You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our financial statements and the related notes, which are included in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements. See "Cautionary Statement Regarding Forward­Looking Statements." You should also review the "Risk Factors" section under this Item 1A of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements.

OVERVIEW

We are a clinical stage biopharmaceutical company developing innovative therapies to improve patient outcomes in cancers that are difficult to treat. Our pipeline features two clinical-stage product candidates and additional compounds in preclinical development.

We have no product sales to date, and our major sources of working capital have been proceeds from various private and public financings and licensing and collaboration agreements with our partners. In September 2019, we commenced a process to explore and evaluate strategic alternatives to enhance shareholder value, and have engaged Oppenheimer and Co. Inc. as our financial advisor to assist us in this process. Potential strategic alternatives include an acquisition, merger, reverse merger, other business combination, sales of assets, licensing, or other strategic alternatives. In connection with the evaluation of strategic alternatives, we are evaluating opportunities to extend our resources and have reduced our headcount to five employees.

Critical Accounting Policies

A "critical accounting policy" is one which is both important to the portrayal of our financial condition and results and requires our management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our accounting policies are in accordance with U.S. generally accepted accounting principles and their basis of application is consistent with that of the previous year. Our significant estimates include assumptions made in estimating the fair values of stock-based compensation, warrant liabilities, marketable securities and our assessment relating to costs incurred on research and development contracts.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses consist primarily of third-party service costs under research and development agreements, salaries and related personnel costs, as well as stock-based compensation related to these costs, costs to acquire pharmaceutical products and product rights for development and amounts paid to CROs, hospitals and laboratories for the provision of services and materials for drug development and clinical trials.

Costs incurred in obtaining the license rights to technology in the research and development stage that have no alternative future uses and are for unapproved product compounds are expensed as incurred.



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We are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We estimate our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

• CROs and investigative sites in connection with clinical studies;

• vendors in connection with product manufacturing, development, and distribution

of clinical supplies; and

• vendors in connection with preclinical development activities.

We record expenses related to clinical studies and manufacturing development activities based on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs and manufacturing vendors. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrued or prepaid expense balance accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there have been no material differences from our estimates to the amounts actually incurred.

Fair Value of Financial Instruments

The carrying amounts reported in the accompanying financial statements for cash and cash equivalents and accounts payable and accrued expenses approximate fair value because of the short­term maturity of these financial instruments. The fair value methodology for our warrant liabilities and marketable securities is described in detail in Item 8 of this Annual Report.

Income Taxes

We account for income taxes in accordance with Accounting Standards Codification ("ASC") 740, "Income Taxes." For additional information on our income tax accounting, see Note 2, "Summary of Significant Accounting Policies," in the Notes to the Financial Statements in this Annual Report.

Warrants

We record warrants as either equity instruments or liabilities at fair value in accordance with ASC 480, "Distinguishing Liabilities from Equity" ("ASC 480") or ASC 815, "Derivatives and Hedging" ("ASC 815"), as discussed further in Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report. We reevaluate the balance sheet classification of our warrants and the fair value of our liability-classified warrants each reporting period, and changes in the fair value of our warrant liabilities between reporting periods is recorded as "unrealized gain (loss) on fair value of warrants" in the statement of operations.



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Stock-Based Compensation

In accordance with ASC 718, "Stock Compensation," compensation costs related to share-based payment transactions, including employee stock options, are recognized in the financial statements, as discussed further in Note 2, "Summary of Significant Accounting Policies" and Note 11, "Stock-Based Compensation," in the Notes to Financial Statements in this Annual Report. We estimate the fair value of stock options using the Black-Scholes valuation model. As required, we review our valuation assumptions at each grant date and, as a result, we may change our valuation assumptions used to value employee stock-based awards granted in future periods. Employee and director stock-based compensation costs are recognized over the vesting period of the award.

Concentration of Credit Risk

ASC 825, "Financial Instruments," requires disclosure of any significant off­balance sheet risk and credit risk concentration. See Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report.

For more information on our critical accounting policies, see Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report.

Recently Issued Accounting Standards

See Note 2, "Summary of Significant Accounting Policies" in the Notes to the Financial Statements," in this Annual Report for a discussion of recent accounting pronouncements.

Results of Operations

Comparison of the Years Ended December 31, 2019 and December 31, 2018

Total Revenues

We had no revenues for the years ended December 31, 2019 or 2018.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including business development, investor relations, and general legal activities.

General and administrative expenses decreased approximately $1,691,000, or 22.8%, to $5,738,000 for the year ended December 31, 2019 from $7,429,000 for the year ended December 31, 2018. The decrease was primarily attributable to lower personnel and operating costs resulting from the streamlining of operations.

Research and Development Expenses

Research and development expenses decreased approximately $7,632,000, or 58.2%, to $5,477,000 for the year ended December 31, 2019, from $13,109,000 for the year ended December 31, 2018. The decreases are a result of the completion of the enrollment of our RX-3117 and RX-5902 clinical trials, decreased drug manufacturing costs as we have adequate supply, the elimination of certain preclinical activities, and headcount reductions.



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The table below summarizes the approximate amounts incurred on each of our
research and development projects for the years ended December 31, 2019 and
2018:

                                               For the Year Ended
                                                  December 31,
                                             2019             2018
Clinical Candidates:
RX-3117                                   $ 3,088,900     $  6,126,200
RX-5902                                       887,200        3,104,400
RX-0201                                       175,600          651,200

Preclinical, Personnel and Overhead 1,325,076 3,227,258

Total Research and Development Expenses $ 5,476,776 $ 13,109,058

We expect total research and development expenses and research and development expense for each of our research and development projects to decrease in 2020 as we progress toward the completion of our Phase 2a clinical trial of RX-3117 with Abraxane, evaluate the development strategy for RX-5902, and explore and evaluate strategic alternatives.

Interest Income

Interest income increased approximately $59,000, or 23.3% to $314,000 for the year ended December 31, 2019 from $254,000 for the year ended December 31, 2018. The increase is primarily attributable to higher interest rates on cash and cash equivalents, and marketable securities for the year ended December 31, 2019 compared to the year ended December 31, 2018.

Other Income

During the year ended December 31, 2018, we recorded approximately $369,000 of other income related to the termination of our collaborative agreement with Next BT. See Note 7, "Collaboration and License Agreements," in the Notes to Financial Statements in this Annual Report for a discussion of the termination of this agreement.

Unrealized Gain on Fair Value of Warrants

Our warrants that are classified as liabilities are recorded at fair value using a lattice model. Changes in the fair value of liability-classified warrants are recorded as unrealized gains or losses in our statement of operations. During the years ended December 31, 2019 and 2018, we recorded unrealized gains on the fair value of warrants of approximately $2,266,000 and $5,546,000 respectively. Estimating fair values of warrants requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the warrants due to related changes to external market factors. The unrealized gains for the years ended December 31, 2019 and December 31, 2018 primarily resulted from a significant decrease in the stock price of the underlying common stock at the end of each period as compared to the beginning of each period.



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Net Loss

As a result of the above, net loss for the year ended December 31, 2019 decreased approximately $5,733,000 or 39.9%, to $8,635,000 ($2.18 per share) from $14,369,000 ($5.25 per share) for the year ended December 31, 2018.

Liquidity and Capital Resources

Current and Future Financing Needs

We have incurred negative cash flow from operations since we started our business. We expect to continue to incur negative cash flow and operating losses as we explore strategic alternatives. We have spent, and subject to our exploration of strategic alternatives, expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials and our research and development efforts. Subject to the result of our exploration of strategic alternatives, we will need to raise additional capital through public or private equity or debt offerings or through arrangements with strategic partners or other sources in order to continue to develop our drug candidates. In conjunction with our exploration of strategic alternatives, we are exploring opportunities to extend our resources. We believe that our cash, cash equivalents, and marketable securities of approximately $12.2 million as of December 31, 2019 will be sufficient to cover our cash flow requirements for our current activities for at least the next 12 months following the issuance of the financial statements contained in this Annual Report. However, our resource requirements could materially change to the extent we identify and enter into any strategic transaction.

Cash Flows

The table below summarizes our net cash flow activity:



                                                         For the Year Ended December 31,
                                                             2019                 2018
Net Cash Used in Operating Activities                  $     (10,277,133 )    $ (18,838,638 )
Net Cash Provided By Investing Activities                      3,098,551         11,910,996
Net Cash Provided by Financing Activities                      7,653,828          6,772,789

Net Increase (Decrease) in Cash and Cash Equivalents $ 475,246 $ (154,853 )

Cash used in operating activities was approximately $10,277,000 for the year ended December 31, 2019. The operating cash flows during the year ended December 31, 2019 reflect a net loss of approximately $8,635,000, an unrealized gain on the fair value of warrants of approximately $2,266,000, and a net increase of cash components of working capital and non-cash charges totaling $624,000. Cash used in operating activities was approximately $18,839,000 for the year ended December 31, 2018. The operating cash flows during the year ended December 31, 2018 reflect a net loss of $14,369,000, an unrealized gain on the fair value of warrants of $5,546,000, and a net increase of cash components of working capital and non-cash charges totaling $1,076,000.

Cash provided by investing activities was approximately $3,099,000 for the year ended December 31, 2019, which consisted of $12,000,000 from the redemption of marketable securities, and approximately $6,000 from the sale of equipment, offset by approximately $8,888,000 and approximately $19,000 from the purchases of marketable securities and equipment, respectively. Cash provided by investing activities was approximately $11,911,000 for the year ended December 31, 2018, which consisted of $11,950,000 from the redemption of marketable securities, offset by $39,000 from the purchase of equipment.



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Cash provided by financing activities was approximately $7,654,000 for the year ended December 31, 2019 which consisted of net proceeds from our underwritten offering in January 2019. Cash provided by financing activities was approximately $6,773,000 for the year ended December 31, 2018, which consisted of net proceeds of $6,873,000 from our registered direct public offering offset by $100,000 in deferred offering costs for our January 2019 underwritten public offering.

Financings

On October 19, 2018, we closed a registered direct public offering of 480,770 shares of common stock and warrants to purchase up to 480,771 shares of common stock. The common stock and warrants were sold in units at a price of $15.60 per unit, for gross proceeds of $7,500,000.

On January 25, 2019, we closed an underwritten public offering of 895,834 shares of common stock and warrants to purchase up to 895,886 shares of common stock. The common stock and warrants were sold in units at a price of $9.60 per unit, for gross proceeds of $8,600,000.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or holdings in variable interest entities.



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