basis on the date that the last of the claims of any licensed patent expires. That is expected to be on April 4, 2028. In addition, we have the right to terminate at any time upon 90 days written notice. Bioventures has the right to terminate the agreement only if we challenge the validity of any licensed patent.

**Intellectual Property**

Intellectual property, especially patents, are important to our business. We endeavor to establish, maintain and enforce intellectual property rights that protect our business interests.

Our patent portfolio, including patents owned by or exclusively licensed to us, is built on a program-by-program basis with a goal of establishing broad protection that generally includes, for each product candidate compound and for selected alternative back-up compounds, claims directed to composition of matter, pharmaceutical compositions, and methods of treatment using such pharmaceutical compositions. We are seeking and maintaining patent protection in the United States and key foreign jurisdictions.

<sup>11</sup> Palli, M. A., H. McTavish, A. Kimball, and T. D. Horn. 2017. Immunotherapy of Recurrent Herpes Labialis With Squaric Acid*. JAMA Dermatol*. 153:828-829.

<sup>12</sup> McTavish H, Zerebiec KW, Zeller JC, Shekels LL, Matson MA, Kren BT. 2019. Immune characteristics correlating with HSV-1 immune control and effect of squaric acid dibutyl ester on immune characteristics of subjects with frequent herpes labialis episodes. *Immun. Inflamm. Dis*. 7(1):22-40.

The term of individual patents depends upon the legal term of patents in the countries in which they are obtained. In most countries in which we file, including the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, the term of a patent may also be eligible for patent term adjustment, which permits patent term restoration as compensation for patent term lost during the regulatory review process. In addition, for patents that cover an FDA-approved drug, the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. While the length of the patent term extension is related to the length of time the drug is under regulatory review, patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent per approved drug may be extended under the Hatch-Waxman Act. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We plan to seek any available patent term extension to any issued patents we may be granted in any jurisdiction where such extensions are available; however, there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.

We also rely on trade secrets, especially relating to technical aspects of our manufacturing, formulations, and data and seek to protect and maintain the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Our trade secrets include, for example, aspects of the manufacturing of our drug, formulation, kits, and delivery device and patient selection and recruitment strategies, and certain proprietary data. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us, and for employees and consultants to enter into invention assignment agreements with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. It is our practice also to require our employees, commercial contractors, and certain consultants and investigators, to enter into invention assignment agreements that grant us ownership of any discoveries or inventions made by them while in our employ.

Upon approval in the United States, since SADBE has not previously been approved in the United States for any indication, it will be eligible for five years of new chemical entity exclusivity, which would run currently with patent exclusivity.

Furthermore, we will seek trademark protection in the United States and internationally where available and when we deem appropriate.

**Patents**

***<u>U.S. Patent No. 9,205,065.</u>*** This patent has claims directed to a method of treating either genital or oral herpes comprising applying SADBE or similar contact sensitizers to a herpes lesion. It will expire in April 2028 or later with possible extensions of time for time spent in the FDA approval process. It is jointly assigned to Squarex and to Bioventures, LLC. Squarex has an exclusive license from Bioventures for Bioventures' portion of the patent. Hugh McTavish, our CEO, is a co-inventor of this patent and assigned his portion to Squarex.

***<u>U.S. Patent No. 10,744,084.</u>*** This is in the same patent family as the U.S. 9,205,065 patent. It has claims directed to a pharmaceutical composition comprising SADBE dissolved in DMSO, which covers the SQX770 formulation as a composition of matter. It will expire in April 2028 or later with possible extensions of time for time spent in the FDA approval process. It is jointly assigned to Squarex and to Bioventures, LLC. Squarex has an exclusive license from Bioventures for Bioventures' portion of the patent. Hugh McTavish, our CEO, is a co-inventor of this patent and assigned his portion to Squarex.

***<u>U.S. Patent No. 10,245,314</u>*** <u>and ***U.S. Patent No. 10,940,197***</u> are in the same patent family and both have claims directed to a method of treating either genital or oral herpes comprising applying SADBE or similar contact sensitizers topically to a site other than to a herpes lesion. They will expire in February 2036 or later with possible extension of time for time spent in the FDA approval process. They are owned exclusively by Squarex. Hugh McTavish, our founder and CEO, is the sole inventor of these patents and assigned them to Squarex.

A Korean patent is issued in the same family as the U.S. 9,205,065 and 10,744,084 patents. It will expire in April 2028. It is jointly assigned to Squarex and to Bioventures, LLC. Squarex has an exclusive license from Bioventures for Bioventures' portion of the patent.

Foreign patents corresponding to U.S. Patent No. 10,245,314 and U.S. Patent No. 10,940,197 are issued in Canada, Australia, Japan, the U.K., Ireland, Germany, France, Switzerland, and the Netherlands. A corresponding patent application is pending in South Korea.

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***<u>U.S. patent application serial no. 17/194,832, publication no. 20210186863</u>.*** Another method of treatment patent application is pending in the U.S. for using SADBE or similar compounds to treat molluscum contagiosum, a common contagious viral skin disease. This is owned exclusively by Squarex. If issued, the patent would expire in September 2038.

***<u>U.S. patent application serial no. 16/932,111, publication no. 20210393542</u>.*** This application has claims directed to kits and delivery devices that will be the commercial products that are sold comprising the SQX770 drug formulation. If issued, the patents in this family would expire in July of 2040 or later with possible extensions of time for time spent in the FDA approval process. An international application under the Patent Cooperation Treaty (PCT), number PCT/US21/37277, in this family has also been filed. Foreign national stage applications in the major markets will be filed based on this. This family of patent applications is owned exclusively by Squarex.

We expect that other patent applications will be filed to cover the Squarex products and methods of medical treatment using those products.

**Sales and Marketing**

We currently do not have a commercial organization for the marketing, sales and distribution of pharmaceutical products. We intend to build the commercial infrastructure necessary to effectively support the commercialization of SQX770, if approved, in North America and most likely Europe and to partner with third parties for commercialization of SQX770 in other markets. This will involve direct to consumer marketing, including by social media, and marketing to primary care physicians and dermatologists, who are expected to be the main prescribers of SQX770 for oral herpes. We will also explore marketing through an outside contract sales force.

To develop the appropriate commercial infrastructure, we will have to invest significant amounts of financial and management resources, some of which will be committed prior to any confirmation that SQX770 will be approved.

As we get closer to filing an NDA, we will also explore, as an alternative to having our own organization for the marketing, sales, and distribution of SQX770, strategic partnerships with pharmaceutical companies that have existing capabilities for marketing, sales, and distribution, particularly with direct to consumer marketing and marketing to primary care providers.

**Manufacturing**

We currently rely, and expect to continue to rely, on third parties for the manufacture of SQX770 and any other product candidates we develop, as well as for future commercial manufacture of SQX770 and any other drugs that we may commercialize. We do not own or operate, and currently have no plans to establish, any manufacturing facilities.

In general, we plan to establish agreements with contract manufacturing organizations, or CMOs, for synthesis of the active pharmaceutical ingredient, or API, manufacturing of drug product comprising such API, as well as packaging, labeling and distribution.

**Competition**

There are no FDA-approved therapies for the indication of *preventing* herpes labialis outbreaks, the indication we are pursuing approval for.

Existing approved drugs for herpes labialis are approved for *treating* herpes labialis—meaning that they are to be taken at the first sign of an outbreak, and if taken soon enough reduce the duration of the treated outbreak. The principal approved drugs for treating herpes labialis are oral valacyclovir, oral acyclovir, topical acyclovir cream, and topical docosanol. None of these are approved for *preventing* herpes labialis outbreaks. Valacylovir (VALTREX®) is the most used of these and generates the most revenue. Its prescribing information states that in clinical trials it has reduced the duration of episodes by one day and that it has no effect or frequency of episodes or severity of episodes. Valacyclovir is approved for preventing genital herpes outbreaks and it is sometimes prescribed off-label for preventing oral herpes outbreaks.

No other drugs are currently listed in clinicaltrials.gov as in clinical trials for the indication of preventing herpes labialis outbreaks, whereas SQX770 has completed a Phase 1 and a Phase 2 trial and we have had an End-of-Phase-2 meeting with the FDA. Accordingly, we believe that we have a substantial head start on any competition for this indication.

**Government Regulation**

Government authorities in the United States at the federal, state, and local level, including the FDA, the FTC and the DEA, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, distribution, marketing and export and import of products such as those we market. For both currently marketed and future products, failure to comply with applicable regulatory requirements can, among other things, result in suspension of regulatory approval and possible civil and criminal sanctions. Regulations, enforcement positions, statutes and legal interpretations applicable to the pharmaceutical industry are constantly evolving and are not always clear. Significant changes in regulations, enforcement positions, statutes and legal interpretations could have a material adverse effect on our financial condition and results of operations.

Additionally, future healthcare legislation or other legislative proposals at the federal and state levels could bring about major changes in the affected health care systems, including statutory restrictions on the means that can be employed by brand and generic pharmaceutical companies to settle Paragraph IV patent litigations. We cannot predict the outcome of such initiatives, but such initiatives, if passed, could result in significant costs to us in terms of costs of compliance and penalties associated with failure to comply.

***Pharmaceutical Regulation in the United States***

In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA's refusal to approve pending applications, withdrawal of an approval, a clinical hold, Warning Letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug or a generic version of a previously approved drug, can be marketed in the United States.

The process required by the FDA before a new drug may be marketed in the United States generally involves:

● Completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA's current GLP regulations;

● Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin in the United States;

● Approval by an IRB at each clinical site before each trial may be initiated;

● Performance of adequate and well-controlled human clinical trials in accordance with the FDA to establish the safety and efficacy of the proposed drug product for each intended use;

● Satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA's cGMP regulations to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity;

● Submission to the FDA of an NDA;

● Satisfactory completion of a potential review by an FDA advisory committee, if applicable; and

● FDA review and approval of the NDA.

***Preclinical Studies***

When developing a branded product and bringing it to market, the first step in proceeding to clinical studies is preclinical testing. Preclinical tests are intended to provide a laboratory or animal study evaluation of the product to determine its chemistry, formulation and stability. Toxicology studies are also performed to assess the potential safety of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs. The results of these studies are submitted to the FDA as part of an IND application along with other information, including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted.

***Clinical Trials***

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it initiates at that institution. Information about certain clinical trials must be submitted within specific timeframes to the NIH for public dissemination on their website, *www.ClinicalTrials.gov*.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

● Phase I: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

● Phase II: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

● Phase III: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2, and Phase 3 trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients.

***Disclosure of Clinical Trial Information***

Sponsors of certain clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information on *www.ClinicalTrials.gov*. Information related to the product, subject population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss certain results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

***Marketing Approval***

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include, among other things, the results of all preclinical, clinical and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture and controls. Under federal law, the submission of most NDAs is subject to a substantial application user fee, and the manufacturer or sponsor under an approved NDA is also subject to annual program fees. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act, as amended, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, Standard Review and Priority Review. Priority Review designation is given to drugs that are intended to treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness over existing therapies. The FDA endeavors to review most applications subject to Standard Review within ten to twelve months whereas the FDA's goal is to review most Priority Review applications within six to eight months, depending on whether the drug is a new molecular entity.

The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. Before approving an NDA, the FDA may inspect one or more clinical sites to assure compliance with GCP requirements. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the NDA unless it determines that the manufacturing process and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications and the NDA contains data that provide substantial evidence that the drug is safe and effective for the labeled indication.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter to indicate that the application is not ready for approval. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencies have been addressed to the FDA's satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

As a condition of NDA approval, the FDA may require a REMS to help ensure that the benefits of the drug outweigh the potential risks. If the FDA determines a REMS is necessary during review of the application, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug's risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use, such as special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. In addition, the REMS must include a timetable to periodically assess the strategy. The requirement for a REMS can materially affect the potential market and profitability of a drug.

Moreover, as a condition of product approval, the FDA may require substantial post-approval testing, known as Phase IV testing, and/or surveillance to monitor the drug's safety or efficacy, and the FDA has the authority to prevent or limit further marketing of a product based on the results of these post-marketing programs. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or certain problems are identified following initial marketing. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling, and, even if the FDA approves a product, it may limit the approved indications for use for the product or impose other conditions, including labeling or distribution restrictions or other risk-management mechanisms.

Further changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented, which may require us to develop additional data or conduct additional preclinical studies and clinical trials. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the similar procedures in reviewing NDA supplements as it does in reviewing NDAs.

***Post-Approval Requirements***

Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to drug listing and registration, recordkeeping, periodic safety reporting, product sampling and distribution, adverse event reporting and advertising, marketing and promotion, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in a manner consistent with the provisions of the approved labeling. While physicians may prescribe for off-label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. There also are extensive DEA regulations applicable to controlled substances.

Adverse event reporting and submission of periodic reports is also required following FDA approval of an NDA. Additionally, the FDA may place conditions on an approval, in addition to REMS programs of Phase IV testing, that could restrict the distribution or use of the product. Drug manufacturers and certain of their subcontractors are required to register their establishments and list their marketed products with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs, including quality control and manufacturing processes. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing or if previously unrecognized problems are subsequently discovered. The FDA may also impose a REMS requirement on a drug already on the market if the FDA determines, based on new safety information, that a REMS is necessary to ensure that the drug's benefits outweigh its risks. In addition, regulatory authorities may take other enforcement action, including, among other things, Warning Letters, the seizure of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, refusal to approve pending applications or supplements to approved applications, civil penalties and criminal prosecution.

***The Hatch-Waxman Amendments***

***505(b)(2) NDAs***

The FDA is authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference from the data owner. The applicant may rely upon the FDA's findings of safety and efficacy for an approved product that acts as the "listed drug." The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the listed drug. The FDA may then approve the new product candidate for all, or some, of the conditions of use for which the branded reference drug has been approved, or for a new condition of use sought by the 505(b)(2) applicant.

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***Abbreviated New Drug Applications ("ANDAs")***

The Hatch-Waxman amendments to the FDCA established a statutory procedure for submission and FDA review and approval of ANDAs for generic versions of listed drugs. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient ("API\I"), drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include clinical data to demonstrate safety and effectiveness. However, a generic manufacturer is typically required to conduct bioequivalence studies of its test product against the listed drug. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorption of the generic product and the reference listed drug. For some drugs, other means of demonstrating bioequivalence may be required by the FDA, especially where rate or extent of absorption are difficult or impossible to measure. The FDA will approve an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the reference listed drug. A product is not eligible for ANDA approval if the FDA determines that it is not bioequivalent to the reference listed drug if it is intended for a different use or if it is not subject to, and requires, an approved Suitability Petition.

***Patent Exclusivity and Orange Book Listing***

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant's product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA (i) that there is no patent listed with the FDA as covering the relevant branded product, (ii) that any patent listed as covering the branded product has expired, (iii) that the patent listed as covering the branded product will expire prior to the marketing of the generic product, in which case the ANDA will not be finally approved by the FDA until the expiration of such patent or (iv) that any patent listed as covering the branded drug is invalid or will not be infringed by the manufacture, sale or use of the generic product for which the ANDA is submitted. A notice of the Paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a "section viii" statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the Paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the Paragraph IV certification, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired as described in further detail below.

***Non-Patent Exclusivity***

In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent exclusivity, during which the FDA cannot approve an ANDA or 505(b)(2) application that relies on the listed drug.

For example, a drug that is considered new chemical entity (NCE) at the time of approval may be awarded a five-year period of marketing exclusivity, starting at the time of product approval. An ANDA or 505(b)(2) application referencing that drug may not be approved until the five-year period expires. Also, an ANDA or 505(b)(2) application referencing that drug may not be filed with the FDA until the expiration of five years, unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval.

A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant.

***Pricing and Reimbursement***

Successful commercialization of our products depends, in part, on the availability of governmental and third-party payor reimbursement for the cost of our products. Government authorities and third-party payors increasingly are challenging the price of medical products and services. On the government side, there is a heightened focus, at both the federal and state levels, on decreasing costs and reimbursement rates for Medicaid, Medicare and other government insurance programs. This has led to an increase in federal and state legislative initiatives related to drug prices, which could significantly influence the purchase of pharmaceutical products, resulting in lower prices and changes in product demand. If enacted, these changes could lead to reduced payments to pharmaceutical manufacturers. Many states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. If our current products or future drug candidates are not included on these preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients, thereby diminishing the potential market for our products.

In addition, third-party payors have been imposing additional requirements and restrictions on coverage and limiting reimbursement levels for pharmaceutical products. Third-party payors may require manufacturers to provide them with predetermined discounts from list prices and limit coverage to specific pharmaceutical products on an approved list, or formulary, which might not include all of the FDA-approved pharmaceutical products for particular indications. Third-party payors may challenge the price and examine the medical necessity and cost-effectiveness of pharmaceutical products in addition to their safety and efficacy. Manufacturers may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of pharmaceutical products in addition to the costs required to obtain the FDA approvals. Adequate third-party reimbursement may not be available to enable manufacturers to maintain price levels sufficient to realize an appropriate return on their investment in drug development.

***Healthcare Reform***

In the United States, there have been a number of federal and state proposals during the last several years regarding the pricing of pharmaceutical products, government control and other changes to the healthcare system of the United States. It is uncertain what other legislative proposals may be adopted or what actions federal, state, or private payors may take in response to any healthcare reform proposals or legislation. We cannot predict the effect such reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.

By way of example, in March 2010, the ACA was signed into law, which, among other things, includes changes to the coverage and payment for drug products under government health care programs. The law includes measures that (i) significantly increase Medicaid rebates through both the expansion of the program and significant increases in rebates, (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts, (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees, (iv) assess a rebate on Medicaid Part D spending in the coverage gap for branded and authorized generic prescription drugs, and (v) levy a significant excise tax on the industry to fund the healthcare reform.

In addition to the changes brought about by the ACA, other legislative changes have been proposed and adopted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products. At the federal level, the Biden Administration is expected to release proposals on drug pricing, which may permit Medicare Part D plans to negotiate the price of all or certain drugs that those plans cover. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

***Healthcare Regulations***

Pharmaceutical companies are subject to various federal and state laws that are intended to combat health care fraud and abuse and that govern certain of our business practices, especially our interactions with third-party payors, healthcare providers, patients, customers and potential customers through sales and marketing or research and development activities. These include anti-kickback laws, false claims laws, sunshine laws, privacy laws and FDA regulation of advertising and promotion of pharmaceutical products.

Anti-kickback laws, including the federal Anti-Kickback Statute, make it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referral of an individual for, or the purchase, order or recommendation of, any good or service reimbursable by, a federal health care program (including our products). The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. The penalties for violating the federal Anti-Kickback Statute include administrative civil money penalties, imprisonment for up to five years, fines of up to $25,000 per violation and possible exclusion from federal healthcare programs such as Medicare and Medicaid.

The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit knowingly presenting, or causing to be presented, claims for payment to the federal government (including Medicare and Medicaid) that are false or fraudulent (and, under the Federal False Claims Act, a claim is deemed false or fraudulent if it is made pursuant to an illegal kickback). Manufacturers can be held liable under these laws if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the False Claims Act can result in significant monetary penalties, including fines ranging from $11,181 to $22,363 for each false claim, and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other improper sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action plans and have often become subject to consent decrees or corporate integrity agreements, severely restricting the manner in which they conduct their business. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers' and manufacturers' compliance with applicable fraud and abuse laws.

The Federal Civil Monetary Penalties Law prohibits, among other things, the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular supplier of Medicare or Medicaid payable items or services. Noncompliance can result in civil money penalties of up to $15,270 for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.

Federal criminal statutes prohibit, among other actions, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Analogous state and foreign laws and regulations, including state anti-kickback and false claims laws, may apply to products and services reimbursed by non-governmental third-party payors, including commercial payors. Additionally, there are state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or that otherwise restrict payments that may be made to healthcare providers as well as state and foreign laws that require drug manufacturers to report marketing expenditures or pricing information.

Sunshine laws, including the Federal Open Payments law enacted as part of the ACA, require pharmaceutical manufacturers to disclose payments and other transfers of value to physicians and certain other health care providers or professionals, and in the case of some state sunshine laws, restrict or prohibit certain such payments. Pharmaceutical manufacturers are required to submit reports to the government by the 90<sup>th</sup> day of each calendar year. Failure to submit the required information may result in civil monetary penalties of up to an aggregate of $165,786 per year (or up to an aggregate of $1.105 million per year for "knowing failures") for all payments, transfers of value or ownership or investment interests not reported in an annual submission, and may result in liability under other federal laws or regulations. Certain states and foreign governments require the tracking and reporting of gifts, compensation and other remuneration to physicians.

Privacy laws, such as the privacy regulations implemented under HIPAA, restrict covered entities from using or disclosing protected health information. Covered entities commonly include physicians, hospitals and health insurers from which we may seek to acquire data to aid in our research, development, sales and marketing activities. Although pharmaceutical manufacturers are not covered entities under HIPAA, our ability to acquire or use protected health information from covered entities may be affected by privacy laws. Specifically, HIPAA, as amended by HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information.

Among other things, HITECH makes HIPAA's privacy and security standards directly applicable to "business associates," defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.

The FDA regulates the sale and marketing of prescription drug products and, among other things, prohibits pharmaceutical manufacturers from making false or misleading statements and from promoting products for unapproved uses. There has been an increase in government enforcement efforts at both the federal and state level. Numerous cases have been brought against pharmaceutical manufacturers under the Federal False Claims Act, alleging, among other things, that certain sales or marketing-related practices violate the Anti-Kickback Statute or the FDA's regulations, and many of these cases have resulted in settlement agreements under which the companies were required to change certain practices, pay substantial fines and operate under the supervision of a federally appointed monitor for a period of years. Due to the breadth of these laws and their implementing regulations and the absence of guidance in some cases, it is possible that our practices might be challenged by government authorities. Violations of fraud and abuse laws may be punishable by civil and criminal sanctions including fines, civil monetary penalties, as well as the possibility of exclusion of our products from payment by federal health care programs.

***Government Price Reporting***

Government regulations regarding reporting and payment obligations are complex, and we will continually evaluate the methods we use to calculate and report the amounts owed with respect to Medicaid and other government pricing programs when we have a marketed drug. Our calculations are subject to review and challenge by various government agencies and authorities, and it is possible that any such review could result either in material changes to the method used for calculating the amounts owed to such agency or the amounts themselves. Because the process for making these calculations, and our judgments supporting these calculations, involve subjective decisions, these calculations are subject to audit. In the event that a government authority challenges or finds ambiguity with regard to our report of payments, such authority may impose civil and criminal sanctions, which could have a material adverse effect on our business. From time to time we conduct routine reviews of our government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.

Many governments and third-party payors reimburse the purchase of certain prescription drugs based on a drug's AWP. In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers' reporting practices with respect to AWP, which they have suggested have led to excessive payments by state and federal government agencies for prescription drugs. Numerous pharmaceutical companies have been named as defendants in various state and federal court actions alleging improper or fraudulent practices related to the reporting of AWP.

***Drug Pedigree Laws***

State and federal governments have proposed or passed various drug pedigree laws which can require the tracking of all transactions involving prescription drugs from the manufacturer to the pharmacy (or other dispensing) level. Companies are required to maintain records documenting the chain of custody of prescription drug products beginning with the purchase of such products from the manufacturer. Compliance with these pedigree laws requires implementation of extensive tracking systems as well as heightened documentation and coordination with customers and manufacturers. While we fully intend to comply with these laws, there is uncertainty about future changes in legislation and government enforcement of these laws. Failure to comply could result in fines or penalties, as well as loss of business that could have a material adverse effect on our financial results.

***Federal Regulation of Patent Litigation Settlements and Authorized Generic Arrangements***

As part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, companies are required to file with the U.S. Federal Trade Commission ("FTC") and the U.S. Department of Justice (the "DOJ") certain types of agreements entered into between brand and generic pharmaceutical companies related to the settlement of patent litigation or manufacture, marketing and sale of generic versions of branded drugs. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical companies and could result generally in an increase in private-party litigation against pharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities.

***Other***

The U.S. federal government and various states and localities have laws regulating the manufacture and distribution of pharmaceuticals, as well as regulations dealing with the substitution of generic drugs for branded drugs. Our operations are also subject to regulation, licensing requirements and inspection by the states and localities in which our operations are located or in which we conduct business.

Certain of our activities are also subject to FTC enforcement actions. The FTC also enforces a variety of antitrust and consumer protection laws designed to ensure that the nation's markets function competitively, are vigorous, efficient and free of undue restrictions. Federal, state, local and foreign laws of general applicability, such as laws regulating working conditions, also govern us.

In addition, we are subject to numerous and increasingly stringent federal, state and local environmental laws and regulations concerning, among other things, the generation, handling, storage, transportation, treatment and disposal of toxic and hazardous substances, the discharge of pollutants into the air and water and the cleanup of contamination. We are required to maintain and comply with environmental permits and controls for some of our operations, and these permits are subject to modification, renewal and revocation by the issuing authorities. Our environmental capital expenditures and costs for environmental compliance may increase in the future as a result of changes in environmental laws and regulations or increased manufacturing activities at any of our facilities. We could incur significant costs or liabilities as a result of any failure to comply with environmental laws, including fines, penalties, third-party claims and the costs of undertaking a clean-up at a current or former site or at a site to which our wastes were transported. In addition, if we grow by acquisition in the future, and our diligence may not have identified environmental impacts from historical operations at sites we may acquire in the future.

**Employees and Labor Relations**

As of the date of this prospectus, we have a total of one full time employee and no part time employees. We have no collective bargaining agreements with our employees, and none are represented by labor unions. We consider our current relations with our employees to be good.

**Facilities**

We lease 2,000 square feet of space for our headquarters and laboratory in Saint Paul, Minnesota, under an agreement that, as amended, expires in June 2023. The current monthly lease payment is $4,086. We expect to lease separate office space in Saint Paul, Minnesota, within the next 12 months. We believe that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

**Legal Proceedings**

From time to time we may be involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending litigation to which we are a party or to which our property is subject that we believe to be material. Regardless of the outcome, litigation can be costly and time consuming, and it can divert management's attention from important business matters and initiatives, negatively impacting our overall operations.

**MANAGEMENT**

**Executive Officers and Directors**

Below is a list of the names, ages, and positions of the individuals who serve as our executive officers and directors.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Hugh McTavish, Ph.D. | 60 | Chairman, Chief Executive Officer, President and Chief Scientist |
| Kwang Lee | 49 | Interim Chief Financial Officer |
| Arkadiusz Dudek, M.D. | 58 | Director |
| Wayne I. Danson | 68 | Director |
| Michael Myers, Ph.D. | 61 | Director |
| Mark W. Schwartz, Ph.D. | 67 | Director |

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**Hugh McTavish, Ph.D.,** is a co-founder of the Company. He has been our Chairman, Chief Executive Officer, President and Chief Scientist since the Company's inception in 2012. Since 2004, he has also been President of IGF Oncology, LLC, a company founded by him. He has also been a patent attorney in solo practice with his own firm McTavish Patent Firm for the past twenty years. He is also the co-inventor of the Company's technology. Hugh is the lead author of 18 referenced scientific publications, and the inventor of 21 issued patents. Dr. McTavish received his Ph.D. in biochemistry from the University of Minnesota in 1992, and his J.D. from the University of Minnesota in 2001. As inventor of the Company's lead technology and his background in biochemistry and as a patent lawyer, make him uniquely suitable for the functions in which he currently serves. Dr. McTavish is expected to spend working for the Company on a full-time basis.

**Kwang Lee** has been our interim Chief Financial Officer since October 2022. Since 2012, he has been a partner at Ravix Group, a leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm based in Silicon Valley. For over 20 years, Mr. Lee has held various leadership financial positions in numerous biotech companies, where he was responsible for managing their financial operations as well as financial oversight of clinical trials and development and successful implementation of strategic and financial corporate objectives. Prior to that, he was the Sr. Director of Finance for Bayhill Therapeutics. Mr. Lee is a certified public accountant who holds a B.S. in Economics from California Polytechnic State University in San Luis Obispo and an M.B.A. from the Lucas Scholl of Business at San Jose State University.

**Arkadiusz Dudek, M.D. Ph.D.,** has been a director of the Company since 2018. Since 2015, he has held various positions, including President, Chief Executive Officer, and Chief Medical Officer at TTC Oncology, whose mission is to develop and bring to market a novel, small-molecule therapy to address unmet needs of breast cancer patients. Since 2019, he has been Chief Medical Officer of Luminary Therapeutics, a developer of a non-viral cell therapy for cancer and autoimmune disorders. He was also a director of Martell Diagnostic Laboratories from 2014 to 2021 and Chief Medical Officer of Vanquish Oncology, Inc. from 2013 to 2020. Dr. Dudek holds a medical degree from the Medical University if Warsaw. He completed his residency in internal medicine at the Pinnacle Health Hospitals in Harrisburg, Pennsylvania. His fellowship in oncology and hematology was at the University of Minnesota. Because of his medical and scientific background and his experience as an executive of pharma companies, we believe that he is highly qualified to be a Director.

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

**Wayne I. Danson** was elected to our board in November 2022. He has been Chief Financial Officer of EOM Pharmaceutical Holdings, Inc. since December 1, 2021. Since 1999, he has been President and Chief Executive Officer of Danson Partners, LLC, a financial advisory and business consulting firm, specializing in corporate finance, mergers and acquisitions, business strategy, management consulting, interim CEO/CFO and turnaround consulting, as well as sophisticated tax services. From 2004 to 2010, he was President, Chief Executive Officer and Director of Encompass Group Affiliates, Inc., a publicly traded logistics organization that he founded. Prior to forming Danson Partners, LLC, he held partnership and leadership positions with PricewaterhouseCoopers (in NY and Washington, D.C.) and Kenneth Leventhal & Co (in NY and Washington, D.C.), now Ernst & Young, where he was a Managing Tax Partner. Mr. Danson previously served as Chairman of the Board of Directors for Encompass Group Affiliates, Inc. and a director of Herborium Group, Inc., both publicly traded small cap companies. He is Chairman of the Board of The Child Foundation, a 501(c)(3) charitable organization established to raise awareness of and funds to develop cures for all forms of children's interstitial and diffuse lung diseases. Mr. Danson graduated with honors from Bernard M. Baruch College with a BBA in Accounting and was a MBA candidate in Taxation. He is a certified public accountant and a member of the American Institute and New York State Societies of Certified Public Accountants. With his broad financial background and experience as a public company executive in the pharmaceutical and other industries, we believe that he is qualified to be a member of the Board of Directors.

**Michael Myers, Ph.D.,** was elected to our board in November 2022. Dr. Myers is the co-founder and has served as director and Chief Executive Officer of Quoin Pharmaceuticals Ltd., an Israeli Nasdaq traded clinical stage, emerging specialty pharmaceutical company, since its inception in 2018. Dr. Myers has 35 years of industry experience in the drug delivery and specialty pharmaceutical sectors. He has served as CEO of Innocoll, Inc. and was responsible for taking that company public in 2014. During his tenure as CEO of Innocoll, Dr. Myers raised over $160 million in public and private funding and was the inventor of the company's lead commercial product. He has also served as President of the drug delivery division of West Pharmaceutical Services, President of pharmaceutical operations for Fuisz Technologies (Biovail) and has held executive positions in Flamel Technologies and Elan Corporation. He is listed as an inventor on numerous patents and has led the development and commercialization of a number of highly successful pharmaceutical products. Dr. Myers earned his Ph.D. in Chemistry from the University College Cork, Ireland. Dr. Myers serves on the Board of Directors of Sonoran Bioscience and Wellesley Pharmaceuticals in addition to the Board of Advisers for a number of Penn State start-up companies. Because of his medical and scientific background and his experience as an executive of pharma companies, we believe that he is highly qualified to be a Director.

**Mark W. Schwartz, Ph.D.,** was elected to our board in November 2022. He is currently the Chairman of MWS Strategic Advisors LLC, serving as an adviser to several early-stage biotechnology and medical device companies. From 2001 to 2017 Dr. Schwartz served as CEO of several biotechnology companies including Calyx Therapeutics, Bayhill Therapeutics, Apthera and Galena Biopharma. Dr. Schwartz also serves as adjunct faculty at San Jose State University with appointments in the Masters in Biotechnology Program, the Lucas School of Management in the Business College, and the department of Biology. Dr. Schwartz holds a Ph.D. in Biochemistry from Arizona State University and a B.A. in Chemistry from Grinnell College. Because of his medical and scientific background and his experience as an executive of pharma companies, we believe that he is highly qualified to be a Director.

**Family Relationships**

None of our Directors are related by blood, marriage, or adoption to any other Director, executive officer, or other key employees.

**CORPORATE GOVERNANCE**

**Board Leadership Structure**

The Board of Directors is currently chaired by Hugh McTavish, who is our President and Chief Executive Officer. The Company believes that combining the positions of Chief Executive Officer and Chairman of the Board of Directors helps to ensure that the Board of Directors and management act with a common purpose. The Company also believes that it is advantageous to have a Chairman who is a co-founder of the Company and who, therefore, has knowledge of, the Company's history. Notwithstanding the combined role of Chief Executive Officer and Chairman, key strategic initiatives and decisions involving the Company are discussed and approved by the entire Board of Directors. The Company believes that the current leadership structure and processes maintains an effective oversight of management and independence of the Board of Directors as a whole without separate designation of a lead independent director. However, the Board of Directors will continue to monitor its functioning and will consider appropriate changes to ensure the effective independent function of the Board of Directors in its oversight responsibilities.

**Independence of the Board of Directors and its Committees**

After review of all relevant transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its Independent Registered Public Accounting Firm, the Board of Directors has determined that a majority of the Company's directors are independent within the meaning of the applicable NASDAQ listing standards. Wayne Danson, Michael Myers, Mark Schwartz, and Arkadiusz Dudek are deemed independent directors.

The Board of Directors has three committees: the Audit Committee, the Compensation Committee and the Nominating Committee. Below is a description of each committee of the Board of Directors. The Board of Directors has determined that each member of each committee meets the applicable rules and regulations regarding "independence" and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to the Company.

**Audit Committee**

The Audit Committee of the Board of Directors oversees the Company's corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee, among other things: evaluates the performance, and assesses the qualifications, of the Independent Registered Public Accounting Firm; determines and pre-approves the engagement of the Independent Registered Public Accounting Firm to perform all proposed audit, review and attest services; reviews and pre-approves the retention of the Independent Registered Public Accounting Firm to perform any proposed, permissible non-audit services; determines whether to retain or terminate the existing Independent Registered Public Accounting Firm or to appoint and engage a new independent registered Public Accounting Firm for the ensuing year; confers with management and the Independent Registered Public Accounting Firm regarding the effectiveness of internal control over financial reporting; establishes procedures as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; reviews the financial statements to be included in the Company's Annual Report on Form 10-K and the Company's periodic quarterly filings on Form 10-Q, recommends whether or not such financial statements should be so included; and discusses with management and the Independent Registered Public Accounting Firm the results of the annual audit and review of the Company's quarterly financial statements.

The Audit Committee is currently composed of three independent directors: Wayne I. Danson, chair, Michael Myers and Mark Schwartz.

The Board of Directors periodically reviews the NASDAQ listing standards' definition of independence for Audit Committee members and has determined that all members of the Company's Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A) of the NASDAQ listing standards and Rule 10A-3(b)(1) of the Securities Exchange Act, as amended). The Board of Directors has determined that Wayne Danson qualifies as an "audit committee financial expert," as defined in applicable SEC rules. The Board of Directors made a qualitative assessment of Mr. Danson's level of knowledge and experience based on a number of factors, including his formal education and his service in executive capacities having financial oversight responsibilities.

**Compensation Committee**

The Compensation Committee of the Board of Directors reviews, modifies and approves the overall compensation strategy and policies for the Company. The Compensation Committee, among other things, reviews and approves corporate performance goals and objectives relevant to the compensation of the Company's officers; determines and approves the compensation and other terms of employment of the Company's Chief Executive Officer; determines and approves the compensation and other terms of employment of the other officers of the Company; and administers the Company's stock option and purchase plans, pension and profit sharing plans and other similar programs.

The Compensation Committee is composed of three independent directors: Michael Myers, chair, Wayne Danson, and Arkadiusz Dudek.

**Compensation Committee Interlocks and Insider Participation**

No member of our compensation committee has at any time been an employee of ours. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

**Nominating Committee**

The Nominating Committee of the Board of Directors is responsible for, among other things, identifying, reviewing and evaluating candidates to serve as directors of the Company; reviewing, evaluating and considering incumbent directors; recommending to the Board of Directors for selection candidates for election to the Board of Directors; making recommendations to the Board of Directors regarding the membership of the committees of the Board of Directors, and assessing the performance of the Board of Directors.

The Nominating and Governance Committee is currently composed of three independent directors: Mark Schwartz, chair, Wayne Danson, Michael Myers and Arkadiusz Dudek.

All members of the Nominating Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards).

The Nominating Committee has not established any specific minimum qualifications that must be met for recommendation for a position on the Board of Directors. Instead, in considering candidates for director the Nominating Committee will generally consider all relevant factors, including among others the candidate's applicable education, expertise and demonstrated excellence in his or her field, the usefulness of the expertise to the Company, the availability of the candidate to devote sufficient time and attention to the affairs of the Company, the candidate's reputation for personal integrity and ethics and the candidate's ability to exercise sound business judgment. Other relevant factors, including diversity, experience and skills, will also be considered. Candidates for director are reviewed in the context of the existing membership of the Board of Directors (including the qualities and skills of the existing directors), the operating requirements of the Company and the long-term interests of its stockholders.

The Nominating Committee considers each director's executive experience and his or her familiarity and experience with the various operational, scientific and/or financial aspects of managing companies in our industry.

With respect to diversity, the Nominating Committee seeks a diverse group of individuals who have executive leadership experience and a complementary mix of backgrounds and skills necessary to provide meaningful oversight of the Company's activities. The Company meets the proposed NASDAQ standards for diversity on the board of directors. The Nominating Committee annually reviews the Board's composition in light of the Company's changing requirements. The Nominating Committee uses the Board of Director's network of contacts when compiling a list of potential director candidates and may also engage outside consultants. Pursuant to its charter, the Nominating Committee will consider, but not necessarily recommend to the Board of Directors, potential director candidates recommended by stockholders. All potential director candidates are evaluated based on the factors set forth above, and the Nominating Committee has established no special procedure for the consideration of director candidates recommended by stockholders.

**Code of Ethics**

We have a Code of Ethics applicable to all of our officers, other employees and directors. The Code of Ethics is available on the Company's website.

**Director Compensation**

We intend to compensate our directors with an annual directors fee of $30,000, $10,000 in Committee Chair fees as well as $5,000 for each committee service. All fees will be payable in cash. In addition, each director will be granted 10,000 stock options each year.

To date, we have not paid our directors any fees.

**EXECUTIVE COMPENSATION**

**SUMMARY COMPENSATION TABLE**

The Summary Compensation Table shows certain compensation information for services rendered for the calendar years ended December 31, 2021, by our executive officers. The following information includes the dollar value of base salaries, bonus awards, stock options grants and certain other compensation, if any, whether paid or deferred. Columns that are not applicable, have been omitted, as allowed under the relevant rules.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Principal**<br> **Position** | **Year** | **Salary** | **\* All Other Compensation** | **Total** |
|  |  | ($) | ($) | ($) |
| Hugh McTavish | 2021 | -0- \* | 91180 | 91180 |
| *Chief Executive Officer* | 2020 | -0- \* | 91180 | 91180 |
| Joseph Cunningham\*\* | 2021 | 20000 | 0 | 20000 |
| *Chief Financial Officer* | 2020 | -0- | 0 | 0 |

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\*The Company has been accruing salary for Mr. McTavish at the monthly rate of $8,015 for the two fiscal years.

\*\* Mr. Cunningham left the Company in November 2022.

Our other executive officers have elected not to receive compensation during the recent reporting periods and no other persons are required to be disclosed in the summary compensation table.

We did not issue any stock option, warrants or Equity Incentive Awards to management in 2021 or 2020.

**Employment Agreements**

*Hugh McTavish*

Hugh McTavish, our Chief Executive Officer, performs his services pursuant to the terms of an Independent Contractor Agreement dated January 1, 2016. Under the terms of the agreement, initially Mr. McTavish was being paid a monthly fee of $5,426. This amount was increased to $6,700, effective May 1, 2016. The Agreement has an indefinite term but is subject to termination by the Company under certain limited circumstances. Effective January 1, 2018, the Board of Directors increased Mr. McTavish's monthly fees to $8,015.

The Company is currently negotiating a new agreement with Dr. McTavish.

*Kwang Lee*

Mr. Lee, our interim Chief Financial Officer, performs his services pursuant to the terms of a Consulting Services Engagement Letter dated November 1, 2022, between the Company and Ravix Group of which Mr. Lee is a partner.

He is being paid at the hourly rate of $275. The agreement may be terminated by either party upon two weeks' prior written notice.

*Equity Incentive Plan*

On January 16, 2023, the Company's Board and the stockholders approved the adoption of the Company's 2023 Equity Incentive Plan (the "Plan") and reserved 1,700,000 shares of common stock for issuance under the Plan. Pursuant to the Plan, a committee appointed by the Board of Directors may grant, at its discretion, qualified or nonqualified stock options, stock appreciation rights and may grant or sell restricted stock to key individuals, including employees, nonemployee directors, consultants and advisors. As of January 16, 2023, no stock options were outstanding under the Plan.

**Limitation of Directors Liability and Indemnification**

The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholder for monetary damages for breach of their fiduciary duties. The Certificate of Incorporation limits the liability of our directors to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with all of our directors and named executive officers whereby we have agreed to indemnify those directors and officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director, officer, employee or agent of ours, provided that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed to, our best interests.

We have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act. The Certificate of Incorporation and bylaws also provide that we indemnify our directors and officers who, by reason of the fact that he or she is or was one of our officers or directors of our Company, is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative related to their board role with us.

There is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

The following includes a summary of transactions since January 1, 2021, to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under "Executive Management- Executive Compensation." We also describe below certain other transactions with our directors, executive officers, and stockholder.

As of December 31, 2021, we owed our Chief Executive Officer $445,794 in principal and $74,007 in accrued interest in connection with loans advanced by him since October 1, 2019. The line of credit accrues interest at an annual rate of 15%. Under the terms of the arrangement, as cash comes into the Company from investments or loans from other sources, the Company will pay 10% of the first $1 million raised from other sources after January 1, 2021, 20% of the second $1 million, and up to 100% of the third $1 million raised from other sources after January 1, 2021, until the indebtedness is repaid in full. The balance is due and payable in full by December 31, 2024.

Our Chief Executive Officer is also owed $216,405 in back pay at the rate of $8,015 per month from October 2019 to March 2022. That balance is not accruing interest.

Since 2019, we have paid our Chief Executive Officer an aggregate of $47,588 for legal fees in connection with patent applications.

**SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

The following table sets forth information as of January ___, 2023, regarding the beneficial ownership of our Common Stock, based on information provided by (i) each of our executive officers and directors; (ii) all executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of the outstanding shares of our Common Stock. The percentage ownership in this table is based on 7,534,512 shares issued and outstanding as of January ___, 2023.

Unless otherwise indicated, we believe that all persons named in the following table have sole voting and investment power with respect to all shares of Common Stock that they beneficially own.

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| | | |
|:---|:---|:---|
| **Name and Address of Beneficial Owner <sup>(1)</sup>** | **Amount and** <br> **Nature** <br> **of Beneficial** <br> **Ownership of**<br> **Common Stock** | **Percent of**<br> **Common Stock** |
| **Hugh McTavish** | 3962324 | 53.9% |
| **Kwang Lee**  | 0 | -  |
| **Arkadiusz Dudek** | 335754 | 4.6% |
| **Wayne Danson** | 0 | - |
| **Michael Myers** | 0 | - |
| **Mark Schwartz** | 0 | - |
| **Ronald Way** | 864960 | 11.8 |
| **Sandra L. McTavish**<br> **6215 Hyland Ave.**<br> **Lakeville, MN 55044** | 762612 | 10.3% |
| **Thomas Horn**<br> **22 Liberty Drive #8F**<br> **Boston, MA 02210** | 819000 | 11.1% |
| **All Directors and Executive Officers as a Group (6 persons)** | 4298078 | 58.4% |

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(\*) Less than 1%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Unless otherwise indicated, the address for each person is the c/o the Company, 7460 Pinehurst Road Saint Paul, MN 55115.

**DESCRIPTION OF SECURITIES**

The following description summarizes some of the terms of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our restated Certificate of Incorporation and Amended and Restated Bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part.

**Authorized Capitalization**

We have 255,000,000 shares of capital stock authorized under our Certificate of Incorporation, consisting of 250,000,000 shares of common stock with a par value of $0.0001 per share and 5,000,000 shares of preferred stock with a par value of $0.0001 per share. As of October 14, 2022, we had 7,354,502 shares of common stock outstanding and no shares of preferred stock outstanding. Our authorized but unissued shares of common stock and preferred stock are available for issuance without further action by our stockholder, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded in the future.

**Common Stock**

Holders of our common stock are entitled to such dividends as may be declared by our Board of Directors out of funds legally available for such purpose. The shares of common stock are neither redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.

Each holder of our common stock is entitled to one vote for each such share outstanding in the holder's name. No holder of common stock is entitled to cumulate votes in voting for directors.

In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets, which are legally available for distribution, after payments of all debts and other liabilities. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares of common stock offered by this prospectus will also be fully paid and non-assessable.

**Preferred Stock**

Our Board of Directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more classes or series and to fix the designations, rights, preferences, privileges and restrictions thereof, without further vote or action by the stockholder. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such class or series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Immediately after completion of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

**Anti-Takeover Effects of Delaware law and Our Certificate of Incorporation and Bylaws**

The provisions of Delaware law, our Certificate of Incorporation and our Amended and Bylaws, described below may have the effect of delaying, deferring or discouraging another party from acquiring control of us.

***Section 203 of the Delaware General Corporation Law***

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

● before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

● upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

● on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholder, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

In general, Section 203 defines business combination to include the following:

● any merger or consolidation involving the corporation and the interested stockholder;

● any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

● subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

● any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

● the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation.

In general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

***Potential Effects of Authorized but Unissued Stock***

We have shares of common stock and preferred stock available for future issuance without stockholder approval. We may utilize these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or payment as a dividend on the capital stock.

The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, the board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock, all to the fullest extent permissible under the Delaware General Corporation Law and subject to any limitations set forth in our certificate of incorporation. The purpose of authorizing the board of directors to issue preferred stock and to determine the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from acquiring, a majority of our outstanding voting stock.

**Jurisdiction**

Our bylaws stipulate that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or the Corporation's Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine.

Accordingly, our bylaws provide exceptions to the Delaware forum requirement in any action brought by stockholders under the Securities Act or the Exchange Act.

**Transfer Agent and Registrar**

The transfer agent and registrar for our shares of common stock is VStock Transfer, LLC.

**SHARES ELIGIBLE FOR FUTURE SALE**

Prior to this offering, there has been no public market for our shares. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Based on the number of shares outstanding as of the date of this prospectus, upon the completion of this offering, shares of our common stock will be outstanding, assuming no exercise of the underwriters' over-allotment option to purchase additional shares. Of the outstanding shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below.

**Rule 144**

In general, a person who has beneficially owned restricted stock for at least six months would be entitled to sell his securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Exchange Act, periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

● 1% of the number of shares then outstanding, which will equal approximately 250,000 shares immediately after this offering assuming no exercise of the underwriters' option to purchase additional shares, based on the number of shares outstanding as of the date of this prospectus; or

● the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

**Rule 701**

Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under "Underwriting" included elsewhere in this prospectus and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.

**UNDERWRITING**

We have entered into an underwriting agreement, dated __________ , 2022, with EF Hutton, division of Benchmark Investments, LLC, as the representative of the underwriters (the "Representative"), with respect to the Shares sold in this offering. Subject to certain conditions, we have agreed to sell to the underwriters, and the underwriters have agreed to purchase the Shares listed next to its name in the table at the public offering price per unit less the underwriting discounts set forth on the cover page of this prospectus.

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| | |
|:---|:---|
| **Underwriters** | **Number of**<br> **Shares** |
| EF Hutton, division of Benchmark Investments, LLC | [\*] |
| Total | [\*] |

---

The underwriters are offering the Shares subject to its acceptance of the Shares from us and subject to prior sale. The underwriting agreement provides that the obligation of the underwriters to pay for and accept delivery of the Shares offered pursuant to this prospectus is subject to the approval of certain legal matters by their counsel and certain other conditions. The underwriters are obligated to take and pay for all of the Shares if any such Shares are taken.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act relating to losses or claims resulting from material misstatements in or omissions from this prospectus, the registration statement of which this prospectus is a part, certain free writing prospectuses that may be used in the offering and in certain marketing materials used in connection with this offering and to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions contained in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

We have been advised by the Representative that the underwriters intend to make a market in our shares of common stock, but that they are not obligated to do so and may discontinue making a market at any time without notice.

**Over-Allotment Option**

We have granted the underwriters an option, exercisable no later than 45 calendar days after the date of the underwriting agreement, to purchase up to an additional ______ shares of common stock at the public offering price per unit set forth on the cover page of this prospectus, less the underwriting discount, to cover over-allotments if any (the "Over-Allotment Option"). The underwriters may exercise the Over-Allotment Option solely to cover over-allotments, if any, made in connection with the offering of Shares offered by this prospectus. To the extent that the Over-Allotment Option is exercised and the conditions of the underwriting agreement are satisfied, we will be obligated to sell to the underwriters, and the underwriters will be obligated to purchase, these additional Shares.

**Discount, Commissions, and Expenses**

The Representative has advised us that they propose to offer the Shares to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per Share. The Representative may allow, and certain dealers may reallow, a discount from the concession not in excess of $ per Share to certain brokers and dealers. After this offering, the public offering price, concession and reallowance to dealers may be changed by the underwriters. No such change will change the amount of proceeds we receive as set forth on the cover page of this prospectus. The Shares are offered by the underwriters as stated herein, subject to receipt and acceptance by it and subject to its right to reject any order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.

The following table shows the underwriting discounts payable to the underwriters by us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriter's over-allotment option to purchase additional Shares.

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| | | | |
|:---|:---|:---|:---|
|  | **Per Share** | **Total** | **Total** |
|  | **Without Over- allotment** | **Without Over- allotment** | **With Over- allotment** |
| Public offering price | $| $— |  |
| Underwriting discounts and commissions paid by us (8%) | $| $— |  |
| Nonaccountable expense allowance (1%) |  |  |  |
| Proceeds, before expenses, to the Company |  |  |  |

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We will be also responsible for and will pay all expenses relating to the offering, including, without limitation, (a) all filing fees and expenses relating to the registration of the securities with the Commission; (b) all fees and expenses relating to the listing of our common stock on a national exchange; (c) all fees, expenses and disbursements relating to the registration or qualification of the securities under the "blue sky" securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of our "blue sky" counsel, which will be the underwriters' counsel) unless such filings are not required in connection with our proposed listing on a national exchange, if applicable; (d) all fees, expenses and disbursements relating to the registration, qualification or exemption of the securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (e) the costs of all mailing and printing of the offering documents; (f) transfer and/or stamp taxes, if any, payable upon the transfer of securities from us to the underwriters; and (g) the fees and expenses of our accountants; (h) all filing fees and communication expenses associated with the review of the offering by FINRA; (i) all fees, expenses and disbursements relating to background checks of our directors and officers in an amount not to exceed $15,000 in the aggregate; (j) up to $20,000 of the Representative's actual accountable road show expenses for the Offering; (k) the $29,500 cost associated with the Representative's use of Ipreo's book building, prospectus tracking and compliance software for the offering; and (l) the fees for the Representative's legal counsel, in an amount not to exceed $150,000. We shall be responsible for the Representative's' external counsel legal costs irrespective of whether or not the offering is consummated, subject to a maximum of $50,000 in the event that it is not consummated. Additionally, one percent (1%) of the gross proceeds of the offering shall be provided to the underwriters for non-accountable expenses. Additionally, we have provided the Representative an expense advance (the "Advance") of $30,000. The Advance shall be applied towards out-of-pocket accountable expense set forth herein and any portion of the Advance shall be returned to us to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).

We estimate the total expenses payable by us for this offering to be approximately $_____ million, which amount includes (i) the underwriting discount of $______ (8%), (ii) a non-accountable expense of $_____ (1%) (iii) reimbursement of the accountable expenses of the representative equal to $____, and (iv) other estimated Company expenses of approximately $_______, which includes legal, accounting, printing costs, and various fees associated with the registration of our securities.

**Underwriter Warrants**

In addition, as additional compensation for EF Hutton's services, we agreed to issue warrants to the EF Hutton or its designees to purchase a number of shares of our common stock equal to five percent (5%) of the aggregate number of shares of our common stock sold in this offering (excluding shares of common stock sold to cover over-allotments, if any) at an exercise price equal to 105% of the public offering price of the shares of our common stock sold in this offering. We are registering hereby the issuance of the underwriters' warrants and the shares of Common Stock issuable upon exercise of such warrants. The underwriters' warrants will be non-exercisable for 180 days following the commencement of sales of the offering (except as provided for in FINRA Rule 5110(e)(2)) and will expire five (5) years following the commencement of such sales in compliance with FINRA Rule 5110(g)(8)(A). The underwriters' warrants will provide for unlimited "piggyback" registration rights for the shares of our common stock exercisable thereunder as well as customary anti-dilution provisions (for stock dividends and splits and recapitalizations) and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.) as permitted under FINRA Rule 5110(g)(8)(E). The demand registration rights and piggyback registration rights will terminate on the fifth anniversary of the commencement of sales of the offering in compliance with FINRA Rules 5110(g)(8)(C) and (D).

**Determination of Offering Price**

Before this offering, there has been no public market for our common stock. Accordingly, the public offering price will be negotiated between us and the Representative. Among the factors to be considered in these negotiations are:

● the information set forth in this prospectus and otherwise available to the underwriters;

● the prospects for our Company and the industry in which we operate;

● an assessment of our management;

● our past and present financial and operating performance;

● our prospects for future earnings;

● financial and operating information and market valuations of publicly traded companies engaged in activities similar to ours;

● the prevailing conditions of United States securities markets at the time of this offering; and

● other factors deemed relevant.

Neither we nor EF Hutton can assure investors that an active trading market will develop for shares of our common stock, or that the shares will trade in the public market at or above the initial public offering price.

**Lock-Up Agreements**

The Company, except for certain transactions, each of our directors and executive officers have agreed not to, subject to certain limited exceptions, offer, issue, pledge, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of the shares of our common stock for a period of 180 days after the date of this prospectus, without the prior written consent of EF Hutton.

In addition, each of our directors, executive officers and holders of 5% or more of our outstanding shares of common stock, have agreed not to, offer, issue, pledge, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of the shares of our common stock for a period of 180 days after the date of this prospectus, without the prior written consent of the Representative.

**Right of First Refusal**

Until twelve (12) months from the closing date of this offering, EF Hutton will have an irrevocable right of first refusal, in its sole discretion, to act as sole investment banker, sole book-runner, and/or sole placement agent, for all future public and private equity and debt offerings, including all equity-linked financings. EF Hutton will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation.

**Price Stabilization, Short Positions, and Penalty Bids**

In connection with this offering, the underwriters may engage in transactions that stabilize, peg, fix, maintain or otherwise affect the price of our common stock. Stabilizing transactions permit bids to purchase the underlying common stock so long as the stabilizing bids do not exceed a specific maximum. These stabilizing transactions may have the effect of raising or maintaining the market prices of our securities or preventing or retarding a decline in the market prices of our securities. Specifically, the underwriters may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of our common stock over-allotted by the underwriters is not greater than the number of shares of our common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of our common stock involved is greater than the number of shares our common stock in the over-allotment option. To close out a short position, the underwriters may elect to exercise all or part of the over-allotment option. The underwriters may also elect to stabilize the price of our common stock or reduce any short position by bidding for, and purchasing, our common stock in the open market.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing shares of our common stock in this offering because the underwriter repurchases the shares of our common stock in stabilizing or short covering transactions.

Finally, the underwriters may bid for, and purchase, shares of our common stock in market-making transactions, including "passive" market-making transactions as described below.

These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the open market in the absence of these activities. Neither we nor the underwriters make any representation or prediction as to the effect or direction or magnitude of any effect that stabilizing transactions may have on the price of our common stock. The underwriters are not required to engage in these activities and may discontinue any of these activities at any time without notice. These transactions may be effected on the Nasdaq Capital Market, in the over-the-counter market, or on any other trading market or otherwise and, if commenced, may be discontinued at any time.

In connection with this offering, the underwriter or its affiliates may engage in passive market-making transactions in our common stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:

● a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers;

● net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker's average daily trading volume in our common stock during a specified two-month prior period or 200 shares, whichever is greater, and must be discontinued when that limit is reached; and

● passive market-making bids must be identified as such.

However, if all independent bids are lowered below the passive market maker's bid that bid must then be lowered when specific purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.

**Electronic Offer, Sale, and Distribution of Shares**

A prospectus in electronic format may be made available on the websites maintained by one or more underwriters or selling group members, if any, participating in this offering. The underwriters may agree to allocate a number of shares of our common stock to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representative to underwriters and selling group members that may make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters' websites and any information contained in any other website maintained by the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part.

**Other Relationships**

The underwriter and its affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

**Selling Restrictions**

*<u>Notice to Prospective Investors in the European Economic Area and the United Kingdom</u>*

 

In relation to each member state of the European Economic Area and the United Kingdom (each, a "relevant state"), no units have been offered or will be offered pursuant to the offering to the public in that relevant state prior to the publication of a prospectus in relation to the units that has been approved by the competent authority in that relevant state or, where appropriate, approved in another relevant state and notified to the competent authority in that relevant state, all in accordance with the Prospectus Regulation, except that offers of our units may be made to the public in that relevant state at any time under the following exemptions under the Prospectus Regulation:

● to any legal entity which is a qualified investor as defined under the Prospectus Regulation;

● to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representative for any such offer; or

● in any other circumstances falling within Article 1(4) of the Prospectus Regulation.

provided that no such offer of units shall require the issuer or the representative to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.

Each person in a relevant state who initially acquires any units or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with the Company and the representative that it is a qualified investor within the meaning of the Prospectus Regulation.

In the case of any units being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the units acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in a relevant state to qualified investors, in circumstances in which the prior consent of the representative has been obtained to each such proposed offer or resale.

We, the representative and each of our and the representative's respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

For the purposes of this provision, the expression an "offer to the public" in relation to any units in any relevant state means the communication in any form and by any means of sufficient information on the terms of the offer and any units to be offered so as to enable an investor to decide to purchase or subscribe for any units, and the expression "Prospectus Regulation" means Regulation (EU) 2017/1129.

References to the Prospectus Regulation include, in relation to the United Kingdom, the Prospectus Regulation as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

The above selling restriction is in addition to any other selling restrictions set out below.

In connection with the offering, the representative is not acting for anyone other than the issuer and will not be responsible to anyone other than the issuer for providing the protections afforded to its clients nor for providing advice in relation to the offering.

*<u>Notice to Prospective Investors in the United Kingdom</u>*

 

This prospectus is for distribution only to persons who (i) have professional experience in matters relating to investments and who qualify as investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended ("FSMA") in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons"). This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.

*<u>Notice to Prospective Investors in France</u>*

 

Neither this prospectus nor any other offering material relating to the units described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The units have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the units has been or will be:

&nbsp;&nbsp;&nbsp;&nbsp;● released,
 issued, distributed or caused to be released, issued or distributed to the public in France; or

● used
 in connection with any offer for subscription or sale of the units to the public in France. Such offers, sales and distributions
 will be made in France only:

○ to
 qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d'investisseurs),
 in each case investing for their own account, all as defined in, and in accordance with, articles L.411-2, D.411-1, D.411-2, D.734-1,
 D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;

○ to
 investment services providers authorized to engage in portfolio management on behalf of third parties; or

○ in
 a transaction that, in accordance with article L.411-2-II-1° -or-2° -or 3° of the French Code monétaire et financier
 and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers,
 does not constitute a public offer (appel public à l'épargne).

The units may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

*<u>Notice to Prospective Investors in Hong Kong</u>*

 

The units have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the units has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to units which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

*<u>Notice to Prospective Investors in Japan</u>*

 

The units have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

*<u>Notice to Prospective Investors in Singapore</u>*

 

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the units were not offered or sold or caused to be made the subject of an invitation for subscription or purchase and will not be offered or sold or caused to be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the units, has not been circulated or distributed, nor will it be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the "SFA")) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the units are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

&nbsp;&nbsp;&nbsp;&nbsp;(a) a
 corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments
 and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a
 trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust
 is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the units pursuant to an offer made under Section 275 of the SFA except:

&nbsp;&nbsp;&nbsp;&nbsp;(a) to
 an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section
 276(4)(i)(B) of the SFA;

(b) where
 no consideration is or will be given for the transfer;

(c) where
 the transfer is by operation of law; or

(d) as
 specified in Section 276(7) of the SFA.

*<u>Notice to Prospective Investors in Canada</u>*

 

The units may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the units must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

*<u>Notice to Prospective Investors in the Dubai International Financial Centre</u>*

 

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale.

Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

*<u>Notice to Prospective Investors in Australia</u>*

 

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission ("ASIC"), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the "Corporations Act"), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act. Any offer in Australia of the securities may only be made to persons (the "Exempt Investors") who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.

The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 18 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions. This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

*<u>Notice to Prospective Investors in Switzerland</u>*

 

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.

*<u>Notice to Prospective Investors in Israel</u>*

 

In the State of Israel, this prospectus shall not be regarded as an offer to the public to purchase securities under the Israeli Securities Law, 5728 - 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 - 1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the "Addressed Investors"); or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728 -1968, subject to certain conditions (the "Qualified Investors"). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. The Company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 - 1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our securities to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.

Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728 - 1968. In particular, we may request, as a condition to be offered securities, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 - 1968 and the regulations promulgated thereunder in connection with the offer to be issued securities; (iv) that the securities that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728 - 1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 - 1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor's name, address and passport number or Israeli identification number.

We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares on our behalf or on behalf of the underwriters.

**EXPERTS**

The balance sheet of Squarex, Inc. as of December 31, 2021 and 2020 and the related statements of operations, changes in shareholder's equity and cash flows for the two years then ended appearing in this prospectus have been audited by L&L CPAs, PA, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of the Company to continue as a going concern as described in Note 1 to the financial statements), appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

**LEGAL MATTERS**

Certain legal matters with respect to the validity of the securities being offered by this prospectus will be passed upon by Louis A. Brilleman, Esq., New York, New York. Sichenzia Ross Ference LLP, New York, New York, is acting as counsel for the representative of the underwriters with respect to the offering.

**WHERE YOU CAN FIND MORE INFORMATION**

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

On the completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available at www.sec.gov. We also maintain a website at www.healthcaretriangle.com. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

**GLOSSARY OF TERMS USED**

---

| | |
|:---|:---|
| API. | Active Pharmaceutical Ingredient. The molecule in a pharmaceutical formulation that causes the therapeutic effect. |
| CMO | Contract Manufacturing Organization. A third party that manufactures drug products and drug substances for pharmaceutical companies. |
| DMSO | Dimethylsulfoxide. The carrier for our SQX770 formulation. |
| Drug substance | An active ingredient that is intended to furnish pharmacological activity. |
| Drug product | A finished dosage form, e.g., tablet, capsule, or solution, that contains a drug substance, generally, but not necessarily, in association with one or more other ingredients. |
| FDA | U.S. Food and Drug Administration. |
| GCP | Good clinical practices. It refers to the requirements for documentation and standards for conducting clinical trials. cGCP refers to current good clinical practices, as the required standards evolve. |
| GLP | Good laboratory practices. It refers to the requirements for documentation and the standards for laboratory testing and practice in support of a New Drug Application. cGLP refers to current good laboratory practices, as the required standards evolve. |
| GMP | Good manufacturing practices. It refers to the requirements for documentation and the standards for manufacturing of drugs and devices for medical use. cGMP refers to current good manufacturing practices, as the required standards evolve. |
| HSV | Herpes simplex virus. HSV type 1 is HSV-1 and type 2 is HSV-2. HSV-1 usually causes oral herpes or herpes labialis and HSV-2 usually causes genital herpes or herpes genitalis. |
| IFNG | Interferon gamma, a cytokine or chemical messenger that is secreted by certain cells, particularly T helper cells, and has effects on other immune cells. IFNG is a key anti-viral cytokine and data shows that SADBE application in our clinical trials causes increased IFNG expression by white blood cells when they are exposed to HSV-1. |
| IgG | Immunoglobulin gamma, the predominant circulating blood form of antibodies. Anti-HSV-1 IgG refers to IgG that recognizes and binds to HSV-1. |
| IL5 | Interleukin-5, a cytokine or chemical messenger that is secreted by certain cells, particularly T helper cells. IL5 stimulates an antibody immune response and shifts the immune response away from a cellular or T cell immune response. Our data shows SADBE topical application causes a decrease in IL5 expression by white blood cells when they are exposed to HSV-1 and that lower IL5 expression in that context correlates with fewer herpes labialis outbreaks and better immune control of the HSV-1 virus. |
| IND | Investigational New Drug application. An request from a study sponsor to the FDA for authorization to administer an investigational drug to humans. An IND must be approved by the FDA before clinical trials for a new drug. |
| IRB | Institutional review board. An ethics board for a clinical site that approves clinical trials or experimentation on humans at that site. |
| NCE | New chemical entity. A drug that has never been previously been an API in an approved drug. NCE status brings some additional periods of exclusivity in the U.S. SADBE qualifies as an NCE. |

---

---

| | |
|:---|:---|
| NDA | New Drug Application. The application filed with the U.S. Food and Drug Administration for approval to market a drug. It is filed after completion of all clinical trials. |
| PBMC | Peripheral blood mononuclear cells. Cells in circulating blood that have a single nucleus. This is basically white blood cells and includes leukocytes and lymphocytes. |
| PCR | Polymerase chain reaction, a widely used laboratory method for amplifying DNA. |
| REMS | A Risk Evaluation and Mitigation Strategy (REMS) is a drug safety program that the U.S. Food and Drug Administration (FDA) can require for certain medications with serious safety concerns to help ensure the benefits of the medication outweigh its risk |
| SADBE | Squaric acid dibutylester, also known as dibutyl squarate or by its proper chemical name of 3,4-Dibutoxy-3-cyclobutene-1,2-dione. The chemical structure is below. |
|  | ![](forms-1_002.jpg) |
| SQX770 | Squarex's code name for our drug formulation comprising SADBE dissolved in DMSO. |
| Th1 | Type 1 T helper cells. A type of immune cell that secretes type 1 cytokines, which include IFNG. |
| Th2 | Type 2 T helper cells. A type of immune cell that secretes type 2 cytokines, which include IL5. |

---

![Sqaurex](fin_001.jpg)

 **SQUAREX, LLC**

 **INDEX TO FINANCIAL STATEMENTS**

 **FINANCIAL STATEMENTS**

 **AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020**

---

| | |
|:---|:---|
| [Report of Independent Registered Public Accounting Firm](#Bk_001) | F-2 |
| [Balance Sheets as of December 31, 2021, and 2020](#Bk_069) | F-3 |
| [Statements of Operations for the years ended December 31, 2021, and 2020](#Bk_003) | F-4 |
| [Statements of Cash Flows for the years ended December 31, 2021 and 2020](#Bk_004) | F-5 |
| [Statements of Change in Members' Deficit](#Bk_005) | F-6 |
| [Notes to Financial Statements](#Bk_006) | F-7 |

---

 **CONDENSED FINANCIAL STATEMENTS**

**AS OF SEPTEMBER 30, 2022 AND 2021** 

**AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021**

**(Unaudited)**

---

| | |
|:---|:---|
| [Condensed Balance Sheets as of September 30, 2022, and 2021](#fin2__001) | F-26 |
| [Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022, and 2021](#fin2__002) | F-27 |
| [Condensed Statements of Change in Members' Deficit for the Nine Months Ended September 30, 2022, and 2021](#fin2__003) | F-28 |
| [Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022, and 2021](#fin2__004) | F-29 |
| [Notes to the Condensed Interim Unaudited Financial Statements](#fin2__005) | F-30 |

---

![](logo_001.jpg)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Squarex, LLC:

**Opinion on the Financial Statements**

We have audited the accompanying balance sheets of Squarex, LLC ("the Company") as of December 31, 2021 and December 31, 2020 and the related statements of operations, members' deficit, cash flows and the related notes to consolidated financial statements (collectively referred to as the consolidated financial statements) for the years ended December 31, 2021 and December 31, 2020. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB and Generally Accepted Audit Standards (GAAS). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**The Company's Ability to Continue as a Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

The firm has served this client since January 2022.

*/s/ L&L CPAS, PA*

L&L CPAS, PA

Certified Public Accountants

Plantation, FL

The United States of America

July 8, 2022

**SQUAREX, LLC**

**BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
| ***Years Ended December 31,*** | ***Year 2021*** | ***Year 2020*** |
| **ASSETS** |  |  |
| **Current Assets:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $35301 | $4509 |
| &nbsp;&nbsp;&nbsp;Right of use asset - current | 26782 |  |
| &nbsp;&nbsp;&nbsp;Other current assets | 10500 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | $72583 | $4509 |
| **Long Term Assets:** |  |  |
| &nbsp;&nbsp;&nbsp;Right of use asset - long term | $14982 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long term assets | $14982 | $- |
| **Total Assets** | $**87565** | $**4509** |
| **LIABILITIES AND MEMBERS' CAPITAL** |  |  |
| **Current Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $53745 | $- |
| &nbsp;&nbsp;&nbsp;Lease liability - current | 26782 |  |
| &nbsp;&nbsp;&nbsp;Accrued liabilities, related party | 229103 | 149920 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities and other current liabilities | 51667 | 49374 |
| &nbsp;&nbsp;&nbsp;Accrued Interest | 6906 | 3656 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | $368203 | $202950 |
| **Long Term Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Line of credit, related party | $445794 | $286000 |
| &nbsp;&nbsp;&nbsp;Lease liability - long term | 15231 |  |
| &nbsp;&nbsp;&nbsp;Accrued Interest, related party | 74007 | $21050 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long term liabilities | $535032 | $307050 |
| **Total Liabilities** | $903235 | $510000 |
| **Members' Capital** |  |  |
| &nbsp;&nbsp;&nbsp;Members' contributions | $6884085 | $5750100 |
| &nbsp;&nbsp;&nbsp;Warrants |  | 1079985 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (7699755) | (7335576) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total members' Capital | $(815670) | $(505491) |
| **Total Liabilities and Members' Capital** | $**87565** | $**4509** |

---

See accompanying notes to financial statements

**SQUAREX, LLC**

 **Statements of Operations** 

---

| | | |
|:---|:---|:---|
| ***Years Ended December 31,*** | ***Year 2021*** | ***Year 2020*** |
| **Operating Expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;Sales and marketing | $4150 | $5225 |
| &nbsp;&nbsp;&nbsp;Research and development | 55388 | 150366 |
| &nbsp;&nbsp;&nbsp;General and administrative | 248434 | 219112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | $307972 | $374703 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from operations | $(307972) | $(374703) |
| **Other Income (Expense):** |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net | $(3250) | $(3250) |
| &nbsp;&nbsp;&nbsp;Interest expense- related party, net | (52957) | (20688) |
| &nbsp;&nbsp;&nbsp;Warrant re-pricing expenses | - | (282486) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | $(56207) | $(306424) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss before income tax provision | $(364179) | $(681127) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax provision | $- | $- |
| **Net Loss** | $**(364179)** | $**(681127)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net Loss per membership unit basic and diluted** | **(0.11)** | **(0.20)** |

---

See accompanying notes to financial statements

**SQUAREX, LLC**

**STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
| ***Years Ended December 31,*** | ***Year 2021*** | ***Year 2020*** |
| **Cash Flows From Operating Activities** |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(364179) | $(681127) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | $- | $4945 |
| &nbsp;&nbsp;&nbsp;Non-cash interest expense - related party | 56208 | 23937 |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrants due to re-pricing |  | 282486 |
| &nbsp;&nbsp;&nbsp;Incremental rent payment on operating lease | 249 |  |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (10500) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 53745 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities - related party | 79183 | 121122 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities and other current liabilities | 2293 | (29891) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | $(183001) | $(278528) |
| **Cash Flows From Investing Activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Net cash used in investing activities | $- | $- |
| **Cash Flows From Financing Activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from LOC-related party | $159793 | $269000 |
| &nbsp;&nbsp;&nbsp;Proceeds from warrants exercised | 54000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | $213793 | $269000 |
| **Increase (Decrease) in Cash and Cash Equivalents** | $30792 | $(9528) |
| **Cash and Cash Equivalents, Beginning of the Year** | $4509 | $14037 |
| **Cash and Cash Equivalents, End of the year** | $**35301** | $**4509** |

---

See accompanying notes to financial statements

**SQUAREX, LLC**

 **STATEMENTS OF CHANGE IN MEMBERS' DEFICIT** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Members' Capital** | **Members' Capital** | **Warrants** | **Warrants** | | |
|  | Unit | Amount | Unit | Amount | **Accumulated Deficit**<br>Amount | **Total**<br>Amount |
| **Balances, December 31, 2019** | **3401251** | $**5750100** | **270000** | $**797499** | $**(6654449)** | $**(106850)** |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrants due to re-pricing |  | -  |  | 282486 |  | 282486 |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | $(681127) | $(681127) |
| **Balances, December 31, 2020** | **3401251** | $**5750100** | **270000** | $**1079985** | $**(7335576)** | $**(505491)** |
| &nbsp;&nbsp;&nbsp;Issuance of member units through warrants exercised | 270000 | $1079985 | (270000) | $(1079985) |  | $- |
| &nbsp;&nbsp;&nbsp;Cash received from warrants exercised |  | 54000 |  | -  |  | 54000 |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | $(364179) | $(364179) |
| **Balances, December 31, 2021** | **3671251** | $**6884085** | **-** | $**-** | $**(7699755)** | $**(815670)** |

---

See accompanying notes to financial statements

**SQUAREX, LLC**

 **NOTES TO FINANCIAL STATEMENTS** 

**NOTE 1 – NATURE OF OPERATIONS**

Squarex, LLC ("the Company") is a limited liability company formed on June 26, 2012, organized under the laws of Delaware and domiciled in Minnesota. The Company is currently in the early stage of development of a proprietary formula to prevent the outbreak of herpes labialis episodes, also known as oral herpes or cold sores, caused by herpes simplex virus type 1 (HSV-1).

**NOTE 2 – GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS**

***Going Concern Matters***

The financial statements have been prepared assuming the Company will continue as a going concern, which assumes that the Company will continue in operation one year after the date these financial statements are issued. However, management has identified the following conditions and events that created an uncertainty about the ability of the Company to continue as a going concern.

The Company has internally developed four distinct patent families. Patents have successfully been acquired by two of the families, while the other two families have applied for patents. The Company is also seeking FDA approval for its proprietary formula to prevent the outbreak of herpes labialias, a.k.a. oral herpes or cold sores, caused by herpes simplex virus type 1 (HSV-1). The Company has completed Phase 1 and a Phase 2 clinical trial and completed an End-of-Phase-2 meeting with the FDA. The Company needs to complete Phase 3 clinical trials to obtain FDA approval.

The Company recorded net losses of $364,179 and $681,127 for the years ended December 31, 2021, and 2020, respectively. The working capital deficit has increased to $293,200 in year 2021 from $198,441 in year 2020.

The Company has raised additional working capital through the exercise of all outstanding warrants by the Company's warrant holders in December 2021, raising $54,000, and through an ongoing Regulation CF offering that has raised over $173,000 up to March 18, 2022, as discussed further in Note 15. In addition, the related party that has given the Company a line of credit has the means and intent to provide additional credit if needed. The Company believes that will provide enough capital to fund operations through February 28, 2023, but there is some uncertainty whether it will be sufficient.

The Company plans to conduct an underwritten initial public offering (IPO) to become listed on NASDAQ or NYSE and has signed a letter of engagement from an investment bank to conduct a firm commitment underwritten IPO. The IPO would provide sufficient capital to continue as a going concern past February 28, 2023. The Company's ability to meet its obligations as they become due is dependent upon the success of management's plans as described above.

These conditions and events create an uncertainty about the ability of the Company to continue as a going concern through February 28, 2023. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.

 ****

 ****

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***COVID-19***

On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic ("coronavirus pandemic"), based on the rapid increase in exposure globally. The coronavirus pandemic is affecting the United States and global economies.

Government restrictions on travel, trade, and activity associated with COVID-19 may affect the Company's operations and those of third parties on which the Company relies, including causing disruptions in the supply of the Company's product candidates and the conduct of current and planned preclinical and clinical studies and contract manufacturing operations. The Company may need to limit operations or implement limitations and may experience limitations in employee resources.

The extent to which the coronavirus impacts the Company's results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the government restrictions associated with coronavirus on the global financial markets may reduce the Company's ability to access capital, which could negatively impact the Company's short-term and long-term liquidity and the Company's ability to complete its preclinical studies on a timely basis, or at all.

 ****

***Industry Specific Risks***

<u>FDA Approval Risk</u>

Our business is dependent on the success and FDA approval of our one product candidate SQX770. We will have no or minimal revenue until we obtain FDA approval or approval from corresponding regulatory authorities elsewhere in the world to market SQX770. SQX770 has been safe and significantly effective in preventing herpes labialis episodes so far in the completed Phase 1 and Phase 2 clinical trials, there is a risk it might not show significant efficacy or a balance of efficacy to safety that is sufficient to satisfy the FDA in the remaining clinical trials required for regulatory approval.

To get FDA approval we must complete further clinical trials, which will require substantial capital. We estimate the remaining clinical trials needed for FDA approval will require $20 million to $50 million to execute. There is a risk we will not be able to obtain sufficient funding or funding on acceptable terms to complete the clinical trials.

<u>Coverage and Reimbursement Risk</u>

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidate which could make it difficult for us to sell our product candidate profitably. Even if we obtain regulatory approval, there is a risk that the cost of our drug may not be covered or reimbursed by governments, pharmacy benefit managers, and health insurers.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

We have conducted a survey of a small number of pharmacy benefit managers, and all indicated they would reimburse for SQX770, with a median price of over $100 per dose. However, that is no guarantee that they actually will approve reimbursement once the drug is approved, and Medicare, foreign governments, or other parties may decline to reimburse patients at an acceptable price point for our product.

<u>Physician Prescription Risk</u>

The FDA and comparable foreign authorities strictly regulate the marketing and promotional claims that are made about pharmaceutical products, such as our product candidate, if approved. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or comparable foreign authorities as reflected in the product's approved labeling. If we receive marketing approval for SQX770, physicians could prescribe SQX770 to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may receive warning letters from the FDA and comparable foreign authorities and become subject to significant liability, which would materially harm our business.

<u>Legislative and Jurisdictional Risk</u>

In the United States and some foreign jurisdictions, there have been, and will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize our product candidates and may affect the prices we may set.

**NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Basis of Accounting***

 ****

The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (US GAAP). Accordingly, all adjustments necessary have been accrued for the fair presentation of the Company's financial position for the periods presented.

 **

***Use of Estimates***

 **

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

 ****

 ****

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***Cash and Cash Equivalents***

 ****

The Company considers cash in financial institutions and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. There were $35,301 and $4,509 on cash equivalents as of December 31, 2021, and 2020, respectively.

 **

***Concentration of Credit Risk***

 **

The Company maintains cash balances in one banking institution. The balances are insured by the Federal Deposit Insurance Company (FDIC). At times throughout the year, the Company's cash balances may exceed the FDIC limit. Management believes there is no significant risk of loss in having cash balances in excess of the insured limit.

 **

***Fair Value Measurements***

 **

Fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 1* – Observable inputs, such as quoted prices for identical assets or liabilities in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 2* – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly, such as quoted prices for similar assets or liabilities, or market-corroborated inputs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 3* – Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities.

Cash, accounts payable, and accrued liabilities – The carrying amounts reported in the consolidated balance sheets for these items are a reasonable estimate of fair value due to their short-term nature.

 **

***Property and Equipment***

 **

Property and equipment are valued at cost. The Company capitalizes assets with an expected useful life of one year or more, and an original purchase price of $1,000 or more. Depreciation is calculated on the double declining balance method over management's estimate of each asset's useful life.

The Company has capitalized $59,349 lab equipment in year 2020 and has remained unchanged in 2021. All lab equipment has been fully depreciated at the end of year 2020, resulting the depreciation expense totaled $0, and $4,945 for years 2021, and 2020, respectively.

 **

***Revenue Recognition***

 **

Due to the Company is still in the early development stage, the Company recognized no revenue during year 2021, and 2020, respectively.

 ****

 ****

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***Research and Development***

 ****

Research and development costs are expensed as incurred and consist primarily of testing and developing costs, materials and supplies, consulting services and other direct expenses. Research and development costs were $55,388 and $150,366 for the years ended December 31, 2021, and 2020, respectively.

 **

***Contingencies***

 **

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company's business, consolidated financial position, and consolidated results of operations or consolidated cash flows.

 **

***Related Parties***

 **

Any transaction, arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which the Company is a participant and in which a Related Person has a direct or indirect interest greater than 5% of the total members capital or deficit shall be considered a related party transaction ("Transaction"). In order for the Transaction to be subject to this policy, it must have a financial aspect, which may, for example, involve payments between the Company and the Related Person, but may also involve providing value to one of the parties.

***Income Taxes***

 ****

The Company has selected to file the tax as a partnership in the federal jurisdiction of the United States. All items of income and expense are reported by the Company's members on their individual tax returns. Therefore, no provision or liability for income taxes has been included in the financial statements.

The Company is subject to franchise tax filing requirements in the State of Delaware and state income tax filing requirements in the State of Minnesota.

 ****

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**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***Subsequent Events***

 ****

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.

 **

***Recently Issued Accounting Pronouncements***

 **

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

<u>Lease (ASC 842)</u>

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), or ASU 2016-02, which supersedes the guidance in ASC 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. This guidance is effective for annual reporting periods beginning after December 15, 2019, for non-public entities. The adoption of ASU 2016-02 had no material impact on the Company's financial statements and related disclosures.

We adopted this standard using a modified retrospective approach since inception of the Company. The modified retrospective approach includes a number of optional practical expedients relating to the identification and classification of leases that commenced as of the inception of the company; initial direct costs for leases that commenced as of inception of the company; and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset.

The Company elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or (iii) the accounting for indirect costs as defined in ASC 842.

In year 2020, in considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable lease payments and no options to extend. The lease is for an office space with no right of use assets. The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components for its facility lease.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

Consistent with ASC 842-20-50-4, for the Company's annual financial statements for the year ended December 31, 2020, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. The Company's office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate. The adoption of this guidance resulted in no significant impact to the Company's results of operations or cash flows.

On June 22, 2021, the Company has entered into a one-year term lease agreement for the office space mentioned above. On June 02, 2022, the lease was extended for 12 additional months with an expiration date of June 30, 2023. On the commencement date of the lease In June 2021, the Company recognizes the lease liability and a corresponding right-of-use asset. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.

<u>Income Taxes (ASU 740)</u>

In December 2019, the FASB issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 is part of the FASB's overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. The updated guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company has assessed that the adoption of this new standard did not have a material impact on our accompanying financial statements for the reporting periods of year 2021, and 2020.

<u>Codification Improvements (ASU 2020-10)</u>

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations. The Company has adopted ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company's financial statements.

<u>Others</u>

Other than the pronouncements mentioned above, the Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

**NOTE 4 – PROPERTY AND EQUIPMENT**

Property and equipment consisted of the following:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Lab equipment | $59349 | $59349 |
| Less current year depreciation expenses | - | (4945) |
| Property and equipment, before accumulated depreciation | 59349 | 54404 |
| Less accumulated depreciation | (59349) | (54404) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $- | $- |

---

The Company has capitalized $59,349 lab equipment as of beginning of 2020 and has not capitalized any new assets during year 2021, or 2020.

All lab equipment is fully depreciated at the end of year 2020. Depreciation expense totaled $0, and $4,945 in years ended December 31, 2021, and 2020, respectively.

**NOTE 5 – OTHER CURRENT ASSETS**

The Company has recorded prepaid expenses of $10,500 and $0 under other current asset as of years ended December 31, 2021, and 2020, respectively.

**NOTE 6 – ACCRUED LIABILITIES**

Accrued liabilities is a combination of related party liabilities and trade payables. For the years ended December 31, 2021, and 2020, the accrued liabilities were $280,770, and $199,294, respectively.

The following table illustrated the balances in each category during the years:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Accrued payables – related party | $229103 | $149920 |
| Accrued payables – trade liabilities | 51667 | 49374 |
| &nbsp;&nbsp;&nbsp;Accrued Payables | $280770 | $199294 |

---

***Accrued Liabilities - Related Party***

Accrued payables – related party reflects the liabilities that owed to related persons such as company officers, or persons who have a direct or indirect interest greater than 5% of the members capital or deficit.

As of December 31, 2021, and 2020, the accrued payables – related party has balances of $229,103, and $149,920, respectively.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

The payables transactions accrued for related party during the years are summarized as below:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Reimbursed expenses |  | 10453 |
| Partner fees | 216405 | 120225 |
| Legal expenses |  | 6544 |
| Rent | 12698 | 12698 |
| &nbsp;&nbsp;&nbsp;Total accrued payables – related party | $229103 | $149920 |

---

***Accrued Liabilities and Other Current Liabilities***

Accrued liabilities and other current liabilities are trade payable amounts owed for goods and services which the Company purchased while doing normal business.

Accrued liabilities and other current liabilities for non-related party consisted of the following:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Consultant fees | $30000 | $27522 |
| Compensation | $21667 | 21667 |
| Supplies | - | 185 |
| &nbsp;&nbsp;&nbsp;Total accrued trade liabilities | $51667 | $49374 |

---

**NOTE 7 – LINE OF CREDIT**

The activities of the Line of Credit during year 2021 and 2020 are illustrated in the table below:

---

| | | |
|:---|:---|:---|
|  | *Principal* | *Accrued Interest* |
| Balance as of December 31, 2019 | $17000 | $362 |
| Drawdown | 269000 |  |
| Interest Incurred | - | 20688 |
| Balance as of December 31, 2020 | $286000 | $21050 |
| Drawdown | 159794 |  |
| Interest Incurred | - | 52957 |
| Balance as of December 31, 2021 | $445794 | $74007 |

---

In 2019, the Company established a $1,000,000 line of credit with a related party in exchange for cash for the purpose of funding continuing operations ("the Line of Credit"). The agreement stipulates a payment arrangement as the Company obtains investor capital. An amount equal to 10% of the first $1,000,000, 20% of the second million and up to 100% of the third million dollars raised through investors will be applied to any outstanding balance on this line of credit. The outstanding balance accrues interest at the rate of 15% per annum and is payable no later than December 2024 (see discussion on interest balance in note 8).

The drawdowns during 2021 and 2020 were $159,794 and $269,000, respectively, resulting on December 31, 2021, and 2020 balances of $445,794 and $286,000, respectively.

**NOTE 8 – ACCRUED INTEREST**

The accrued interest balances during the years are presented as below:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Employee compensation | $6906 | $3656 |
| Related party - line of credit | 74007 | 21050 |
| &nbsp;&nbsp;&nbsp;Total accrued interest | $80913 | $24706 |

---

During the years of 2021, and 2020, because of a short-term employment, the Company has accrued interest of $3,250 in each year on unpaid compensation to a former employee who currently is a member of the Company. The unpaid compensation bears interest at a rate of 15% per annum. As of the years ended December 31, 2021, and 2020, the accumulated accrued interest to the unpaid compensation were $6,906 and $3,656, respectively.

In connection with a Line of Credit from a related party, the Company recognized approximately $52,957 and $20,688 in interest during the year of 2021, and 2020, respectively, accumulating the accrued interest balance of $74,007, and $21,050 as of December 31, 2021, and 2020, respectively (see further discussion regarding Line of Credit in Note 7).

**NOTE 9 – MEMBER CAPITAL**

The Company's member capital consisted of member units and member unit purchasable warrants.

The below table summarized the Company's member contribution activity during years 2021 and 2020:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *Members' Contribution* | *Members' Contribution* | *Warrants* | *Warrants* |
|  | *Units* | *Values* | *Units* | *Values* |
| Balance as of December 31, 2019 | 3401251 | $5750100 | 270000 | $797499 |
| Warrant re-pricing in January 2020 | - | - | - | 282486 |
| Balance as of December 31, 2020 | 3401251 | $5750100 | 270000 | $1079985 |
| Issuance of member units through warrants exercised | 270000 | 1079985 | (270000) | (1079985) |
| Warrant exercised in December 2021 | - | 54000 | - | - |
| Balance as of December 31, 2021 | 3671251 | $6884085 | - | $- |

---

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**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***Member Units***

Prior to the reporting periods of year 2020, at various dates between years 2012 to 2019, the Company had 3,401,251 member units issued and outstanding, in which the Company had recorded $5,750,100 in the member units' account.

Primarily due to all warrants were exercised in December 2021, the Company had 3,671,251 member units authorized, issued and outstanding, which was increased by 270,000 member units with cash receipt of $54,000 as of December 31, 2021. Moreover, the member contribution was increased by $1,079,985 which was resulting from warrant valuation in the prior years (see further discussion on warrant valuation in note 10).

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***Member Unit Purchasable Warrants***

All warrants were issued to individuals for professional services such as accounting, advisory and project management and performed through the issuance dates. All warrants had no voting right and were immediate vesting on the grant dates. Each warrant gives the holder the right to buy one member unit in the Company.

Between years 2013 to 2019, the Company issued warrants with the aggregate result of 270,000 units outstanding as of December 31, 2019. No warrants were cancelled, forfeited, converted, or expired during those years.

There was a balance of $797,499 in the warrant capital account on December 31, 2019, which was resulting from warrant valuation at various grant dates during the years. The warrant capital was increased by $282,486 in connection with warrant re-valuation in year 2020 (see further discussion on warrant repricing in note 10).

The Company's warrant activity for all previous years ended December 31, 2019, is shown below:

---

| | | |
|:---|:---|:---|
| *Issued Year* | *Warrants Issued* | *Warrant Price* |
| 2013 | 45000 | $2.50 |
| 2014 | 30000 | 2.50 |
| 2015 | 30000 | 2.50 |
| 2016 | 80000 | 2.50 |
| 2017 | 5000 | 2.50 |
| 2017 | 40000 | 4.00 |
| 2019 | 40000 | $4.00 |
| Total | 270000 | $2.94 |

---

On January 6, 2020, the Board of Directors had approved reissuing all existing 270,000 warrants from the weight average exercise price of $2.94 to a strike price of $0.20 with 7-year term on January 1, 2020.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

The Company's warrant activity during the years of 2021, and 2020, is listed below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *Number of Warrants* | *Weighted Average Exercise Price* | *Weighted Average Contractual Term (in years)* | *Aggregate Intrinsic Value* |
| Outstanding, December 31, 2019 | 270000 | $2.94 | 6.64 | 282500 |
| &nbsp;&nbsp;&nbsp;Issued |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercised |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Expired or Forfeited |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Modified | 270000 | (2.74) | (0.64) | 743500 |
| Outstanding, December 31, 2020 | 270000 | $0.20 | 6.00 | 1026000 |
| &nbsp;&nbsp;&nbsp;Issued |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercised | (270000) | 0.20 | (6.00) | (1026000) |
| &nbsp;&nbsp;&nbsp;Expired or Forfeited |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Modified | - | - | - | - |
| Outstanding, December 31, 2021 | - | $- | - | - |

---

The aggregate intrinsic values for the warrants were $0, and $1,026,000 as of years ended December 31, 2021, and 2020, respectively.

As of December 31, 2020, there were 270,000 warrants reissued and outstanding. No warrants were forfeited, or expired during years 2021, and 2020, respectively.

In December 2021, all issued and outstanding warrants were exercised at a strike price of $0.20 each, resulting in cash receipt of $54,000 of additional working capital.

**NOTE 10 – WARRANT VALUATION**

As of December 31, 2020, the warrant equities account has a balance of $1,079,985 which was a combination of warrant valuation at grant date during the years, and warrant repricing in January 2020. On December 31, 2021, the warrant capital has a zero balance as all warrants were converted to members' units in December 2021.

The following is a summary of warrant capital transactions during the reporting periods:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Warrant issuance | $- | $797499 |
| Warrant repricing | *-* | 282486 |
| Warrant exercised | 1079985 | - |
| &nbsp;&nbsp;&nbsp;Total warrant capital | $- | $1079985 |

---

 ****

 ****

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

***Warrant Issuance***

Since all warrants were immediate vesting upon issuance, the Company values the warrants under Black Scholes Option Pricing Model at grant dates and recorded the full gain or loss in the warrant capital against warrant expenses which is recorded in other income or expense.

As of December 31, 2019, in connection with warrant issued in all previous years, the warrant capital has an outstanding balance of $797,499 with 270,000 units. The warrant unit balance stays the same in year 2020 while the warrant unit balance became zero in year 2021 as all warrants were exercised during the year.

 ****

***Warrant Repricing***

The fair values of warrants re-priced in 2020 were estimated using the Black Scholes Option Pricing Model on the repricing date with the following assumptions:

---

| | |
|:---|:---|
| *January 1,* | *2020* |
| Weighted Avg grant date fair value per unit | 0.20 |
| Risk-free interest rate | 1.79% |
| Dividend yield |  |
| Expected term (in year) | 7 |
| Volatility | 300% |

---

All warrants were repriced and reissued with a reissued date of January 1, 2020, approved by the Board of Directors on January 7, 2020. The Company has revalued the warrants and recorded the incremental expense of $282,486 in warrant re-pricing expense in the statements of operations.

As reflected in the accompanying financial statements, the Company has accumulated deficit since organized, and the current working capital is negative. Furthermore, the Company is still in the early stage of development of a proprietary formula, and the income is projected won't be generated until year 2025. Due to all uncertainties about the ability of the Company to continue as a going concern, the Company has used 300% volatility for warrant evaluation.

**NOTE 11 – FAIR VALUE MEASUREMENTS**

The Company adopted ASC 820, Fair Value Measurements and Disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Combined financial statements on a recurring basis (at least annually). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

Financial instruments include cash, accounts payable and accrued expenses. The carrying amounts of cash, accounts payable and accrued expenses approximate their fair value due to the short-term maturities of these instruments.

The Company used Level 3 inputs for its valuation methodology for the warrants in determining the fair value. As discussed on note 3 "Fair Value Measurements", Level 3 inputs are "Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities".

The following table represents the Company's fair value hierarchy for warrant capital that is required to be measured at fair value during the reporting periods:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *As of December 31, 2021* | *As of December 31, 2021* | *As of December 31, 2021* | *As of December 31, 2021* |
|  | Fair Value | Fair Value Measurements Using Fair Value Hierarchy | Fair Value Measurements Using Fair Value Hierarchy | Fair Value Measurements Using Fair Value Hierarchy |
| Description | | Level 1 | Level 2 | Level 3 |
| Warrants |  |  |  |  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | *As of December 31, 2020* | *As of December 31, 2020* | *As of December 31, 2020* | *As of December 31, 2020* | *As of December 31, 2020* | *As of December 31, 2020* |
|  | Fair Value | Fair Value | Fair Value Measurements Using Fair Value Hierarchy | Fair Value Measurements Using Fair Value Hierarchy | Fair Value Measurements Using Fair Value Hierarchy | Fair Value Measurements Using Fair Value Hierarchy |
| Description | | | Level 1 | Level 2 | Level 3 | Level 3 |
| Warrants |  | 1079985 |  |  |  | 1079985 |

---

The warrants are evaluated under the hierarchy of ASC 480-10, ASC Paragraph 815-25-1 and ASC Subparagraph 815-10-15-74 addressing embedded derivatives. The fair values of such warrants are estimated using the Black Scholes Option Pricing Model at each period end, with any increase or decrease in the fair value being recorded in the other income and expenses.

**NOTE 12 – COMMITMENTS AND CONTINGENCIES**

***Operating lease***

The Company's leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability and a corresponding right-of-use asset for leases with terms greater than twelve months.

As of December 31, 2021, and 2020, total facility lease expenses including the Company's pro-rata share of real estate taxes and operating expenses were $23,345, and $12,698, respectively.

The Company's operating lease expenses during the years of 2021, and 2020, are listed below:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Rent | $15656 | $12698 |
| Real estate taxes and operating expenses | 7689 | - |
| &nbsp;&nbsp;&nbsp;Total operating lease commitment | $23345 | $12698 |

---

 

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

<u>Month to month</u>

The Company occupied 949 Square foot of laboratory space in a building in Minnesota subleased month to month from IGF Oncology, LLC (IGF), a related party in year 2020. The original lease agreement was between IGF, and the landlord UEL Real Estate Holdings LLC (UEL). As the lease term was monthly, the Company elected to use the short-term exception and did not record assets and liabilities for this lease. The Company has calculated its total lease cost based solely on its monthly rent obligation.

<u>Long term contract</u>

On June 22, 2021, the lease mentioned above was extended with a one-year term, and the legal lessee was changed from IGF to Squarex. The lease has a monthly base rent of $2,567.83, commenced on July 1, 2021.

On June 02, 2022, the lease was further extended for additional 12 months between UEL and Squarex, with an increase of monthly base rent to $2,650.67 commenced from July 01, 2022, to June 30, 2023. In considering its qualitative disclosure obligations under ASC 842, the Company recognized a right-of-use asset and calculated a corresponding lease liability immediately, and the financial impact has been recorded retroactively from July 01, 2021. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown.

The calculations on the lease liabilities and lease right of use assets are using the following assumptions:

---

| | |
|:---|:---|
| Total lease obligation amount included in the measurement | $62622 |
| Number of periods included in the measurement (in years) | 2 |
| Incremental borrowing rate | 15% |
| Weighted average remaining lease term-operating leases (in years) | 150% |
| Lease beginning date | 7/1/2021 |

---

The supplemental information related to lease for the year ended 12/31/2021 is as follows:

---

| | |
|:---|:---|
| Lease amortized liabilities | $11738 |
| Lease amortized right of use asset | $11986 |
| Operating lease cost (included in general and admin in company's statement of operations) | $15656 |
| Cash paid for amounts included in the measurement of lease liabilities | $15407 |
| Short - term right-of-use assets | $26782 |
| Long - term right-of-use assets | $14982 |
| Total right-of-use assets | $41765 |
| Short-term operating lease liabilities | $26782 |
| Long-term operating lease liabilities | $15231 |
| Total operating lease liabilities | $42013 |
| Cumulative effect of incremental rent payment | $249 |

---

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

Maturities of the lease remaining liabilities are as follows:

---

| | |
|:---|:---|
| Year ending Dec 31 |  |
| 2022 | $31311 |
| 2023 | $15904 |
| Total future lease payments | $47215 |
| Less: Imputed interest/present value discount | $(5202) |
| Present value of lease liabilities | $42013 |

---

 ****

***Contractual Agreements***

On January 1, 2016, and March 17, 2018, the Company has entered into independent contractor agreements with its President, and Chief Financial Officer, providing for annual compensations of $96,180, and $48,000, without any benefit or worker's compensation insurance, until termination, respectively.

In additional, the agreement between Chief Financial Officer and the Company provides for certain cash and equity compensations payable for any Merger or Acquisition, or joint economic undertaking introduced by the officer within 12 months after termination, as defined in the agreement. The Company does not consider such an event to be probable until consummated and, accordingly, no liability has been recognized in the financial statements.

 ****

***License Agreement***

On December 15, 2014, the Company has entered into an exclusive license agreement to in-license a patent family from The Board of Trustees of the University of Arkansas (University), which is now with Bioventures, LLC since the University transferred the rights to that entity it created. This agreement grants the Company certain exclusive rights under the Patent Rights to develop and commercialize certain of the inventions for public use as disclosed and claimed in the agreement.

Subject to the terms and conditions for the obligations, the Company had agreed to pay royalties, continuation fees, and other compensations to the University as set forth in the agreement.

The underlying structure of the obligations are summarized below:

1) *License Fees*: The Company shall pay the University $20,953 within 60 days of invoice from the University as reimbursement for the University costs for patent expenses and patent legal service performed for the University prior to March 2013. As recognition of this payment, the University agrees to waive a demand for any other Licensing Fee.

2) *Continuation Fees*: Prior to the first commercial sales, the Company shall pay to the University upon the first and subsequent anniversaries of the effective date a nonrefundable continuation fee of $2,500.

3) *University Royalties*: The Company shall pay to the University running royalties of 5.5% of net sales by the Company or its affiliates subject to the adjustment of third-party royalties and sublicense income in below #4 and according to the timeline set forth in the agreement.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

4) *Third Party Royalties and Sublicense Income*: The University Royalties described in above #3 shall be decreased by no greater than 50% in any given year in the event the Company has additional third-party royalties due on the Licensed Products or Licensed Processes in the Licensed Field. The sublicense income due to the University described in below #4 shall be decreased no greater than 25% in any given year in the event that the Company has additional sublicense income due to a third party based on intellectual property on the Licensed Product or Licensed Processes in the Licensed Field.

5) *Sublicense Income*: The Company shall pay to the University 25% of all sublicense income based on an agreement executed prior to completing Phase II clinical trial of the Licensed Product or License Process, 20% of all sublicense income received based on an agreement executed after completing a Phase II clinical trial of the Licensed Product or Licensed Process and before approval of a New Drug Application for the Licensed Product or Licensed Process by the U.S. Food and Drug Administration, and 15% of all sublicense income received based on an agreement executed after approval of a New Drug Application for the Licensed Product or Licensed Process by the U.S. Food and Drug Administration, subject to the adjustment described in #4.

6) *Equity*: Upon execution of this agreement, the Company shall issue the University 150,000 units of equity in the Company, which is equal to 10% of total equity of the Company prior to the sale of equity to any investors ("Equity Interest"). The Equity Interest shall not be subject to dilution except of the same extent that the other Series A shares or other initial ownership interests of the Company are subject to dilution. The University will have notice and non-voting observation rights for one individual at all meetings of the board of directors.

7) *Future Patent Costs*: In addition to the initial license fee, the Company shall pay 100% of the costs incurred in the preparation, filing, prosecution (including appeals, interferences, and other ex parte and inter partes proceedings), and maintenance of patent applications and patents beginning on and continuing after the effective date of December 15, 2014.

8) *Past Non-U.S. Patent Costs*: As of August 2015, the University has expended a sum of $12,552.74 in fees and payments in the acquisition and maintenance of Patent Rights in non-U.S. jurisdictions. The Company agrees to reimburse this total sum to the University within 1 year of the effective date of December 15, 2014.

Upon execution of the agreement in December 2014, the Company has fulfilled the obligations as outlined below:

1) Issued the University 150,000 units of capital as set forth in the agreement item #6.

2) Paid the University a onetime initial license fee of $20,953 as specified in the agreement item #1.

3) Paid the continuation fees of $2,500 each year in 2015 to 2021 in the agreement item #2.

As of December 31, 2021, the Company is current on all obligations as called for the agreement.

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

**NOTE 13 – RELATED PARTY TRANSACTIONS**

The related party transactions are summarized as below:

---

| | | |
|:---|:---|:---|
| *December 31,* | *2021* | *2020* |
| Patent legal fees | $44102 | $46203 |
| Line of credit | 159794 | 269000 |
| Interest exp - Line of credit | 52957 | 20688 |
| Office rent | 15656 | 12698 |
| Partner fees | 96180 | 96180 |
| &nbsp;&nbsp;&nbsp;Total related party transactions | $368689 | $444769 |

---

 ****

***Legal Fees***

The Company contracts with a law firm owned by Hugh McTavish (a member of the Company) to handle work related to securing and defending its intellectual property. The Company does not consider that these transactions are carried out "at arm's length," but believes that the terms are commercially reasonable and fees generally representative of the market value for similar services, and accordingly, the Company expects to continue engaging legal services with McTavish in the future.

The Company incurred expenses to McTavish Patent Firm $44,102 and $46,203 as of December 31, 2021, and 2020, respectively. The Company has owed McTavish Patent Firm $6,544 and $0 for the years ended December 31, 2021, and 2020, respectively.

 ****

***Line of Credit***

The Company utilizes a line of credit ("the Line of Credit) with Hugh McTavish in exchange for cash for the purpose of funding continuing operations (see further discussion in Note 7).

 ****

***Office Lease***

In year 2020, the Company occupied laboratory space leased on a month-to-month basis from IGF Oncology, a related party, owned by Hugh McTavish.

In year 2021, the Company has entered into a twelve-month term lease agreement for the same laboratory space mentioned above (see further discussion in Note 12).

 ****

***Partner Fees***

During year 2021, and 2020, the Company has engaged Hugh McTavish to perform executive service for the Company and to conduct, coordinate and supervise the Company's activities to Exploitation of DTH Compositions. The Company has compensated McTavish monthly partner fees of $8,015, resulting the same partner fees amount of $96,180 for the years (see further discussion in Note 12).

**SQUAREX, LLC**

**NOTES TO FINANCIAL STATEMENTS**

**NOTE 14 – INCOME TAXES**

The Company is a limited liability company treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the members. As such, no recognition of federal or state income taxes for the Company have been provided for in the accompanying financial statements. Any uncertain tax position taken by the members is not an uncertain position of the Company.

We have adopted the provisions of ASC 740-10-25, which provide recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.

Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

**NOTE 15 – SUBSEQUENT EVENTS**

In January and March 2022, proceeds from the execution of a Regulation CF Offering were recognized and deposited, resulting in receipts of $73,410 and $100,000, respectively, of additional working capital.

The Company entered into an investment banking agreement with EF Hutton Investments LLC on February 8, 2022, to undertake fund raising and financial advisory on behalf of the Company which may include an Initial Public Offering ("IPO").

On June 02, 2022, the Company signed a Lease Agreement with UEL Real Estate Holdings LLC to extend the current laboratory space lease for additional 12 months from July 01, 2022, to June 30, 2023. The financial impact arose from the lease extension under ASC 842 has been retroactivity recognized and recorded in the financial statements (see further discussion in Note 12).

In 2022, it is the Company's intention to convert to a C Corporation prior to going public. The Company has filed it's 2021 annual information tax returns of partnership to report the deductions, and loss, and had allocated the net operating loss (NOL) to the members.

The Company has evaluated subsequent events through July 8, 2022, which is the date the financial statements were available to be issued. The Company determined that no additional subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.

 **SQUAREX PHARMACEUTICAL CORPORATION**

 **(FORMERLY SQUAREX LLC)** 

 **CONDENSED FINANCIAL STATEMENTS**

 **AS OF SEPTEMBER 30, 2022, AND 2021**

 **AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022, AND 2021**

 **(UNAUDITED)**

 **SQUAREX PHARMACEUTICAL CORPORATION**

 **(FORMERLY SQUAREX, LLC)** 

**Balance Sheets**

 **(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **September 30,** | **December 31,** |
|  | ***2022*** | **2021** |
| **ASSETS** |  |  |
| **Current Assets:** |  |  |
| &nbsp;&nbsp;&nbsp; Cash and cash equivalents | $8079 | $35301 |
| &nbsp;&nbsp;&nbsp; Right of use asset - current | 7076 | 26782 |
| &nbsp;&nbsp;&nbsp; Other current assets | 4996 | 10500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Current Assets | $20151 | $72583 |
| **Long Term Assets:** |  |  |
| &nbsp;&nbsp;&nbsp; Right of use asset - long term | $14982 | $14982 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Long Term Assets | $14982 | $14982 |
| **Total Assets** | $**35133** | $**87565** |
| **LIABILITIES AND STOCKHOLDERS'/MEMBERS' DEFICIT** |  |  |
| **Current Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp; Accounts payable | $35787 | $53744 |
| &nbsp;&nbsp;&nbsp; Lease liability - current | 7076 | 26782 |
| &nbsp;&nbsp;&nbsp; Accrued liabilities, related party | 255148 | 229103 |
| &nbsp;&nbsp;&nbsp; Accrued liabilities and other current liabilities | 51667 | 51667 |
| &nbsp;&nbsp;&nbsp; Accrued Interest | 10381 | 6906 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Current Liabilities | $360059 | $368202 |
| **Long Term Liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp; Line of credit, related party | $469294 | $445794 |
| &nbsp;&nbsp;&nbsp; Lease liability - long term | 15231 | 15231 |
| &nbsp;&nbsp;&nbsp; Accrued Interest, related party | 124284 | 74007 |
| &nbsp;&nbsp;&nbsp; Simple Agreement for Future Equity | 235067 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Long Term Liabilities | $843876 | $535032 |
| **Total Liabilities** | $1203935 | $903234 |
| **Stockholders'/Members' Deficit** |  |  |
| &nbsp;&nbsp;&nbsp; Members' Contributions | $- | $6884085 |
| &nbsp;&nbsp;&nbsp; Common Stock ($0.0001 par value; 250,000,000 shares authorized; 7,354,502 shares issued and outstanding) | 735 |  |
| &nbsp;&nbsp;&nbsp; Preferred Stock ($0.0001 par value; 5,000,000 authorized; -0- shares issued and outstanding) |  |  |
| &nbsp;&nbsp;&nbsp; Additional paid-in capital | 6894630 |  |
| &nbsp;&nbsp;&nbsp; Accumulated deficit | (8064167) | (7699755) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Stockholders'/Members' Deficit | $(1168802) | $(815670) |
| **Total Liabilities and Stockholders'/Members' Deficit** | $**35133** | $**87565** |

---

The accompanying notes are an integral part of these unaudited condensed financial statements

 **SQUAREX PHARMACEUTICAL CORPORATION**

 **(FORMERLY SQUAREX, LLC)**

**CONDENSED Statements of Operations**

 **(UNAUDITED)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months Ended<br> September 30,** | **Three months Ended<br> September 30,** | **Nine months ended<br> September 30,** | **Nine months ended<br> September 30,** |
|  | ***Year 2022*** | ***Year 2021*** | ***Year 2022*** | ***Year 2021*** |
| **Operating Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Research and development | $- | $4987 | $12975 | $8621 |
| &nbsp;&nbsp;&nbsp;General and administrative | 77933 | 18120 | 280056 | 44654 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | $77933 | $23107 | $293031 | $53275 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Loss from Operations** | $**(77933)** | $**(23107)** | $**(293031)** | $**(53275)** |
| **Other Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net | $(1202) | $(797 ) | $(3475) | $(2392 ) |
| &nbsp;&nbsp;&nbsp;Interest expense- related party, net | (16842) | (13440 ) | (50277) | (37826) |
| &nbsp;&nbsp;&nbsp; Other expense | - | - | (17630 ) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other expenses, net | $(18044) | $(14237 ) | $(71382) | $(40218 ) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss before income tax provision | $(95977) | $(37344) | $(364413) | $(93493) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax provision | $- | $- | $- | $- |
| **Net Loss** | $**(95977)** | $**(37344)** | $**(364413)** | $**(93493)** |
| **Net Loss per share or membership unit basic and diluted\***  | **(0.01)** | **(0.01)** | **(0.05)** | **(0.01)** |

---

\* Amounts were calculated giving effect to the LLC conversion in September 2022 whereupon one member unit was exchanged for two shares of common stock.

The accompanying notes are an integral part of these unaudited condensed financial statements

**SQUAREX PHARMACEUTICAL CORPORATION**

**(FORMERLY SQUAREX, LLC)**

**CONDENSED Statement of changes in STOCKHOLDERS'/Member's Deficit**

**(UNAUDITED)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Members' Capital** | **Members' Capital** | **Common Stock** | **Common Stock** | **Additional Paid-In Capital** | | |
|  | Units\* | Amount | Shares | Amount | Amount | **Accumulated Deficit**<br>Amount | **Total**<br>Amount |
| **Balances, December 31, 2021** | **3671251** | $**6884085** | **-** | $**-** | $**-** | $**(7699754)** | $**(815669)** |
| &nbsp;&nbsp;&nbsp; Net loss | - | - | - | - | - | $(173188) | $(173188) |
| **Balances, March 31, 2022** | **3671251** | $**6884085** | **-** | $**-** | $**-** | $**(7872942)** | $**(988857)** |
| &nbsp;&nbsp;&nbsp; Net loss | - | - | - | - |  | $(95248) | $(95248) |
| **Balances, June 30, 2022** | **3671251** | $**6884085** | **-** | $**-** | $**-** | $**(7968190)** | $**(1084105)** |
| Stock compensation expense | 6000 |  |  |  | 11280 | $- | $11280 |
| &nbsp;&nbsp;&nbsp; Common stock issued upon conversion from LLC to C Corp | (3677251) | (6884085) | 7354502 | 735 | 6883350 | $- | $- |
| &nbsp;&nbsp;&nbsp; Net loss | - | - | - | - | - | $(95977) | $(95977) |
| **Balances, September 30, 2022** | **-** | $**-** | **7354502** | $**735** | $**6894630** | $**(8064167)** | $**(1168802)** |

---

\* Effective September 13, 2022, the Company converted from a Delaware limited liability company into a Delaware corporation. As a result of the LLC Conversion, each LLC membership unit previously outstanding was automatically converted into two shares of common stock. Accordingly, immediately following the LLC Conversion, the Company had issued and outstanding 7,354,502 shares of common stock.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Members' Capital** | **Members' Capital** | **Warrants** | **Warrants** | | |
|  | Unit | Amount | Unit | Amount | **Accumulated Deficit**<br>Amount | **Total**<br>Amount |
| **Balances, December 31, 2020** | **3401251** | $**5750100** | **270000** | $**1079985** | $**(7335576)** | $**(505491)** |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | $(20026) | $(20026) |
| **Balances, March 31, 2021** | **3401251** | $**5750100** | **270000** | $**1079985** | $**(7355602)** | $**(525517)** |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | $(36123) | $(36123) |
| **Balances, June 30, 2021** | **3401251** | $**5750100** | **270000** | $**1079985** | $**(7391725)** | $**(561640)** |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | $(37344) | $(37344) |
| **Balances, September 30, 2021** | **3401251** | $**5750100** | **270000** | $**1079985** | $**(7429069)** | $**(598984)** |

---

The accompanying notes are an integral part of these unaudited condensed financial statements

 **SQUAREX PHARMACEUTICAL CORPORATION**

 **(FORMERLY SQUAREX, LLC)**

**CONDENSED Statements of Cash Flows**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** |
| **Cash Flows From Operating Activities** |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(364413) | $(93493) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp; Non-cash interest expense | 3475 | 2392 |
| &nbsp;&nbsp;&nbsp;Non-cash interest expense - related party | 50277 | 37826 |
| &nbsp;&nbsp;&nbsp;Expenses incurred against equity | 11280 |  |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, related party |  | (4150) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 5504 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (17957) | 1000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities - related party | 26045 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities and other current liabilities | $- | $(15501) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | $(285789) | $(71926) |
| **Cash Flows From Investing Activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Net cash used in investing activities | $- | $- |
| **Cash Flows From Financing Activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from LOC-related party | $23500 | $80000 |
| &nbsp;&nbsp;&nbsp;Proceeds from SAFE notes | 235067 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | $258567 | $80000 |
| **Increase (Decrease) in Cash and Cash Equivalents** | $(27222) | $8074 |
| **Cash and Cash Equivalents, Beginning of the Year** | $35301 | $4509 |
| **Cash and Cash Equivalents, End of the year** | $**8079** | $**12583** |

---

The accompanying notes are an integral part of these unaudited condensed financial statements

 **SQUAREX PHARMACEUTICAL CORPORATION**

 **(FORMERLY SQUAREX, LLC)**

**Notes to INTERIM CONDENSED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**NOTE 1 – NATURE OF OPERATIONS**

Squarex, LLC ("the Company") is a limited liability company formed on June 26, 2012, organized under the laws of Delaware and domiciled in Minnesota. The Company is currently in the early stage of development of a proprietary formula to prevent the outbreak of herpes labialis episodes, also known as oral herpes or cold sores, caused by herpes simplex virus type 1 (HSV-1).

**NOTE 2 – GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS**

***Going Concern Matters***

 ****

The financial statements have been prepared assuming the Company will continue as a going concern, which assumes that the Company will continue in operation one year after the date these financial statements are issued. However, management has identified the following conditions and events that created an uncertainty about the ability of the Company to continue as a going concern.

The Company has internally developed four distinct patent families. Patents have successfully been acquired by two of the families, while the other two families have applied for patents. The Company is also seeking FDA approval for its proprietary formula to prevent the outbreak of herpes labialias, a.k.a. oral herpes or cold sores, caused by herpes simplex virus type 1 (HSV-1). The Company has completed Phase 1 and a Phase 2 clinical trial and completed an End-of-Phase-2 meeting with the FDA. The Company needs to complete Phase 3 clinical trials to obtain FDA approval. The Company expects to gain FDA approval and, as a result, start earning revenue in the year 2025.

The Company recorded net losses of $364,413 for the nine months ended September 30, 2022 and $93,493 for the nine months ended September 30, 2021.

The Company has raised additional cash through the exercise of all outstanding warrants by the Company's warrant holders in December 2021, totaling $54,000. We made an Regulation CF offering that raised $235,067 net of expenses to date, as discussed further in Note 9. In addition, the related party that has given the Company a line of credit has the means and intent to provide additional credit if needed. The Company believes that will provide enough capital to fund operations through February 28, 2023, but there is some uncertainty whether it will be sufficient.

The Company plans to conduct an underwritten initial public offering (IPO) to become listed on NASDAQ or NYSE and has signed a letter of engagement from an investment bank to conduct a firm commitment underwritten IPO. The IPO would provide sufficient capital to continue as a going concern past February 28, 2023. The Company's ability to meet its obligations as they become due is dependent upon the success of management's plans as described above.

These conditions and events create an uncertainty about the ability of the Company to continue as a going concern through February 28, 2023. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue in existence.

**SQUAREX, LLC**

**Notes to Financial Statements**

***COVID-19***

 ****

On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic ("coronavirus pandemic"), based on the rapid increase in exposure globally. The coronavirus pandemic is affecting the United States and global economies.

Government restrictions on travel, trade, and activity associated with COVID-19 may affect the Company's operations and those of third parties on which the Company relies, including causing disruptions in the supply of the Company's product candidates and the conduct of current and planned preclinical and clinical studies and contract manufacturing operations. The Company may need to limit operations or implement limitations and may experience limitations in employee resources.

The extent to which the coronavirus impacts the Company's results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the government restrictions associated with coronavirus on the global financial markets may reduce the Company's ability to access capital, which could negatively impact the Company's short-term and long-term liquidity and the Company's ability to complete its preclinical studies on a timely basis, or at all.

***Industry Specific Risks***

 ****

<u>FDA Approval Risk</u>

Our business is dependent on the success and FDA approval of our one product candidate SQX770. We will have no or minimal revenue until we obtain FDA approval or approval from corresponding regulatory authorities elsewhere in the world to market SQX770. SQX770 has been safe and significantly effective in preventing herpes labialis episodes so far in the completed Phase 1 and Phase 2 clinical trials, there is a risk it might not show significant efficacy or a balance of efficacy to safety that is sufficient to satisfy the FDA in the remaining clinical trials required for regulatory approval.

To get FDA approval we must complete further clinical trials, which will require substantial capital. We estimate the remaining clinical trials needed for FDA approval will require $20 million to $50 million to execute. There is a risk we will not be able to obtain sufficient funding or funding on acceptable terms to complete the clinical trials.

**SQUAREX, LLC**

**Notes to Financial Statements**

<u>Coverage and Reimbursement Risk</u>

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidate which could make it difficult for us to sell our product candidate profitably. Even if we obtain regulatory approval, there is a risk that the cost of our drug may not be covered or reimbursed by governments, pharmacy benefit managers, and health insurers.

We have conducted a survey of a small number of pharmacy benefit managers, and all indicated they would reimburse for SQX770, with a median price of over $100 per dose. However, that is no guarantee that they actually will approve reimbursement once the drug is approved, and Medicare, foreign governments, or other parties may decline to reimburse patients at an acceptable price point for our product.

<u>Physician Prescription Risk</u>

The FDA and comparable foreign authorities strictly regulate the marketing and promotional claims that are made about pharmaceutical products, such as our product candidate, if approved. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or comparable foreign authorities as reflected in the product's approved labeling. If we receive marketing approval for SQX770, physicians could prescribe SQX770 to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may receive warning letters from the FDA and comparable foreign authorities and become subject to significant liability, which would materially harm our business.

<u>Legislative and Jurisdictional Risk</u>

In the United States and some foreign jurisdictions, there have been, and will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize our product candidates and may affect the prices we may set.

**NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Basis of Accounting***

 ****

The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (US GAAP). Accordingly, all adjustments necessary have been accrued for the fair presentation of the Company's financial position for the periods presented.

***Use of Estimates***

 ****

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

**SQUAREX, LLC**

**Notes to Financial Statements**

***Cash and Cash Equivalents***

 ****

The Company considers cash in financial institutions and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. There were cash and cash equivalents of $8,079 as of September 30, 2022 and $35,301 as of December 31, 2021.

***Concentration of Credit Risk***

 ****

The Company maintains cash balances in one banking institution. The balances are insured by the Federal Deposit Insurance Company (FDIC). At times throughout the year, the Company's cash balances may exceed the FDIC limit. Management believes there is no significant risk of loss in having cash balances in excess of the insured limit.

***Fair Value Measurements***

 ****

Fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 1* – Observable inputs, such as quoted prices for identical assets or liabilities in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 2* – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly, such as quoted prices for similar assets or liabilities, or market-corroborated inputs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Level 3* – Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities.

Cash, accounts payable, and accrued liabilities – The carrying amounts reported in the consolidated balance sheets for these items are a reasonable estimate of fair value due to their short-term nature.

***Property and Equipment***

 ****

Property and equipment are valued at cost. The Company capitalizes assets with an expected useful life of one year or more, and an original purchase price of $1,000 or more. Depreciation is calculated on the double declining balance method over management's estimate of each asset's useful life.

The Company has capitalized $59,349 lab equipment in year 2021 and the same has remained unchanged till September 30, 2022. As all lab equipment has been fully depreciated at the end of year 2021, the depreciation expense totaled $0 for the period ended September 30, 2022 and for the year ended on December 31, 2021.

***Revenue Recognition***

 ****

As the Company is still in the early development stage, the Company recognized no revenue during the nine months ended September 30, 2022 and during the year ended December 31, 2021.

**SQUAREX, LLC**

**Notes to Financial Statements**

***Research and Development***

 ****

Research and development costs are expensed as incurred and consist primarily of testing and developing costs, materials and supplies, consulting services and other direct expenses. Research and development costs were $12,975 and $8,621 for the nine months ended September 30, 2022, and 2021, respectively.

***Contingencies***

 ****

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company's business, consolidated financial position, and consolidated results of operations or consolidated cash flows.

***Related Parties***

 ****

Any transaction, arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which the Company is a participant and in which a Related Person has a direct or indirect interest greater than 5% of the total members capital or deficit shall be considered a related party transaction ("Transaction"). In order for the Transaction to be subject to this policy, it must have a financial aspect, which may, for example, involve payments between the Company and the Related Person, but may also involve providing value to one of the parties.

***Income Taxes***

 ****

The Company has selected to file the tax as a partnership in the federal jurisdiction of the United States. All items of income and expense are reported by the Company's members on their individual tax returns. Therefore, no provision or liability for income taxes has been included in the financial statements.

The Company is subject to franchise tax filing requirements in the State of Delaware and state income tax filing requirements in the State of Minnesota.

**SQUAREX, LLC**

**Notes to Financial Statements**

***Subsequent Events***

 ****

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.

***Recently Issued Accounting Pronouncements***

 ****

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

<u>Lease (ASC 842)</u>

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), or ASU 2016-02, which supersedes the guidance in ASC 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. This guidance is effective for annual reporting periods beginning after December 15, 2019, for non-public entities. The adoption of ASU 2016-02 had no material impact on the Company's financial statements and related disclosures.

We adopted this standard using a modified retrospective approach since inception of the Company. The modified retrospective approach includes a number of optional practical expedients relating to the identification and classification of leases that commenced as of the inception of the company; initial direct costs for leases that commenced as of inception of the company; and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset.

The Company elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii) the classification of the lease; or (iii) the accounting for indirect costs as defined in ASC 842.

In year 2020, in considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable lease payments and no options to extend. The lease is for an office space with no right of use assets. The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components for its facility lease.

**SQUAREX, LLC**

**Notes to Financial Statements**

Consistent with ASC 842-20-50-4, for the Company's annual financial statements for the year ended December 31, 2020, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. The Company's office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate. The adoption of this guidance resulted in no significant impact to the Company's results of operations or cash flows.

On June 22, 2021, the Company has entered into a one-year term lease agreement for the office space mentioned above. On June 02, 2022, the lease was extended for 12 additional months with an expiration date of June 30, 2023. On the commencement date of the lease In June 2021, the Company recognizes the lease liability and a corresponding right-of-use asset. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.

<u>Income Taxes (ASU 740)</u>

In December 2019, the FASB issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 is part of the FASB's overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. The updated guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company has assessed that the adoption of this new standard did not have a material impact on our accompanying financial statements for the reporting periods of nine months ended September 30, 2022 and for the year ended December 31, 2021.

<u>Codification Improvements (ASU 2020-10)</u>

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations. The Company has adopted ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company's financial statements.

<u>Others</u>

Other than the pronouncements mentioned above, the Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

**SQUAREX, LLC**

**Notes to Financial Statements**

**NOTE 4 – PROPERTY AND EQUIPMENT**

Property and equipment consisted of the following:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Lab equipment | $59349 | $59349 |
| Less current year depreciation expenses | - | - |
| Property and equipment, before accumulated depreciation | 59349 | 59349 |
| Less accumulated depreciation | (59349) | (59349) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $- | $- |

---

The Company has capitalized $59,349 lab equipment as of beginning of 2021 and has not capitalized any new assets during the year ended December 31, 2021, or during the nine months ended September 30, 2022.

All lab equipment is fully depreciated at the end of year 2021. Depreciation expense totaled $0 for the nine months ended September 30, 2022 and during the year ended December 31, 2021.

**NOTE 5 – OTHER CURRENT ASSETS**

The Company has recorded prepaid expenses of $4,996 as of September 30, 2022 and $10,500 as of year ended December 31, 2021.

**NOTE 6 – ACCRUED LIABILITIES**

Accrued liabilities is a combination of related party liabilities and trade payables. For the nine months period ended September 30, 2022, the accrued liabilities were $306,815 and for the year ended December 31, 2021, the accrued liabilities were $280,770.

The following table illustrated the balances in each category during the years:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Accrued payables – related party | $255148 | $229103 |
| Accrued payables - trade liabilities | 51667 | 51667 |
| &nbsp;&nbsp;&nbsp;Accrued Payables | $306815 | $280770 |

---

**SQUAREX, LLC**

**Notes to Financial Statements**

***Accrued Liabilities - Related Party***

Accrued payables – related party reflects the liabilities that owed to related persons such as company officers, or persons who have a direct or indirect interest greater than 5% of the members capital or deficit.

As of September 30, 2022 and December 31, 2021, the accrued payables – related party has balances of $255,148 and $229,103 respectively.

The payables transactions accrued for related party during the years are summarized as below:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Partner fees | 240450 | 216405 |
| Rent | 14698 | 12698 |
| &nbsp;&nbsp;&nbsp;Total accrued payables – related party | $255148 | $229103 |

---

***Accrued Liabilities and Other Current Liabilities***

Accrued liabilities and other current liabilities are trade payable amounts owed for goods and services which the Company purchased while doing normal business.

Accrued liabilities and other current liabilities for non-related party consisted of the following:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Consultant fees | $30000 | $30000 |
| Compensation | 21667 | 21667 |
| &nbsp;&nbsp;&nbsp;Total accrued trade liabilities | $51667 | $51667 |

---

**SQUAREX, LLC**

**Notes to Financial Statements**

**NOTE 7 – LINE OF CREDIT**

The activities of the Line of Credit during the nine months ended September 30, 2022 and during the year ended December 31, 2021 are illustrated in the table below:

---

| | | |
|:---|:---|:---|
|  | *Principal* | *Accrued Interest* |
| Balance as of December 31, 2020 | $286000 | $21050 |
| Drawdown | 159794 | -  |
| Interest Incurred | - | 52957 |
| Balance as of December 31, 2021 | $445794 | $74007 |
| Drawdown | 23500 |  |
| Interest Incurred | - | 50277 |
| Balance as of September 30, 2022 | $469294 | $124284 |

---

In 2019, the Company established a $1,000,000 line of credit with a related party in exchange for cash for the purpose of funding continuing operations ("the Line of Credit"). The agreement stipulates a payment arrangement as the Company obtains investor capital. An amount equal to 10% of the first $1,000,000, 20% of the second million and up to 100% of the third million dollars raised through investors will be applied to any outstanding balance on this line of credit. The outstanding balance accrues interest at the rate of 15% per annum and is payable no later than December 2024 (see discussion on interest balance in note 8).

The drawdowns during the nine months ended September 30, 2022 was $23,500 and during the year ended December 31, 2021 was $159,794, resulting in balances of $469,294 as on September 30, 2022 as well as December 31, 2021.

**NOTE 8 – ACCRUED INTEREST**

The accrued interest balances during the years are presented as below:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Employee compensation | $10381 | $6906 |
| Related party - line of credit | 124284 | 74007 |
| &nbsp;&nbsp;&nbsp;Total accrued interest | $134665 | $80913 |

---

During the years of 2022, and 2021, because of a short-term employment, the Company has accrued interest of $3,250 in each year on unpaid compensation to a former employee who currently is a member of the Company. The unpaid compensation bears interest at a rate of 15% per annum. During the nine months ended September 30, 2022 and year ended December 31, 2021, the accumulated accrued interest to the unpaid compensation were $10,381 and $6,906, respectively.

In connection with a Line of Credit from a related party, the Company recognized approximately $50,277 and $52,957 in interest during the nine months ended September 30, 2022 and year ended December 31, 2021, respectively, accumulating the accrued interest balance of $124,284 and $74,007 as of September 30, 2022 and December 31, 2021, respectively (see further discussion regarding Line of Credit in Note 7).

**SQUAREX, LLC**

**Notes to Financial Statements**

**NOTE 9 – CAPITAL STOCK** 

***Member Units***

 ****

Prior to the reporting periods of year 2021, at various dates between years 2012 to 2020, the Company had 3,401,251 member units issued and outstanding, in which the Company had recorded $5,750,100 in the member units' account.

Primarily due to all warrants being exercised in December 2021, the Company had 3,671,251 member units authorized, issued and outstanding, after it was increased by 270,000 member units, which were exercised at a strike price of $0.20 each, resulting in cash receipt of $54,000, as of December 31, 2021. Moreover, the member contribution was increased by $1,079,985 which resulted from warrant valuation in the prior years (see further discussion on warrant valuation in note 10).

As of December 31, 2021, assuming the stock split of 2 for 1 resulting from the LLC Conversion as defined below, the Company had 7,342,502 member units authorized, issued and outstanding. During the nine months ended September 30, 2022, 6,000 new units (12,000 new units post stock split) were allotted to a member against the services rendered which were valued at the price of $0.94 per unit.

***SAFE***

 ****

During the 9-months ended September 30, 2022, the Company issued SAFEs resulting in a raise of $235,067. Under the terms of the SAFEs, as amended, in the event of an initial public offering, the investors will be issued shares of our common stock at a 30% discount to the price at which our shares are being offered to the public.

For the period ended September 30, 2022, the SAFEs have been classified as Convertible SAFE Notes in the balance sheet.

 ***LLC Conversion***

Effective September 13, 2022, the Company converted from a Delaware limited liability company into a Delaware corporation. As a result of the LLC Conversion, each LLC membership unit previously outstanding was automatically converted into two shares of common stock. Accordingly, immediately following the LLC Conversion, the Company had issued and outstanding 7,354,502 shares of common stock.

 ****

**SQUAREX, LLC**

**Notes to Financial Statements**

**NOTE 10 – COMMITMENTS AND CONTINGENCIES**

***Operating lease***

 ****

The Company's leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability and a corresponding right-of-use asset for leases with terms greater than twelve months.

As of September 30, 2022 and December 31, 2021, total facility lease expenses including the Company's pro-rata share of real estate taxes and operating expenses were $36,717 and $23,345, respectively.

The Company's operating lease expenses during the nine months ended September 30, 2022 and year ended December 31, 2021, are listed below:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Rent | $25233 | $15656 |
| Real estate taxes and operating expenses | 11484 | 7689 |
| &nbsp;&nbsp;&nbsp;Total operating lease commitment | $36717 | $23345 |

---

<u>Month to month</u>

The Company occupied 949 Square foot of laboratory space in a building in Minnesota subleased month to month from IGF Oncology, LLC (IGF), a related party in year 2020. The original lease agreement was between IGF, and the landlord UEL Real Estate Holdings LLC (UEL). As the lease term was monthly, the Company elected to use the short-term exception and did not record assets and liabilities for this lease. The Company has calculated its total lease cost based solely on its monthly rent obligation.

<u>Long term contract</u>

On June 22, 2021, the lease mentioned above was extended with a one-year term, and the legal lessee was changed from IGF to Squarex. The lease has a monthly base rent of $2,567.83, commenced on July 1, 2021.

On June 02, 2022, the lease was further extended for additional 12 months between UEL and Squarex, with an increase of monthly base rent to $2,650.67 commenced from July 01, 2022, to June 30, 2023. In considering its qualitative disclosure obligations under ASC 842, the Company recognized a right-of-use asset and calculated a corresponding lease liability immediately, and the financial impact has been recorded retroactively from July 01, 2021. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown.

**SQUAREX, LLC**

**Notes to Financial Statements**

The calculations on the lease liabilities and lease right of use assets are using the following assumptions:

---

| | |
|:---|:---|
| Total lease obligation amount included in the measurement | $62622 |
| Number of periods included in the measurement (in years) | 2 |
| Incremental borrowing rate | 15% |
| Weighted average remaining lease term-operating leases (in years) | 75% |
| Lease beginning date | 01-07-2021 |

---

The supplemental information related to lease for the year ended 09/30/2022 is as follows:

---

| | |
|:---|:---|
| Lease amortized liabilities | $6937 |
| Lease amortized right of use asset | $6812 |
| Operating lease cost (included in general and admin in company's statement of operations) | $7828 |
| Cash paid for amounts included in the measurement of lease liabilities | $7952 |
| Short - term right-of-use assets | $7076 |
| Long - term right-of-use assets | $14982 |
| Total right-of-use assets | $22058 |
| Short-term operating lease liabilities | $7076 |
| Long-term operating lease liabilities | $14982 |
| Total operating lease liabilities | $22058 |
| Cumulative effect of incremental rent payment | $- |

---

Maturities of the lease remaining liabilities are as follows:

---

| | |
|:---|:---|
| <u>Quarter ending September 30</u> |  |
| 2022 | $7952 |
| 2023 | $15904 |
| Total future lease payments | $23856 |
| Less: Imputed interest/present value discount | $(1425) |
| Present value of lease liabilities | $22058 |

---

***Contractual Agreements***

 ****

On January 1, 2016, and March 17, 2018, the Company has entered into independent contractor agreements with its President, and Chief Financial Officer, providing for annual compensations of $96,180, and $48,000, without any benefit or worker's compensation insurance, until termination, respectively.

In additional, the agreement between Chief Financial Officer and the Company provides for certain cash and equity compensations payable for any Merger or Acquisition, or joint economic undertaking introduced by the officer within 12 months after termination, as defined in the agreement. The Company does not consider such an event to be probable until consummated and, accordingly, no liability has been recognized in the financial statements.

**SQUAREX, LLC**

**Notes to Financial Statements**

***License Agreement***

 ****

On December 15, 2014, the Company has entered into an exclusive license agreement to in-license a patent family from The Board of Trustees of the University of Arkansas (University), which is now with Bioventures, LLC since the University transferred the rights to that entity it created. This agreement grants the Company certain exclusive rights under the Patent Rights to develop and commercialize certain of the inventions for public use as disclosed and claimed in the agreement.

Subject to the terms and conditions for the obligations, the Company had agreed to pay royalties, continuation fees, and other compensations to the University as set forth in the agreement.

The underlying structure of the obligations are summarized below:

1) *License Fees*: The Company shall pay the University $20,953 within 60 days of invoice from the University as reimbursement for the University costs for patent expenses and patent legal service performed for the University prior to March 2013. As recognition of this payment, the University agrees to waive a demand for any other Licensing Fee.

2) *Continuation Fees*: Prior to the first commercial sales, the Company shall pay to the University upon the first and subsequent anniversaries of the effective date a nonrefundable continuation fee of $2,500.

3) *University Royalties*: The Company shall pay to the University running royalties of 5.5% of net sales by the Company or its affiliates subject to the adjustment of third-party royalties and sublicense income in below #4 and according to the timeline set forth in the agreement.

4) *Third Party Royalties and Sublicense Income*: The University Royalties described in above #3 shall be decreased by no greater than 50% in any given year in the event the Company has additional third-party royalties due on the Licensed Products or Licensed Processes in the Licensed Field. The sublicense income due to the University described in below #4 shall be decreased no greater than 25% in any given year in the event that the Company has additional sublicense income due to a third party based on intellectual property on the Licensed Product or Licensed Processes in the Licensed Field.

5) *Sublicense Income*: The Company shall pay to the University 25% of all sublicense income based on an agreement executed prior to completing Phase II clinical trial of the Licensed Product or License Process, 20% of all sublicense income received based on an agreement executed after completing a Phase II clinical trial of the Licensed Product or Licensed Process and before approval of a New Drug Application for the Licensed Product or Licensed Process by the U.S. Food and Drug Administration, and 15% of all sublicense income received based on an agreement executed after approval of a New Drug Application for the Licensed Product or Licensed Process by the U.S. Food and Drug Administration, subject to the adjustment described in #4.

6) *Equity*: Upon execution of this agreement, the Company shall issue the University 150,000 units of equity in the Company, which is equal to 10% of total equity of the Company prior to the sale of equity to any investors ("Equity Interest"). The Equity Interest shall not be subject to dilution except of the same extent that the other Series A shares or other initial ownership interests of the Company are subject to dilution. The University will have notice and non-voting observation rights for one individual at all meetings of the board of directors.

**SQUAREX, LLC**

**Notes to Financial Statements**

7) *Future Patent Costs*: In addition to the initial license fee, the Company shall pay 100% of the costs incurred in the preparation, filing, prosecution (including appeals, interferences, and other ex parte and inter partes proceedings), and maintenance of patent applications and patents beginning on and continuing after the effective date of December 15, 2014.

8) *Past Non-U.S. Patent Costs*: As of August 2015, the University has expended a sum of $12,552.74 in fees and payments in the acquisition and maintenance of Patent Rights in non-U.S. jurisdictions. The Company agrees to reimburse this total sum to the University within 1 year of the effective date of December 15, 2014.

Upon execution of the agreement in December 2014, the Company has fulfilled the obligations as outlined below:

1) issued the University 150,000 units of capital as set forth in the agreement item #6.

2) paid the University a onetime initial license fee of $20,953 as specified in the agreement item #1.

3) paid the continuation fees of $2,500 each year in 2015 to 2021 in the agreement item #2.

As of December 31, 2021, the Company is current on all obligations as called for the agreement.

**NOTE 11 – RELATED PARTY TRANSACTIONS**

The related party transactions are summarized as below:

---

| | | |
|:---|:---|:---|
|  | *September 30,* | *December 31,* |
|  | *2022* | *2021* |
| Patent legal fees | $- | $44102 |
| Line of credit | 23500 | 159794 |
| Interest exp - Line of credit | 50277 | 52957 |
| Office rent | 25233 | 15656 |
| Partner fees | 75055 | 96180 |
| &nbsp;&nbsp;&nbsp;Total related party transactions | $174065 | $368689 |

---

***Legal Fees***

 ****

The Company contracts with a law firm owned by Hugh McTavish (a member of the Company) to handle work related to securing and defending its intellectual property. The Company does not consider that these transactions are carried out "at arm's length," but believes that the terms are commercially reasonable and fees generally representative of the market value for similar services, and accordingly, the Company expects to continue engaging legal services with McTavish in the future.

The Company incurred expenses to McTavish Patent Firm $0 and $44,102 as of September 30, 2022 and December 31, 2021, respectively.

**SQUAREX, LLC**

**Notes to Financial Statements**

***Line of Credit***

 ****

The Company utilizes a line of credit ("the Line of Credit) with Hugh McTavish in exchange for cash for the purpose of funding continuing operations (see further discussion in Note 7).

***Office Lease***

 ****

In year 2020, the Company occupied laboratory space leased on a month-to-month basis from IGF Oncology, a related party, owned by Hugh McTavish.

In year 2021, the Company has entered into a twelve-month term lease agreement for the same laboratory space mentioned above (see further discussion in Note 12).

***Partner Fees***

 ****

During year 2022, and 2021, the Company has engaged Hugh McTavish to perform executive service for the Company and to conduct, coordinate and supervise the Company's activities to Exploitation of DTH Compositions. The Company has compensated McTavish monthly partner fees of $8,015 and the total partner fees paid is $75,055 for the nine month ended 09.30.2022 (see further discussion in Note 12).

**NOTE 12 – INCOME TAXES**

Until September 13, 2022, the Company was a limited liability company and was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the members. As such, no recognition of federal or state income taxes for the Company have been provided for in the accompanying financial statements. Any uncertain tax position taken by the members is not an uncertain position of the Company.

We have adopted the provisions of ASC 740-10-25, which provide recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.

Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

**NOTE 13 – SUBSEQUENT EVENTS**

The Company has evaluated subsequent events through the date of this filing. The Company has determined that no significant subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.

**________________ Shares of Common Stock**

![](formdrs_003.jpg)

**SQUAREX PHARMACEUTICAL CORPORATION**

**____________________________**

**PRELIMINARY PROSPECTUS**

**____________________________**

**EF Hutton**

division of Benchmark Investments, LLC

**PART II**

**INFORMATION NOT REQUIRED IN PROSPECTUS**

**Item 13. Other Expenses of Issuance and Distribution.**

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee.

---

| | |
|:---|:---|
|  | **Amount** |
| Securities and Exchange Commission registration fee | $1653  |
| FINRA Filing Fee | $nan \* |
| Nasdaq Listing Fee | \* |
| Accountants' fees and expenses | $nan \* |
| Legal fees and expenses | $nan \* |
| Printing and engraving expenses | $nan \* |
| Miscellaneous | $— \* |
| Total expenses | $— |

---

\* To be filed by amendment

**Item 14. Indemnification of Directors and Officers.**

Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our restated certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.

We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any other company or enterprise to which the person provides services at our request.

We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, or the Securities Act, against certain liabilities.

**Item 15. Recent Sales of Unregistered Securities.**

On October 28, 2022, the Company issued a convertible promissory note in the principal amount of $25,000 to one investor. The Note bears interest at the annual rate of 6% and will be converted at the closing of this Offering at a conversion price per share equal to 0.85 multiplied by the offering price of the common stock. The note was issued in reliance on an exemption from registration under Regulation S promulgated under the Securities of 1933, as amended.

On October 25, 2022, the Company issued a convertible promissory note in the principal amount of $25,000 to one accredited investor. The Note bears interest at the annual rate of 6% and will be converted at the closing of this Offering at a conversion price per share equal to 0.85 multiplied by the offering price of the common stock.

In September 2022, the Company issued 7,354,502 shares of common stock to all its then equity holders in connection with the conversion of the Company from a limited liability company to a Delaware corporation.

During February and March 2022, the Company issued rights to membership units in the form of SAFEs, or Simple Agreements for Future Equity, to a group of investors in a crowd funding campaign under Regulation CF. Total proceeds from the offering were approximately $235,000. Under the terms of the SAFEs, as amended, in the event of an initial public offering, the investors will be issued shares of our common stock at a 30% discount to the price at which our shares are being offered to the public.

In December 2021, prior to its conversion to a Delaware corporation, the Company issued 270,000 limited liability company membership units upon the exercise of warrants by then current members of the Company at an exercise price of $0.20 per unit. Total proceeds from these exercises were $54,000.

 ****

***Securities Act Exemptions***

Except as set forth above, we deemed the offers, sales and issuances of the above-mentioned securities to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.

**Item 16. Exhibits and Financial Statement Schedules.**

---

| | |
|:---|:---|
| **Exhibit** | **Description** |
| **1.1** | Underwriting Agreement\* |
| **3.1** | [Certificate of Incorporation](ex3-1.htm) |
| **3.2** | [Certificate of Conversion](ex3-2.htm) |
| **3.3** | [Amended and Restated Bylaws](ex3-3.htm) |
| **5.1** | Opinion re: legality by Louis A. Brilleman, Esq.\* |
| **10.1** | [Line of Credit Agreement dated October 1, 2019, between the Company and Hugh McTavish](ex10-1.htm) |
| **10.2** | [License Agreement dated December 15, 2014, between the Company and the Board of Trustees of the University of Arkansas](ex10-2.htm) |
| **10.3** | [Independent Contractor Agreement dated January 1, 2016, between the Company and Hugh McTavish](ex10-3.htm) |
| **10.4** | [Addendum to Hugh McTavish Agreement, dated January 31, 2022](ex10-4.htm) |
| **10.5** | [Reserved] |
| **10.6** | [University Enterprise Laboratory Lease dated November 28, 2018, between IGF Oncology, LLC and UEL Real Estate](ex10-6.htm) |
| **10.7** | [First Amendment, dated June 21, 2021, to Lease Agreement](ex10-7.htm) |
| **10.8** | [Second Amendment dated June 22, 2021 to Lease Agreement](ex10-8.htm) |
| **10.9** | [Third Amendment dated June 2, 2022, to Lease Agreement](ex10-9.htm) |
| **10.10** | [Consulting Services Engagement Letter dated November 1, 2022, between the Company and Ravix Group](ex10-10.htm) |
| **10.11** | [2023 Equity Incentive Plan](ex10-11.htm) |
| **16.1** | [Letter from Auditor](ex16-1.htm) |
| **23.1** | [Consent of L&L CPAs PA](ex23-1.htm) |
| **23.2** | Consent of Louis A. Brilleman, Esq. (included in Exhibit 5.1)\* |
| **24.1** | [Power of Attorney (see signature page hereof)](#s_001) |
| **107** | [Filing Fee Table](ex107.htm) |

---

\* To be filed by amendment

**Item 17. Undertakings.**

The undersigned registrant hereby undertakes:

(a) Insofar
 as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
 persons of the registrant pursuant to any charter provision, by law or otherwise, the registrant has been advised that in the opinion
 of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933
 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the
 registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense
 of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
 being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
 submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
 in the Securities Act and will be governed by the final adjudication of such issue.

(b) The
 undersigned registrant hereby undertakes that:

&nbsp;&nbsp;&nbsp;&nbsp;(1) For
 purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
 as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
 to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time
 it was declared effective.

(2) For
 the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
 prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
 securities at that time shall be deemed to be the initial bona fide offering thereof.

**SIGNATURES**

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Saint Paul, Minnesota, on the 17<sup>th</sup> day of January 2023.

---

| | |
|:---|:---|
| **Squarex Pharmaceutical Corporation** | **Squarex Pharmaceutical Corporation** |
| By: | */s/ Hugh McTavish* |
| Name: | Hugh McTavish |
| Title: | Chief Executive Officer |

---

**POWER OF ATTORNEY**

We, the undersigned officers and directors of Squarex Pharmaceutical Corporation, hereby severally constitute and appoint Hugh McTavish, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and his agent(s) or any of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

---

| | | |
|:---|:---|:---|
| **Name** | **Position** | **Date** |
| */s/ Hugh McTavish* | Chief Executive Officer | January 17, 2023 |
| Hugh McTavish | and Director (Principal Executive Officer) |  |
| */s/ Kwang Lee* | Interim Chief Financial Officer | January 17, 2023  |
| Kwang Lee | (Principal Financial and Accounting Officer) |  |
| */s/ Wayne I. Danson* | Director | January 17, 2023 |
| Wayne I. Danson |  |  |
| */s/ Michael Myers* | Director | January 17, 2023 |
| Michael Myers |  |  |
| */s/ Arkadiusz Dudek* | Director | January 17, 2023 |
| Arkadiusz Dudek |  |  |
| */s/ Mark W. Schwartz* | Director | January 17, 2023 |
| Mark Schwartz |  |  |

---

## Exhibit 3.1

**Exhibit 3.1**

![](ex3-1_001.jpg)

![](ex3-1_002.jpg)

![](ex3-1_003.jpg)

## Exhibit 3.2

**Exhibit 3.2**

![](ex3-2_001.jpg)

## Exhibit 3.3

**Exhibit 3.3**

**AMENDED AND RESTATED** **BYLAWS**

**OF**

**SQUAREX PHARMACEUTICAL CORPORATION**

**<u>**TABLE OF CONTENTS**</u>**

---

| | | |
|:---|:---|:---|
| | | **Page** |
| ARTICLE I - CORPORATE OFFICES | ARTICLE I - CORPORATE OFFICES | 1 |
| 1.1 | Registered Office | 1 |
| 1.2 | Other Offices | 1 |
| ARTICLE II - MEETINGS OF STOCKHOLDERS | ARTICLE II - MEETINGS OF STOCKHOLDERS | 1 |
| 2.1 | Place Of Meetings | 1 |
| 2.2 | Annual Meeting | 1 |
| 2.3 | Special Meeting | 1 |
| 2.4 | Notice Of Stockholders' Meetings | 2 |
| 2.5 | Manner Of Giving Notice; Affidavit Of Notice | 2 |
| 2.6 | Quorum | 3 |
| 2.7 | Adjourned Meeting; Notice | 3 |
| 2.8 | Voting | 3 |
| 2.9 | Validation Of Meetings; Waiver Of Notice; Consent | 4 |
| 2.10 | Stockholder Action By Written Consent Without A Meeting | 4 |
| 2.11 | Record Date For Stockholder Notice, Voting, Or Giving Consents | 5 |
| 2.12 | Proxies | 6 |
| 2.13 | List Of Stockholders Entitled To Vote | 6 |
| ARTICLE III - DIRECTORS | ARTICLE III - DIRECTORS | 7 |
| 3.1 | Powers | 7 |
| 3.2 | Number Of Directors | 7 |
| 3.3 | Election And Term Of Office Of Directors | 7 |
| 3.4 | Resignation And Vacancies | 8 |
| 3.5 | Place Of Meetings; Meetings By Telephone | 8 |
| 3.6 | Regular Meetings | 9 |
| 3.7 | Special Meetings; Notice | 9 |
| 3.8 | Quorum | 9 |
| 3.9 | Waiver Of Notice | 9 |
| 3.10 | Adjournment Meeting; Notice | 10 |
| 3.11 | Board Action By Written Consent Without A Meeting | 10 |
| 3.12 | Fees And Compensation Of Directors | 10 |
| 3.13 | Removal Of Directors | 10 |
| ARTICLE IV - COMMITTEES | ARTICLE IV - COMMITTEES | 11 |
| 4.1 | Committees Of Directors | 11 |
| 4.2 | Meetings And Action Of Committees | 11 |
| ARTICLE V - OFFICERS | ARTICLE V - OFFICERS | 12 |
| 5.1 | Officers | 12 |
| 5.2 | Election Of Officers | 12 |
| 5.3 | Subordinate Officers | 12 |
| 5.4 | Removal And Resignation Of Officers | 12 |
| 5.5 | Vacancies In Offices | 12 |
| 5.6 | Chairman Of The Board | 13 |

---

-i-

---

| | | |
|:---|:---|:---|
|  |  | Page |
| 5.7 | President | 13 |
| 5.8 | Vice Presidents | 13 |
| 5.9 | Secretary | 13 |
| 5.10 | Chief Financial Officer | 14 |
| 5.11 | Assistant Secretary | 14 |
| 5.12 | Assistant Treasurer | 14 |
| 5.13 | Authority And Duties Of Officers | 15 |
| 5.14 | Salaries | 15 |
| 5.15 | Loans To Officers And Employees | 15 |
| ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | 15 |
| 6.1 | Indemnification Of Directors And Officers | 15 |
| 6.2 | Prepayment Of Expenses; Undertaking To Repay | 16 |
| 6.3 | Claims By Indemnitee; Presumption Of Validity | 16 |
| 6.4 | Non-Exclusivity Of Rights | 17 |
| 6.5 | Set-Off Against Other Indemnification | 17 |
| 6.6 | Effect Of Amendment Or Repeal | 17 |
| 6.7 | Indemnification Of Employees And Agents | 17 |
| 6.8 | Insurance; Indemnification Agreements | 17 |
| 6.9 | Reliance Upon Books, Reports And Records | 18 |
| 6.10 | Certain Definitions | 18 |
| ARTICLE VII - RECORDS AND REPORTS | ARTICLE VII - RECORDS AND REPORTS | 18 |
| 7.1 | Maintenance And Inspection Of Share Register | 18 |
| 7.2 | Inspection By Directors | 19 |
| ARTICLE VIII - STOCK AND STOCK CERTIFICATES | ARTICLE VIII - STOCK AND STOCK CERTIFICATES | 19 |
| 8.1 | Stock Certificates; Partly Paid Shares | 19 |
| 8.2 | Special Designation On Certificates | 20 |
| 8.3 | Lost Certificates | 20 |
| 8.4 | Transfer Of Stock; Restrictions On Transfer | 20 |
| 8.5 | Stock Transfer Agreements | 21 |
| 8.6 | Registered Stockholders | 21 |
| 8.7 | Dividends | 21 |
| ARTICLE IX - GENERAL MATTERS | ARTICLE IX - GENERAL MATTERS | 22 |
| 9.1 | Checks; Drafts; Evidences Of Indebtedness | 22 |
| 9.2 | Corporate Contracts And Instruments; How Executed | 22 |
| 9.3 | Fiscal Year | 22 |
| 9.4 | Seal | 22 |
| 9.5 | Representation Of Shares Of Other Corporations | 22 |
| 9.6 | Construction; Definitions | 22 |
| 9.7 | Forum Selection | 22 |
| ARTICLE X - AMENDMENTS | ARTICLE X - AMENDMENTS | 22 |
| 10.1 | Amendments | 22 |

---

-ii-

**BYLAWS**

**OF**

**SQUAREX PHARMACEUTICAL CORPORATION** 

**a** **Delaware Corporation**

**ARTICLE I**

**<u>CORPORATE OFFICES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1  **<u>Registered Office</u>.** 

The address of its registered office in the State of Delaware and the name of its registered agent shall be as designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the State of Delaware as the Board of Directors may, from to time, determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2  **<u>Other Offices</u>.** 

The Board of Directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

**ARTICLE II**

**<u>MEETINGS OF STOCKHOLDERS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1  **<u>Place Of Meetings</u>.** 

Meetings of stockholders shall be held at any place within or outside the State of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2  **<u>Annual Meeting</u>.** 

The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board of Directors. At the meeting, directors shall be elected, and any other proper business may be transacted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3  **<u>Special Meeting</u>.** 

A special meeting of the stockholders may be called at any time by the Board of Directors, or by such person or persons authorized by the Board of Directors.

If a special meeting is called by any person or persons other than the Board of Directors or the president or the chairman of the board, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4  **<u>Notice Of Stockholders' Meetings</u>.** 

All notices of meetings of the stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of this Article II not fewer than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, except for any notice of a meeting to act on a plan of merger or consolidation, or on the sale, lease or exchange of all or substantially all of the corporation's property and assets (including its goodwill and corporate franchises) which shall be given not fewer than twenty (20) nor more than sixty (60) days in advance of such meeting. The notice shall specify the place (if any), date, and hour of the meeting, the means of remote communication (if any), by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5  **<u>Manner Of Giving Notice; Affidavit Of Notice</u>.** 

Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at the address of such stockholder as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be deemed given in the manner provided in Section 232 of the General Corporation Law of Delaware: (i) if sent by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if sent by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if sent by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting or the giving of such separate notice; and (iv) if sent by any other form of electronic transmission consented to by the stockholder to whom the notice is given. Any consent to receive notice by electronic transmission shall be revocable by written notice from such stockholder to the corporation. Any such consent shall be deemed revoked if (a) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (b) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be *prima facie* evidence of the facts stated therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6  **<u>Quorum</u>.** 

The holders of 35% of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Certificate of Incorporation, <u>provided</u>, <u>however</u>, that where a separate vote by a class or series is required, a majority of the outstanding shares of such class or series present in person or represented by proxy shall also be required. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. Once a share is represented for any purpose at a meeting other than solely to object to holding the meeting or transacting business, it shall be deemed present for the remainder of the meeting and any adjournment (unless a new record date is or must be set for the adjourned meeting), notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7  **<u>Adjourned Meeting; Notice</u>.** 

When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place (if any), thereof, and the means of remote communications (if any), by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8  **<u>Voting</u>.** 

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of this Article II, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

Except as may be otherwise provided in the Certificate of Incorporation, (i) each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, (ii) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors, and (iii) every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon that are present in person or represented by proxy at the meeting and are voted for or against the matter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9  **<u>Validation Of Meetings; Waiver Of Notice; Consent</u>.** 

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting or upon arrival of such person, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission, unless so required by the Certificate of Incorporation or these Bylaws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10  **<u>Stockholder Action By Written Consent Without A Meeting</u>.** 

Unless otherwise provided in the Certificate of Incorporation, any action required by the General Corporation Law of Delaware to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided, however, that an action by written consent to elect directors, unless such action is unanimous, may be in lieu of holding an annual meeting only if all the vacant directorships to which directors could be elected at an annual meeting held at the effective time of such action are filled by such action.

A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section 2.10, provided that any such telegram, cablegram or other electronic transmission sets forth (or is delivered with information from which the corporation can determine) (i) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by a telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to in such consent unless written consents signed by the requisite number of stockholders entitled to vote with respect to the subject matter thereof are delivered to the corporation, in the manner required by this Section 2.10, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner required by this Section 2.10. Any such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action that is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11  **<u>Record Date For Stockholder Notice, Voting, Or Giving Consents</u>.** 

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to an action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date. Such record date shall not (i) precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, (ii) be more than sixty (60) nor fewer than ten (10) days before the date of such meeting, (iii) be more than ten (10) days after the date upon which the resolution fixing the record date for an action by written consent in lieu of a meeting is adopted by the Board of Directors, or (iv) be more than sixty (60) days prior to any other action.

If the Board of Directors does not so fix a record date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the first date on which a signed written consent is expressed; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12  **<u>Proxies</u>.** 

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy or by an electronic transmission indicating such proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy with respect to a specific meeting shall entitle the proxy holder to vote at any reconvened meeting following adjournment of such meeting, but shall not be valid after the final adjournment of such meeting. A proxy shall be deemed signed if the stockholder's name is placed on the proxy or the electronic transmission indicating such proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware. A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the intended holder of the proxy or to a proxy solicitation firm, proxy support service or similar agent duly authorized by the intended proxy holder to receive such transmission; provided, that any such telegram, cablegram or other electronic transmission must either set forth (or be accompanied by information from which it can be determined) that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission by which a stockholder has authorized another person to act as proxy for such stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13  **<u>List Of Stockholders Entitled To Vote</u>.** 

The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section 2.13 shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

**ARTICLE III**

**<u>DIRECTORS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1  **<u>Powers</u>.** 

Subject to the provisions of General Corporation Law of Delaware and any limitations in the Certificate of Incorporation and these Bylaws relating to actions required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2  **<u>Number Of Directors</u>.** 

The authorized number of directors of the corporation, which initially shall be no less than one (1), shall be determined by (i) resolution of the Board of Directors, (ii) by the stockholders at the annual meeting of the stockholders, or (iii) until changed by a bylaw amending this Section 3.2, duly adopted by the Board of Directors or by the stockholders, except as otherwise provided in these Bylaws, and each director elected shall hold office until the successor of such director is elected and qualified.

No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3  **<u>Election And Term Of Office Of Directors</u>.** 

Except as provided in Section 3.4 of this Article III, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until the successor of such director is elected and qualified or until the death, resignation or removal of such director. Elections of directors need not be by written ballot.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4  **<u>Resignation And Vacancies</u>.** 

Any director may resign at any time upon written notice given in writing or by electronic transmission to the corporation. Any such resignation shall be effective upon delivery, unless the notice of resignation specifies a future effective date, and unless otherwise specified, the acceptance of such resignation shall not be a precondition to its effectiveness. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in Section 3.3.

Unless otherwise provided in the Certificate of Incorporation or these Bylaws:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or series may, unless otherwise set forth in the Certificate of Incorporation, be filled by a majority of the directors elected by such class or series thereof then in office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5  **<u>Place Of Meetings; Meetings By Telephone</u>.** 

The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6  **<u>Regular Meetings</u>.** 

Regular meetings of the Board of Directors shall be held on such dates and at such times and places as the Board of Directors may determine by resolution. Such regularly scheduled meetings may be held without further notice to the directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7  **<u>Special Meetings; Notice</u>.** 

Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairperson of the board, the president, or any two (2) directors. Special meetings of the Board of Directors shall be held upon four (4) days notice by mail or forty-eight (48) hours notice delivered personally, by telephone (including a voice messaging system or other system or technology designed to record and communicate messages), or by other form of electronic transmission. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. A notice, or waiver of notice, need not specify the purpose of any regular or special meeting of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8  **<u>Quorum</u>.** 

At all meetings of the Board of Directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may otherwise be specifically provided by the General Corporation Law of Delaware or by the Certificate of Incorporation. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A director of the corporation who is present at a board or committee meeting at which any action is taken shall be deemed to have assented to the action taken unless (i) the director objects at the beginning of the meeting, or promptly upon the director's arrival, to holding the meeting or transacting any business at such meeting, (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the director delivers written notice of the director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within a reasonable time after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9  **<u>Waiver Of Notice</u>.** 

Whenever notice is required to be given to a director under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Such waiver shall be deemed delivered if made by electronic transmission. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting or upon the director's arrival, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10  **<u>Adjournment Meeting; Notice</u>.** 

If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11  **<u>Board Action By Written Consent Without A Meeting</u>.** 

Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12  **<u>Fees And Compensation Of Directors</u>.** 

Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. Directors and committee members may be paid their expenses (if any) of attendance at each board or committee meeting, a fixed sum for attendance at each board or committee meeting or a stated salary as director or a committee member, and such other compensation as the Board of Directors may determine. No such payment shall preclude any director or committee member from serving the corporation in any other capacity and receiving compensation therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13  **<u>Removal Of Directors</u>.** 

Any Director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of Directors, unless the certificate of incorporation provides that Directors may be removed for cause only, provided, however, that such Director shall not be removed if the corporation states in its certificate of incorporation that its Directors shall be elected by cumulative voting and there are a significant number of shares cast against his or her removal, which if cumulatively voted at an election of Directors would be sufficient to elect him or her. If a Director was elected by a voting group of stockholders, only the stockholders of that voting group may participate in the vote to remove that Director.

**ARTICLE IV**

**<u>COMMITTEES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1  **<u>Committees Of Directors</u>.** 

The Board of Directors may designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in the Bylaws of the corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matter: (i) approving or adopting, or recommending to the stockholders, any action or matter required by the General Corporation Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any bylaw of the corporation. Unless otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2  **<u>Meetings And Action Of Committees</u>.** 

Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when requested by the Board of Directors. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, including, without limitation, Section 3.5 (place of meetings; meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings; notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjourned meeting; notice), and Section 3.11 (board action by written consent without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. Unless the Board of Directors adopts rules for the governance of a committee, then each committee may adopt its own governance rules, provided that such rules shall not be inconsistent with the provisions of the General Corporation Law of Delaware, the Certificate of Incorporation or these Bylaws.

**ARTICLE V**

**<u>OFFICERS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1  **<u>Officers</u>.** 

The officers of the corporation shall be a president and/or chief executive officer, a secretary, and a chief financial officer and/or treasurer. The corporation may also have, at the discretion of the Board of Directors, a chairperson of the board, one or more vice presidents, assistant vice presidents, assistant secretaries, assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of this Article V. Any number of offices may be held by the same person. Each officer shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2  **<u>Election Of Officers</u>.** 

The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of this Article V, shall be appointed by the board, subject to the rights (if any) of an officer under any contract of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3  **<u>Subordinate Officers</u>.** 

The Board of Directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors (or, if so empowered, the president) may from time to time determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4  **<u>Removal And Resignation Of Officers</u>.** 

Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the Board of Directors or, except in the case of an officer appointed by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

Any officer may resign at any time upon written notice given in writing or by electronic transmission to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights (if any) of the corporation under any contract to which the officer is a party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5  **<u>Vacancies In Offices</u>.** 

Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6  **<u>Chairman Of The Board</u>.** 

The chairman of the board, if such an officer is elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board of Directors or as may be prescribed by these Bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of this Article V.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7  **<u>President</u>.** 

Subject to such supervisory powers (if any) as may be given by the Board of Directors to the chairman of the board, if there is such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the Board of Directors. The President shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8  **<u>Vice Presidents</u>.** 

In the absence or disability of the president, the vice presidents (if any) in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the president or the chairman of the board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9  **<u>Secretary</u>.** 

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these Bylaws. He or she shall keep the seal of the corporation (if any) in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10  **<u>Chief Financial Officer</u>.** 

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the president and directors, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.

The chief financial officer shall also be the treasurer of the corporation unless otherwise designated by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11  **<u>Assistant Secretary</u>.** 

The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of the inability or refusal of such officer to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12  **<u>Assistant Treasurer</u>.** 

The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of the inability or refusal of such officer to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13  **<u>Authority And Duties Of Officers</u>.** 

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14  **<u>Salaries</u>.** 

The salaries of the officers shall be fixed from time to time by the Board of Directors, or by any committee or officer to which or whom, as the case may be, the Board of Directors has delegated such authority. No officer shall be disqualified from receiving such salary by reason of the fact that he or she is also a director of the corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15  **<u>Loans To Officers And Employees</u>.** 

The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or any of its subsidiaries, including any officer or employee who is a director of the corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this Section 5.14 shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Notwithstanding the foregoing, any such loan made, guaranteed, or arranged for by the corporation shall contain a provision requiring the borrower to repay the obligation in full if the corporation becomes subject to the restrictions of the Sarbanes-Oxley Act of 2002, as amended, or if the borrower becomes an officer or director of a parent entity that is subject to the restrictions of the Sarbanes-Oxley Act of 2002, as amended.

**ARTICLE VI**

**<u>INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,<br> AND OTHER AGENTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1  **<u>Indemnification Of Directors And Officers</u>.** 

To the fullest extent permitted by applicable law as it presently exists or may hereafter be amended (provided, that in the case of such an amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), the corporation shall indemnify and hold harmless each person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "***proceeding***") by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (including service with respect to an employee benefit plan), against all liability, loss and reasonable expense incurred by such person, including attorneys' fees, judgments, fines, penalties, ERISA excise taxes and amounts paid in settlement of proceedings. Except as set forth in Section 6.2 of this Article VI, the corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification under this Article VI shall be construed as a contractual right of the indemnitees and shall inure to the benefit of an indemnitee's heirs, executors and administrators.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2  **<u>Prepayment Of Expenses; Undertaking To Repay</u>.** 

The corporation shall pay the expenses (including attorneys' fees) expected to be incurred in defending any proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of Delaware then so requires, the payment of expenses incurred in advance of the final disposition of the proceeding by a director or officer in such person's capacity as such (and not in any other capacity in which service is or was rendered by such person, such as service with respect to an employee benefit plan) shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it is determined by a final judicial determination from which there is no further possibility of appeal that the director or officer is not entitled to be indemnified under this Article VI or otherwise; and provided, further, that the corporation shall not be required to prepay any expenses to a person against whom the corporation directly brings a claim alleging that such person has (i) breached such person's duty of loyalty to the corporation, or committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or (ii) derived an improper personal benefit from a transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3  **<u>Claims By Indemnitee; Presumption Of Validity</u>.** 

If a claim for indemnification or payment of expenses under this Article VI is not paid in full within sixty (60) days after a written claim therefor has been presented to the corporation (except in the case of a claim for prepayment of expenses in accordance with Section 6.2 above, in which case the applicable period shall be twenty (20) days) the indemnitee may file suit to recover the unpaid amount of such claim. If successful in whole or in part in any such suit, the indemnitee shall be entitled to be paid the expense of prosecuting such claim. In any such action, the corporation shall have the burden of proving by a preponderance of evidence that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law. The indemnitee shall be presumed to be entitled to indemnification under this Article VI upon submission of a written claim (and, in an action brought to enforce a claim for prepayment of expenses, where the required undertaking, if any is required, has been tendered to the corporation), and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is so entitled. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4  **<u>Non-Exclusivity Of Rights</u>.** 

The rights conferred on any person by this Article VI shall not be exclusive of any other rights that such person may have or may hereafter acquire under any statute, provision of the Certificate of Incorporation or these Bylaws, contractual agreement, vote of the stockholders or disinterested directors or otherwise. Additionally, nothing in this Article VI shall limit the ability of the corporation, in its discretion, to indemnify or advance expenses to persons whom the corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5  **<u>Set-Off Against Other Indemnification</u>.** 

The corporation's obligation (if any) to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount that such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6  **<u>Effect Of Amendment Or Repeal</u>.** 

No repeal or modification of this Article VI shall adversely affect any right or protection afforded hereunder to any person in respect of an act or omission occurring prior to the time of such repeal or modification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7  **<u>Indemnification Of Employees And Agents</u>.** 

The corporation may by action of the Board of Directors, extend the rights described in this Article VI to individual employees or agents, or groups of employees or agents of the corporation with the same scope and effect as the provisions of this Article VI; provided, however, that an undertaking of the sort described in Section 6.2 shall be required only if specifically requested by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8  **<u>Insurance; Indemnification Agreements</u>.** 

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity against any liability asserted against such person and incurred by such person in any such capacity, or arising out of the status of such person as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the General Corporation Law of Delaware. The corporation, without further stockholder approval, may enter into contracts with any person who is or was a director, officer, employee or agent, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity, in furtherance of the provisions of this Article VI. The corporation may also create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9  **<u>Reliance Upon Books, Reports And Records</u>.** 

Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the corporation and upon such information, opinions, reports or statements presented to the corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10  **<u>Certain Definitions</u>.** 

For purposes of this Article VI, references to the "***Corporation***" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity, shall stand in the same position under this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

**ARTICLE VII**

**<u>RECORDS AND REPORTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1  **<u>Maintenance And Inspection Of Share Register</u>.** 

The corporation shall, either at its principal executive office or at such place or places as designated by the Board of Directors, keep a record of its stockholders, listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2  **<u>Inspection By Directors.</u>** 

Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to the position of such person as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

**ARTICLE VIII**

**<u>STOCK AND STOCK CERTIFICATES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1  **<u>Stock Certificates; Partly Paid Shares</u>.** 

No shares of the corporation shall be issued unless authorized by the Board of Directors, which authorization shall include the maximum number of shares to be issued and the consideration to be received for each share.

The shares of a corporation shall be represented by certificates, which shall include on their face or back written notice of any restrictions that may be imposed on the transferability of such shares and shall be consecutively numbered or otherwise identified. Notwithstanding the foregoing, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson or vice-chairperson of the Board of Directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. The Board of Directors may in its discretion appoint responsible banks or trust companies from time to time to act as transfer agents and registrars of the stock of the corporation; and, when such appointments shall have been made, no stock certificate thereafter issued shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares (or upon the books and records of the corporation in the case of uncertificated partly paid shares), the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2  **<u>Special Designation On Certificates</u>.** 

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such powers, preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such powers, preferences and/or rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3  **<u>Lost Certificates</u>.** 

Except as provided in this Section 8.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it that is alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the legal representative of such owner, to give the corporation a bond or an indemnity sufficient to protect it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4  **<u>Transfer Of Stock; Restrictions On Transfer</u>.** 

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

Except to the extent that the corporation has obtained an opinion of counsel acceptable to the corporation that transfer restrictions are not required under applicable securities laws, or has otherwise satisfied itself that such transfer restrictions are not required, all certificates representing shares of the corporation shall bear on the face of the certificate, or on the reverse of the certificate if a reference to the legend is contained on the face, such legends as may be required by applicable law, including without limitation a legend that reads substantially as follows:

"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT EFFECTIVE REGISTRATIONS THEREUNDER OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION ARE NOT REQUIRED."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5  **<u>Stock Transfer Agreements</u>.** 

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes or series owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6  **<u>Registered Stockholders</u>.** 

The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7  **<u>Dividends</u>.** 

The directors of the corporation, subject to any restrictions contained in the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock.

The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include, but not be limited to, equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

**ARTICLE IX**

**<u>GENERAL MATTERS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1  **<u>Checks; Drafts; Evidences Of Indebtedness</u>.** 

From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2  **<u>Corporate Contracts And Instruments; How Executed</u>.** 

The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3  **<u>Fiscal Year</u>.** 

The fiscal year of the corporation shall be the same as the calendar year unless otherwise fixed by resolution of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4  **<u>Seal</u>.** 

The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board of Directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5  **<u>Representation Of Shares Of Other Corporations</u>.** 

The chairperson of the Board of Directors, the president, any vice president, the treasurer, the secretary or assistant secretary of the corporation, or any other person authorized by the Board of Directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6  **<u>Construction; Definitions</u>.** 

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "***person***" includes both a corporation and a natural person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7  **<u>Forum Selection.</u>** 

The Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or the Corporation's Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine. The foregoing provision shall not apply to actions brought under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

**ARTICLE X**

**<u>AMENDMENTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1  **<u>Amendments</u>.** 

Subject to any voting requirements set forth in the corporation's Certificate of Incorporation, the original or other Bylaws of the corporation may be adopted, amended or repealed by the Board of Directors; provided, however, that the foregoing shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.

## Exhibit 10.1

**Exhibit 10.1**

**LINE OF CREDIT AGREEMENT**

**LOAN PURPOSE: LINE OF CREDIT FOR WORKING CAPITAL** 

**BORROWER INFORMATION** 

**Squarex, LLC** 

**7460 Pinehurst Road**

**Pine Springs, MN 55115** 

**LINE OF CREDIT AGREEMENT AND NOTE.** This Commercial Line of Credit Agreement and Note will be referred to in this document as the "Agreement".

**DATE.** This Agreement concerns advances under this Agreement made since October 1, 2019, with an oral understanding between Hugh McTavish and the Board of Directors of Squarex, LLC, and is signed February 5, 2021. It is effective as of October 1, 2019.

**LENDER.** "Lender" means **Hugh McTavish** whose address is **7460 Pinehurst Road, Pine Springs, MN 55115,** his successors and assigns.

**BORROWER.** "Borrower" means **Squarex, LLC**.

**PROMISE TO PAY.** For value received, receipt of which is hereby acknowledged, on or before the Maturity Date, the Borrower promises to pay the principal amount of One Million and 00/100 Dollars ($1,000,000.00) or such lesser amount as shall have been advanced by Lender, from time to time, to or on behalf of Borrower under this Agreement, and all interest and any other charges, including service charges, to the order of Lender at its office at the address noted above or at such other place as Lender may designate in writing. The Borrower will make all payments in lawful money of the United States of America.

**PAYMENT SCHEDULE.** This Agreement will be paid according to the following required payment schedule:

As cash comes into the Company from investments or loans from other sources the Borrower will pay 10% of the first $1 million raised from other sources after January 1, 2021, 20% of the second $1 million, and up to 100% of the third $1 million raised from other sources after January 1, 2021, until the Agreement is paid in full.

The Agreement will be paid in full with all interest and any other charges by **December 31, 2024**, or prepaid in part or in full at the choice of the borrower. All payments received by the Lender from the Borrower for application to the Line of Credit may be applied to the Borrower's obligations under the Line of Credit in such order as determined by the Lender.

**ADVANCES BY LENDER.** Advances of principal, repayment, and readvances may be made under this Agreement from time to time, but Lender, in his sole discretion, may refuse to make advances or readvances hereunder. All advances made will be charged to a loan account in Borrower's name on Lender's books, and the Lender shall debit such account for the amount of each advance made to, and credit to such account the amount of each repayment made by Borrower. If the Lender furnishes the Borrower with a statement of Borrower's loan account, such statement shall be deemed to be correct, accepted by, and binding upon Borrower, unless Lender receives a written statement exception from Borrower within 10 days after such statement has been furnished.

**INTEREST RATE AND SCHEDULED PAYMENT CHANGES.** The interest rate on this Agreement will be **15%** per annum, accrued monthly.

**LATE PAYMENT CHARGE.** If payment in full is not received by the due date of December 31, 2024, an immediate late payment charge of 5% of the amount outstanding will be assessed and the interest rate from that point forward will be 24% annually, compounded monthly.

**LINE OF CREDIT TERMS.** The Borrower and Lender agree that the Borrower may request an advance of all or part of the Line of Credit Limit if, at the time of the request, none of the following conditions exist.

● Maximum amount on this Agreement is outstanding.

● Undersigned has breached any of the terms, provisions, representations, requirements or promises contained in this Agreement or any other agreement noted below.

● The Agreement or any other agreement relating thereto is in default.

● Undersigned makes a request for an advance after the Maturity Date cited above.

● The Lender chooses in his sole discretion to refuse an advance for any reason.

● The Lender is precluded by law from making the advance.

● Advances of principal, repayment, and readvances may be made under this Agreement from time to time but Lender, in its sole discretion, may refuse to make advances or readvances hereunder for any reason.

● Advances under this Agreement may be requested orally or in writing by the Borrower or by an authorized person.

● The total of any advance requested and unpaid principal cannot exceed **One Million and 00/100 Dollars ($1,000,000.00).** 

● All advances made will be charged to a loan account in Borrower's name on Lender's books, and the Lender shall debit such account the amount of each advance made to, and credit to such account the amount of each repayment made by Borrower. Lender shall provide to Borrower periodic statements of Borrower's loan account, which shall be deemed to be correct, accepted by, and binding upon Borrower unless Lender receives a written statement of exception from Borrower within 10 days after such statement is furnished.

**DEFAULT.** Upon the occurrence of any one of the following events (each, an "Event of Default" or "default" or "event of default"), Lender's obligations, if any, to make any advances will, at Lender's option, immediately terminate and Lender, at its option, may declare all indebtedness of Borrower to Lender under this Agreement to be immediately due and payable without further notice of any kind notwithstanding anything to the contrary in this Agreement or any other agreement. (a) Borrower's failure to make any payment on time or in the amount due; (b) any default by Borrower under the terms of this Agreement or any other agreement, security agreement executed in connection with this Agreement (individually, a "Loan Document" and collectively, the "Loan Documents"); (c) any default by Borrower under the terms of any other loan agreement, security agreement, or other document in favor of Lender,; (d) the dissolution, or termination of existence of Borrower or any guarantor; (e) Borrower is generally not paying Borrower's debts as such debts become due; (f) the commencement of any proceeding under bankruptcy or insolvency laws by or against Borrower or any guarantor or the appointment of a receiver; (g) any default under the terms of any other indebtedness of Borrower to any other creditor; (h) any writ of attachment, garnishment, execution, tax lien or similar instrument is issued against any collateral securing the loan, if any, or any of Borrower's property or any judgment is entered against Borrower or any guarantor; (i) any part of Borrower's business is sold to or merged with any other business, individual, or entity; (j) Lender has deemed itself insecure or there has been a material adverse change of condition of the financial prospects of Borrower or any collateral securing the obligations owing to Lender by Borrower; or (k) the death of the Lender.

**OTHER APPLICABLE AGREEMENTS.** If this Agreement is secured by a security agreement, mortgage, deed of trust, trust deed, security deed or loan agreement of even or previous date, it is subject to all the terms thereof.

**GENERAL WAIVERS.** To the extent permitted by law, the Borrower severally waives any required notice of presentment, demand, acceleration, intent to accelerate, protest and any other notice and defense due to extensions of time or other indulgence by Lender or to any substitution or release of collateral. No failure or delay on the part of Lender, and no course of dealing between Borrower and Lender, shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right.

**SEVERABILITY.** If a court of competent jurisdiction determines any term or provision of this Agreement is invalid or prohibited by applicable law, that term or provision will be ineffective to the extent required. Any term or provision that has been determined to be invalid or prohibited will be severed from the rest of this Agreement without invalidating the remainder of either the affected provision or this Agreement

**SURVIVAL.** The rights and privileges of the Lender hereunder shall inure to the benefits of his heirs, executors, administrators, and assigns, and this Agreement shall be binding on all successors, administrators, heirs, executors, administrators, assigns and successors of Borrower.

**ASSIGNABILITY.** Lender may assign, pledge or otherwise transfer this Agreement or any of its rights and powers under this Agreement without notice, with all or any of the obligations owing to Lender by Borrower, and in such event the assignee shall have the same rights as if originally named herein in place of Lender. Borrower may not assign this Agreement or any benefit accruing to it hereunder without the express written consent of the Lender.

**ORAL AGREEMENTS DISCLAIMER.** This Note represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.

**GOVERNING LAW.** This Agreement is governed by the laws of the state of Minnesota except to the extent that federal law controls.

**HEADING AND GENDER.** The headings preceding text in this Agreement are for general convenience in identifying subject matter, but have no limiting impact on the text which follows any particular heading. All words used in this Agreement shall be construed to be of such gender or number as the circumstances require.

**ATTORNEYS' FEES AND OTHER COSTS.** If legal proceedings are instituted to enforce the terms of this Agreement, Borrower agrees to pay all costs of the Lender in connection therewith, including reasonable attorneys' fees, to the extent permitted by law.

---

| | |
|:---|:---|
| BORROWER | LENDER |
| Squarex, LLC | Hugh McTavish |
| /s/ | /s/ |
| Hugh McTavish, President and Board Chair | Hugh McTavish |
| /s/ |  |
| Gary Hildebrand, Director |  |
| /s/ |  |
| Arkadiusz Dudek, Director |  |

---

## Exhibit 10.2

**Exhibit 10.2**

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## Exhibit 10.3

**Exhibit 10.3**

**Addendum to Hugh McTavish – Squarex, LLC, Independent Contractor Agreement and**

**Hugh McTavish – IGF Oncology, LLC, Independent Contractor Agreement**

This Agreement between Hugh McTavish and Squarex, LLC, memorializes an understanding between the parties and revises the Independent Contractor Agreement between Squarex and Hugh McTavish dated January 1, 2016 (the Squarex-McTavish Independent Contractor Agreement).

Hugh McTavish is and has been President of both Squarex, LLC, and IGF Oncology, LLC, since at least January 1, 2016. The two companies received major investment from the same investor and have similar ownership structures. Currently, Hugh McTavish owns a majority of LLC Units in each company.

The Squarex-McTavish Independent Contractor Agreement dated January 1, 2016, specifies McTavish is to be paid $6,700 per month starting on May 1, 2016;

McTavish separately entered into an Independent Contractor Agreement with IGF Oncology, LLC, dated January 1, 2016, (the McTavish-IGF Oncology Independent Contractor Agreement) that specifies McTavish is to be paid $9,329.66 per month from January 1, 2016, for work for IGF Oncology.

Whereas McTavish expended approximately equal effort for each of the two companies, prior to May 1, 2018, it was determined and agreed between McTavish and the Boards of both companies that his pay should be equal from both companies and each of the two companies therefore began paying McTavish $8,015 per month.

Since October 1, 2019, McTavish's pay from Squarex has been unpaid and has been accruing without interest and continues to accrue without interest. Squarex agrees to pay Mr. McTavish's accrued back pay when it has the funds to do so.

Since May 1, 2018, McTavish's pay from IGF Oncology has been unpaid and has been accruing without interest and continued to accrue without interest up to December 31, 2022. From January 1, 2022, forward Hugh McTavish shall be paid $2,000 per month as President of IGF Oncology, that pay currently accruing without interest. IGF Oncology agrees to pay Mr. McTavish's accrued back pay when it has the funds to do so.

**Signature Page to Follow**

**Addendum to McTavish Independent Contractor Agreements with IGF and Squarex**

---

| | |
|:---|:---|
| /s/ | 1/3/2022 |
| Hugh McTavish | Date |
| /s/ | 1/31/2022 |
| Gary Hildebrand | Date |
| Director, Squarex, LLC |  |
| /s/ | 1/29/2022 |
| Arkadiusz Dudek | Date |
| Director, Squarex, LLC |  |
| /s/ | 1/31/2022 |
| Gary Hildebrand | Date |
| Director, IGF Oncology, LLC |  |
| /s/ | 1/29/2022 |
| Arkadiusz Dudek | Date |
| Director, IGF Oncology, LLC |  |

---

## Exhibit 10.4

**Exhibit 10.4**

**Addendum to Hugh McTavish – Squarex, LLC, Independent Contractor Agreement and**

**Hugh McTavish – IGF Oncology, LLC, Independent Contractor Agreement**

This Agreement between Hugh McTavish and Squarex, LLC, memorializes an understanding between the parties and revises the Independent Contractor Agreement between Squarex and Hugh McTavish dated January 1, 2016 (the Squarex-McTavish Independent Contractor Agreement).

Hugh McTavish is and has been President of both Squarex, LLC, and IGF Oncology, LLC, since at least January 1, 2016. The two companies received major investment from the same investor and have similar ownership structures. Currently, Hugh McTavish owns a majority of LLC Units in each company.

The Squarex-McTavish Independent Contractor Agreement dated January 1, 2016, specifies McTavish is to be paid $6,700 per month starting on May 1, 2016;

McTavish separately entered into an Independent Contractor Agreement with IGF Oncology, LLC, dated January 1, 2016, (the McTavish-IGF Oncology Independent Contractor Agreement) that specifies McTavish is to be paid $9,329.66 per month from January 1, 2016, for work for IGF Oncology.

Whereas McTavish expended approximately equal effort for each of the two companies, prior to May 1, 2018, it was determined and agreed between McTavish and the Boards of both companies that his pay should be equal from both companies and each of the two companies therefore began paying McTavish $8,015 per month.

Since October 1, 2019, McTavish's pay from Squarex has been unpaid and has been accruing without interest and continues to accrue without interest. Squarex agrees to pay Mr. McTavish's accrued back pay when it has the funds to do so.

Since May 1, 2018, McTavish's pay from IGF Oncology has been unpaid and has been accruing without interest and continued to accrue without interest up to December 31, 2022. From January 1, 2022, forward Hugh McTavish shall be paid $2,000 per month as President of IGF Oncology, that pay currently accruing without interest. IGF Oncology agrees to pay Mr. McTavish's accrued back pay when it has the funds to do so.

**Signature Page to Follow**

**Addendum to McTavish Independent Contractor Agreements with IGF and Squarex**

---

| | |
|:---|:---|
| /s/ | 1/3/2022 |
| Hugh McTavish | Date |
| /s/ | 1/31/2022 |
| Gary Hildebrand | Date |
| Director, Squarex, LLC |  |
| /s/ | 1/29/2022 |
| Arkadiusz Dudek | Date |
| Director, Squarex, LLC |  |
| /s/ | 1/31/2022 |
| Gary Hildebrand | Date |
| Director, IGF Oncology, LLC |  |
| /s/ | 1/29/2022 |
| Arkadiusz Dudek | Date |
| Director, IGF Oncology, LLC |  |

---

## Exhibit 10.6

**Exhibit 10.6**

**UNIVERSITY ENTERPRISE LABORATORY LEASE**

**GENERAL CONDITIONS**

**1.** <u>Premises</u>.
 Landlord, in consideration of the rent to be paid and the covenants to be performed by Tenant,
 does hereby

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Demise
 and lease unto Tenant, and Tenant hereby rents from Landlord space in that part of the University
 Enterprise Laboratory Inc, located at 1000 Westgate Drive, St. Paul MN, 55114 illustrated
 on Exhibit "A" (the "Premises").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Agree
 to permit Tenant equal access and common use of the Common Areas illustrated on Exhibit A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** <u>Term and Termination</u>.

If a Lease Term exceeding one month is specified in the Data Sheet attached hereto and incorporated herein then the lease term shall run through the date specified, unless sooner terminated as herein after provided.

**3.** <u>Surrender of Premises</u>. At the expiration of or any termination of this Lease, Tenant shall surrender
 the Premises in the same condition as at the commencement of the term, reasonable wear and
 tear excepted, and shall surrender all keys to Landlord. Tenant's obligations hereunder
 shall survive expiration or termination of the Lease.

**4.** <u>Past Due Rent</u>. If Tenant fails to pay rent when the same is due, the unpaid amount shall,
 at Landlord's option and without waiving any other right of Landlord, bear interest
 from the due date to the date of payment at eighteen percent (18%) per annum.

**5.** <u>Alterations, Improvements and Changes</u>. Tenant, at its own expense, shall have the right to make such
 alterations, improvements and changes to the Premises as it may deem necessary, PROVIDED
 that prior to making any alterations, improvements or changes, Tenant shall obtain Landlord's
 prior written approval of plans and specifications. Landlord may withhold its consent in
 its sole discretion. Tenant shall in no event make any alteration, improvements or changes
 which will decrease the value of the Premises, adversely affect the structural integrity
 of the building within which the Premises are located, or, materially increase the risk to
 health or safety of any person. Tenant shall promptly pay all contractors and materialmen
 for work and supplies and shall not permit any lien to attach to the Premises. Should any
 lien attach or should a "Notice of Intent to File Lien" be mailed to or served
 upon Tenant or Landlord as a result of material or services supplied or performed at the
 request of Tenant, Tenant shall immediately provide a bond against the same or discharge
 the lien within ten (10) days thereafter. In any and all events, Tenant shall and does hold
 Landlord harmless against the lien.

**6.** <u>Disposition of Improvements</u>. Notwithstanding their disposition provided elsewhere in this Lease,
 all alterations, improvements, changes or additions shall be the property of Landlord and
 Tenant shall have only a leasehold interest therein.

**7.** <u>Maintenance by Tenant</u>. Tenant shall, at its own cost and without any expense to Landlord or claim
 against Landlord for reimbursement, keep, maintain and repair the Premises, including all
 improvements of every kind which may be a part thereof, in the same condition as existed
 as of the commencement of this Lease, (except structural repairs to the building, its roof,
 heating, plumbing, electrical, air conditioning and ventilating systems) and shall repair,
 restore, and replace any improvements or landscaping which may be destroyed or damaged other
 than by reason of the act or negligence of Landlord or its agents.

**8.** <u>Reconstruction of Damaged Premises</u>. In the event that any buildings or improvements on the Premises
 shall be partially or totally destroyed by fire or other casualty so as to make the Premises
 totally untenantable, rent and other charges due from Tenant under the Lease shall abate
 to the extent that and in proportion as Tenant's operations are curtailed by such fire
 or other casualty. Within a reasonable time, Landlord shall repair the Premises in a manner
 and to at least a condition equal to that prior to the damage or destruction. If repairs
 are not complete within a reasonable time, Tenant shall have the right to terminate this
 Lease. In the event that Tenant shall elect to terminate this Lease, Tenant shall have no
 further obligations under this Lease.

**9.** <u>Operating Expenses & Utilities.</u> Tenant shall have in addition to the Base Rent payable by Tenant
 under the provisions of hereof, Tenant shall pay to Landlord "Additional Rent"
 as hereinafter provided for in this Section 9. For purposes of this Section 9, the parties
 hereto agree upon the following Definitions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The term "Lease Year" shall mean each of those calendar years commencing with and including the year during which the term of this Lease commences, and ending with the calendar year during which the term of this Lease (including any extensions or renewals) terminates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The term "Real Estate Taxes" shall mean and include any personal property taxes of Landlord, to the extent relating to Landlord's personal property located in the office complex and used in connection with the operation and maintenance thereof, real estate taxes, and installments of future special assessments, including interest thereon (but not interest or late charges or penalties for payment of taxes or installments of special assessments [which may include an interest factor] beyond the due date), relating to the Property and office complex, and all other governmental charges and taxes, general and special, ordinary and extraordinary, foreseen as well as unforeseen, of any kind and nature whatsoever, however described, which is levied or assessed by the United States of America or the state in which the office complex is located or any political subdivision thereof, against Landlord or all or any part of the office complex as a result of Landlord's ownership of the Property or office complex, and payable during the respective Lease Year. Real Estate Taxes shall not include any net income tax, estate tax, gift tax, inheritance tax, transfer tax, or registration tax. As used in this paragraph, the phrase "installments of future special assessments" means, as to each respective assessment, installments due and payable during the applicable Lease Year or which would have been due and payable during the applicable Lease Year had Landlord chosen to pay for the special assessments and installments, where such option was allowable to Landlord for the longest period of time permitted by the assessing authority for the applicable assessment, whichever is lower over the term as to such respective assessment. Landlord shall pay all Real Estate Taxes on or before the due date thereof.

Landlord reserves all rights to contest real estate taxes and special assessments in respect to the office complex and Tenant shall not file any contest or protest in respect to same; provided, however, Landlord shall protest taxes upon the request of Tenant to do so. Landlord shall consult with Tenant as to the progress of such protests but Landlord shall have the right to settle or litigate such taxes or tax valuations as Landlord deems advisable in its reasonable discretion. After any real estate tax protest which results in an adjustment of taxes an equitable adjustment shall be made to reflect the amount that should have been paid in respect to the applicable Lease Year by Landlord and Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. The term "Real Estate Taxes" for an applicable Lease Year shall mean the amount of Real Estate Taxes payable during such applicable Lease Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. The term "Operating Expenses" shall mean and include all expenses reasonably incurred with respect to the maintenance and operation of the Property and office complex as determined on a consistent basis by Landlord's accountant, including, but not limited to, insurance premiums, maintenance and repair costs, steam, electricity, water, sewer, gas, and other utility charges, fuel, lighting, window washing, janitorial services, trash and rubbish removal, wages payable to employees of Landlord whose duties are connected with the operation and maintenance of the Property and office complex (but only for the portion of their time allocable to work related to the office complex), amounts paid to contractors or subcontractors for work or services performed in connection with the operation and maintenance of the Property and office complex, all costs of uniforms, supplies and materials to the extent used in connection with the operation and maintenance of the Property and office complex, all payroll taxes, unemployment insurance costs, vacation allowances, and the cost of providing disability insurance or benefits, pensions, profit sharing benefits, hospitalization, retirement or other so-called fringe benefits of Landlord's employees, and any other expense imposed on Landlord, its contractors or subcontractors, pursuant to law or pursuant to any collective bargaining agreement covering such employees, all services, supplies, repairs, replacements or other expenses (including an imputed rent factor) for maintaining and operating the office complex (including but not limited to areas such as any common loading platform and receiving area, any common conference room(s) (if any), any common locker room(s), vending room(s), any common reception area, any common laboratory, and any common cafeteria), reasonable attorney's fees and costs in connection with appeal or contest of real estate or other taxes or levies (but only if the contest relates to taxes or levies which are [in whole or in part] part of Operating Expenses for which Tenant is in whole or in part responsible pursuant to the provisions of this Section), and such other expenses as may be ordinarily incurred in the operation and maintenance of an office complex and not specifically set forth herein, including management fees (in the aggregate) of no more than 3% of gross rental receipts for the office complex. Landlord shall use all reasonable efforts to operate the office complex in an efficient manner consistent with prudent management practices. If Landlord installs equipment in or makes improvements or alterations to the office complex which are for the purpose of reducing energy costs, maintenance costs or other Operating Expenses or which are required under any governmental laws, regulations, or ordinances which were not required at the date of commencement of the term of this Lease, Landlord may include in Operating Expenses reasonable charges for interest on such investment and reasonable charges for depreciation on the same so as to amortize such investment over the reasonable life of such equipment, improvement or alteration on a straight line basis. Operating Expenses shall also be deemed to include expenses incurred by Landlord in connection with city sidewalks adjacent to the Property or other public facility to which Landlord or the office complex is from time to time subject in connection with the operations of the Property and office complex.

Operating Expenses shall also be deemed to include expenses incurred by Landlord in connection with city sidewalks adjacent to the Property or other public facility to which Landlord or the office complex is from time to time subject in connection with operations of the Property and office complex.

Costs and expenses of employees and equipment of Landlord that are not solely and exclusively engaged in the operation and maintenance of the office complex shall be prorated so that Operating Expenses shall include only the pro rata share of such costs and expenses based on the number of hours such employees perform work or such equipment is used in the operation and maintenance of the office complex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. The term "Operating Expenses" for any applicable Lease Year shall mean the amount of Operating Expenses payable in respect to such applicable Lease Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. The term "Tenant's Pro Rata Share of Real Estate Taxes" shall mean 0.84% of the Real Estate Taxes for the applicable Lease Year, and the term "Tenant's Pro Rata Share of Operating Expenses" shall mean 0.84% of the Operating Expenses for the applicable Lease Year. Said percentages have been agreed upon by the parties hereto after due consideration of the rentable area of the Premises compared to the rentable area of the office complex; provided, however, Tenant's above percentages for Tenant's Pro Rata Share of Operating Expenses and for Tenant's Pro Rata Share of Real Estate Taxes shall be amended for each Lease Year to the percentage which the average rentable area of the Premises bears to the total average rentable area of the office complex for such Lease Year. Additionally, in the event that, at any time, any portion of the office complex has not been converted to office and laboratory space, Landlord shall have the right at its option to make a reasonable allocation of Operating Expenses and Real Estate Taxes between the portion of the office complex that is finished as office and laboratory space and that which is not, such allocation to be made in accordance with BOMA standards to the extent applicable and otherwise on an equitable basis and Tenant's Pro Rata Share of Real Estate Taxes and Tenant's Pro Rata Share of Operating Expenses shall be recalculated on the basis of the rentable area of the Premises compared to the rentable area of the office/laboratory portion of the Complex and shall be applied to the Operating Expenses and Real Estate Taxes allocated to the office/laboratory portion of the office complex as provided above. - Rentable area shall in no event include basement storage space designated as such by Landlord or garage space. If the rentable area of the office complex changes an equitable adjustment shall be made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Anything herein to the contrary notwithstanding, it is agreed that in the event the office complex is not fully occupied during any Lease Year, a reasonable and equitable adjustment to Operating Expenses which vary with occupancy shall be made by Landlord in computing the Operating Expenses for such year so that the Operating Expenses shall be adjusted to the amount that would have been incurred had the office complex been fully occupied during such year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. Landlord agrees that the provisions of clauses F and G above shall not be interpreted so as to allow Landlord to receive more than 100% of actual Operating Expenses in any Lease Year.

As to each Lease Year after the initial Lease Year, Landlord shall reasonably estimate for each such Lease Year (i) the total amount of Real Estate Taxes; (ii) the total amount of Operating Expenses; (iii) Tenant's Pro Rata Share of Real Estate Taxes; (iv) Tenant's Pro Rata Share of Operating Expenses; (v) the computation of the annual and monthly rental payable during such Lease Year as a result of increases or decreases in Tenant's Pro Rata Share of Real Estate Taxes and Tenant's Pro Rata Share of Operating Expenses. Said estimate in reasonable detail shall be in writing and shall be delivered or mailed to Tenant at the notice addresses contained in this Lease.

Tenant shall pay, as Additional Rent, the amount of Tenant's Pro Rata Share of Real Estate Taxes for each Lease Year and Tenant's Pro Rata Share of Operating Expenses for each Lease Year, so estimated, in equal monthly installments, in advance, on the first day of each month during each applicable Lease Year. In the event that said estimate is delivered to Tenant after the first day of January of the applicable Lease Year, said amount, so estimated, shall be payable as Additional Rent, in equal monthly installments, in advance, on the first day of each month over the balance of such Lease Year, with the number of installments being equal to the number of full calendar months remaining in such Lease Year.

During any applicable Lease Year, Landlord may reasonably reestimate the amount of Real Estate Taxes and Operating Expenses and Tenant's Pro Rata Share thereof, and in such event Landlord shall notify Tenant, in writing, of such reestimate in the manner above set forth and fix monthly installments for the then remaining balance of such Lease Year in an amount sufficient to pay the reestimated amount over the balance of such Lease Year after giving credit for payments made by Tenant on the previous estimate. Any such reestimate shall also be in reasonable detail.

Upon completion of each Lease Year, Landlord shall cause its accountants to determine the actual amount of Real Estate Taxes and Operating Expenses for such Lease Year and Tenant's Pro Rata Share thereof and deliver a written certification in reasonable detail of the amounts thereof to Tenant after the end of each Lease Year. If Tenant has paid less than its Pro Rata Share of Real Estate Taxes or its Pro Rata Share of Operating Expenses for any Lease Year, Tenant shall pay the balance of its Pro Rata Share of the same within thirty (30) days after the receipt of such statement. If Tenant has paid more than its Pro Rata Share of Real Estate Taxes or its Pro Rata Share of Operating Expenses for any Lease Year, Landlord shall, at Tenant's option, either (i) promptly refund such excess, or (ii) credit such excess against the most current monthly installment or installments due Landlord for its estimate of Tenant's Pro Rata Share of Real Estate Taxes and Tenant's Pro Rata Share of Operating Expenses for the next following Lease Year. A pro rata adjustment shall be made for a fractional Lease Year occurring during the term of this Lease or any renewal or extension thereof based upon the number of days of the term of this Lease during said Lease Year as compared to three hundred sixty-five (365) days and all additional sums payable by Tenant or credits due Tenant as a result of the provisions of this Section 9 shall be adjusted accordingly.

Further, Tenant shall pay, also as Additional Rent, any tax or excise on rents, gross receipts tax, or other tax, however described, which is levied or assessed by the United States of America or the state in which the office complex is located or any political subdivision thereof, against Landlord in respect to the Base Rent, Additional Rent, or other charges reserved under this Lease or as a result of Landlord's receipt of such rents or other charges accruing under this Lease (but only to the extent such tax as a result of such receipt by Landlord is reasonably allocable to the rent and other charges payable by Tenant under this Lease); provided, however, Tenant shall have no obligation to pay net income taxes of Landlord.

**10.** <u>Parking, Other Services. Tenan</u> t shall have the right to use the parking lot adjacent to the Premises
 for its employees and guests. Parking in that lot shall be unrestricted, except for handicap,
 visitor parking areas and such other areas as Landlord may designate from time to time. If
 Tenant anticipates special parking needs for contractors, oversized vehicle, or special events
 arrangements should be made with the landlord to avoid inconveniencing other tenants. In
 the event that Landlord shall provide, or arrange to provide services to Tenant, such as
 secretarial, clerical, or administrative assistance from employees of Landlord or others
 who are located at University Enterprise Laboratory Inc., and including chargeable services
 provided on the Landlord's internet facilities, known as UELnet, and Tenant shall elect
 to use such services, Tenant agrees to promptly pay the applicable charges as they may be
 determined from time to time. Landlord shall have no obligation to provide any such services
 except pursuant to written agreement between Landlord and Tenant.

**11.** <u>Fees, Assessments and Real Property Taxes</u>. Tenant shall pay and discharge, as they become due,
 promptly and before delinquency, all charges, license fees, whether general or special, ordinary
 or extraordinary, of every nature and kind whatsoever which may be levied, assessed, charged
 or in respect of Tenant's operations on and occupancy of the Premises except real estate
 taxes.

**12.** <u>Personal Property Taxes</u>. Tenant shall promptly pay and discharge, as they become due and before
 any delinquency whatsoever, all personal property taxes, assessments, rates, license fees,
 municipal liens, levies, excises or imports of every nature and kind levied, assessed, charged,
 or imposed on or against Tenant's leasehold interest or personal property of any kind
 owned or placed in the Premises by Tenant.

**13.** <u>Condition and Use, Environmental</u>. Tenant shall use the Premises solely for office and laboratory
 use and uses incidental thereto and for no other purpose without Landlord's prior written
 permission, which permission may be withheld by Landlord in the exercise of its reasonable
 business judgment. No use shall be permitted, or acts done, which may cause a cancellation
 of any insurance policy covering the Premises nor shall Tenant sell, permit to be kept, used
 or sold in or about the Premises any article which may be prohibited from the standard form
 of fire insurance policy. Tenant shall, at its own expense, comply with all requirements
 pertaining to the Premises imposed by any insurance company for the continued maintenance
 of insurance required by this Lease. Tenant shall use UELnet only for purposes consistent
 with Tenant's current business and shall not abuse or misuse the UELnet. Tenant is
 fully familiar with the physical condition of the Premises, improvements and equipment and
 has received the same in good order and condition. Landlord makes no representation or warranty
 with respect to the condition of the Premises, improvements and equipment, or its fitness
 or availability for any particular use, and Landlord shall not be liable for any latent or
 patent defect unknown to Landlord. By execution of this Lease, Tenant accepts the Premises,
 improvements and equipment "as is." Except as to minor amounts of chemicals generally
 used in most offices (such as copier toner) and minor amounts of cleaning supplies, Tenant
 shall not bring any materials onto the Office complex or allow under its authority any materials
 to be brought onto the Office complex which are so-called "Hazardous Waste" or
 "Hazardous Materials" under federal or state environmental laws which would subject
 Landlord or Tenant to liability for clean up or other damages if such were spilled, released
 or disposed of (through storm sewers or otherwise) on the Office complex and not in operations
 or processes of Tenant. The foregoing notwithstanding, Tenant shall not bring onto the Premises
 or generate, transport, store, treat or dispose of the following Hazardous Materials, or
 products or mixtures containing these Hazardous Materials: arsenic, cadmium, lead, polynuclear
 aromatic hydrocarbons (PAHs), 1,1,1 trichloroethane or its breakdown components (e.g., vinyl
 chloride), or 1,1 dichloroethane or its breakdown components. Tenant shall handle any Hazardous
 Materials brought onto or used by the Tenant at the Premises in accordance with applicable
 laws and prudent industry practice.

Tenant shall at all times and in all respects (as to materials and substances brought onto or into the Office complex by Tenant or its employees or separate contractors) comply with all federal, state and local laws, ordinances and regulations ("Hazardous Materials Laws") relating to the industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, presence, disposal or transportation of any oil, flammable explosives, asbestos, urea formaldehyde, polychlorinated biphenyls, radioactive materials or waste, or other hazardous toxic, contaminated or polluting materials, substances or wastes, including without limitation any "hazardous substances", hazardous wastes", "hazardous materials" or "toxic substances" under any such laws, ordinances or regulations (collectively, "Hazardous Materials").

Tenant shall at its own expense procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required for Tenant's use of the Premises, including, without limitation, discharge of (appropriately treated) materials or waste into or through any sanitary sewer system serving the Premises. Except as discharged into the sanitary sewer in strict accordance and conformity with all applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials introduced by Tenant or its employees or its separate contractors into the Premises or Office complex to be removed from the Premises and the Office complex upon completion of Tenant's use thereof and, in any event, prior to the expiration or earlier termination of the term of the Lease, and, to the extent required by applicable law, such Hazardous Materials shall be transported solely by duly licensed haulers to duly licensed facilities for final disposal. Tenant shall in all respects handle, treat, deal with and manage any and all Hazardous Materials in, on, under or about the Premises and Office complex in complete conformity with all applicable Hazardous Materials Laws and prudent industry practices regarding the management of such Hazardous Materials. All reporting obligations imposed by Hazardous Materials Laws pertaining to Hazardous Materials introduced by Tenant or its employees or its separate contractors are solely the responsibility of Tenant. Upon expiration or earlier termination of this Lease, Tenant shall cause all Hazardous Materials to be removed from the Premises and Office complex and transported for use, storage or disposal in accordance with and in complete compliance with all applicable Hazardous Materials Laws. Tenant shall not take any remedial action in response to the presence of any Hazardous Materials in, on, about or under the Premises and Office complex or in any Improvement situated on the Land, nor enter into any settlement agreement, consent decree or other compromise in respect to any claims relating to any Hazardous Materials in any way connected with the Premises and the Office complex or the improvements on the Land without first notifying Landlord of Tenant's intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto. In addition, at Landlord's request, Tenant shall remove all of its tanks or fixtures which contain or contained or are contaminated with Hazardous Materials introduced by Tenant or its employees or separate contractors into or onto the Office complex.

If Landlord has good faith reason to believe that unauthorized Hazardous Materials introduced by Tenant or its employees or its separate contractors may exist on or in respect to the Premises or Office complex, or that Hazardous Materials may have been spilled or disposed of or treated or handled by Tenant, its employees or its separate contractors in violation of the provisions hereof, Landlord shall have the right to require Tenant to undertake and submit to Landlord an environmental audit from an environmental company reasonably acceptable to Landlord, which audit shall evidence Tenant's compliance with this provision. Landlord may, at its expense, commission an environmental audit of the Premises or the Office complex at any time after prior written notice to Tenant.

Tenant shall be responsible only for that part of the cost of compliance with Hazardous Materials laws which relates to a breach by Tenant of the covenants contained in this Lease to be kept and performed by Tenant, including but not limited to the covenants contained in this Section.

**14.** <u>Waste and Nuisance; Rules</u>. Tenant shall comply with all applicable laws and regulations affecting
 the Premises and Tenant's business and use of such Premises, including without limitation
 rules established by the University of Wisconsin concerning the use of the UELnet. Tenant
 shall also comply with any rules and regulations Landlord shall promulgate as reasonably
 necessary for the operation of University Enterprise Laboratory, Inc., including parking,
 Common Areas, UELnet, and other Center facilities in a manner that is efficient and beneficial
 to Landlord, Tenant, and all other tenants. Tenant shall not commit, or permit to be committed,
 any waste or nuisance on the Premises.

**15.** <u>Right of Entry; Furnishing Information</u>. Tenant shall permit Landlord, its agents and employees,
 upon reasonable prior notice, to enter the Leased Premises at all reasonable times, and promptly,
 within three (3) days of Landlord's request, for the purpose of inspecting the same
 (including without limitation inspections for determining the compliance by any laboratory
 and animal operations with minimum health and safety requirements or standards) or for the
 purpose of posting notices of availability for rent without any rebate or abatement of rent
 and without any liability for any loss of occupation or quiet enjoyment of the Leased Premises.
 For purposes of this Section, the standards set forth in the *Guide for the Care and Use of Laboratory Animal* (which outlines the rules and regulations of the Animal Welfare
 Act and the Public Health Service Policy on Humane Care and Use of Laboratory Animals) shall
 constitute such minimum standards. In addition, upon the request of Landlord, Tenant will
 promptly, within three days of Landlord's request, furnish to Landlord copies of all
 reports, filings and records required to be maintained by Tenant with respect to hazardous
 materials located or used in the Leased Premises, including all "Material Safety Data
 Sheets."

**16.** <u>Use of Common Areas</u>. Landlord and Tenant shall not take any action to obstruct the Common
 Areas as depicted on Exhibit A, and each shall make reasonable efforts to prevent obstruction
 of such Common Areas by their employees, agents, customers, licensees, invitees, tenants
 and subtenants. Landlord agrees to include in any leases which provide for the lease of all
 or part of the Common Areas, a provision or provisions which will restrict its tenants from
 obstructing the Common Areas and requires any such tenants to make reasonable efforts to
 prevent obstruction of the Common Areas.

**17.** <u>Smoke-Free Environment</u>. The Premises shall be a smoke-free environment. No smoking shall be permitted
 anywhere in the building or in or around the main entrance to the building.

**18.** <u>No Right to Encumber</u>. Tenant shall not encumber, by mortgage, chattel or real estate security
 agreement, deed of trust or any other similar security documents or documents of transfer
 and conveyance, its leasehold interest and estate in the Premises.

**19.** <u>Casualty Insurance</u>. Landlord shall, at all times during the term of this Lease, at Landlord's
 sole expense, keep the Premises insured against loss or damage by fire and extended coverage
 hazards.

**20.** <u>Public Liability Insurance</u>. Tenant shall, at Tenant's sole cost and expense but for the
 mutual benefit of Landlord, its managing agent and Tenant, maintain commercial general liability
 and/or umbrella liability insurance against claims for personal injury, death or property
 damage occurring upon, in or about the Premises, such insurance to afford protection to Landlord,
 its managing agent and Tenant to the limit of not less than One Million and No/100 Dollars
 ($1,000,000.00) single limit coverage on an occurrence basis. Such policies of insurance
 shall be written in companies reasonably satisfactory to Landlord, naming Landlord and Landlord's
 managing agent as additional insureds thereunder, and such policies, or a memorandum or certificate
 of such insurance, shall be delivered to Landlord. Failure to deliver such memorandum or
 certificate to Landlord within five days after a written demand therefore shall be a default
 under this Lease. At such time as insurance limits required of tenants in office buildings
 in the area in which the office complex is located are generally increased to greater amounts,
 Landlord shall have the right to require such greater limits as may then be customary. To
 the extent such coverage is generally available, Tenant agrees to include in such policy
 the contractual liability coverage insuring Tenant's indemnification obligations provided
 for herein. Any such coverage shall be deemed primary and non-contributing to any liability
 coverage secured by Landlord.

Tenant agrees to indemnify and save Landlord and its managing agent harmless against and from any and all claims by or on behalf of any third parties unaffiliated with Landlord, arising from any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed, pursuant to the terms of this Lease, or arising from any willful act or gross negligence on the part of Tenant or its agents, contractors, or employees, or arising from any accident, injury or damage to the extent caused by Tenant, or its contractors, agents and employees to any person, firm or corporation occurring during the term of this Lease or any renewal thereof, in or about the Premises and office complex, and from and against all costs, reasonable counsel fees, expenses and liabilities incurred in or about any such claim or action or proceeding brought thereon; and in case any action or proceeding be brought against Landlord or its managing agent by reason of any such claim, Tenant, upon notice from Landlord, covenants to resist or defend such action or proceeding by counsel reasonably satisfactory to Landlord.

Except in the case of intentional damage to property or a negligent act or failure to act by Landlord, Tenant agrees, to the extent not expressly prohibited by law, that Landlord and its agents, employees, servants, and contractors shall not be liable, and Tenant waives all claims for damage to property and business sustained by Tenant during the term of this Lease by Tenant occurring in or about the office complex, resulting directly or indirectly from any existing or future condition, defect, matter or thing in the Premises, the office complex, or any part thereof, or from equipment or appurtenances becoming out of repair or from accident, or from any occurrence or act or omission of Landlord and its agents, employees, servants, and contractors, or any tenant or occupant of the Building or any other person. This paragraph shall apply especially, but not exclusively, to damage caused as aforesaid or by the flooding of basements or other subsurface areas, or by refrigerators, sprinkling devices, air conditioning apparatus, water, snow, frost, steam, excessive heat or cold, falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures, and shall apply equally, whether any such damage results from the act or omission of other tenants or occupants in the office complex or any other persons, and whether such damage be caused by or result from any of the aforesaid, or shall be caused by or result from other circumstances of a similar or dissimilar nature.

Anything herein to the contrary notwithstanding, in the event any damage to the office complex results from any act or omission of Tenant, its agents, employees or invitees, and all or any portion of Landlord's loss is "deductible," Tenant shall pay to Landlord the amount of such deductible loss (not to exceed $5,000 per event). All property in the office complex or on the Premises belonging to Tenant, and its employees and affiliates, or otherwise located at the Premises, shall be at the risk of Tenant only, and Landlord shall not be liable for damage thereto or theft, misappropriation or loss thereof and Tenant agrees to defend and hold Landlord and its agents and employees and contractors harmless and indemnify them against claims and liability for injuries to such property or loss of use thereof.

**21.** <u>Loss and Damage</u>. Tenant shall be solely responsible for carrying personal property insurance
 sufficient to cover loss of all personal property on the Premises. Landlord shall not be
 liable for any damage to or loss of property of Tenant or others located on the Premises
 except to the extent such damage or loss was caused by Landlord's negligent or willful
 act. Landlord shall not be liable for any injury or damage to persons or property resulting
 from fire, explosion, falling plaster, steam, gas, electricity, water, rain, snow or leaks
 from any part of the Premises, or from pipes, appliances or plumbing works, or from any other
 place, or by dampness, or by any other cause of any nature except to the extent such injury
 or damage was caused by Landlord's negligent or willful act or failure to act. Landlord
 shall not be liable for any such damage caused by persons on the Premises, occupants of adjacent
 property or the public, or caused by construction of any private, public, or quasi-public
 work except to the extent such damage was caused by Landlord's own negligent or willful
 act or failure to act. Landlord shall not be liable for any latent defect in the Premises.

**22.** <u>Certificate of Insurance</u>. Tenant and Landlord shall, with respect to any insurance coverage required
 in this Lease, furnish the other with certificates of insurance evidencing required insurance
 coverage, which certificates shall state that the other party will be notified in writing
 ten (10) days prior to cancellation, material change or non- renewal of insurance.

**23.** <u>Indemnification of Landlord</u>. Tenant shall indemnify and save Landlord harmless against and from all liabilities,
 obligations, damages, penalties, claims, costs, charges and expenses, including reasonable
 architects' and attorneys' fees, which may be imposed upon or incurred by or
 asserted against Landlord by reason of any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any
 negligent or willful act on the part of Tenant, or any of its agents, contractors, servants,
 employees, subtenants, licensees or invitees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any
 failure by Tenant to perform or comply with any of the covenants, agreements, terms or conditions
 contained in this Lease on its part to be performed or complied with.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Any
 tax attributable to the execution, delivery or recording of this Lease or any modification
 hereof.

In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant, upon written notice of Landlord, will, at Tenant's expenses, resist or defend such action or proceeding by counsel approved by Landlord in writing, provided however that such approval shall not be unreasonably withheld. The obligations of Tenant under this section shall survive any termination of this Lease. If Landlord does not approve of counsel designated by Tenant, then Landlord may designate counsel of its choice who shall defend at the expense of Tenant.

**24.** <u>Indemnification of Tenant</u>. Landlord shall indemnify and save Tenant harmless against and from all liabilities,
 obligations, damages, penalties, claims, costs, charges and expenses, including reasonable
 architects' and attorneys' fees, which may be imposed upon or incurred by or
 asserted against Tenant by reason of any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any
 negligent or willful act on the part of Landlord, or any of its agents, contractors, servants,
 employees, subtenants, licensees or invitees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any
 failure by Landlord to perform or comply with any of the covenants, agreements, terms or
 conditions contained in this Lease on its part to be performed or complied within.

In case any action or proceeding is brought against Landlord by reason of any such claim, Landlord, upon written notice of Tenant, will, at Landlord's expense, resist or defend such action or proceeding by counsel approved by Tenant in writing, provided however that such approval shall not be unreasonably withheld. The obligations of Landlord under this section shall survive any termination of this Lease. If Tenant does not approve of counsel designated by Landlord, then Tenant may designate counsel of its choice who shall defend at the expense of Landlord.

**25.** <u>Landlord's Payment</u>. In the event of Tenant's failure to pay any required insurance premiums
 when the same are due, Landlord may, in addition to and without waiving its other rights,
 pay the same on Tenant's behalf, and Tenant shall be liable to and obligated to repay
 Landlord the amount advanced, plus eighteen percent (18%) interest per annum computed on
 the principal amount of such payment by Landlord at the time and place rent is next due.

**26.** <u>Waiver of Subrogation</u>. Landlord and Tenant for themselves and their successors hereby mutually
 release and discharge each other from all liability arising by subrogation or otherwise on
 account of any loss or damage caused by or arising out of any fire or other insured casualty,
 however caused.

**27.** <u>Total Condemnation</u>. In the event the entire Premises or such part of the Premises as will render
 the remainder unsuitable for Tenant's use, shall be appropriated or taken under the
 power of eminent domain by any public or quasi-public authority, this Lease, except as herein
 provided, shall terminate and expire as of the date of taking.

**28.** <u>Partial Condemnation</u>. In the event of partial condemnation, not rendering the remainder of the
 Premises unsuitable for Tenant's use, this Lease shall remain in full force and effect,
 with the exception that rent, additional rent, utility charges and any other tenant expenses
 or charges under this Lease shall be adjusted to reasonably reflect the portion of the Premises,
 if any, lost by condemnation.

**29.** <u>Condemnation Award</u>. In the event of partial condemnation of the Premises and this Lease is not terminated,
 then Tenant shall have the right to make claim against the condemning or taking authority
 for the unamortized cost of improvements placed on the Premises by Tenant and located thereon
 at the time of the taking or appropriation.

**30.** <u>Notice of Default</u>. Tenant shall not be deemed to be in default hereunder in the payment of rent
 or the payment of any other moneys as herein required or in the furnishing of any bond or
 insurance policy when required herein unless Landlord first gives Tenant written notice of
 such default and Tenant fails to cure the default within ten (10) days of receipt of such
 notice, except if Landlord shall have twice previously given Tenant notice of default during
 the term hereof, Landlord shall not be required to give any further notice. Notwithstanding
 the foregoing, Tenant will be deemed in Default, and no notice will be required, if Tenant
 pays any two (2) monthly Rent amounts late in any one (1) twelve (12) month period. Except
 as to the provisions or events referred to in the preceding sentence of this section, Tenant
 shall not be deemed to be in default hereunder unless Landlord shall first give to Tenant
 thirty (30) days written notice of default, and Tenant fails to cure such default within
 such thirty (30) day period or, if the default is of such a nature that it cannot be cured
 within thirty (30) days, Tenant fails to commence to cure such default within such period
 of thirty (30) days or fails thereafter to proceed to the curing of such default with all
 possible diligence.

**31.** <u>Default</u>.
 In the event of any breach of this Lease by Tenant, Landlord, in addition to the other rights
 or remedies it may have, shall have the immediate right of re-entry and may remove all persons
 and property from the Premises; provided, however, that Landlord has notified Tenant of such
 breach and given Tenant a reasonable time to cure and Tenant has failed to do so. Tenant's
 property may, in such event, be removed by Landlord and stored in a public warehouse or elsewhere
 at the cost of, and for the account of, Tenant. Should Landlord elect to re-enter as herein
 provided, or should it take possession pursuant to legal proceedings or pursuant to any notice
 provided for by law, Landlord may either terminate this Lease or it may from time to time,
 without terminating this Lease re-let the Premises, or any part thereof, for such term or
 terms and at such rental or rentals and on such other terms and conditions as Landlord, in
 its sole discretion, may deem advisable, with the right to make alterations and repairs to
 the Premises. On each such re-letting:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Tenant
 shall be immediately liable to pay to Landlord, in addition to any indebtedness other than
 rent due hereunder, the expenses of such re-letting and of such alterations and repairs incurred
 by Landlord, and in the amount, if any, by which the rent reserved in this Lease for the
 period of such re-letting (up to, but not beyond, the term of this Lease) exceeds the amount
 agreed to be paid as rent for the Premises for such period on such re-letting; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At
 the option of Landlord, rents received by Landlord from such re-letting shall be applied
 first, to the payment of any indebtedness, other than rent due hereunder from Tenant to Landlord;
 second, to the payment of any expenses of re-letting and alterations and repairs; third,
 to the payment of rent due and unpaid hereunder. The residue, if any, shall be held by Landlord
 and applied in payment of future rent payments as the same may become due and payable hereunder.

If Tenant has been credited with any rent to be received by such re-letting under option (a), hereof, and such rent shall not be promptly paid to Landlord by the new tenant, or if such rentals received from such re-letting under option (b), hereof, during any month is less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on the part of Landlord to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any such re-letting without termination, Landlord may, at any time thereafter, elect to terminate this Lease for any breach, in addition to any other remedy it may have Landlord may recover from Tenant all damages incurred by reason of such breach, including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to rent reserved in this Lease for the remainder of the stated term over the then reasonable rental value of the Premises for the remainder of the stated term, all of which amounts shall be immediately due and payable from Tenant to Landlord.

In the event of any material breach of this Lease by Landlord, Tenant in addition to the other rights and remedies it may have, including without limitation, abatement of rent and/or money damages, shall have the right on thirty (30) days written notice of default (or if the default is of such a nature that it cannot be cured within thirty (30) days, Landlord fails to commence to cure such default within such period of thirty (30) days or fails thereafter to proceed to the curing of such default with all reasonable diligence) to terminate this lease,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**32.** <u>Financial Statements.</u> Tenant shall furnish concurrently with the execution of this lease, a financial
 statement of Tenant prepared by the Tenant's CFO. Tenant hereby represents and warrants
 that all the information contained therein is complete, true, and correct. Tenant understands
 that Landlord is relying upon the accuracy of the information contained therein to determine
 the credit worthiness of the Tenant. Should there be found to exist any inaccuracy within
 the financial statement or material changes which adversely affect Tenant's financial
 standing, Landlord may, at its option, demand additional security in the form of additional
 security deposit, pre-payment of Rent, additional corporate or personal guarantees or may
 elect to terminate this Lease. Any financial information supplied by Tenant shall be treated
 as highly confidential and proprietary information belonging to the Tenant, and shall be
 used by Landlord only for the purposes contemplated by this Section 32. Landlord shall hold
 this information in strict confidence, and shall not disclose it to any other person either
 inside or outside of its organization who does not have a need to know such information for
 the purpose of this Section 32 and who are bound with respect to maintaining the confidentiality
 of the information by a similar agreement.

**33.** <u>Tenant's Assignment</u>. Tenant shall not assign this Lease, in whole or in part, without the prior
 written consent of Landlord. The consent by Landlord to any assignment shall not constitute
 a waiver of the necessity for consent to any subsequent assignment. Notwithstanding any assignment,
 Tenant shall remain fully liable on this Lease.

**34.** <u>Subletting</u>.
 Tenant may not sublet all, or any part, of the Premises nor permit any concessionaires or
 licensee to operate from the Premises without the prior written consent of Landlord. The
 consent by Landlord to sublet shall not constitute a waiver of the necessity for consent
 to any subsequent subletting. Notwithstanding any subletting, Tenant shall remain fully liable
 on this Lease. Tenant shall provide Landlord with copies of all subleases and with such information
 with respect thereto as Landlord may reasonably require.

**35.** <u>Assignment of Subleases</u>. Tenant hereby irrevocably assigns to Landlord all rents and other charges
 due, or to become due, from any subleases of Tenant, together with the right to collect and
 receive such rents and other charges, provided that, so long as Tenant is not in default
 under this Lease, Tenant shall have the right to collect such rents and other charges.

**36.** <u>Landlord's Assignment</u>. Landlord shall have the right to assign or transfer its interests in this
 Lease at any time without the consent of Tenant, provided that the assignee or transferee
 assumes and agrees to be bound by the terms of this Lease and further provided that Landlord
 notifies Tenant of such assignment and provides Tenant with an executed copy of the transfer
 instrument immediately upon occurrence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**37.** <u>Subordination Agreements</u>. This lease is subordinate to all financing. Upon Landlord's request,
 Tenant shall execute and deliver to Landlord all documents required to subordinate Tenant's
 right hereunder to the lien of any mortgages or of any other method of financing or refinancing
 now or hereafter in force against the Premises. Upon Landlord's request, Tenant shall
 obtain and deliver to Landlord similar subordination agreements executed by Tenant's
 sublessees.

**38.** <u>Estoppel Certificates</u>. Upon Landlord's request, Tenant shall, within ten (10) days of Landlord's
 written request, execute and deliver to Landlord a written estoppel certificate:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Certifying
 that this Lease is in full force and effect and has not been modified (or stating such modifications);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Specifying
 the dates on which rent and other charges have been paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Stating
 whether or not, to the knowledge of Tenant, Landlord is in default under the Lease (and the
 nature of the default);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Stating
 the commencement and termination dates of this Lease;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Stating
 whether or not any options to renew have been exercised; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Stating
 any such other information as Landlord may reasonably require.

Upon Landlord's request, Tenant shall obtain and deliver to Landlord similar estoppel certificates executed by Tenant's sublessees.

**39.** <u>Accord and Satisfaction</u>. No payment received by Landlord of a lesser amount than the rent or
 other charges shall be deemed to be other than on account of the earliest stipulated rent
 or other charges nor shall any statement on a check or any letter accompanying a payment
 of rent or other charges be deemed an accord and satisfaction. Landlord may accept payment
 without prejudice to Landlord's right to recover the balance of rent or other charges
 or pursue any remedy in this Lease.

**40.** <u>Entire Agreement</u>. This Lease, the Data Sheet, and Exhibit A attached hereto and incorporated
 herein by reference, set forth all covenants, promises, agreements, conditions and understanding
 between Landlord and Tenant concerning the Premises. There are no covenants, promises, agreements,
 conditions or understandings, either oral or written, between Landlord and Tenant other than
 herein set forth. No subsequent change or addition to this Lease shall be binding upon Landlord
 or Tenant unless reduced to writing and signed by them.

**41.** <u>No Partnership</u>. Landlord shall not by the execution of this Lease as the creation of the

 deemed to be a partner, joint venturer or member of a joint enterprise with Tenant.

**42.** <u>Force Majeure</u>. If either party is delayed from the performance of any act required hereunder
 by reason of labor difficulties, restrictive governmental regulations, riots, insurrection,
 war or like reasons not the fault of the party delayed, then the period for performance of
 the act shall be extended for a period equivalent to the period of the delay. This section
 shall not excuse Tenant from prompt payment of rent, additional rent or any other payments
 required by this Lease.

**43.** <u>Waiver</u>.
 The waiver by Landlord or Tenant of any breach of any term, covenant or condition herein
 shall not be deemed a waiver of the term, covenant or condition. The acceptance of rent by
 Landlord shall not be deemed a waiver of any preceding breach by Tenant of any covenant herein,
 other than the failure of Tenant to pay the rent so accepted. No covenant, term or condition
 of this Lease shall be waived by Landlord or Tenant, unless the waiver is in writing signed
 by Landlord or Tenant.

**44.** <u>Notices</u>.
 Any notices given or required to be given to Landlord shall be mailed, with appropriate postage,
 to the addresses set forth on the Data Sheet cover page of this Lease.

**45.** <u>Partial Invalidity</u>. If any provision of this Lease or any specific application shall be invalid
 or unenforceable, the remainder of this Lease, or the application of the provision in other
 circumstances, shall not be affected, and each provision of this Lease shall be valid and
 enforceable to the fullest extent permitted by law.

**46.** <u>Warranty of Title</u>. Landlord warrants and represents that it holds the Premises pursuant to a ground
 lease and has full right to make this Lease, and that Tenant shall have quiet and peaceable
 possession of the Premises as long as Tenant is not in default thereunder.

**47.** <u>Remedies Cumulative</u>. All remedies conferred on Landlord or Tenant by this Lease shall be deemed
 cumulative and no one exclusive of the other or of any other remedy conferred by law.

**48.** <u>Holding Over</u>. In the event Tenant remains in possession of the Premises after the expiration
 of this Lease and without the execution of a new Lease, it shall be deemed to be occupying
 said premises as a Tenant from month-to-month, subject to all conditions, provisions and
 obligations of this Lease insofar as the same are applicable to a month-to- month tenancy.
 Nothing in this section shall operate to preclude Landlord from removing Tenant from the
 Premises upon the expiration of this Lease.

**49.** <u>Services.</u> Subject to the provisions of Section 9 hereof, Landlord shall provide the following services
 on all days excepting Saturdays, Sundays, holidays, and as otherwise stated: Janitorial services
 Monday through Friday during normal business hours in and about the Premises. The janitorial
 service furnished to the Premises shall include normal cleaning and upkeep services, normal
 removal of trash and rubbish, vacuuming and spot cleaning of carpeting, maintenance of towels,
 tissue and other restroom supplies and such other work as is customarily performed in connection
 with such janitorial services in an office complex similar in construction, general location,
 use and occupancy to the Office Complex. Landlord shall also provide periodic interior and
 exterior window washing and cleaning and waxing of uncarpeted floors in accordance with Landlord's
 reasonable schedule, but during normal business hours. Landlord's obligations as to
 janitorial services for the Premises are set forth on Exhibit F attached hereto. Tenant shall
 be responsible to contract and pay for all removal of special medical or other waste of Tenant
 not generated in a typical office building and to comply with all laws in respect thereto.

No interruption in, or temporary stoppage of, any of utilities or services of any kind caused by repairs, renewals, improvements, alterations, strikes, lockouts, labor controversy, accidents, inability to obtain fuel or supplies, or other causes shall be deemed an eviction or disturbance of Tenant's use and possession, or render Landlord liable for damages, by abatement of rent or otherwise or relieve Tenant from any obligation herein set forth. In no event shall Lessor be required to provide any heat, air conditioning, electricity or other service in excess of that permitted by voluntary or involuntary guidelines or laws, ordinances or regulations of governmental authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**50.** <u>Binding Effect</u>. The covenants and agreements contained in this Lease shall bind the respective
 successors, heirs and legal representatives of the parties hereto.

**[END]**

**EXHIBIT A**

**PREMISES**

**EXHIBIT B**

**BUILDING RULES AND REGULATIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Any sign, lettering, picture, notice or advertisement installed on or in any part of the Premises and generally directed outside of the Premises, shall be installed at Tenant's sole cost and expense, and in such manner, character and style as Landlord may approve in writing. In the event of a violation of the foregoing by Tenant, Landlord (after fifteen [15] days written notice to Tenant and failure of Tenant to correct such violation within such fifteen-day period) may remove the same without any liability and may charge the expense incurred by such removal to Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No awning or other projection shall be attached to the outside walls of the Office complex. No curtains, blinds, shades or screens visible from the exterior of the Office complex or visible from the exterior of the Premises, shall be attached to or hung in, or used in connection with any window or door of the Premises without the prior written consent of Landlord. Such curtains, blinds, shades, screens or other fixtures must be of a quality, type, design and color, and attached in the manner reasonably approved by Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Tenant, its employees, and contractors shall not obstruct sidewalks, entrances, passages, corridors, vestibules, halls, elevators, or stairways in and about the Office complex which are used in common with other tenants and their servants, employees, customers, guests and invitees, and which are not a part of the Premises of Tenant. Tenant shall not place objects against glass partitions or doors or windows which would be unsightly from the Office complex corridors or from the exterior of the Office complex and will promptly remove any such objects upon notice from Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Tenant shall not make excessive noises, cause disturbances or vibrations or use or operate any electrical or mechanical devices that emit excessive sound or other waves or disturbances or create obnoxious odors, any of which is offensive to the other tenants and occupants of the Office complex, or that would interfere with the operation of any device, equipment, radio, television broadcasting or reception from or within the Office complex or elsewhere and shall not place or install any projections, antennas, aerials or similar devices inside or outside of the Premises or on the Office complex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Tenant shall not waste electricity, water or air conditioning and shall cooperate fully with Landlord to insure effective operation of the Office complex's heating and air conditioning systems and shall refrain from attempting to adjust any controls other than unlocked room thermostats, if any, installed for Tenant's use. Tenant shall keep corridor doors closed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Tenant assumes full responsibility for protecting its space from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed and secured after normal business hours.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Except as otherwise provided in this Lease, no person or contractor not employed by Landlord shall be used to perform janitorial work, window washing, cleaning, maintenance, repair or similar work in the Premises without the written consent of Landlord, which consent shall not be unreasonably withheld or delayed; provided, however, this provision shall not apply to maintenance or repair of Tenant's personal property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. In no event shall Tenant bring into the Office complex inflammables, such as gasoline, kerosene, naphtha and benzine, or explosives or any other article of intrinsically dangerous nature unless Landlord has approved in writing Tenant's use of such materials, other than such chemicals used in compliance with the provisions of this Lease. If, by reason of the failure of Tenant to comply with the provisions of this subparagraph, any insurance premium for all or any part of the Office complex shall at any time be increased, Tenant shall make payment within thirty (30) days after receipt of invoice (and reasonably satisfactory evidence of the increased premium and the reasons for Tenant's responsibility therefor) of the whole of the increased insurance premium, without waiver of any of Landlord's other rights at law or in equity for Tenant's breach of this Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Except as otherwise expressly provided in this Lease, Tenant shall comply with all applicable federal, state and municipal laws, ordinances and regulations, and building rules and shall not directly or indirectly make any use of the Premises which may be prohibited by any of the foregoing or which may be dangerous to persons or property or may increase the cost of insurance or require additional insurance coverage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. No advertising by Tenant within the office complex which impairs the reputation of the office complex or its desirability as an office complex for office use shall be permitted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. The Premises shall not be used for cooking (except microwaved food and coffee machines), lodging, sleeping or for any immoral or illegal purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. Tenant shall observe faithfully and comply with the foregoing rules and regulations and such other and further appropriate reasonable rules and regulations as Landlord or Landlord's agent may from time to time adopt. Reasonable notice to Tenant of any additional rules and regulations shall be given in such manner as Landlord may reasonably elect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. Subject to the provisions of this Lease, unless expressly approved by Landlord, which approval shall not unreasonably be withheld, no additional locks or similar devices shall be attached to any door or window and no keys other than those provided by Landlord shall be made for any door. If more than two keys for one lock are desired by Tenant, Landlord may provide the same upon payment by Tenant. Upon termination of this Lease or of Tenant's possession, Tenant shall surrender all keys of the Premises and shall explain to Landlord all combination locks on safes, cabinets and vaults.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. Any carpeting cemented down by Tenant shall be installed with a releasable adhesive. In the event of a violation of the foregoing by Tenant, Landlord may charge the expense incurred by such removal to Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. The water and wash closets, drinking fountains and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags, coffee grounds or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. No person shall waste water by interfering or tampering with the faucets or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. The office complex is a no smoking facility and no smoking shall be permitted in any building which is a part of the office complex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. No bicycle or other vehicle, and no dog or other animal shall be allowed in offices, halls, corridors, or elsewhere in the building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. Tenant shall not intentionally throw anything out of the door or windows, or down any passageways or elevator shafts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. All loading, unloading, receiving or delivery of goods, supplies or disposal of garbage or refuse shall be made only through entryways and facilities provided for such purposes and indicated by Landlord. Notwithstanding the provisions of the Lease provisions governing Insurance, Tenant shall be responsible for any damage to the building or the property of its employees and injuries sustained by any person whomsoever resulting from the use or moving of such articles in or out of the leased premises, and shall make all repairs and improvements required by Landlord or governmental authorities in connection with the use or moving of such articles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. All safes, equipment or other heavy articles shall be carried in or out of the Premises only at such reasonable times and in such manner as shall be prescribed in writing by Landlord, and Landlord shall in all cases have the reasonable right to specify the proper position of any such safe, equipment or other heavy article, which shall only be used by Tenant in a manner which will not interfere with or cause damage to the leased premises or the building in which they are located, or to the other tenants or occupants of said building. Tenant shall be responsible for any damage to the building or the property of its employees and injuries sustained by any person whomsoever resulting from the use or moving of such articles in or out of the leased premises, and shall make all repairs and improvements required by Landlord or governmental authorities in connection with the use or moving of such articles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. Except as to Tenant's internal corporate action, canvassing, soliciting, and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22. Vending machines shall not be installed without permission of Landlord except those for the exclusive use of Tenant's employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23. Wherever in these Building Rules and Regulations the word "Tenant" occurs, it is understood and agreed that it shall also mean Tenant's employees and contractors. Wherever the word "Landlord" occurs, it is understood and agreed that it shall also mean Landlord's employees and contractors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24. Subject to the provisions of this Lease, Landlord shall have the right to enter upon the leased premises at all reasonable hours (upon reasonable notice under the circumstances) for the purpose of inspecting the same.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25. Tenant shall not keep animals on the Premises for any purpose excepting only "seeing eye" or "helping" dogs providing assistance to challenged individuals while in the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26. Subject to the provisions of this Lease, Landlord shall have the right (upon reasonable notice under the circumstances) to enter the leased premises at hours convenient to Tenant for the purpose of exhibiting the same to prospective tenants within the ten (10) month period prior to the expiration of this Lease, including any exercised renewal terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27. Tenant, its employees, and contractors shall, when using the common parking facilities, if any, in and around the building, observe and obey all signs regarding fire lanes and no parking zones, and when parking always park between the designated lines. Landlord reserves the right to tow away, at the expense of the owner, any vehicle which is improperly parked or parked in a no parking zone. All vehicles shall be parked at the sole risk of the owner. Landlord assumes no responsibility for any damage to or loss of vehicles (except for the Landlord's intentional wrongdoing). No vehicles shall be routinely parked overnight or when such would interfere with Landlord's maintenance and operation of the office complex (notice of which shall be given by Landlord or its management agent to Tenant).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28. (A) Persons may enter the office complex only in accordance with Landlord's reasonable and non-discriminatory regulations, (B) Persons entering or departing from the office complex may be questioned as to their business in the office complex, and the right is reserved to require the use of an identification card or other access device and the registering of such persons as to the hour of entry and departure, nature of visit, and other information deemed necessary for the protection of the office complex, and (C) All entries into and departures from the office complex will take place through such one or more entrances as Landlord shall from time to time designate; provided, however, anything herein to the contrary notwithstanding, Landlord shall not be liable for any lack of security in respect to the office complex whatsoever. Landlord will normally not enforce clauses (A), (B) and (C) above from 7:00 a.m. to 6:00 p.m., Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturdays, but it reserves the right to do so or not to do so at any time at its sole discretion. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the office complex during the continuance of the same by closing the doors or otherwise, for the safety of the tenants or the protection of the office complex and the property therein. Landlord shall in no case be liable for damages for any error or other action taken with regard to the admission to or exclusion from the office complex of any person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29. All entrance doors to the Premises shall be locked when the Premises are not in use. All corridor doors shall also be closed during times when the air conditioning equipment in the office complex is operating so as not to dissipate the effectiveness of the system or place an overload thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30. Landlord reserves the right at any time and from time to time upon reasonable notice to rescind or waive, in whole or in part, any of these Rules and Regulations when it is deemed necessary, desirable, or proper, in Landlord's judgment, for its best interest or for the best interest of the tenants of the office complex.

**[END]**

**EXHIBIT C**

**ADDITIONAL SERVICES**

Business Services.

○ Phones: $45/user/month

○ Copier: $0.07 for black and white, $0.59 for color

○ Fax machine: $1.00 per page Local, $2.00 for first page long distance, $1.50 after first page long distance

○ Maintenance Services $45/hour

○ Mail room

○ Shipping and receiving facility access

○ Company name on lobby directory and at suite entry

○ 6 shared conference rooms

Technical Services

○ Data and Internet: UELnet costs provided through UEL IT vendor

○ Turn Key Customer Support (phone support triage & trouble shooting)

○ Email accounts

○ Centralized data storage

○ Back ups

○ Virus protection

○ Spam blocking

○ Web hosting (FTP)

○ Data base management

○ Internet access: $125/month plus activation fee

**EXHIBIT D**

ATTORNMENT AGREEMENT

**<u>SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT AND ESTOPPEL CERTIFICATE</u>**

THIS AGREEMENT, made effective as of the______day of___________, 20___, by and between IGF ONCOLOGY, LLC ("Tenant"), whose mailing address is 1000 Westgate Drive, Suite 120B, St, Paul, Minnesota 55114, and SUNRISE NEW MARKETS FUND XVI, LLC, a Minnesota limited liability company ("Lender"), whose mailing address is 2525 Wabash Avenue, St. Paul, Minnesota 55114, and/or its participants, successors or assigns.

**<u>W I T N E S S E T H:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. WHEREAS, by [LEASE] dated as of November 28, 2018 (hereinafter referred to as the "Lease"), UEL REAL ESTATE HOLDINGS, LLC ("Landlord"), leased and rented to Tenant a portion of the real property legally described on the attached <u>Exhibit A</u> (the "Property"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. WHEREAS, Landlord has obtained a loan from Lender secured by, among other things, a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement encumbering, among other things, the Property (the "Mortgage"), and as a condition to making such loan, it was agreed between Landlord and Lender that Landlord would obtain from Tenant certain written agreements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. WHEREAS, Tenant and Lender desire hereby to establish certain rights, safeguards, obligations and priorities with respect to their respective interests by means of the following agreement.

NOW THEREFORE, for and in consideration of the premises and of the mutual covenants and promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tenant and Lender agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Lease and the rights of Tenant thereunder are and shall be subject and subordinate to the lien of the Mortgage and to all of the terms, conditions and provisions thereof, to all advances made or to be made thereunder, to the full extent of the principal sum, interest thereon and other amounts from time to time secured thereby, and to any renewal, substitution, extension, modification or replacement thereof, including any increase in the indebtedness secured thereby or any supplements thereto. In the event that Lender or any other person (the Lender, any other such person and their successors and assigns being referred to herein as the "Purchaser") acquires title to the Property pursuant to the exercise of any remedy provided for in the Mortgage or by reason of the acceptance of a deed in lieu of foreclosure, Tenant covenants and agrees to attorn to and recognize and be bound to Purchaser as its new Landlord, and subject to the other terms, provisions and conditions of this Agreement, the Lease shall continue in full force and effect as a direct Lease between Tenant and Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. So long as the Lease is in full force and effect and Tenant shall not be in default under any provision of the Lease or this Agreement, and no event has occurred which has continued to exist for a period of time (after notice, if any, required by the Lease) as would entitle Landlord to terminate the Lease or would cause, without further action by Landlord, the termination of the Lease or would entitle Landlord to dispossess the Tenant thereunder:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the right of possession of Tenant to the Property shall not be terminated or disturbed by any steps or proceedings taken by Lender in the exercise of any of its rights under the Mortgage; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the Lease shall not be terminated or affected by said exercise of any remedy provided for in the Mortgage, and Lender hereby covenants that any sale by it of the Property pursuant to the exercise of any rights and remedies under the Mortgage or otherwise, shall be made subject to the Lease and the rights of Tenant thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3. In no event shall Lender or any other Purchaser be:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a. liable for any act or omission of any prior landlord;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. liable for the return of any security deposit which has not been delivered to the Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. subject to any offsets or defenses which the Tenant might have against any prior landlord;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. bound by any payment of base rent or additional rent which the Tenant might have paid to any prior landlord for more than the current month;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. bound by any provisions of the Lease regarding commencement or completion of construction of the Property; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. bound by any warranties of construction provided by Landlord under the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Tenant agrees to give prompt written notice to Lender of any default by the Landlord under the Lease which would entitle Tenant to cancel the Lease or abate the rent payable thereunder, and agrees that notwithstanding any provision of Lease, no notice of cancellation thereof shall be effective unless Lender has received the notice aforesaid and has failed within 30 days of the date of receipt thereof to cure, or if the default cannot be cured within 30 days, has failed to commence and to pursue diligently the cure of the Landlord's default which gave rise to such right of cancellation or abatement. Tenant further agrees to give such notices to any successor-in-interest of Lender, provided that such successor-in-interest shall have given written notice to Tenant of its acquisition of Lender's interest in the Mortgage and designated the address to which such notices are to be sent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Tenant acknowledges that, under the terms of the Mortgage, Landlord has assigned to Lender the rentals under the Lease as additional security for said loan, and Tenant hereby expressly consents to and recognizes such assignment, and agrees to pay the rent to Lender or its nominee whenever Lender claims or requests the rent under the terms of the Mortgage. Notwithstanding anything to the contrary in this Agreement or the Lease, upon any attornment pursuant to this Agreement the Lease shall be deemed to have been automatically amended to provide that Purchaser's obligations and liability under the Lease shall never extend beyond Purchaser's (or is successors' or assigns') interest, if any, in the Property from time to time. Tenant shall look exclusively to Purchaser for payment or discharge of any obligations of Purchaser under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Purchaser with respect to the Lease or the relationship between Purchaser and Tenant, then Tenant shall look solely to Purchaser's interest in the Property to collect such judgment. Tenant shall not collect or attempt to collect any such judgment out of any other assets of the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Tenant agrees that it will not, without the prior written consent of Lender, do any of the following, and any such purported action without such consent shall be void as against Lender:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a. make a prepayment in excess of one month of rent thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. subordinate or permit subordination of the Lease to any lien subordinate to the Mortgage; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. make or enter into any amendment or modification to or termination of the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Tenant agrees to certify in writing to Lender, upon request, whether or not any default on the part of the Landlord exists under the Lease and the nature of any such default. Tenant states that as of this date, the Lease is in full force and effect, without modification, a copy of said Lease being attached hereto. Tenant further states as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Tenant is the tenant under the Lease for the Property. The monthly base rent presently is $2,485.00 per month.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Lease term commenced or commences on February 1, 2019 and runs two (2) year. Tenant does not have the right to extend or renew the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Lease has not been assigned, modified, supplemented or amended in any way by Tenant, except as described on the attached sheet (if any). The Lease constitutes the entire agreement between the parties and there are no other agreements concerning the Property, and Tenant is not entitled to receive any concession or benefit (rental or otherwise) or other similar compensation in connection with renting the Property other than as set forth in the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The Lease is valid and in full force and effect, and, to the best of Tenant's knowledge, no party thereto, their successors or assigns is presently in default thereunder. Tenant has no defense, set-off or counterclaim against Landlord arising out of the Lease or in any way relating thereto, and no event has occurred and no condition exists, which with the giving of notice or the passage of time, or both, will constitute a default under the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. No rent or other sum payable under the Lease has been paid more than one month in advance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. The amount of the security deposit, if any, to secure Tenant's performance under the Lease is $3,644.67.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Tenant agrees to deliver to Lender, or any other Purchaser, within thirty (30) days after request therefor, a copy of Tenant's most recent annual financial statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. The foregoing provisions shall be self-operative and effective without the execution of any further instruments on the part of either party hereto. However, Tenant agrees to execute and deliver to Lender or to any person to whom Tenant herein agrees to attorn such other instruments as either shall request in order to effect said provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. The agreements herein contained shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, successors-in-interest and assigns, and, without limiting such, the agreements of Lender shall specifically be binding upon any Purchaser of the Property at foreclosure or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. This agreement may not be modified other than by an agreement in writing signed by the parties hereto or their respective successors-in-interest.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12. This agreement may be signed in counterparts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. If any term or provision of this Agreement shall to any extent be held invalid or unenforceable, the remaining terms and provisions hereof shall not be affected thereby, but each term and provision hereof shall be valid and enforceable to the fullest extent permitted by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. All notices, statements and other communications to be given under the terms of this agreement shall be in writing and delivered by hand against written receipt or sent by certified or registered mail, return receipt requested, postage prepaid and addressed as provided in the first paragraph of this Agreement, or at such other address as from time to time designated by the party receiving the notice.

IN WITNESS WHEREOF, Tenant and Lender have caused this instrument to be executed as of the day and year first above written.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE TO SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT AND ESTOPPEL CERTIFICATE]

---

| | |
|:---|:---|
| **TENANT:** | **TENANT:** |
| <u>IGF ONCOLOGY, LLC</u> | <u>IGF ONCOLOGY, LLC</u> |
| By: |  |
| Name: | Hugh McTavish, Ph.D., J.D. |
| Its: | President |

---

STATE OF MINNESOTA) ) SS. <br> COUNTY OF)

The foregoing instrument was acknowledged before me the ____________day of____________, 20_____, by____________, the ____________ of ____________ , a ____________ , for and on behalf of said ____________.

  <br> Notary Public

[SIGNATURE PAGE TO SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT AND ESTOPPEL CERTIFICATE]

---

| | |
|:---|:---|
| **LENDER:** | **LENDER:** |
| **SUNRISE NEW MARKETS FUND XVI,** | **SUNRISE NEW MARKETS FUND XVI,** |
| **LLC**, a Minnesota limited liability company | **LLC**, a Minnesota limited liability company |
| By: | University Financial Corp., GBC, a <br> Minnesota public benefit corporation, <br> its Managing Member |

---

By:   <br> David C. Reiling <br> Its Chief Executive Officer

STATE OF MINNESOTA) ) SS. <br> COUNTY OF RAMSEY)

The foregoing instrument was acknowledged before me the ____________ day of ____________, 2018, by David C. Reiling, the Chief Executive Officer of University Financial Corp., GBC, a Minnesota public benefit corporation, and the Managing Member of Sunrise New Markets Fund XVI, LLC, a Minnesota limited liability company, for and on behalf of the limited liability company.

  <br> Notary Public

[SIGNATURE PAGE TO SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT AND ESTOPPEL CERTIFICATE]

---

| |
|:---|
| **AGREED:** |
| **LANDLORD:** |
| **UEL REAL ESTATE HOLDINGS, LLC,** |
| a Delaware limited liability company |
| By: |
| Name: |
| Its: |

---

STATE OF MINNESOTA) ) SS. <br> COUNTY OF)

The foregoing instrument was acknowledged before me the ____________ day of March, 2018, by ____________, the ____________ of UEL Real Estate Holdings, LLC, a Delaware limited liability company, for and on behalf of the limited liability company.

  <br> Notary Public

This instrument was prepared by: WINTHROP & WEINSTINE, P.A. (JJH)

225 South Sixth Street, Suite 3500

Minneapolis, Minnesota 55402

**EXHIBIT E**

**LAB 1010**

**EXHIBIT F**

**OFFICE AREAS/LUNCH ROOM**

(Daily)

1. Empty
 wastebaskets and other trash containers and provide trash container liners.

2. Empty
 and damp wipe ashtrays.

3. Dust
 desks, tables, credenzas, counters, file tops, and other horizontal surfaces (provided they are clear of papers and other materials.
 The janitorial staff should not move any materials left on desks and tabletops).

4. Vacuum
 all "traffic lanes" of carpeted areas with an upright vacuum.

5. Spot
 clean small stains in carpeting as they appear.

6. Dust
 plastic chair mats.

7. Dust
 mop tile floors (damp mop stains as needed).

8. Spot
 clean entry door glass.

9. Turn
 out lights and properly secure offices upon completion of work.

**OFFICE AREAS**

(The following items are to be done at various frequencies depending on the particular needs of an individual space in order to keep the Office Complex in the condition of other similar Class-A office buildings in the Southwest Minneapolis suburban area.)

1. Spot
 clean interior partition and door glass.

2. Vacuum
 "inaccessible" areas under desks, between furniture and walls, along edges of carpet/walls, etc.

3. Spot
 wash glass doors and door frames.

4. Spray
 buff resilient floor tile.

5. Strip
 and refinish resilient floor tile

6. Dust
 wall paneling.

**COMMON AREAS**

(i.e., restrooms, corridors, lobbies, entryways, etc. - daily)

1. Vacuum
 carpeted areas with an upright vacuum. Spot clean small stains in the carpet as they appear.

2. Vacuum
 and "edge" all elevator carpet and dust interior hard finished surfaces with a treated dust cloth. Spot clean all fingerprints
 and smudges from around call button panels.

3. Wipe
 down hallway side of elevator doors and frames with a treated dust cloth. Vacuum out track of elevator door threshold plates.

4. Clean
 drinking fountains.

5. Empty
 all ash/trash receptacles. Damp wipe all ash receptacle tops.

6. Dust
 mop all hard surface floors. Damp mop as necessary to remove any stains.

7. Spot
 clean all entrance door glass and partition glass.

8. Clean
 and sanitize all restroom sinks, toilets, and urinals.

9. Clean
 and polish all chrome, faucets, flush valves, soap dispensers, etc.

10. Refill
 all soap, tissue, and towel dispensers.

11. Spot
 clean mirrors, walls, toilet partitions.

12. Wet
 mop and sanitize all restroom floors.

13. Keep
 all janitor closets and storage areas in a clean and orderly condition.

14. Turn
 out lights and properly secure building upon completion of work.

Note - exterior and interior of windows shall be cleaned at least 2 times per year (spring and fall) and otherwise as reasonably needed.

**ADDITIONAL SERVICES AVAILABLE**

(The following is a list of other services which are NOT included in your "regular monthly charge," but for which an extra charge will be made to a tenant)

1. Carpet
 shampooing.

2. Destaticizing
 of carpet.

3. Wash
 inside surface of exterior building wall windows.

4. Moving
 or rearranging of furniture or other items.

5. Vacuum
 and/or shampoo cleaning of upholstered furniture.

6. High
 dusting (areas more than "head high").

7. Washing
 of office furniture (telephones, wastebaskets, chair mats, chalkboards, lunchroom, etc.).

8. Providing
 of plastic trash container liners.

9. Wall
 or ceiling washing in tenant or common areas.

**SCROLL BAR**

## Exhibit 10.7

**Exhibit 10.7**

**FIRST AMENDMENT TO LEASE**

**THIS FIRST AMENDMENT TO LEASE** ("Amendment") is made and entered into as of the 215<sup>1</sup> day of June, 2021, by and between **UEL REAL ESTATE HOLDINGS, LLC,** a Minnesota limited liability company, ("Landlord") and **IGF ONCOLOGY, LLC,** a Minnesota liability company, ("Tenant").

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord
 and Tenant entered into a certain Lease dated November 28, 2018 ("Lease"), pursuant
 to which Tenant leased from Landlord approximately 994 rentable square feet of laboratory
 space (Lab 1010) in the building located at 1000 Westgate Drive, St. Paul, Minnesota.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Tenant
 desires and Landlord agrees to modify Tenant's Lease, subject to and in accordance
 with the terms and conditions of this Amendment.

**NOW, THEREFORE,** in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby **C acknowledged, Landlord and Tenant hereby agree as follows:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Recitals Incorporated.</u> The Recitals set forth above are hereby ratified by Landlord and Tenant and are by this reference incorporated into this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Revisions to Lease.</u> The section labeled **"Assignment"** in the Lease is to include the following:

**Assignment:** Tenant desires and Landlord agrees to assign this Lease and all subsequent Amendments to Squarex, LLC as of June 30, 2021. Squarex, LLC accepts all the benefits and obligations outlined in the Lease and all subsequent Amendments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Lease to Remain in Full Force and Effect</u>. Except to the extent as expressly provided in this First Amendment, and not inconsistent with the terms of this First Amendment, the Lease, will remain in full force and effect, and the terms and conditions of the Lease, to the extent not inconsistent with the terms hereof, shall be binding upon Landlord and Tenant.

**IN WITNESS WHEREOF,** Landlord and Tenant have executed this Amendment as of the day and year first above written.

---

| | |
|:---|:---|
| **LANDLORD:** | **LANDLORD:** |
| **UEL REAL ESTATE HOLDINGS, LLC,** | **UEL REAL ESTATE HOLDINGS, LLC,** |
| a Minnesota limited liability company | a Minnesota limited liability company |
| By: | */s/ Thomas W. LaSalle* |
|  | **TENANT:** |
|  | **SQUAREX, LLC,** a Minnesota incorporated company |
| By: | */s/ Hugh McTavish* |

---

## Exhibit 10.8

**Exhibit 10.8**

**SECOND AMENDMENT TO LEASE**

**THIS SECOND AMENDMENT TO LEASE** ("Amendment") is made and entered into as of the 22<sup>nd</sup> day of June, 2021, by and between **UEL REAL ESTATE HOLDINGS, LLC,** a Minnesota limited liability company, ("Landlord") and **SQUAREX, LLC,** a Minnesota liability company, ("Tenant").

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord
 and Tenant entered into a certain Lease dated November 28, 2018 ("Lease"), pursuant to which Tenant leased from Landlord
 approximately 994 rentable square feet of laboratory space (Lab 1010) in the building located at 1000 Westgate Drive, St. Paul, Minnesota.

B. Landlord
 and Tenant entered into a First Amendment to Lease dated June 21, 2021, pursuant to which Tenant assigned its Lease and all subsequent
 amendments to Squarex, LLC.

B. Tenant
 desires and Landlord agrees to modify Tenant's Lease, subject to and in accordance with the terms and conditions of this Amendment.

**NOW, THEREFORE,** in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. <u>Recitals Incorporated</u>. The Recitals set forth above are hereby ratified by Landlord and Tenant and are by this reference incorporated into this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Revisions to Lease.</u> The sections labeled **"Base Rent"** and **"Term"** in the Lease are to include the following:

---

| | |
|:---|:---|
| **Base Rent:** | As of July 1, 2021, Base Rent will increase to $31.00 per rentable square foot or 2,567.83 per month. |
| **Term:** | The Term for Lab 1010 is currently set to expire on June 30, 2021. Tenant desires and Landlord agrees to extend the Term by one (1) year with a new expiration date of June 30, 2022. |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Lease to Remain in Full Force and Effect.</u> Except to the extent as expressly provided in this Second Amendment, and not inconsistent with the terms of this Second Amendment, the Lease, will remain in full force and effect, and the terms and conditions of the Lease, to the extent not inconsistent with the terms hereof, shall be binding upon Landlord and Tenant.

**IN WITNESS WHEREOF,** Landlord and Tenant have executed this Amendment as of the day and year first above written.

---

| | |
|:---|:---|
| **LANDLORD:** | **LANDLORD:** |
| **UEL REAL ESTATE HOLDINGS, LLC,** | **UEL REAL ESTATE HOLDINGS, LLC,** |
| a Minnesota limited liability company | a Minnesota limited liability company |
| By: | */s/ Thomas W. LaSalle* |
| **TENANT:** | **TENANT:** |
| **SQUAREX, LLC,** | **SQUAREX, LLC,** |
| a Minnesota incorporated company | a Minnesota incorporated company |
| By: | */s/ Hugh McTavish* |

---

## Exhibit 10.9

**Exhibit 10.9**

**THIRD AMENDMENT TO LEASE.**

**THIS THIRD AMENDMENT TO LEASE** ("Amendment") is made and entered into as of the 2<sup>nd</sup> day of June, 2022, by and between **VEL REAL ESTATE IJOLDINGS, LLC,** a Delaware limited liability company, ('1Landlord") and **SQUAREX, LLC,** a Minnesota liability company, ("Tenant").

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Landlord
 and Tenant entered into a certain Lease dated November 28, 2018 ("Lease"), pursuant to which Tenant leased from Landlord
 approximately 994 rentahle square feet of laboratory space (Lab IOI0) in the building located at I000 Westgate Drive, St. Paul, Minnesota.

B. Landlord
 and Tenant entered into a First Amendment to Lease dated June 21, 2021, pursuant to which Tenant assigned its Lease and all subsequent
 amendments to SquareX, LLC.

C. Landlord
 and Tenant entered into a Second Amendment to Lease dated June 22, 2021, pursuant to which Tenant extended the Tenn of its Lease
 with a new expiration date of June 30, 2022.

D. Tenant
desires and Landlord agrees to modify Tenant's Lea _e, subject to and in accordance with the tenns and conditions of this Amendment.

**NOW, THEREFORE,** in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Recitals Incorporated.</u> The Recitals set forth above are hereby ratified by Landlord and Tenant and are by this reference incorporated into this Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2. <u>Revisions to Lease.</u> The sections labeled **"Base Rent"** and **"Term"** in the

Lease are to include the following:

---

| | |
|:---|:---|
| **Base Rent:** | As of July 1, 2022, Base Rent will increase to $32.00 per rentable square foot or 2,650.67 per month. |
| **Term:** | The Tenn for Lab 1010 is currently set to expire on Jwie 30, 2022. Tenant desires and Landlord agrees to extend the Term by one (1) year with a new expiration date of Jnne 30, 2023. |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Lease to Remain in Full Force and Effect.</u> Except to the extent as expressly provided in this Third Amendment, and not inconsistent with the terms of this Third Amendment, the Lease, will remain in full force and effect, and the terms and conditions of the Lease, to the extent not inconsistent with the terms hereof, shall be binding upon Landlord and Tenant.

**IN WITNESS WHEREOF,** Landlord and Tenant have executed this Amendment as of the day and year first above written.

---

| | |
|:---|:---|
| **LANDLORD:** | **LANDLORD:** |
| **UEL REAL ESTATE HOLDINGS, LLC,** | **UEL REAL ESTATE HOLDINGS, LLC,** |
| a Minnesota limited liability company | a Minnesota limited liability company |
| By: | */s/ Thomas W. LaSalle* |
| **TENANT:** | **TENANT:** |
| **SQUAREX, LLC,** a Minnesota incorporated company | **SQUAREX, LLC,** a Minnesota incorporated company |
| By: | */s/ Hugh McTavish* |

---

## Exhibit 10.10

**Exhibit 10.10**

![](ex10-10_001.jpg)

**<u>PERSONAL & CONFIDENTIAL</u>**

November 1, 2022

Hugh McTavish Ph.D., J.D.

President & CEO

Squarex Pharmaceutical Corporation

7460 Pinehurst Road

Saint Paul, MN 55115

**<u>Re: Consulting Services Engagement Letter</u>**

Dear Hugh,

It was a pleasure talking with you and learning about SquareX Pharmaceuticals. Based on our understanding of your current position and plans, we are pleased to present the following engagement letter for financial consulting services.

**<u>SERVICES</u>**

Ravix proposes that we will provide the following services for the company, as directed by management, including:

<u>Recurring activities:</u>

● Manage
 internal accounting functions consistent with accrual basis accounting standards as appropriate

● Perform
 the monthly close and prepare financial statements, including Board of Directors reporting
 package

<u>Potential additional work:</u>

● Develop
 cash forecasts and the operating budget to reflect the Company's dynamic business model

● Perform
 equity tracking and stock administration, including interface with corporate attorneys

● Assist
 with selection of CPA firm and provide audit/tax support [when required]

● Provide
 technical accounting support (e.g., for S-1/IPO activities)

● Act
 as a "sounding board" for the management of the Company

Additional tasks not included in the above list of services will be handled on an as-needed basis.

In the event that SquareX Pharmaceuticals or we identify a situation in which the company could benefit from the specific expertise our firm provides in Human Resources, we will meet with you in advance and make appropriate recommendations from our pool of resources.

**<u>TIMING</u>**

Ravix can start work at a mutually agreeable time after receipt of this executed letter and the deposit described below.

Ravix' management is very interested in ensuring that our clients receive quality attention and service to help make our relationship successful. To that end, we may periodically contact you to see if your expectations are being met and evaluate the cost/benefit relationship for both companies. In any event, please do not hesitate to contact Timi Okah, President & CEO , at (650) 669-8635 if there are questions or concerns.

![](ex10-10_002.jpg)

Hugh McTavish Ph.D., J.D. <br> November 1, 2022 <br> Page 2 of 3

**<u>COST</u>**

Ravix' team will consist of the following, including billing rates and time estimates:

---

| | | |
|:---|:---|:---|
| **Team Member** | **Billing Rate**<br> **per Hour** | **Time Estimate** |
| CFO | $275.00 | 6 hours per month for basic recurring activities |

---

The above time estimates are based on our current understanding of the status and immediate needs for your business. As your company grows, the nature of your business changes, the volume of activity increases, staffing changes occur, or as additional needs are identified, these time estimates generally increase corresponding to the increase in activities.

A deposit of (1,500) is required to begin this assignment. The deposit will be refunded less any outstanding invoices once the company requests termination of our engagement. In the event billings increase significantly, an additional deposit will be invoiced and is payable upon receipt.

**<u>TERMS</u>**

Fees are billed on the 16<sup>th</sup> and the 1<sup>st</sup> of the month for the prior period and are due within 7 days of receipt. Unpaid invoices in excess of 30 days may result in suspension of services until the account is current. A copy of Ravix' Standard Terms and Conditions is attached as Exhibit A. This engagement letter is valid for ten calendar days from the date of this letter. After five calendar days, we can no longer guarantee the availability of specific individuals for this job assignment.

**<u>APPROVAL</u>**

Hugh, if the above is agreeable to you, please sign this letter in the space below and return a copy to Ravix.

Thank you for giving Ravix Group Inc. the opportunity to be of service to SquareX Pharmaceuticals. We look forward to working with you.

---

| | | |
|:---|:---|:---|
| Sincerely, |  | Accepted: |
| */s/ Kwang Lee* | | */s/ Hugh McTavish* |
| Kwang Lee |  | Hugh McTavish Ph.D., J.D. |
| Partner |  | President & CEO |
|  |  | SquareX Pharmaceuticals |
| xx/xx |  | Date |

---

![](ex10-10_002.jpg)

![](ex10-10_001.jpg)

EXHIBIT A

STANDARD TERMS AND CONDITIONS

RAVIX GROUP INC.

1. <u>Services</u>: Ravix Group Inc. ("Ravix") will use reasonable efforts to perform the services (the "Services") described in the engagement letter between Ravix and the Client addressed therein to which these Standard Terms and Conditions are attached as Exhibit A. Client will provide Ravix with all resources (physical and human) reasonably requested by Ravix to enable Ravix to perform the Services, including a "full-service" payroll service (with tax filings and deposits, if payroll processing is to be provided), and a computer (with accounting software as needed) available on site. To the extent that Client information is maintained on computers or systems owned by Ravix or its personnel, Client will indemnify Ravix and hold it harmless to the extent of any loss of client data and expense of recovery.

2. <u>Fees and Expenses</u>: Unless otherwise specified in the engagement letter, fees will be billed semi-monthly, on the sixteenth and first day of each month. Expenses incurred by Ravix on behalf of Client will include mileage from the Ravix office (or the Ravix employee's home when the employee is remote) to Client's facility and will be billed when incurred with the fee billings. All invoices are due within seven (7) days of receipt. If Ravix is requested or authorized by the Client (or former Client) or are required by government regulation, subpoena or other legal process to produce our documents or our personnel as witnesses with respect to the Services for the Client (or former Client), the Client (or former Client) will, so long as we are not a party to the proceeding in which the information is sought, reimburse Ravix for our professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such requests. If the Services performed for the Client (or former Client) are selected for inspection by any authoritative body/entity, the professional time and expenses incurred related to the routine inspections activity and any related remediation work will be billed as incurred.

3. <u>Rate Increases:</u> Ravix reserves the right to review and revise billable rates offered to Client beginning on, or after, the 12-month anniversary of Client's original engagement with Ravix Group, and every subsequent 12-month anniversary thereafter. Client will receive a written notice outlining any rate changes at least 30 days prior to the increase taking effect.

4. <u>Term</u>: The term of Ravix's engagement shall continue until completion of the Services. Notwithstanding the foregoing, either party may terminate the engagement by giving the other party two weeks' prior written notice.

5. <u>Use of Client's Name</u>: Client hereby agrees that Ravix may use Client's name and logo, and reference Client as a customer of Ravix in Ravix's marketing, advertising, publicly available financial documents and filings and websites, and that Ravix shall be allowed to use Client's name and logo on its customer lists and disclose the same to its present and potential customers.

6. <u>Client Confidential Information</u>: Ravix consultants regularly work with confidential client data and, in the execution of services, may need to track certain data on personal computers owned by Ravix or its employees. Ravix agrees to hold Client information in strict confidence and will not disclose confidential information that can be directly associated with Client during the term of this engagement. Upon request from Client at termination of this engagement, Ravix will return to Client or destroy all tangible and intangible forms of confidential data.

7. <u>Independent Contractor</u>: Ravix is an independent contractor and will indemnify Client and hold Client harmless to the extent of any obligation imposed by law on Client to pay any withholding taxes, social security, unemployment or disability insurance, or similar items in connection with any payments made by Client for the Services.

8. <u>No Assurance</u>: Ravix may make recommendations or provide assistance to Client regarding funding alternatives and may advise Client on contractual terms and assist in contract negotiations. Client acknowledges and understands that Ravix is acting as Client's agent in performing these services and that Client is solely responsible for its decisions to enter into transactions or contracts. Ravix cannot and does not guarantee that Client will obtain funding which it deems acceptable or adequate as a result of Ravix's performance of the Service.

9. <u>Indemnification</u>: Client will indemnify Ravix, its shareholders, directors, officers, employees and agents, and hold them harmless from all claims made against them in connection with performance of the Services to the fullest extent permitted under applicable law, except when such claims arise as a result of their gross negligence or willful misconduct. Client represents and warrants to Ravix that its Articles of Incorporation, Bylaws and/or Operating Agreement contain provisions authorizing such indemnification.

10. <u>Placement Fee:</u> Client agrees that should client hire or engage a Ravix employee or contractor introduced to Client by Ravix during this engagement or within the 120-day period following such termination date, then Client will pay an amount equal to 40% of the terminated employee's or contractor's first year targeted cash compensation, including bonus.

11. <u>Placement Equity Compensation</u>: Client agrees that should client hire or engage a Ravix employee or contractor introduced to Client by Ravix during this engagement or within the 120-day period following such termination date, Client shall issue Ravix a warrant to purchase the same series of securities as Client issued in its last equity financing, at an exercise price equal to the same price per share in such financing. The number of shares subject to the warrant will equal, at the exercise price, 20% of the employee's or contractor's first year targeted cash compensation, including bonus. Such warrants will expire no earlier than five years after issuance and will include provisions for net exercise and piggyback registration rights. Any form of equity relating to this engagement or to the people performing Services for this engagement must be issued to Ravix Financial, Inc. (dba Ravix Group Inc.).

 

*Revised 1022*

 

![](ex10-10_002.jpg)

## Exhibit 10.11

**Exhibit 10.11**

**SQUAREX PHARMACEUTICAL CORPORATION**

**2023 EQUITY INCENTIVE PLAN**

**ADOPTED BY THE BOARD OF DIRECTORS: JANUARY 16, 2023**

**APPROVED BY THE STOCKHOLDERS: JANUARY 16, 2023**

&nbsp;&nbsp;&nbsp;&nbsp;**1.** **GENERAL.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Eligible Award Recipients.** Employees, Directors and Consultants are eligible to receive Awards
 under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Available Awards.** The Plan provides for the grant of the following types of Awards: (i) Incentive
 Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights (iv) Restricted
 Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance
 Cash Awards, and (viii) Other Stock Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Purpose.** The Plan, through the granting of Awards, is intended to help the Company secure and
 retain the services of eligible award recipients, provide incentives for such persons to
 exert maximum efforts for the success of the Company and any Affiliate and provide a means
 by which the eligible recipients may benefit from increases in value of the Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;2. **ADMINISTRATION.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Administration by Board.** The Board will administer the Plan. The Board may delegate administration of
 the Plan to a Committee or Committees, as provided in Section 2(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Powers of Board.** The Board will have the power, subject to, and within the limitations of, the
 express provisions of the Plan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** To
 determine (A) who will be granted Awards; (B) when and how each Award will be granted; (C)
 what type of Award will be granted; (D) the provisions of each Award (which need not be identical),
 including when a person will be permitted to exercise or otherwise receive cash or Common
 Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value
 of, an Award; and (F) the Fair Market Value applicable to a Stock Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** To
 construe and interpret the Plan and Awards granted under it, and to establish, amend and
 revoke rules and regulations for administration of the Plan and Awards. The Board, in the
 exercise of these powers, may correct any defect, omission or inconsistency in the Plan or
 in any Award Agreement, in a manner and to the extent it will deem necessary or expedient
 to make the Plan or Award fully effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** To
 settle all controversies regarding the Plan and Awards granted under it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** To
 accelerate, in whole or in part, the time at which an Award may be exercised or vest (or
 at which cash or shares of Common Stock may be issued).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** To
 suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an
 Award Agreement, suspension or termination of the Plan will not impair a Participant's
 rights under the Participant's then-outstanding Award without the Participant's
 written consent except as provided in subsection (viii) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vi)** To
 amend the Plan in any respect the Board deems necessary or advisable, including, without
 limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified
 deferred compensation under Section 409A of the Code and/or to make the Plan or Awards granted
 under the Plan compliant with the requirements for Incentive Stock Options or exempt from
 or compliant with the requirements for nonqualified deferred compensation under Section 409A
 of the Code, subject to the limitations, if any, of applicable law. However, if required
 by applicable law or listing requirements, and except as provided in Section 9(a) relating
 to Capitalization Adjustments, the Company will seek stockholder approval of any amendment
 of the Plan that (A) materially increases the number of shares of Common Stock available
 for issuance under the Plan, (B) materially expands the class of individuals eligible to
 receive Awards under the Plan, (C) materially increases the benefits accruing to Participants
 under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued
 or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially
 expands the types of Awards available for issuance under the Plan. Except as provided in
 the Plan (including Section 2(b)(viii)) or an Award Agreement, no amendment of the Plan will
 impair a Participant's rights under an outstanding Award without the Participant's
 written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vii)** To
 submit any amendment to the Plan for stockholder approval, including, but not limited to,
 amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the
 Code regarding the exclusion of performance-based compensation from the limit on corporate
 deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding
 incentive stock options or (C) Rule 16b-3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(viii)** To
 approve forms of Award Agreements for use under the Plan and to amend the terms of any one
 or more Awards, including, but not limited to, amendments to provide terms more favorable
 to the Participant than previously provided in the Award Agreement, subject to any specified
 limits in the Plan that are not subject to Board discretion; *provided*, *however*,
 that a Participant's rights under any Award will not be impaired by any such amendment
 unless (A) the Company requests the consent of the affected Participant, and (B) such Participant
 consents in writing. Notwithstanding the foregoing, (1) a Participant's rights will
 not be deemed to have been impaired by any such amendment if the Board, in its sole discretion,
 determines that the amendment, taken as a whole, does not materially impair the Participant's
 rights, and (2) subject to the limitations of applicable law, if any, the Board may amend
 the terms of any one or more Awards without the affected Participant's consent (A)
 to maintain the qualified status of the Award as an Incentive Stock Option under Section
 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results
 in impairment of the Award solely because it impairs the qualified status of the Award as
 an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption
 from, or to bring the Award into compliance with, Section 409A of the Code; or (D) to comply
 with other applicable laws or listing requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ix)** Generally,
 to exercise such powers and to perform such acts as the Board deems necessary or expedient
 to promote the best interests of the Company and that are not in conflict with the provisions
 of the Plan or Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(x)** To
 adopt such procedures and sub-plans as are necessary or appropriate to permit participation
 in the Plan by Employees, Directors or Consultants who are foreign nationals or employed
 outside the United States (provided that Board approval will not be necessary for immaterial
 modifications to the Plan or any Award Agreement that are required for compliance with the
 laws of the relevant foreign jurisdiction).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Delegation to Committee.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **General.** The Board may delegate some or all of the administration of the Plan to a Committee or
 Committees. If administration of the Plan is delegated to a Committee, the Committee will
 have, in connection with the administration of the Plan, the powers theretofore possessed
 by the Board that have been delegated to the Committee, including the power to delegate to
 a subcommittee of the Committee any of the administrative powers the Committee is authorized
 to exercise (and references in this Plan to the Board will thereafter be to the Committee
 or subcommittee, as applicable). Any delegation of administrative powers will be reflected
 in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time
 by the Board or Committee (as applicable). The Committee may, at any time, abolish the subcommittee
 and/or revest in the Committee any powers delegated to the subcommittee. The Board may retain
 the authority to concurrently administer the Plan with the Committee and may, at any time,
 revest in the Board some or all of the powers previously delegated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** **Section 162(m) and Rule 16b-3 Compliance.** The Committee may consist solely of two (2) or more
 Outside Directors, in accordance with Section 162(m) of the Code, or solely of two (2) or
 more Non-Employee Directors, in accordance with Rule 16b-3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** **Delegation to an Officer**. The Board may delegate to one (1) or more Officers the authority to do
 one or both of the following (i) designate Employees who are not Officers to be recipients
 of Options, SARs, or, to the extent permitted by applicable law, other Stock Awards and,
 to the extent permitted by applicable law, the terms of such Awards, and (ii) determine the
 number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; *provided, however*, that the Board resolutions regarding such delegation will specify
 the total number of shares of Common Stock that may be subject to the Stock Awards granted
 by such Officer and that such Officer may not grant a Stock Award to himself or herself.
 Any such Stock Awards will be granted on the form of Award Agreement most recently approved
 for use by the Committee or the Board, unless otherwise provided in the resolutions approving
 the delegation authority. The Board may not delegate authority to an Officer who is acting
 solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market
 Value pursuant to Section 13(x)(iii) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** **(e) Effect of Board's Decision.** All determinations, interpretations and constructions
 made by the Board in good faith will not be subject to review by any person and will be final,
 binding and conclusive on all persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** **Cancellation and Re-Grant of Stock Awards**. Neither the Board nor any Committee will have the authority
 to: (i) reduce the exercise, purchase or strike price of any outstanding Option, SAR or Other
 Stock Award under the Plan, or (ii) cancel any outstanding Option, SAR or Other Stock Award
 that has an exercise price or strike price greater than the current Fair Market Value of
 the Common Stock in exchange for cash or other Stock Awards under the Plan, unless the stockholders
 of the Company have approved such an action within twelve (12) months prior to such an event.

&nbsp;&nbsp;&nbsp;&nbsp;**3.** **SHARES SUBJECT TO THE PLAN.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Share Reserve.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** Subject
 to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of
 Common Stock that may be issued pursuant to the Plan from and after the Effective Date will
 not exceed 1,700,000 shares (such aggregate number of shares, the "  ***Share Reserve*** ").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** For
 clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of
 Common Stock that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does
 not limit the granting of Stock Awards except as provided in Section 7(a). Shares may be
 issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c)
 or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section
 711 or other applicable rule, and such issuance will not reduce the number of shares available
 for issuance under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Reversion of Shares to the Share Reserve.** If a Stock Award or any portion thereof (i) expires or
 otherwise terminates without all of the shares covered by such Stock Award having been issued
 or (ii) is settled in cash (*i.e.*, the Participant receives cash rather than stock),
 such expiration, termination or settlement will not reduce (or otherwise offset) the number
 of shares of Common Stock that may be available for issuance under the Plan. If any shares
 of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by
 the Company because of the failure to meet a contingency or condition required to vest such
 shares in the Participant, then the shares that are forfeited or repurchased will revert
 to and again become available for issuance under the Plan. Any shares reacquired by the Company
 in satisfaction of tax withholding obligations on a Stock Award or as consideration for the
 exercise or purchase price of a Stock Award will again become available for issuance under
 the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **Section 162(m) Limitations**. Subject to the Share Reserve and Section 9(a) relating to Capitalization
 Adjustments, at such time as the Company may be subject to the applicable provisions of Section
 162(m) of the Code, the following limitations will apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** A
 maximum of 1,700,000 shares of Common Stock subject to Options, SARs and Other Stock Awards
 whose value is determined by reference to an increase over an exercise or strike price of
 at least 100% of the Fair Market Value on the date any such Stock Award is granted may be
 granted under the Plan as "qualified performance-based compensation" under Section
 162(m) of the Code to any one Participant during any fiscal year. Grants in excess of the
 foregoing annual limit of any additional Options, SARs or Other Stock Awards whose value
 is determined by reference to an increase over an exercise or strike price of at least 100%
 of the Fair Market Value on the date any such Stock Award is granted will not satisfy the
 requirements for such "qualified performance-based compensation" unless such
 additional Stock Awards are separately approved by the Company's stockholders in a
 manner that complies with the applicable requirements of Section 162(m) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** A
 maximum of 1,700,000 shares of Common Stock subject to Performance Stock Awards may be granted
 to any one Participant during any one fiscal year (whether the grant, vesting or exercise
 is contingent upon the attainment during the Performance Period of the Performance Goals).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** A
 maximum of $2,000,000 may be granted as a Performance Cash Award to any one Participant during
 any one fiscal year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **Limitation on Grants to Non-Employee Directors.** The maximum number of shares subject to Stock Awards
 granted under this Plan or under any other equity plan maintained by the Company during a
 single fiscal year to any Non-Employee Director, taken together with any cash fees paid to
 such Non-Employee Director during the fiscal year, will not exceed $375,000 in total value
 (calculating the value of any such Stock Awards based on the grant date fair value of such
 Stock Awards for financial reporting purposes and excluding, for this purpose, the value
 of any dividend equivalent payments paid pursuant to any Stock Award granted in a previous
 fiscal year).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **Source of Shares.** The stock issuable under the Plan will be shares of authorized but unissued
 or reacquired Common Stock, including shares repurchased by the Company on the open market
 or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **ELIGIBILITY.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Eligibility for Specific Stock Awards**. Incentive Stock Options may be granted only to employees of
 the Company or a "parent corporation" or "subsidiary corporation"
 thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards
 other than Incentive Stock Options may be granted to Employees, Directors and Consultants; *provided*, *however*, that Stock Awards may not be granted to Employees, Directors
 and Consultants who are providing Continuous Service only to any "parent" of
 the Company, as such term is defined in Rule 405, unless (i) the stock underlying such Stock
 Awards is treated as "service recipient stock" under Section 409A of the Code
 (for example, because the Stock Awards are granted pursuant to a corporate transaction such
 as a spin off transaction) or (ii) the Company, in consultation with its legal counsel, has
 determined that such Stock Awards are otherwise exempt from or alternatively comply with
 the distribution requirements of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Ten Percent Stockholders.** A Ten Percent Stockholder will not be granted an Incentive Stock
 Option unless the exercise price of such Option is at least one hundred ten percent (110%)
 of the Fair Market Value on the date of grant and the Option is not exercisable after the
 expiration of five (5) years from the date of grant.

&nbsp;&nbsp;&nbsp;&nbsp;**5.** **PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.** 

Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; *provided*, *however*, that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Term.** Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option
 or SAR will be exercisable after the expiration of ten (10) years from the date of its grant
 or such shorter period specified in the Award Agreement. Notwithstanding the preceding sentence,
 if the expiration date of any such Option or SAR occurs during a period in which the sale
 of any Common Stock received upon exercise of an Option or SAR would violate the Company's
 insider trading policy (each, a "  ***Blackout Period***") and the holder
 of such Option or SAR has not terminated employment or service with the Company or any Affiliate
 on or prior to the expiration date set forth in the preceding sentence (the "  ***Original Expiration Date*** "), the Original Expiration Date will automatically be extended
 to the earlier of (i) the date that occurs thirty (30) days after the expiration of the applicable
 Blackout Period, and (ii) the day before the tenth anniversary (or if the Option is an ISO
 granted to any Ten Percent Stockholder, the fifth anniversary) of the date on which the Option
 or SAR was granted (in either case, the "  ***Extended Expiration Date*** ").
 For the sake of clarity, the preceding sentence will not apply to any holder of an Option
 or SAR who terminates employment or service with the Company or any Affiliate on or prior
 to the Original Expiration Date, notwithstanding the fact that such date may occur during
 a Blackout Period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Exercise Price.** Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders,
 the exercise or strike price of each Option or SAR will be not less than one hundred percent
 (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date
 the Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with
 an exercise or strike price lower than one hundred percent (100%) of the Fair Market Value
 of the Common Stock subject to the Award if such Award is granted pursuant to an assumption
 of or substitution for another option or stock appreciation right pursuant to a Corporate
 Transaction and in a manner consistent with the provisions of Section 409A of the Code and,
 if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common
 Stock equivalents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Purchase Price for Options.** The purchase price of Common Stock acquired pursuant to the exercise
 of an Option may be paid, to the extent permitted by applicable law and as determined by
 the Board in its sole discretion, by any combination of the methods of payment set forth
 below. The Board will have the authority to grant Options that do not permit all of the following
 methods of payment (or that otherwise restrict the ability to use certain methods) and to
 grant Options that require the consent of the Company to use a particular method of payment.
 The permitted methods of payment are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** by
 cash, check, bank draft or money order payable to the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** pursuant
 to a program developed under Regulation T as promulgated by the Federal Reserve Board that,
 prior to the issuance of the stock subject to the Option, results in either the receipt of
 cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
 exercise price to the Company from the sales proceeds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** by
 delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** if
 an Option is a Nonstatutory Stock Option, by a "net exercise" arrangement pursuant
 to which the Company will reduce the number of shares of Common Stock issuable upon exercise
 by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate
 exercise price; *provided*, *however*, that the Company will accept a cash or other
 payment from the Participant to the extent of any remaining balance of the aggregate exercise
 price not satisfied by such reduction in the number of whole shares to be issued. Shares
 of Common Stock will no longer be subject to an Option and will not be exercisable thereafter
 to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant
 to the "net exercise," (B) shares are delivered to the Participant as a result
 of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** in
 any other form of legal consideration that may be acceptable to the Board and specified in
 the applicable Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** **Exercise and Payment of a SAR.** To exercise any outstanding SAR, the Participant must provide written
 notice of exercise to the Company in compliance with the provisions of the Award Agreement
 evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will
 be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value
 (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the
 number of Common Stock equivalents in which the Participant is vested under such SAR, and
 with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate
 strike price of the number of Common Stock equivalents with respect to which the Participant
 is exercising the SAR on such date. The appreciation distribution may be paid in Common Stock,
 in cash, in any combination of the two or in any other form of consideration, as determined
 by the Board and contained in the Award Agreement evidencing such SAR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** **Transferability of Options and SARs.** The Board may, in its sole discretion, impose such limitations on
 the transferability of Options and SARs as the Board will determine. In the absence of such
 a determination by the Board to the contrary, the following restrictions on the transferability
 of Options and SARs will apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Restrictions on Transfer**. An Option or SAR will not be transferable except by will or by the laws
 of descent and distribution (and pursuant to Sections 5(e)(ii) and 5(e)(iii)), and will be
 exercisable during the lifetime of the Participant only by the Participant. The Board may
 permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax
 and securities laws. Except as explicitly provided in the Plan, neither an Option nor a SAR
 may be transferred for consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** **Domestic Relations Orders**. Subject to the approval of the Board or a duly authorized Officer,
 an Option or SAR may be transferred pursuant to the terms of a domestic relations order,
 official marital settlement agreement or other divorce or separation instrument as permitted
 by Treasury Regulations Section 1.421-1(b)(2). If an Option is an Incentive Stock Option,
 such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** **Beneficiary Designation**. Subject to the approval of the Board or a duly authorized Officer, a Participant
 may, by delivering written notice to the Company, in a form approved by the Company (or the
 designated broker), designate a third party who, upon the death of the Participant, will
 thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other
 consideration resulting from such exercise. In the absence of such a designation, upon the
 death of the Participant, the executor or administrator of the Participant's estate
 will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration
 resulting from such exercise. However, the Company may prohibit designation of a beneficiary
 at any time, including due to any conclusion by the Company that such designation would be
 inconsistent with the provisions of applicable laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** **Vesting Generally.** The total number of shares of Common Stock subject to an Option or SAR may
 vest and become exercisable in periodic installments that may or may not be equal. The Option
 or SAR may be subject to such other terms and conditions on the time or times when it may
 or may not be exercised (which may be based on the satisfaction of Performance Goals or other
 criteria) as the Board may deem appropriate. The vesting provisions of individual Options
 or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions
 governing the minimum number of shares of Common Stock as to which an Option or SAR may be
 exercised.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)** **Termination of Continuous Service.** Except as otherwise provided in the applicable Award Agreement
 or other agreement between the Participant and the Company, if a Participant's Continuous
 Service terminates (other than for Cause and other than upon the Participant's death
 or Disability), the Participant may exercise the Participant's Option or SAR (to the
 extent that the Participant was entitled to exercise such Award as of the date of termination
 of Continuous Service) within the period of time ending on the earlier of (i) the date three
 (3) months following the termination of the Participant's Continuous Service (or such
 longer or shorter period specified in the applicable Award Agreement), and (ii) the expiration
 of the term of the Option or SAR as set forth in the Award Agreement. If, after termination
 of Continuous Service, the Participant does not exercise the Participant's Option or
 SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)** **Extension of Termination Date.** Except as otherwise provided in the applicable Award Agreement or
 other agreement between the Participant and the Company, if the exercise of an Option or
 SAR following the termination of the Participant's Continuous Service (other than for
 Cause and other than upon the Participant's death or Disability) would be prohibited
 at any time solely because the issuance of shares of Common Stock would violate the registration
 requirements under the Securities Act, then the Option or SAR will terminate on the earlier
 of (i) the expiration of a total period of time (that need not be consecutive) equal to the
 applicable post-termination exercise period after the termination of the Participant's
 Continuous Service during which the exercise of the Option or SAR would not be in violation
 of such registration requirements, or (ii) the expiration of the term of the Option or SAR
 as set forth in the applicable Award Agreement. In addition, unless otherwise provided in
 a Participant's Award Agreement, if the sale of any Common Stock received upon exercise
 of an Option or SAR following the termination of the Participant's Continuous Service
 (other than for Cause) would violate the Company's insider trading policy, then the
 Option or SAR will terminate on the earlier of (i) the expiration of a period of time (that
 need not be consecutive) equal to the applicable post-termination exercise period after the
 termination of the Participant's Continuous Service during which the sale of the Common
 Stock received upon exercise of the Option or SAR would not be in violation of the Company's
 insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth
 in the applicable Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Disability of Participant.** Except as otherwise provided in the applicable Award Agreement or other
 agreement between the Participant and the Company, if a Participant's Continuous Service
 terminates as a result of the Participant's Disability, the Participant may exercise
 the Participant's Option or SAR (to the extent that the Participant was entitled to
 exercise such Option or SAR as of the date of termination of Continuous Service), but only
 within such period of time ending on the earlier of (i) the date twelve (12) months following
 such termination of Continuous Service (or such longer or shorter period specified in the
 Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in
 the Award Agreement. If, after termination of Continuous Service, the Participant does not
 exercise the Participant's Option or SAR within the applicable time frame, the Option
 or SAR (as applicable) will terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)** **Death of Participant.** Except as otherwise provided in the applicable Award Agreement or other
 agreement between the Participant and the Company, if (i) a Participant's Continuous
 Service terminates as a result of the Participant's death, or (ii) the Participant
 dies within the period (if any) specified in the Award Agreement for exercisability after
 the termination of the Participant's Continuous Service (for a reason other than death),
 then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise
 such Option or SAR as of the date of death) by the Participant's estate, by a person
 who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person
 designated to exercise the Option or SAR upon the Participant's death, but only within
 the period ending on the earlier of (i) the date eighteen (18) months following the date
 of death (or such longer or shorter period specified in the Award Agreement), and (ii) the
 expiration of the term of such Option or SAR as set forth in the Award Agreement. If, after
 the Participant's death, the Option or SAR is not exercised within the applicable time
 frame, the Option or SAR (as applicable) will terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(k)** **Termination for Cause.** Except as explicitly provided otherwise in a Participant's Award Agreement
 or other individual written agreement between the Company or any Affiliate and the Participant,
 if a Participant's Continuous Service is terminated for Cause, the Option or SAR will
 terminate immediately upon such Participant's termination of Continuous Service, and
 the Participant will be prohibited from exercising the Participant's Option or SAR
 from and after the time of such termination of Continuous Service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(l)** **Non-Exempt Employees**. If an Option or SAR is granted to an Employee who is a non-exempt employee
 for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will
 not be first exercisable for any shares of Common Stock until at least six (6) months following
 the date of grant of the Option or SAR (although the Award may vest prior to such date).
 Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt
 employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option
 or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv)
 upon the Participant's retirement (as such term may be defined in the Participant's
 Award Agreement, in another agreement between the Participant and the Company, or, if no
 such definition, in accordance with the Company's then current employment policies
 and guidelines), the vested portion of any Options and SARs may be exercised earlier than
 six (6) months following the date of grant. The foregoing provision is intended to operate
 so that any income derived by a non-exempt employee in connection with the exercise or vesting
 of an Option or SAR will be exempt from the Employee's regular rate of pay. To the
 extent permitted and/or required for compliance with the Worker Economic Opportunity Act
 to ensure that any income derived by a non-exempt employee in connection with the exercise,
 vesting or issuance of any shares under any other Stock Award will be exempt from the employee's
 regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and
 are hereby incorporated by reference into such Stock Award Agreements.

&nbsp;&nbsp;&nbsp;&nbsp;**6.** **PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Restricted Stock Awards.** Each Restricted Stock Award Agreement will be in such form and will contain
 such terms and conditions as the Board deems appropriate. To the extent consistent with the
 Company's bylaws, at the Board's election, shares of Common Stock underlying
 a Restricted Stock Award may be (i) held in book entry form subject to the Company's
 instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii)
 evidenced by a certificate, which certificate will be held in such form and manner as determined
 by the Board. The terms and conditions of Restricted Stock Award Agreements may change from
 time to time, and the terms and conditions of separate Restricted Stock Award Agreements
 need not be identical. Each Restricted Stock Award Agreement will conform to (through incorporation
 of the provisions hereof by reference in the agreement or otherwise) the substance of each
 of the following provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Consideration.** A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft
 or money order payable to the Company, (B) past services to the Company or an Affiliate,
 or (C) any other form of legal consideration (including future services) that may be acceptable
 to the Board, in its sole discretion, and permissible under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** **Vesting.** Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject
 to forfeiture to the Company in accordance with a vesting schedule to be determined by the
 Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** **Termination of Participant's Continuous Service.** If a Participant's Continuous Service
 terminates, the Company may receive through a forfeiture condition or a repurchase right
 any or all of the shares of Common Stock held by the Participant that have not vested as
 of the date of termination of Continuous Service under the terms of the Restricted Stock
 Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** **Transferability.** Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will
 be transferable by the Participant only upon such terms and conditions as are set forth in
 the Restricted Stock Award Agreement, as the Board will determine in its sole discretion,
 so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject
 to the terms of the Restricted Stock Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** **Dividends.** A Restricted Stock Award Agreement may provide that any dividends paid on Restricted
 Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares
 subject to the Restricted Stock Award to which they relate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Restricted Stock Unit Awards.** Each Restricted Stock Unit Award Agreement will be in such form and
 will contain such terms and conditions as the Board deems appropriate. The terms and conditions
 of Restricted Stock Unit Award Agreements may change from time to time, and the terms and
 conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each
 Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions
 hereof by reference in the Agreement or otherwise) the substance of each of the following
 provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Consideration.** At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration,
 if any, to be paid by the Participant upon delivery of each share of Common Stock subject
 to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant
 for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any
 form of legal consideration that may be acceptable to the Board, in its sole discretion,
 and permissible under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** **Vesting.** At the time of the grant of a Restricted Stock Unit Award, the Board may impose such
 restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in
 its sole discretion, deems appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** **Payment**.
 A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their
 cash equivalent, any combination thereof or in any other form of consideration, as determined
 by the Board and contained in the Restricted Stock Unit Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** **Additional Restrictions.** At the time of the grant of a Restricted Stock Unit Award, the Board, as
 it deems appropriate, may impose such restrictions or conditions that delay the delivery
 of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit
 Award to a time after the vesting of such Restricted Stock Unit Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** **Dividend Equivalents.** Dividend equivalents may be credited in respect of shares of Common Stock
 covered by a Restricted Stock Unit Award, as determined by the Board and contained in the
 Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
 equivalents may be converted into additional shares of Common Stock covered by the Restricted
 Stock Unit Award in such manner as determined by the Board. Any additional shares covered
 by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be
 subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award
 Agreement to which they relate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** **Termination of Participant's Continuous Service.** Except as otherwise provided in the applicable
 Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that
 has not vested will be forfeited upon the Participant's termination of Continuous Service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Performance Awards**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Performance Stock Awards**. A Performance Stock Award is a Stock Award (covering a number of shares
 not in excess of that set forth in Section 3(d)(ii)) that is payable (including that may
 be granted, vest or be exercised) contingent upon the attainment during a Performance Period
 of certain Performance Goals. A Performance Stock Award may, but need not, require the Participant's
 completion of a specified period of Continuous Service. The length of any Performance Period,
 the Performance Goals to be achieved during the Performance Period, and the measure of whether
 and to what degree such Performance Goals have been attained will be conclusively determined
 by the Committee (or, if not required for compliance with Section 162(m) of the Code, the
 Board), in its sole discretion. In addition, to the extent permitted by applicable law and
 the applicable Award Agreement, the Board may determine that cash may be used in payment
 of Performance Stock Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** **Performance Cash Awards**. A Performance Cash Award is a cash award (for a dollar value not in excess
 of that set forth in Section 3(d)(iii)) that is payable contingent upon the attainment during
 a Performance Period of certain Performance Goals. A Performance Cash Award may also require
 the Participant's completion of a specified period of Continuous Service. At the time
 of grant of a Performance Cash Award, the length of any Performance Period, the Performance
 Goals to be achieved during the Performance Period, and the measure of whether and to what
 degree such Performance Goals have been attained will be conclusively determined by the Committee
 (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole
 discretion. The Board may specify the form of payment of Performance Cash Awards, which may
 be cash or other property, or may provide for a Participant to have the option for the Participant's
 Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole
 or in part in cash or other property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** **Board Discretion**. The Board retains the discretion to reduce or eliminate the compensation
 or economic benefit due upon attainment of Performance Goals and to define the manner of
 calculating the Performance Criteria it selects to use for a Performance Period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** **Section 162(m) Compliance**. Unless otherwise permitted in compliance with Section 162(m) of the
 Code with respect to an Award intended to qualify as "performance-based compensation"
 thereunder, the Committee will establish the Performance Goals applicable to, and the formula
 for calculating the amount payable under, the Award no later than the earlier of (A) the
 date ninety (90) days after the commencement of the applicable Performance Period, and (B)
 the date on which twenty-five percent (25%) of the Performance Period has elapsed, and in
 any event at a time when the achievement of the applicable Performance Goals remains substantially
 uncertain. Prior to the payment of any compensation under an Award intended to qualify as
 "performance-based compensation" under Section 162(m) of the Code, the Committee
 will certify the extent to which any Performance Goals and any other material terms under
 such Award have been satisfied (other than in cases where the Performance Goals relate solely
 to the increase in the value of the Common Stock). Notwithstanding satisfaction or any completion
 of any Performance Goals, shares subject to Options, cash or other benefits granted, issued,
 retainable and/or vested under an Award on account of satisfaction of such Performance Goals
 may be reduced by the Committee on the basis of any further considerations as the Committee,
 in its sole discretion, will determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** **Other Stock Awards**. Other forms of Stock Awards valued in whole or in part by reference to,
 or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options
 or stock rights with an exercise price or strike price less than one hundred percent (100%)
 of the Fair Market Value of the Common Stock at the time of grant) may be granted either
 alone or in addition to Stock Awards granted under Section 5 and this Section 6. Subject
 to the provisions of the Plan, the Board will have sole and complete authority to determine
 the persons to whom and the time or times at which such Other Stock Awards will be granted,
 the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant
 to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

&nbsp;&nbsp;&nbsp;&nbsp;**7.** **COVENANTS OF THE COMPANY.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Availability of Shares.** The Company will keep available at all times the number of shares of Common
 Stock reasonably required to satisfy then-outstanding Stock Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Securities Law Compliance.** The Company will seek to obtain from each regulatory commission or agency
 having jurisdiction over the Plan the authority required to grant Stock Awards and to issue
 and sell shares of Common Stock upon exercise of the Stock Awards; *provided*, *however*,
 that this undertaking will not require the Company to register under the Securities Act the
 Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.
 If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from
 any such regulatory commission or agency the authority that counsel for the Company deems
 necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will
 be relieved from any liability for failure to issue and sell Common Stock upon exercise of
 such Stock Awards unless and until such authority is obtained. A Participant will not be
 eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant
 to the Award if such grant or issuance would be in violation of any applicable securities
 law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **No Obligation to Notify or Minimize Taxes.** The Company will have no duty or obligation to
 any Participant to advise such holder as to the time or manner of exercising such Stock Award.
 Furthermore, the Company will have no duty or obligation to warn or otherwise advise such
 holder of a pending termination or expiration of an Award or a possible period in which the
 Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences
 of an Award to the holder of such Award.

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **MISCELLANEOUS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Use of Proceeds from Sales of Common Stock.** Proceeds from the sale of shares of Common Stock
 issued pursuant to Stock Awards will constitute general funds of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Corporate Action Constituting Grant of Awards.** Corporate action constituting a grant by the Company
 of an Award to any Participant will be deemed completed as of the date of such corporate
 action, unless otherwise determined by the Board, regardless of when the instrument, certificate,
 or letter evidencing the Award is communicated to, or actually received or accepted by, the
 Participant. In the event that the corporate records (e.g., Board consents, resolutions or
 minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise
 price, vesting schedule or number of shares) that are inconsistent with those in the Award
 Agreement or related grant documents as a result of a clerical error in the papering of the
 Award Agreement or related grant documents, the corporate records will control and the Participant
 will have no legally binding right to the incorrect term in the Award Agreement or related
 grant documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Stockholder Rights.** No Participant will be deemed to be the holder of, or to have any of the rights
 of a holder with respect to, any shares of Common Stock subject to an Award unless and until
 (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares
 of Common Stock under, the Award pursuant to its terms, and (ii) the issuance of the Common
 Stock subject to such Award has been entered into the books and records of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** **No Employment or Other Service Rights.** Nothing in the Plan, any Award Agreement or any other
 instrument executed thereunder or in connection with any Award granted pursuant thereto will
 confer upon any Participant any right to continue to serve the Company or an Affiliate in
 the capacity in effect at the time the Award was granted or will affect the right of the
 Company or an Affiliate to terminate (i) the employment of an Employee with or without notice
 and with or without Cause, (ii) the service of a Consultant pursuant to the terms of such
 Consultant's agreement with the Company or an Affiliate, or (iii) the service of a
 Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions
 of the corporate law of the state in which the Company or the Affiliate is incorporated,
 as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** **Change in Time Commitment**. In the event a Participant's regular level of time commitment
 in the performance of the Participant's services for the Company and any Affiliates
 is reduced (for example, and without limitation, if the Participant is an Employee of the
 Company and the Employee has a change in status from a full-time Employee to a part-time
 Employee) after the date of grant of any Award to the Participant, the Board has the right
 in its sole discretion to (x) make a corresponding reduction in the number of shares or cash
 amount subject to any portion of such Award that is scheduled to vest or become payable after
 the date of such change in time commitment, and (y) in lieu of or in combination with such
 a reduction, extend the vesting or payment schedule applicable to such Award. In the event
 of any such reduction, the Participant will have no right with respect to any portion of
 the Award that is so reduced or extended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** **Incentive Stock Option Limitations.** To the extent that the aggregate Fair Market Value (determined
 at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable
 for the first time by any Optionholder during any calendar year (under all plans of the Company
 and any Affiliates) exceeds one hundred thousand dollars ($100,000) (or such other limit
 established in the Code) or otherwise does not comply with the rules governing Incentive
 Stock Options, the Options or portions thereof that exceed such limit (according to the order
 in which they were granted) or otherwise do not comply with such rules will be treated as
 Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option
 Agreement(s).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)** **Investment Assurances.** The Company may require a Participant, as a condition of exercising or acquiring
 Common Stock under any Award, (i) to give written assurances satisfactory to the Company
 as to the Participant's knowledge and experience in financial and business matters
 and/or to employ a purchaser representative reasonably satisfactory to the Company who is
 knowledgeable and experienced in financial and business matters and that the Participant
 is capable of evaluating, alone or together with the purchaser representative, the merits
 and risks of exercising the Award; and (ii) to give written assurances satisfactory to the
 Company stating that the Participant is acquiring Common Stock subject to the Award for the
 Participant's own account and not with any present intention of selling or otherwise
 distributing the Common Stock. The foregoing requirements, and any assurances given pursuant
 to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise
 or acquisition of Common Stock under the Stock Award has been registered under a then currently
 effective registration statement under the Securities Act, or (B) as to any particular requirement,
 a determination is made by counsel for the Company that such requirement need not be met
 in the circumstances under the then applicable securities laws. The Company may, upon advice
 of counsel to the Company, place legends on stock certificates issued under the Plan as such
 counsel deems necessary or appropriate in order to comply with applicable securities laws,
 including, but not limited to, legends restricting the transfer of the Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)** **Withholding Obligations.** Unless prohibited by the terms of an Award Agreement, the Company may, in
 its sole discretion, satisfy any federal, state or local tax withholding obligation relating
 to an Award by any of the following means or by a combination of such means: (i) causing
 the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the
 shares of Common Stock issued or otherwise issuable to the Participant in connection with
 the Stock Award; *provided*, *however*, that no shares of Common Stock are withheld
 with a value exceeding the minimum amount of tax required to be withheld by law (or such
 lesser amount as may be necessary to avoid classification of the Stock Award as a liability
 for financial accounting purposes); (iii) withholding cash from an Award settled in cash;
 (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by
 such other method as may be set forth in the Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** **Electronic Delivery**. Any reference herein to a "written" agreement or document will
 include any agreement or document delivered electronically, filed publicly at www.sec.gov
 (or any successor website thereto) or posted on the Company's intranet (or other shared
 electronic medium controlled by the Company to which the Participant has access).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)** **Deferrals.** To the extent permitted by applicable law, the Board, in its sole discretion, may determine
 that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement
 of all or a portion of any Award may be deferred and may establish programs and procedures
 for deferral elections to be made by Participants. Deferrals by Participants will be made
 in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the
 Board may provide for distributions while a Participant is still an employee or otherwise
 providing services to the Company. The Board is authorized to make deferrals of Awards and
 determine when, and in what annual percentages, Participants may receive payments, including
 lump sum payments, following the Participant's termination of Continuous Service, and
 implement such other terms and conditions consistent with the provisions of the Plan and
 in accordance with applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(k)** **Compliance with Section 409A of the Code.** To the extent that the Board determines that any Award
 granted hereunder is subject to Section 409A of the Code, the Award Agreement evidencing
 such Award will incorporate the terms and conditions necessary to avoid the consequences
 specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award
 Agreements will be interpreted in accordance with Section 409A of the Code. Notwithstanding
 anything to the contrary in this Plan (and unless the Award Agreement specifically provides
 otherwise), if the shares of Common Stock are publicly traded and a Participant holding an
 Award that constitutes "deferred compensation" under Section 409A of the Code
 is a "specified employee" for purposes of Section 409A of the Code, no distribution
 or payment of any amount will be made upon a "separation from service" before
 a date that is six (6) months following the date of such Participant's "separation
 from service" (as defined in Section 409A of the Code without regard to alternative
 definitions thereunder) or, if earlier, the date of the Participant's death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(l)** **Clawback/Recovery**.
 All Awards granted under the Plan will be subject to recoupment in accordance with any clawback
 policy that the Company is required to adopt pursuant to the listing standards of any national
 securities exchange or association on which the Company's securities are listed or
 as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act
 or other applicable law. In addition, the Board may impose such other clawback, recovery
 or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate,
 including but not limited to a reacquisition right in respect of previously acquired shares
 of Common Stock or other cash or property upon the occurrence of an event constituting Cause.
 No recovery of compensation under such a clawback policy will be an event giving rise to
 a right to resign for "good reason" or "constructive termination"
 (or similar term) under any agreement with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;**9.** **ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **Capitalization Adjustments**. In the event of a Capitalization Adjustment, the Board will appropriately
 and proportionately adjust: (i) the class(es) and maximum number of securities subject to
 the Plan pursuant to Section 3(a)(i), (ii) the class(es) and maximum number of securities
 that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section
 3(c), (iii) the class(es) and maximum number of securities that may be awarded to any person
 pursuant to Section 3(d), and (iv) the class(es) and number of securities and price per share
 of stock subject to outstanding Stock Awards. The Board will make such adjustments, and its
 determination will be final, binding and conclusive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **Dissolution**.
 Except as otherwise provided in the Stock Award Agreement, in the event of a Dissolution
 of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested
 and outstanding shares of Common Stock not subject to a forfeiture condition or the Company's
 right of repurchase) will terminate immediately prior to the completion of such Dissolution,
 and the shares of Common Stock subject to the Company's repurchase rights or subject
 to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding
 the fact that the holder of such Stock Award is providing Continuous Service, *provided, however,* that the Board may, in its sole discretion, cause some or all Stock Awards to
 become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to
 the extent such Stock Awards have not previously expired or terminated) before the Dissolution
 is completed but contingent on its completion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** **Transactions.** The following provisions will apply to Stock Awards in the event of a Transaction unless
 otherwise provided in the Stock Award Agreement or any other written agreement between the
 Company or any Affiliate and the Participant or unless otherwise expressly provided by the
 Board at the time of grant of a Stock Award. In the event of a Transaction, then, notwithstanding
 any other provision of the Plan, the Board may take one or more of the following actions
 with respect to Stock Awards, contingent upon the closing or completion of the Transaction:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** arrange
 for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation's
 parent company) to assume or continue the Stock Award or to substitute a similar stock award
 for the Stock Award (including, but not limited to, an award to acquire the same consideration
 paid to the stockholders of the Company pursuant to the Transaction);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** arrange
 for the assignment of any reacquisition or repurchase rights held by the Company in respect
 of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring
 corporation (or the surviving or acquiring corporation's parent company);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** accelerate
 the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which
 the Stock Award may be exercised) to a date prior to the effective time of such Transaction
 as the Board determines (or, if the Board does not determine such a date, to the date that
 is five (5) days prior to the effective date of the Transaction), with such Stock Award terminating
 if not exercised (if applicable) at or prior to the effective time of the Transaction; *provided*, *however*, that the Board may require Participants to complete and deliver to the Company
 a notice of exercise before the effective date of a Transaction, which exercise is contingent
 upon the effectiveness of such Transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** arrange
 for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the
 Company with respect to the Stock Award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** cancel
 or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised
 prior to the effective time of the Transaction, in exchange for such cash consideration or
 no consideration, as the Board, in its sole discretion, may consider appropriate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vi)** **(vi)** make a payment, in such form as may be determined by the Board equal to the excess, if
 any, of (A) the value of the property the Participant would have received upon the exercise
 of the Stock Award immediately prior to the effective time of the Transaction, over (B) any
 exercise price payable by such holder in connection with such exercise. For clarity, this
 payment may be zero ($0) if the value of the property is equal to or less than the exercise
 price. Payments under this provision may be delayed to the same extent that payment of consideration
 to the holders of the Common Stock in connection with the Transaction is delayed as a result
 of escrows, earn outs, holdbacks or any other contingencies.

The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** **Change in Control.** A Stock Award may be subject to additional acceleration of vesting and exercisability
 upon or after a qualifying termination that occurs in connection with a Change in Control
 as may be provided in the Stock Award Agreement for such Stock Award or as may be provided
 in any other written agreement between the Company or any Affiliate and the Participant,
 but in the absence of such provision, no such acceleration will occur.

&nbsp;&nbsp;&nbsp;&nbsp;**10.** **PLAN TERM; EARLIER TERMINATION OR SUSPENSION OF THE PLAN.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** The
 Board may suspend or terminate the Plan at any time. No Incentive Stock Option will be granted
 after the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by
 the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Awards
 may be granted under the Plan while the Plan is suspended or after it is terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** **No Impairment of Rights.** Suspension or termination of the Plan will not impair rights and
 obligations under any Award granted while the Plan is in effect except with the written consent
 of the affected Participant or as otherwise permitted in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;**11.** **EFFECTIVE DATE OF PLAN.** 

This Plan will become effective on the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;**12.** **CHOICE OF LAW.** 

The laws of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state's conflict of laws rules.

&nbsp;&nbsp;&nbsp;&nbsp;13. **DEFINITIONS.** As used in the Plan, the following definitions will apply to the capitalized terms indicated
 below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**"  ***Affiliate*** "
 means, at the time of determination, any "parent" or "subsidiary"
 of the Company as such terms are defined in Rule 405. The Board will have the authority to
 determine the time or times at which "parent" or "subsidiary" status
 is determined within the foregoing definition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**"  ***Award*** "
 means a Stock Award or a Performance Cash Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**"  ***Award Agreement***" means a written agreement between the Company and a Participant
 evidencing the terms and conditions of an Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**"  ***Board*** "
 means the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**"  ***Capitalization Adjustment***" means any change that is made in, or other events that occur with
 respect to, the Common Stock subject to the Plan or subject to any Stock Award after the
 Effective Date without the receipt of consideration by the Company through merger, consolidation,
 reorganization, recapitalization, reincorporation, stock dividend, dividend in property other
 than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating
 dividend, combination of shares, exchange of shares, change in corporate structure or any
 similar equity restructuring transaction, as that term is used in Statement of Financial
 Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor
 thereto). Notwithstanding the foregoing, the conversion of any convertible securities of
 the Company will not be treated as a Capitalization Adjustment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)**"  ***Cause*** "
 will have the meaning ascribed to such term in any written agreement between the Participant
 and the Company defining such term and, in the absence of such agreement, such term means,
 with respect to a Participant, the occurrence of any of the following events: (i) such Participant's
 willful breach or habitual neglect or continued incapacity to perform Participant's
 required duties, (ii) such Participant's intentional, material violation of any contract
 or agreement between the Participant and the Company; (iii) such Participant's unauthorized
 use or disclosure of the Company's confidential information or trade secrets; or (iv)
 such Participant's gross misconduct. The determination that a termination of the Participant's
 Continuous Service is either for Cause or without Cause will be made by the Company, in its
 sole discretion. Any determination by the Company that the Continuous Service of a Participant
 was terminated with or without Cause for the purposes of outstanding Awards held by such
 Participant will have no effect upon any determination of the rights or obligations of the
 Company or such Participant for any other purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)**"  ***Change in Control***" means the occurrence, in a single transaction or in a series of
 related transactions, of any one or more of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company's securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the "***Subject Person***") exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. individuals who, on the date the Plan is adopted by the Board, are members of the Board (the "***Incumbent Board***") cease for any reason to constitute at least a majority of the members of the Board; *provided*, *however*, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)**"  ***Code*** "
 means the Internal Revenue Code of 1986, as amended, including any applicable regulations
 and guidance thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)**"  ***Committee*** "
 means a committee of one (1) or more Directors to whom authority has been delegated by the
 Board in accordance with Section 2(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)**"  ***Common Stock***" means the common stock of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(k)**"  ***Company*** "
 means Squarex Pharmaceutical Corporation, a Delaware corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(l)**"  ***Consultant*** "
 means any person, including an advisor, who is (i) engaged by the Company or an Affiliate
 to render consulting or advisory services and is compensated for such services, or (ii) serving
 as a member of the board of directors of an Affiliate and is compensated for such services.
 However, service solely as a Director, or payment of a fee for such service, will not cause
 a Director to be considered a "Consultant" for purposes of the Plan. Notwithstanding
 the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration
 Statement under the Securities Act is available to register either the offer or the sale
 of the Company's securities to such person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(m)**"  ***Continuous Service***" means that the Participant's service with the Company or an
 Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.
 A change in the capacity in which the Participant renders service to the Company or an Affiliate
 as an Employee, Director or Consultant or a change in the Entity for which the Participant
 renders such service, provided that there is no interruption or termination of the Participant's
 service with the Company or an Affiliate, will not terminate a Participant's Continuous
 Service; *provided, however,* that if the Entity for which a Participant is rendering
 services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion,
 such Participant's Continuous Service will be considered to have terminated on the
 date such Entity ceases to qualify as an Affiliate. For example, a change in status from
 an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute
 an interruption of Continuous Service. To the extent permitted by law, the Board or the chief
 executive officer of the Company, in that party's sole discretion, may determine whether
 Continuous Service will be considered interrupted in the case of (i) any leave of absence
 approved by the Board or chief executive officer, including sick leave, military leave or
 any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors.
 Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for
 purposes of vesting in a Stock Award only to such extent as may be provided in the Company's
 leave of absence policy, in the written terms of any leave of absence agreement or policy
 applicable to the Participant, or as otherwise required by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(n)**"  ***Corporate Transaction***" means the consummation, in a single transaction or in a series
 of related transactions, of any one or more of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** a
 sale or other disposition of all or substantially all, as determined by the Board, in its
 sole discretion, of the consolidated assets of the Company and its Subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** a
 sale or other disposition of more than fifty percent (50%) of the outstanding securities
 of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** a
 merger, consolidation or similar transaction following which the Company is not the surviving
 corporation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** a
 merger, consolidation or similar transaction following which the Company is the surviving
 corporation but the shares of Common Stock outstanding immediately preceding the merger,
 consolidation or similar transaction are converted or exchanged by virtue of the merger,
 consolidation or similar transaction into other property, whether in the form of securities,
 cash or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(o)**"  ***Covered Employee***" will have the meaning provided in Section 162(m)(3) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(p)**"  ***Director*** "
 means a member of the Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(q)**"  ***Disability*** "
 means, with respect to a Participant, the inability of such Participant to engage in any
 substantial gainful activity by reason of any medically determinable physical or mental impairment
 that can be expected to result in death or that has lasted or can be expected to last for
 a continuous period of not less than twelve (12) months, as provided in Sections 22(e)(3)
 and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such
 medical evidence as the Board deems warranted under the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(r)** **" *Dissolution* "** means when the Company, after having executed a certificate of dissolution with the State
 of Delaware, has completely wound up its affairs. Conversion of the Company into a Limited
 Liability Company (or any other pass- through entity) will not be considered a "Dissolution"
 for purposes of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(s)**"  ***Effective Date***" means the effective date of this Plan document, which is the date of
 the annual meeting of stockholders of the Company held in calendar year 2016, provided the
 Plan is approved by the Company's stockholders at such meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(t)**"  ***Employee*** "
 means any person employed by the Company or an Affiliate. However, service solely as a Director,
 or payment of a fee for such services, will not cause a Director to be considered an "Employee"
 for purposes of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(u)**"  ***Entity*** "
 means a corporation, partnership, limited liability company or other entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)**"  ***Exchange Act***" means the Securities Exchange Act of 1934, as amended, and the rules and
 regulations promulgated thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(w)**"  ***Exchange Act Person***" means any natural person, Entity or "group" (within
 the meaning of Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act
 Person" will not include (i) the Company or any Subsidiary of the Company, (ii) any
 employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other
 fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary
 of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering
 of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of
 the Company in substantially the same proportions as their Ownership of stock of the Company;
 or (v) any natural person, Entity or "group" (within the meaning of Section 13(d)
 or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly,
 of securities of the Company representing more than fifty percent (50%) of the combined voting
 power of the Company's then outstanding securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(x)**"  ***Fair Market Value***" means, as of any date, the value of the Common Stock determined
 as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** If
 the Common Stock is listed on any established stock exchange or traded on any established
 market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined
 by the Board, the closing sales price for such stock as quoted on such exchange or market
 (or the exchange or market with the greatest volume of trading in the Common Stock) on the
 date of determination, as reported in a source the Board deems reliable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** Unless
 otherwise provided by the Board, if there is no closing sales price for the Common Stock
 on the date of determination, then the Fair Market Value will be the closing selling price
 on the last preceding date for which such quotation exists.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** In
 the absence of such markets for the Common Stock, the Fair Market Value will be determined
 by the Board in good faith and in a manner that complies with Sections 409A and 422 of the
 Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(y)**"  ***Incentive Stock Option***" means an option granted pursuant to Section 5 that is intended
 to be, and that qualifies as, an "incentive stock option" within the meaning
 of Section 422 of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(z)**"  ***Non-Employee Director***" means a Director who either (i) is not a current employee or officer
 of the Company or an Affiliate, does not receive compensation, either directly or indirectly,
 from the Company or an Affiliate for services rendered as a consultant or in any capacity
 other than as a Director (except for an amount as to which disclosure would not be required
 under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("  ***Regulation S-K*** ")), does not possess an interest in any other transaction for which disclosure
 would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship
 for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii)
 is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(aa)**"  ***Nonstatutory Stock Option***" means any option granted pursuant to Section 5 that does not
 qualify as an Incentive Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(bb)**"  ***Officer*** "
 means a person who is an officer of the Company within the meaning of Section 16 of the Exchange
 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(cc)**"  ***Option*** "
 means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common
 Stock granted pursuant to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(dd)**"  ***Option Agreement***" means a written agreement between the Company and an Optionholder
 evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject
 to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ee)**"  ***Optionholder*** "
 means a person to whom an Option is granted pursuant to the Plan or, if applicable, such
 other person who holds an outstanding Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ff)**"  ***Other Stock Award***" means an award based in whole or in part by reference to the Common
 Stock which is granted pursuant to the terms and conditions of Section 6(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(gg)**"  ***Other Stock Award Agreement***" means a written agreement between the Company and a
 holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award
 grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the
 Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(hh)**"  ***Outside Director***" means a Director who either (i) is not a current employee of the
 Company or an "affiliated corporation" (within the meaning of Treasury Regulations
 promulgated under Section 162(m) of the Code), is not a former employee of the Company or
 an "affiliated corporation" who receives compensation for prior services (other
 than benefits under a tax-qualified retirement plan) during the taxable year, has not been
 an officer of the Company or an "affiliated corporation," and does not receive
 remuneration from the Company or an "affiliated corporation," either directly
 or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered
 an "outside director" for purposes of Section 162(m) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)**"  ***Own,*** "
 "  ***Owned,***" "  ***Owner,***" "  ***Ownership*** "
 A person or Entity will be deemed to "Own," to have "Owned," to be
 the "Owner" of, or to have acquired "Ownership" of securities if
 such person or Entity, directly or indirectly, through any contract, arrangement, understanding,
 relationship or otherwise, has or shares voting power, which includes the power to vote or
 to direct the voting, with respect to such securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(jj)**"  ***Participant*** "
 means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other
 person who holds an outstanding Stock Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(kk)**"  ***Performance Cash Award***" means an award of cash granted pursuant to the terms and conditions
 of Section 6(c)(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ll)**"  ***Performance Criteria***" means the one or more criteria that the Committee will select for
 purposes of establishing the Performance Goals for a Performance Period. The Performance
 Criteria that will be used to establish such Performance Goals may be based on any one of,
 or combination of, the following as determined by the Board: (1) earnings (including earnings
 per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings
 before interest, taxes, depreciation and amortization; (4) total stockholder return; (5)
 return on equity or average stockholder's equity; (6) return on assets, investment,
 or capital employed; (7) stock price; (8) margin (including gross margin); (9) income (before
 or after taxes); (10) operating income; (11) operating income after taxes; (12) pre-tax profit;
 (13) operating cash flow; (14) sales or revenue targets; (15) increases in revenue or product
 revenue; (16) expenses and cost reduction goals; (17) improvement in or attainment of working
 capital levels; (18) economic value added (or an equivalent metric); (19) market share; (20)
 cash flow; (21) cash flow per share; (22) share price performance; (23) debt reduction; (24)
 customer satisfaction; (25) stockholders' equity; (26) capital expenditures; (27) debt
 levels; (28) operating profit or net operating profit; (29) workforce diversity; (30) growth
 of net income or operating income; (31) billings; (32) pre-clinical development related compound
 goals; (33) financing; (34) regulatory milestones, including approval of a compound; (35)
 stockholder liquidity; (36) corporate governance and compliance; (37) product commercialization;
 (38) intellectual property; (39) personnel matters; (40) progress of internal research or
 clinical programs; (41) progress of partnered programs; (42) partner satisfaction; (43) budget
 management; (44) clinical achievements; (45) completing phases of a clinical study (including
 the treatment phase); (46) announcing or presenting preliminary or final data from clinical
 studies; in each case, whether on particular timelines or generally; (47) timely completion
 of clinical trials; (48) submission of INDs and NDAs and other regulatory achievements; (49)
 partner or collaborator achievements; (50) internal controls, including those related to
 the Sarbanes-Oxley Act of 2002; (51) research progress, including the development of programs;
 (52) investor relations, analysts and communication; (53) manufacturing achievements (including
 obtaining particular yields from manufacturing runs and other measurable objectives related
 to process development activities); (54) strategic partnerships or transactions (including
 in-licensing and out-licensing of intellectual property; (55) establishing relationships
 with commercial entities with respect to the marketing, distribution and sale of the Company's
 products (including with group purchasing organizations, distributors and other vendors);
 (56) supply chain achievements (including establishing relationships with manufacturers or
 suppliers of active pharmaceutical ingredients and other component materials and manufacturers
 of the Company's products); (57) co-development, co-marketing, profit sharing, joint
 venture or other similar arrangements; and (58) to the extent that an Award is not intended
 to comply with Section 162(m) of the Code, other measures of performance selected by the
 Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(mm)**"  ***Performance Goals***" means, for a Performance Period, the one or more goals established by
 the Board for the Performance Period based upon the Performance Criteria. Performance Goals
 may be based on a Company-wide basis, with respect to one or more business units, divisions,
 Affiliates, or business segments, and in either absolute terms or relative to the performance
 of one or more comparable companies or the performance of one or more relevant indices. Unless
 specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted
 or (ii) in such other document setting forth the Performance Goals at the time the Performance
 Goals are established, the Board will appropriately make adjustments in the method of calculating
 the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring
 and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the
 effects of changes to generally accepted accounting principles; (4) to exclude the effects
 of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items
 that are "unusual" in nature or occur "infrequently" as determined
 under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions
 or joint ventures; (7) to assume that any business divested by the Company achieved performance
 objectives at targeted levels during the balance of a Performance Period following such divestiture;
 (8) to exclude the effect of any change in the outstanding shares of common stock of the
 Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization,
 merger, consolidation, spin-off, combination or exchange of shares or other similar corporate
 change, or any distributions to common stockholders other than regular cash dividends; (9)
 to exclude the effects of stock based compensation and the award of bonuses under the Company's
 bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or
 divestitures that are required to be expensed under generally accepted accounting principles;
 and (11) to exclude the goodwill and intangible asset impairment charges that are required
 to be recorded under generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(nn)**"  ***Performance Period***" means the period of time selected by the Board over which the attainment
 of one or more Performance Goals will be measured for the purpose of determining a Participant's
 right to and the payment of a Stock Award or a Performance Cash Award. Performance Periods
 may be of varying and overlapping duration, at the sole discretion of the Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(oo)**"  ***Performance Stock Award***" means a Stock Award granted under the terms and conditions of
 Section 6(c)(i).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(pp)**"  ***Plan*** "
 means this Squarex Pharmaceutical Corporation 2023 Equity Incentive Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(qq)**"  ***Restricted Stock Award***" means an award of shares of Common Stock which is granted pursuant
 to the terms and conditions of Section 6(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(rr)**"  ***Restricted Stock Award Agreement***" means a written agreement between the Company and a
 holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock
 Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions
 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ss)**"  ***Restricted Stock Unit Award***" means a right to receive shares of Common Stock which is
 granted pursuant to the terms and conditions of Section 6(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(tt)**"  ***Restricted Stock Unit Award Agreement***" means a written agreement between the Company and
 a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted
 Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the
 terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(uu)**"  ***Rule 16b-3***" means Rule 16b-3 promulgated under the Exchange Act or any successor
 to Rule 16b-3, as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vv)**"  ***Rule 405***" means Rule 405 promulgated under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ww)**"  ***Rule 701***" means Rule 701 promulgated under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(xx)**"  ***Securities Act***" means the Securities Act of 1933, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(yy)**"  ***Stock Appreciation Right***" or "  ***SAR***" means a right to receive
 the appreciation on Common Stock that is granted pursuant to the terms and conditions of
 Section 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(zz)**"  ***Stock Appreciation Right Agreement***" means a written agreement between the Company
 and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock
 Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the
 terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(aaa)**"  ***Stock Award***" means any right to receive Common Stock granted under the Plan, including
 an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted
 Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award or any Other Stock
 Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(bbb)**"  ***Stock Award Agreement***" means a written agreement between the Company and a Participant
 evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement will
 be subject to the terms and conditions of the Plan.

 ****

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ccc)**  ***"Subsidiary*** "
 means, with respect to the Company, (i) any corporation of which more than fifty percent
 (50%) of the outstanding capital stock having ordinary voting power to elect a majority of
 the board of directors of such corporation (irrespective of whether, at the time, stock of
 any other class or classes of such corporation will have or might have voting power by reason
 of the happening of any contingency) is at the time, directly or indirectly, Owned by the
 Company, and (ii) any partnership, limited liability company or other entity in which the
 Company has a direct or indirect interest (whether in the form of voting or participation
 in profits or capital contribution) of more than fifty percent (50%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ddd)**"  ***Ten Percent Stockholder***" means a person who Owns (or is deemed to Own pursuant
 to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total
 combined voting power of all classes of stock of the Company or any Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(eee)**"  ***Transaction*** "
 means a Corporate Transaction or a Change in Control.

## Exhibit 16.1

**EXHIBIT 16.1**

December 1, 2022

Securities and Exchange Commission

Office of the Chief Accountant

100 F. Street, N.E.

Washington, DC 20549

Ladies and Gentlemen:

We have read the statements of Squarex Pharmaceutical Corporation pertaining to our firm included in the registration statement on Form S-1/A under the section entitled "Changes in and Disagreements with Accountants on Accounting and Financial Disclosure" submitted to the Securities and Exchange Commission on December 1, 2022 and agree with such statements as they pertain to our firm.

---

| |
|:---|
| */s/ L&L CPAS, PA* |
| Plantation, FL |

---

## Exhibit 23.1

**Exhibit 23.1**

<u>Independent Registered Public Accounting Firm's Consent</u>

We consent to the inclusion in this Registration Statement of Squarex Pharmaceutical Corporation in the Form S-1 of our report dated July 8, 2022, which includes an explanatory paragraph as to the Company's ability to continue as a going concern, with respect to our audits of the consolidated financial statements of Squarex Pharmaceutical Corporation as of December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading "Experts" in such Prospectus.

---

| |
|:---|
| */s/ L&L CPAs, PA* |
| L&L CPAs, PA |
| January 17, 2023 |

---

## Ex-Filing

**Exhibit 107**

**Calculation of Filing Fee Tables**

Form S-1

(Form Type)

**SQUAREX PHARMACEUTICAL CORPORATION** 

(Exact Name of Registrant as Specified in its Charter)

<u>Table 1: Newly Registered and Carry Forward Securities</u>

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| Security <br> Type | Security Class Title | Fee <br> Calculation <br> or Carry <br> Forward <br> Rule | Amount <br> Registered | Proposed <br> Maximum <br> Offering <br> Price Per <br> share | Maximum <br> Aggregate <br> Offering Price | Fee Rate | Amount of <br> Registration <br> Fee |
| Equity | Common Stock, par value $0.0001 | 457 (o) |  |  | $15000000 | 110.20 per $1,000,000 | 1653 |
| &nbsp;&nbsp;&nbsp; Total Offering Amounts | &nbsp;&nbsp;&nbsp; Total Offering Amounts | &nbsp;&nbsp;&nbsp; Total Offering Amounts | &nbsp;&nbsp;&nbsp; Total Offering Amounts |  | $15000000 |  | 1653 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Pursuant
 to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution
 resulting from share sub-divisions, share dividends or similar transactions.