UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 001-39488

Apexigen, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-1260244
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
900 Industrial Road, Suite C San Carlos, CA	94070
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 931-6236

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	APGN	The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	APGNW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May~~August 54, 2023, the registrant had 24,~~660~~861,~~587~~926 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Unaudited Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the Three and Six Months Ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for Three Months Ended March 31, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for Six Months Ended June 30, 2023 and 2022	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3335
Item 4.	Controls and Procedures	3335
PART II.	OTHER INFORMATION	3436
Item 1.	Legal Proceedings	3436
Item 1A.	Risk Factors	3436
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8691
Item 3.	Defaults Upon Senior Securities	8691
Item 4.	Mine Safety Disclosures	8691
Item 5.	Other Information	8691
Item 6.	Exhibits	8792
Signatures		8893

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing, and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements about:

•

our expectations regarding the length of time that our existing capital resources will be sufficient to enable us to fund our planned operations, including our ability to continue as a going concern;

•

our public securities’ potential liquidity and trading;

•

our ability to maintain the listing of our public securities on the Nasdaq Stock Market;

•

our projected financial performance and market opportunity;

•

estimates of our expenses, capital requirements, and need for additional financing;

•

the anticipated benefits of cost-reduction efforts;

•

our expectations regarding the anticipated timing and benefits of the ~~Business~~contemplated ~~Combination~~merger ~~(as~~transaction ~~defined~~with inPyxis ~~our notes to unaudited condensed consolidated financial statements in this Quarterly Report)~~Oncology;

•

the outcome of any legal proceedings that may be instituted against us related to the ~~Business~~contemplated ~~Combination~~merger transaction with Pyxis Oncology;

•

the efficacy of immuno-oncology therapeutics in the treatment of cancer;

•

the timing and focus of our current and future clinical trials, and the reporting of data from those trials;

•

the ability of our clinical trials to demonstrate safety and efficacy, and other positive results, of our product candidates;

•

the anticipated beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;

•

our estimates of the number of patients in the United States who suffer from the diseases we are targeting and the number of patients that will enroll in clinical trials;

•

the timing or likelihood of regulatory filings and approvals for our product candidates for various diseases;

•

our ability to obtain and maintain regulatory approval of our product candidates;

•

our plans relating to commercializing our product candidates, if approved, including which indications will be pursued;

•

the development of competitors’ product candidates;

•

existing regulations and regulatory developments in the United States and other jurisdictions;

•

the impact of rising interest rates and geopolitical risks on our business and operations;

•

the impact of our corporate restructuring to explore strategic alternatives, including the impacts of our reduction in the size of our workforce and adoption of a retention plan in connection with such restructuring;

•

our ability to retain, manage and motivate members of our senior management team and other key personnel;

•

our plans and ability to obtain, maintain, enforce, or protect intellectual property rights;

•

our ability to establish and maintain relationships with, and our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials; and

•

the success of our licensing agreements and clinical development by our licensees.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this report and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. We do not plan to publicly update or revise any forward-looking statements contained herein whether as a result of any new information, future events, or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

APEXIGEN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	March 31,2023			December 31,2022
	June 30,2023			December 31,2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	129,~~730~~369		$	14,802
Short-term investments		-			1,997
Prepaid expenses and other current assets		21,~~123~~455			2,618
Deferred financing costs, current		1,776			1,776
Total current assets		1612,~~629~~600			21,193
Property and equipment, net		-			150
Right-of-use assets		-			100
Deferred financing costs, non-current		~~592~~148			1,036
Other assets		~~355~~335			376
Total assets	$	1713,~~576~~083		$	22,855
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	23,~~809~~381		$	5,343
Accrued liabilities		5,~~494~~362			5,359
Deferred revenue		6,~~150~~662			5,659
Lease liabilities, current portion		-			106
Total current liabilities		1415,~~453~~405			16,467
Derivative warrant liabilities		10-			11
Total liabilities		1415,~~463~~405			16,478
Commitment and contingencies (Note 9)
Stockholders’ equity:
Stockholders’ (deficit) equity:
Common stock, $0.0001 par value; 1,000,000,000 shares authorized as of March 31, 2023 (unaudited) and December 31, 2022; 24,652,546 and 22,646,015 shares issued and outstanding as of March 31, 2023 (unaudited) and December 31, 2022, respectively		2			2
Common stock, $0.0001 par value; 1,000,000,000 shares authorized as of June 30, 2023 (unaudited) and December 31, 2022; 24,850,082 and 22,646,015 shares issued and outstanding as of June 30, 2023 (unaudited) and December 31, 2022, respectively		2			2
Additional paid-in capital		~~185~~186,~~957~~569			183,168
Accumulated deficit		(~~182~~188,~~846~~893	)		(176,793	)
Total stockholders’ equity		3,113			6,377
Total stockholders’ (deficit) equity		(2,322	)		6,377
Total liabilities and stockholders’ equity	$	1713,~~576~~083		$	22,855

See accompanying notes to unaudited condensed consolidated financial statements.

APEXIGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	21,~~937~~753		$	76,~~108~~005		$	4,689		$	13,113
General and administrative		34,~~279~~405			12,~~986~~139			7,684			4,124
Total operating expenses		6,~~216~~158			98,~~094~~144			12,373			17,237
Loss from operations		(6,~~216~~158	)		(98,~~094~~144	)		(12,373	)		(17,237	)
Other income, net		~~163~~111			5240			273			91
Net loss	$	(6,~~053~~047	)	$	(98,~~042~~104	)	$	(12,100	)	$	(17,146	)
Net loss per share	$	(0.25	)	$	(0.50	)
Net loss per share, basic and diluted	$	(0.24	)	$	(0.45	)	$	(0.50	)	$	(0.95	)
Weighted-average common shares used to compute net loss per share, basic and diluted		24,~~156~~725,~~890~~768			18,~~084~~090,~~751~~770			24,442,900			18,087,777
Comprehensive Loss:
Net loss	$	(6,~~053~~047	)	$	(98,~~042~~104	)	$	(12,100	)	$	(17,146	)
Other comprehensive loss
Unrealized gain on marketable securities		-			2(15	)		-			(13	)
Comprehensive loss	$	(6,~~053~~047	)	$	(98,~~040~~119	)	$	(12,100	)	$	(17,159	)

See accompanying notes to unaudited condensed consolidated financial statements.

APEXIGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands, except share amounts)

(Unaudited)

	Three Months Ended June 30, 2023
	CommonStock				AdditionalPaid-In		Accumulated			AccumulatedOtherComprehensive		TotalStockholders’
	Shares		Amounts		Capital		Deficit			Income (Loss)		Equity (Deficit)
Balance at January 1, 2023		22,646,015	$	2	$	183,168	$	(176,793	)	$	-	$	6,377
Balance at April 1, 2023		24,652,546	$	2	$	185,957	$	(182,846	)	$	-	$	3,113
Private offering, net of transaction costs of $659		1,995,708		-		2,132		-			-		2,132
Vesting of restricted stock units		180,536		-		241		-			-		241
Vesting of restricted stock units		10,823		-		170		-			-		170
Issuance of common stock under employee stock plan		17,000		-		5		-			-		5
Stock-based compensation		-		-		487		-			-		487
Reclassification of private warrants		-		-		13		-			-		13
Net loss		-		-		-		(6,053	)		-		(6,053	)
Stock-based compensation		-		-		353		-			-		353
Other comprehensive loss		-		-		-		-			-		-
Net loss		-		-		-		(6,047	)		-		(6,047	)
Balance at March 31, 2023		24,652,546	$	2	$	185,957	$	(182,846	)	$	-	$	3,113
Balance at June 30, 2023		24,850,082	$	2	$	186,569	$	(188,893	)	$	-	$	(2,322	)


	Six Months Ended June 30, 2023
	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive		Total Stockholders’
	Shares		Amounts		Capital		Deficit			Income (Loss)		Equity (Deficit)
Balance at January 1, 2023		22,646,015	$	2	$	183,168	$	(176,793	)	$	-	$	6,377
Private offering, net of transaction costs of $659		1,995,708		-		2,132		-			-		2,132
Vesting of restricted stock units		191,359		-		411		-			-		411
Issuance of common stock under employee stock plan		17,000		-		5							5
Reclassification of private warrants		-		-		13		-			-		13
Stock-based compensation		-		-		840		-			-		840
Net loss		-		-		-		(12,100	)		-		(12,100	)
Balance at June 30, 2023		24,850,082	$	2	$	186,569	$	(188,893	)	$	-	$	(2,322	)

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended March 31, 2022
	Three Months Ended June 30, 2022
	ConvertiblePreferred Stock						CommonStock						AdditionalPaid-In		Accumulated		~~Accumulated~~		AccumulatedOtherComprehensive		~~AccumulatedOtherComprehensive~~		TotalStockholders’		~~TotalStockholders’~~
	Shares			Amounts			Shares			Amounts			Capital		Deficit		~~Deficit~~		Loss		~~Loss~~		Equity (Deficit)		~~Equity (Deficit)~~
Balance at January 1, 2022, as previously reported		145,130,628		$	158,707			31,070,665		$	31		$	7,991			$	(144,724	)		$	(4	)		$	(136,706	)
Balance at April 1, 2022, as previously reported		145,130,628		$	158,707			31,395,489		$	31		$	8,462	$	(153,766	)		$	(2	)		$	(145,275	)
Retroactive application of recapitalization		(145,130,628	)		(158,707	)		(13,~~019~~310,~~073~~621	)		(29	)		158,736		-		-		-		-		158,707		~~158,707~~
Balance at January 1, 2022, as adjusted		-			-			18,051,592			2			166,727				(144,724	)			(4	)			22,001
Balance at April 1, 2022, as adjusted		-			-			18,084,868			2			167,198		(153,766	)			(2	)			13,432
Exercise of stock options		-			-			336,~~276~~760			-			5023		-		-		-		-		23		50
Stock-based compensation		-			-			-			-			~~421~~368		-		-		-		-		368		~~421~~
Net loss		-			-			-			-			-		(8,104	)	~~(9,042~~	)	-		-		(8,104	)	~~(9,042~~	)
Other comprehensive loss		-			-			-			-			-		-		-		(15	)	2		(15	)	2
Balance at March 31, 2022		-		$	-			18,084,868		$	2		$	167,198	-		$	(153,766	)		$	(2	)		$	13,432
Balance at June 30, 2022		-		$	-			18,091,628		$	2		$	167,589	$	(161,870	)		$	(17	)		$	5,704


	Six Months Ended June 30, 2022
	Convertible Preferred Stock						Common Stock						Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares			Amounts			Shares			Amounts			Capital		Deficit			Loss			Equity (Deficit)
Balance at January 1, 2022, as previously reported		145,130,628		$	158,707			31,070,665		$	31		$	7,991	$	(144,724	)	$	(4	)	$	(136,706	)
Retroactive application of recapitalization		(145,130,628	)		(158,707	)		(13,019,073	)		(29	)		158,736		-			-			158,707
Balance at January 1, 2022, as adjusted		-			-			18,051,592			2			166,727		(144,724	)		(4	)		22,001
Exercise of stock options		-			-			40,036			-			73		-			-			73
Stock-based compensation		-			-			-			-			789		-			-			789
Net loss		-			-			-			-			-		(17,146	)		-			(17,146	)
Other comprehensive loss		-			-			-			-			-		-			(13	)		(13	)
Balance at June 30, 2022		-		$	-			18,091,628		$	2		$	167,589	$	(161,870	)	$	(17	)	$	5,704

See accompanying notes to unaudited condensed consolidated financial statements.

APEXIGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(612,~~053~~100	)	$	(917,~~042~~146	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		17			2855
Stock-based compensation		~~486~~840			~~421~~789
Expense from restricted stock units		~~170~~411			-
Accretion of discount and amortization of premiums on marketable securities		(3	)		187
Amortization of deferred financing costs		~~444~~888			-
Change in fair value of derivative warrant liabilities		(12	)		-
Non-cash lease expense		100			~~100~~200
Gain on disposals		(16	)		-
Changes in current assets and liabilities:
Prepaid expenses and other current assets		~~495~~1,182			~~(18~~82	)
Other assets		2041			(~~100~~104	)
Accounts payable		(2,~~798~~005	)		~~(402~~2,058	)
Accrued expenses		(817	)		~~251~~(865	)
Deferred revenue		~~491~~1,003			~~507~~991
Lease liabilities		(106	)		(~~103~~209	)
Net cash used in operating activities		(69,~~762~~763	)		(814,~~340~~142	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		-			(43	)
Sales of property and equipment		150			-
Purchases of marketable securities		-			(814,~~937~~985	)
Sales of marketable securities		2,000			1117,~~500~~947
Net cash provided by investing activities		2,150			2,~~520~~919
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private offering		2,791			-
Payments of transaction costs		(~~251~~616	)		(~~122~~649	)
Proceeds from exercise of stock options		-			50
Proceeds from issuances of common stock under equity stock purchase plan		5			-
Net cash provided by (used in) financing activities		2,540			(72	)
Proceeds from exercise of stock options		-			73
Net decrease in cash and cash equivalents		(2,072	)		(5,892	)
Net cash provided by (used in) financing activities		2,180			(576	)
Net decrease in cash and cash equivalents		(5,433	)		(11,799	)
Cash and cash equivalents, beginning of period		14,802			23,443
Cash and cash equivalents, end of period	$	129,~~730~~369		$	1711,~~551~~644
Supplemental disclosure of non-cash investing and financing activities:
Transaction costs in accounts payable and accrued liabilities at period end	$	~~408~~43		$	1,~~204~~582
Reclassification of private warrants	$	13		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

APEXIGEN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of the Business

Description of Business

Apexigen, Inc. (“Apexigen” or "“we"”) is a clinical-stage biopharmaceutical company focused on discovering and developing antibody therapeutics for oncology, with an emphasis on new immuno-oncology agents designed to harness the patient’s immune system to combat and eradicate cancer. Our lead product candidates are sotigalimab (“sotiga” or “APX005M”), which is a CD40 agonist antibody, and APX601, which is a TNFR2 antagonist antibody. We also have out-license arrangements for a number of programs. Since inception, we have devoted substantially all of our resources to performing research, development, and manufacturing activities in support of our product candidates. In October 2019, the first of our out-licensed product candidates was approved for commercial product sale. Apexigen is headquartered in San Carlos, California.

In March 2022, Brookline Capital Acquisition Corp. (“BCAC”) and Apexigen America, Inc., which was then known as Apexigen, Inc. (“Legacy Apexigen”), entered into a business combination agreement (“Brookline Business Combination Agreement”) pursuant to which BCAC and Legacy Apexigen agreed to combine, with Legacy Apexigen’s equityholders owning a majority of the equity in the combined public company. The transactions contemplated under the Brookline Business Combination Agreement (the “~~Business~~Brookline ~~Combination~~Merger”) closed in July 2022. At that time, a subsidiary of BCAC merged with and into Legacy Apexigen with Legacy Apexigen surviving the ~~business~~merger ~~combination~~ as a wholly owned subsidiary of BCAC. Additionally, BCAC changed its name to Apexigen, Inc. and Legacy Apexigen changed its name to Apexigen America, Inc.

Legacy Apexigen was incorporated in Delaware in 2010, the year Legacy Apexigen was spun-out of Epitomics, Inc. (“Epitomics”), which was a California-based biotechnology company that was acquired by Abcam plc in 2012. Legacy Apexigen was spun-out of Epitomics to focus on the discovery, development, and commercialization of humanized monoclonal antibody therapeutics.

Liquidity, ~~and~~ Capital Resources, and Recent Developments

On February 27, 2023, we announced that we were implementing a corporate restructuring to extend our cash runway as we ~~review~~reviewed and ~~explore~~explored strategic alternatives. As part of the restructuring, which was approved by our board of directors on February 23, 2023, we announced plans to reduce the size of our workforce by 55%, impacting up to 11 of our 20 employee positions. We eliminated ~~eight~~nine employee positions as of ~~March~~June 3130, 2023 and do not expect to eliminate any additional positions inprior to the ~~second~~completion orof ~~third~~the ~~quarter~~merger ofwith ~~2023~~Pyxis Oncology, Inc. As a result of the restructuring, we incurred severance costs of $0.31 million and $0.4 million during the three and six months ended ~~March~~June 3130, 2023, respectively.

AsOn ofApril ~~March 31~~11, 2023, we ~~had~~received ~~approximately~~a ~~$12.7~~written ~~million~~notice offrom ~~cash~~the ~~and~~Listing ~~cash~~Qualifications ~~equivalents,~~Staff ~~and~~of ~~expect~~the toNasdaq ~~fund~~Stock ~~our~~Market ~~operations~~(“Nasdaq”) ~~into~~notifying the ~~fourth~~Company ~~quarter~~that ofit ~~2023~~has ~~based~~not onbeen ~~current~~in ~~operations~~compliance ~~assuming~~with nothe ~~additional~~minimum ~~proceeds~~bid ~~from~~price ~~our~~requirement ~~equity~~set ~~line~~forth ~~agreement~~in ~~with~~Nasdaq ~~Lincoln~~Listing ~~Park~~Rule ~~Capital Fund, LLC~~ 5450(~~"Lincoln Park"~~a)(1) orfor ~~any~~a ~~other~~period ~~potential~~of ~~financing~~30 orconsecutive business ~~development~~days transactions. We have incurred substantial losses and negative cash flows from operations since inception and had an accumulated deficit of $182.8 million as of March 31, 2023. Since inception through March 31, 2023, we have funded operations primarily through (the ~~issuance of equity, proceeds from collaborative research and development agreements, and borrowings under a debt arrangement~~“Notice”). ~~Due~~This toNotice ~~our~~has ~~significant~~no ~~research,~~immediate ~~development,~~effect ~~and~~on ~~manufacturing expenditures, we have generated operating losses in all periods presented. We expect to incur substantial additional losses in~~ the ~~future~~listing ~~as we advance and expand our research and development activities and prepare to pursue the potential regulatory approval and commercialization~~ of our ~~product~~stock ~~candidates. Based~~ on ~~our research and development activities and plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate~~ the ~~business~~Nasdaq ~~effectively,~~Capital ~~which raises substantial doubt as to our ability to continue as a going concern~~Market.

WeIn ~~may~~accordance ~~seek~~with ~~additional~~Nasdaq ~~funds~~Listing ~~through~~Rule ~~the~~5810(c)(3)(A), ~~sale~~we ~~and~~have ~~issuance~~a ofcompliance ~~shares~~period of ~~our~~180 ~~common~~calendar ~~stock~~days infrom ~~private~~the ordate ~~public~~of ~~offerings,~~the ~~other~~Notice ~~equity~~to orregain ~~debt~~compliance ~~financings, collaborations, or partnerships~~ with ~~third~~the ~~parties,~~minimum orclosing ~~other~~bid ~~transactions~~price torequirement. ~~monetize~~If ~~assets,~~we ~~including~~do ~~our~~not ~~right~~regain tocompliance ~~receive~~during ~~milestone~~the ~~payments~~compliance ~~and~~period, ~~royalties under our out-license arrangements. We cannot assure that~~ we ~~will~~may ~~succeed~~be inafforded ~~acquiring~~a ~~additional~~second ~~funding~~180 atcalendar ~~levels~~day ~~sufficient~~period to ~~fund~~regain ~~our~~compliance. ~~operations~~To orqualify, onwe ~~terms~~must ~~favorable~~meet tothe ~~us.~~continued Iflisting werequirement ~~are~~for ~~unable~~market tovalue ~~obtain~~of ~~adequate~~publicly-held ~~financing~~shares ~~when~~and ~~needed,~~all weother ~~may~~initial ~~have~~listing tostandards ~~delay,~~for ~~reduce~~ the ~~scope~~Nasdaq ofCapital orMarket ~~suspend~~(with ~~one~~the orexception ~~more~~ of ~~our~~the ~~clinical~~minimum ~~trials~~bid orprice ~~preclinical~~requirement) ~~studies or research~~ and ~~development~~notify ~~programs.~~Nasdaq ~~Because~~ of ~~the~~our ~~numerous~~intent ~~risks~~to ~~and~~cure ~~uncertainties~~the ~~associated~~deficiency ~~with~~by ~~the~~effecting ~~development~~a ~~and~~reverse ~~commercialization~~stock ofsplit ~~our~~if ~~product~~necessary. ~~candidates,~~If we ~~are~~do ~~unable~~not toregain ~~estimate~~compliance within the ~~amount~~allotted ofcompliance ~~increased~~periods, ~~capital~~including ~~outlays~~any ~~and~~extensions ~~operating~~that ~~expenditures~~may ~~associated~~be ~~with~~granted ~~our~~by ~~current~~Nasdaq, ~~and~~our ~~planned~~stock ~~research,~~will ~~development,~~be ~~and~~subject ~~manufacturing~~to ~~activities~~delisting.

ToWe ~~the~~can ~~extent~~achieve ~~that~~compliance wewith ~~raise~~the ~~additional~~minimum ~~capital~~bid ~~through~~price ~~strategic~~requirement ~~alliances~~if, ~~licensing~~during ~~arrangements~~either orcompliance ~~other~~period, ~~monetization~~the ~~transactions~~closing ~~with~~bid ~~third~~price ~~parties,~~per weshare ~~may~~of ~~have~~our tostock ~~relinquish~~is ~~valuable~~at ~~rights~~least to$1.00 ~~our~~for ~~product~~a ~~candidates,~~minimum ~~future~~of ~~revenue~~ten ~~streams~~consecutive orbusiness ~~research~~ days.

We intend to monitor the closing bid price of our stock and assess potential actions to regain compliance, but there can be no assurance that we will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second 180-day period to regain compliance, or maintain compliance with the other Nasdaq listing requirements.

On May 23, 2023, we entered into an Agreement and Plan of Merger (the “Pyxis Merger Agreement”) with Pyxis Oncology, Inc. (“Pyxis Oncology”) and Ascent Merger Sub Corp., a wholly owned subsidiary of Pyxis Oncology (“Merger Sub”), pursuant to which Merger Sub will merge with and into Apexigen (the “Pyxis Merger”), with Apexigen surviving such merger as a wholly owned

~~programs~~subsidiary orof ~~grant~~Pyxis ~~licenses~~Oncology. onThe ~~terms~~Pyxis ~~that~~Merger ~~may~~is ~~not~~intended beto ~~favorable~~qualify toas ~~us.~~a Iftax-free wereorganization ~~raise~~for ~~additional~~U.S. ~~capital~~federal ~~through~~income ~~public~~tax orpurposes. ~~private~~On ~~equity~~June ~~offerings~~30, ~~the~~2023, ~~ownership~~we ~~interest~~filed ofa ~~the~~definitive ~~then-existing~~merger proxy statement announcing a special meeting of Apexigen stockholders ~~will~~to be ~~diluted~~held virtually on August 22, ~~and~~2023. ~~the~~Holders ~~terms~~of our common stock as of ~~these~~the ~~securities~~close ~~may~~of ~~include~~business ~~liquidation~~on orJune ~~other~~28, ~~preferences~~2023 ~~that~~(the ~~adversely~~“Record ~~affect~~Date”) ~~our~~are ~~stockholders’~~entitled ~~rights.~~to Ifvote weat ~~raise~~the ~~additional~~special ~~capital~~meeting. ~~through~~The ~~debt~~completion ~~financing,~~of wethe ~~may~~Pyxis beMerger is subject to ~~covenants~~the ~~limiting~~satisfaction or ~~restricting~~waiver of certain closing conditions, including the ~~ability~~approval toof ~~take~~the ~~specific~~adoption ~~actions,~~of ~~such~~the Pyxis Merger Agreement by a majority of our outstanding shares of common stock as ~~incurring~~of ~~additional~~the ~~debt,~~Record ~~making~~Date. ~~capital~~At ~~expenditures~~the closing of the Pyxis Merger, oreach ~~declaring~~outstanding ~~dividends~~share of our common stock will automatically convert into the right to receive 0.1725 (the “Exchange Ratio”) shares of common stock of Pyxis Oncology.

As of June 30, 2023, we had approximately $9.4 million of cash and cash equivalents, and expect to fund our operations into the fourth quarter of 2023 based on current operations assuming no additional proceeds from our equity line agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) or any other potential financing or business development transactions. We have incurred substantial losses and negative cash flows from operations since inception and had an accumulated deficit of $188.9 million as of June 30, 2023. Since inception through June 30, 2023, we have funded operations primarily through the issuance of equity, proceeds from collaborative research and development agreements, and borrowings under a debt arrangement. Due to our significant research, development, and manufacturing expenditures, we have generated operating losses in all periods presented. We expect to incur substantial additional losses in the future as we advance and expand our research and development activities and prepare to pursue the potential regulatory approval and commercialization of our product candidates. Based on our research and development activities and plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate the business effectively, which raises substantial doubt as to our ability to continue as a going concern.

We may seek additional funds through the sale and issuance of shares of our common stock in private or public offerings, other equity or debt financings, collaborations, or partnerships with third parties, or other transactions to monetize assets, including our right to receive milestone payments and royalties under our out-license arrangements. We cannot assure that we will succeed in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical trials or preclinical studies or research and development programs. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amount of increased capital outlays and operating expenditures associated with our current and planned research, development, and manufacturing activities.

To the extent that we raise additional capital through strategic alliances, licensing arrangements or other monetization transactions with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of the then-existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting the ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("“GAAP"”), and in our opinion, include all adjustments of a normal recurring nature necessary for fair financial statement presentation. Interim results are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. We have made estimates and assumptions that affect the amounts reported and disclosed in the unaudited interim consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

As a result of the merger with BCAC in July 2022, we have retrospectively applied the effect of our 1:0.102448 reverse stock split to all shares outstanding, earnings per share, and equity plan amounts for all periods presented.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Apexigen and its wholly owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934 (the "“Exchange Act"”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amounts expensed during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to accruals for research and development costs, stock-based compensation, and uncertain tax positions ~~and fair values of common stock~~. We adjust such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

Segment Reporting

We have one operating segment, which is the business of researching, developing and commercializing antibody therapeutics for oncology. Our chief operating decision maker, our Chief Executive Officer, manages our operations on an aggregated basis for the purposes of allocating resources and evaluating financial performance.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds. The carrying amount of cash equivalents approximates their fair value.

Short-Term Investments

Short-term investments consist of U.S. treasury securities with original maturities of greater than three months from the date of purchase but less than one year from the balance sheet date. Such investments are considered available-for-sale and reported at fair value with unrealized gains and losses included as a component of stockholders’ equity. The amortized cost of the securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included as other income, net in the consolidated statements of operations and comprehensive loss. Realized gains and losses and declines in fair value determined to be other-than-temporary, if any, on investments are included in other income, net. We determine the cost of securities sold using the specific identification method.

Fair Value Measurements

We apply fair value accounting to all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The carrying amount of our financial assets and liabilities, including accounts payable and accrued expenses, approximate their fair values due to their short-term maturities.

Concentrations of Credit and Other Risks

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents on deposit with financial institutions, the balance of which frequently exceed federally insured limits. On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed Federal Deposit Insurance Corporation as receiver. If any of the financial institutions with whom we do business were to be placed into receivership, we may be unable to access to the cash we have on deposit with such institutions. If we are unable to access our cash and cash equivalents as needed, our financial position and ability to operate our business could be adversely affected. We limit our credit risk associated with cash and cash equivalents by placing them with financial institutions we believe are of high quality. We have not experienced any losses on our deposits of cash. As of ~~March~~June 3130, 2023, we had no off-balance sheet concentrations of credit risk.

We are subject to a number of risks similar to other early-stage biopharmaceutical companies, including the need to obtain adequate additional funding, possible failure of clinical trials, the need to obtain marketing approval for our product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of our products, and protection of proprietary technology. If we do not successfully develop, obtain regulatory approval for, commercialize or partner our product candidates, we will be unable to generate revenue from product sales or achieve profitability.

Property and Equipment, Net

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. The estimated useful life of laboratory equipment, furniture and fixtures, office equipment, and software ranges from two to five years. We expense maintenance, repair and calibration costs as incurred.

Impairment of Long-Lived Assets

Our long-lived assets are comprised principally of our property and equipment and right-of-use lease assets. We periodically evaluate our long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets or group of assets may not be fully recoverable. We deem a long-lived asset impaired when the undiscounted future cash flows expected to be generated by the asset or group of assets is less than the carrying amount of the assets. If there is an impairment, we would reduce the carrying amount of the assets through an impairment charge, to their estimated fair values based on a discounted cash flow approach or, when available and appropriate, to comparable market values. We recorded no impairment of long-lived assets during the three and six months ended June 30, 2023 and 2022.

cash flow approach or, when available and appropriate, to comparable market values. We recorded no impairment of long-lived assets during the three months ended March 31, 2023 and 2022.

Deferred Financing Costs

Deferred financing costs consist of direct costs and commitment fees directly attributable to the commencement of the equity line agreement with Lincoln Park upon the closing of the merger with BCAC in July 2022. We capitalize deferred financing costs and amortize these costs over the 24 months of the equity line agreement. As of ~~March~~June 3130, 2023, deferred financing costs totaled $21.49 million. Amortization expense for deferred financing costs was $0.4 million and $0.8 million for the three and six months ended ~~March~~June 3130, 2023.

Revenue Recognition

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, we recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consolidated balance sheets to which we expect to be entitled in exchange for those goods or services. We have not commenced sales of our drug candidates and did not have a product approved for marketing as of ~~March~~June 3130, 2023.

We may also earn contingent fees, including milestone payments based on counterparty performance and royalties on sales, from collaborations and other out-license arrangements. We will recognize milestone payments as revenue once the underlying events are probable of being met and there is not a significant risk of reversal. We will recognize sales-based royalties as revenue when the underlying sales occur. In October 2019, Novartis’ Beovu® product, which is covered by one of our out-license agreements, was approved for commercial product sale. Under this agreement, Novartis is obligated to pay us a very low single-digit royalty on net sales of the Beovu product. However, Novartis has disputed its obligation to pay us royalties on Beovu sales under this agreement. As a result, we have determined that any sales-based Beovu product royalty revenue that we may earn under this agreement is currently fully constrained. We have recorded the royalty proceeds as deferred revenue in the consolidated balance sheets. As of ~~March~~June 3130, 2023 and December 31, 2022, deferred revenue totaled $6.27 million and $5.7 million, respectively.

Lease

We determine if an arrangement is a lease at inception and if so, we determine whether the lease qualifies as an operating or a finance lease. We previously leased our principal facility under a non-cancelable operating lease agreement with a lease term, which ended in March 2023. We currently lease our facility under a six-month ~~short term~~ lease that commenced in March 2023. We recognize the monthly rent of $2,000 as rent expense and include it in operating expenses in the consolidated statements of operations and comprehensive income. As of ~~March~~June 3130, 2023 and December 31, 2022, the right-of-use assets were zero and $0.1 million, respectively, and lease liabilities were zero and $0.1 million, respectively. Rent expense was not significant and was $0.1 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and $0.1 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses are primarily for the development of sotiga, our lead product candidate, as well as APX601 and other preclinical product candidates. Research and development costs consist primarily of external costs related to clinical development, contract manufacturing, preclinical development and discovery as well as personnel costs and allocated overhead, such as rent, equipment, depreciation, and utilities. Personnel costs consist of salaries, employee benefits and stock-based compensation.

We estimate external research and development expenses based on the services performed, pursuant to contracts with commercial and academic institutions that conduct and manage research and development services on our behalf. We record the costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in accrued liabilities in the consolidated balance sheets. These costs are a component of our research and development expenses. We accrue these costs based on factors such as the number of patient visits, the number of active patients, the number of patients enrolled, estimates of the work completed and other measures in accordance with agreements established with our third-party service providers under the service agreements. As actual costs become known, we adjust our accrued liabilities. We have not experienced any significant differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed may vary from our estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in significant changes to our accruals could significantly affect our results of operations.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are capitalized and then expensed as the related goods are delivered or the services are performed. We evaluate such payments for current or long-term classification based on when they will be realized.

Transaction Costs

Transaction costs consist of direct legal, accounting, filing and other fees and costs directly attributable to our exploration of strategic alternatives. We expense transaction costs in the period in which the costs are incurred and the services are received. Transaction costs were $01.25 million and $1.7 million for the three and six months ended ~~March~~June 3130, 2023, respectively, and they were included as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

Common Stock Warrant

We record at fair value freestanding puttable or redeemable warrants, or warrants which are not considered to be indexed to our stock and include this amount in accrued expenses on our consolidated balance sheets as of December 31, 2021. On the closing date of the merger with BCAC in July 2022, the preferred stock warrant that was outstanding immediately before closing became a common stock warrant. We adjusted the carrying value of such warrant to its estimated fair value at the closing date of the merger with BCAC based upon the value of our common stock warrant and reclassified estimated fair value at the closing date of the merger with BCAC from accrued expenses to additional paid-in capital on the closing date of the merger with BCAC. This common stock warrant of 4,321 shares is outstanding as of ~~March~~June 3130, 2023.

Public Warrants

The public warrants, issued in connection with the BCAC'’s initial public offering prior to the merger between Apexigen and BCAC, and the warrants issued in private offering transactions completed in July 2022 and January 2023, are classified as equity (see Note 7).

Derivative Warrant Liabilities

We account for the private placement warrants (see Note 7) issued in connection with the initial public offering as derivative warrant liabilities in accordance with FASB ASC Topic 815, “Derivative and Hedging”. Accordingly, we recognize the private placement warrants as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized and included as other income, net in the condensed consolidated statements of operations and comprehensive loss. We measured the fair value of the private placement warrants using a Black-Scholes option-pricing model. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. As of March 31, 2023 and December 31, 2022, deferred warrant liabilities were approximately $10,000 and $11,000, respectively. Change in fair value of derivative warrant liabilities was not significant for the three months ended March 31, 2023. 12

As of June 30, 2023, the private placement warrants had been transferred from the initial purchaser to individuals. After the transfer, the terms of the private placement warrants became identical to the public warrants. The private placement warrants were re-measured and reclassified as equity. As of June 30, 2023 and December 31, 2022, deferred warrant liabilities were zero and approximately $11,000, respectively. Change in fair value of derivative warrant liabilities was not significant for the three and six months ended June 30, 2023.

Stock-Based Compensation

We measure all equity awards granted to employees and non-employees based on the estimated grant date fair value. For awards subject to service-based vesting conditions, we recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term. For awards subject to performance-based vesting conditions, we recognize stock-based compensation expense using the accelerated attribution method when it is probable that the performance condition will be achieved. We recognize forfeitures as they occur.

We use the Black-Scholes option-pricing model to estimate the fair value of equity awards and recognize expense using the straight-line attribution approach. The Black-Scholes option-pricing model requires assumptions to be made related to the expected term of the awards, expected stock priced volatility, risk-free rate for a period that approximates the expected term of the awards and the expected dividend yield.

Income Taxes

We account for income taxes under the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates applied to taxable income in the years in which we expect to realize those temporary differences. We recognize the effect on deferred tax assets and liabilities of a change in tax rates as income or loss in the period that includes the enactment date. We establish a valuation allowance, when necessary, to reduce deferred tax assets to the amount we expect to realize. We recognize the financial statement effects of uncertain tax positions when it is more-likely-than-not, based on the technical merits of the position, that it will be sustained upon examination. We include interest and penalties related to unrecognized tax benefits within the provision of income tax. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains or losses on our marketable securities.

Net Loss per Share

We calculate basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for each period presented, since the effects of potentially dilutive securities are antidilutive given our net loss.

Major ~~Vendor~~Vendors

We had aone major vendor that accounted for approximately 1518.02% and 4236.1% of the research and development expenses for the three months ended ~~March~~June 3130, 2023 and 2022, respectively and approximately 16.2% and 39.4% of the research and development expenses for the six months ended June 30, 2023 and 2022, respectively. The same vendor also accounted for approximately 118.50% and 24.8% of the total accounts payable and accrued liabilities as of ~~March~~June 3130, 2023 and December 31, 2022, respectively. Moreover, there is ~~another~~a second vendor that accounted for approximately 4341.31% and 33.6% of the total accounts payable and accrued liabilities as of ~~March~~June 3130, 2023 and December 31, 2022, respectively, but we did not incur any expenses with this vendor during the three and six months ended ~~March~~June 3130, 2023 and 2022.

We had additional two vendors that accounted for approximately 12.8% and 10.1% of the general and administrative expenses for the three months ended March 31, 2023, respectively. The same vendors did not account for a major portion of accounts payable and accrued liabilities as of March 31, 2023.

3. Merger

Under the Business Combination Agreement, Legacy Apexigen was valued at $205.0 million on a fully diluted basis, net of exercise proceeds for Legacy Apexigen’s pre-closing stock options. On July 29, 2022, Legacy Apexigen and BCAC consummated the Business Combination or merger, contemplated by the Business Combination Agreement, with Legacy Apexigen surviving the merger as a wholly-owned subsidiary of BCAC. Also at closing, BCAC changed its name to Apexigen, Inc. and Legacy Apexigen changed its name to Apexigen America, Inc.

Upon the closing of the merger, we amended and restated our certificate of incorporation to, among other things, increase the total number of authorized shares of capital stock to 1,020,000,000 shares, of which 1,000,000,000 shares were designated common stock, $0.0001 par value per share, and of which 20,000,000 shares were designated preferred stock, $0.0001 par value per share.

Immediately prior to the closing of the merger, each issued and outstanding share of Legacy Apexigen’s convertible preferred stock, was converted into shares of common stock based on a one-to-one ratio (see Note 7). The merger is accounted for with a retrospective application that results in 145,130,628 shares of convertible preferred stock converting into the same number of shares of Legacy Apexigen's common stock.

Upon the consummation of the merger, each share of Legacy Apexigen common stock issued and outstanding was canceled and converted into the right to receive 0.102448 shares (the “Exchange Ratio”) of BCAC's common stock (the “Per Share Merger Consideration”).

Outstanding stock options, whether vested or unvested, to purchase shares of Legacy Apexigen's common stock granted under the 2010 and 2020 Plan (“Legacy Options”) (see Note 8) converted into stock options for shares of our common stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the merger, after giving effect to the Exchange Ratio.

Outstanding warrants to purchase shares of common stock remained outstanding after the closing of the merger. The warrants became exercisable 30 days after the completion of the merger, subject to other conditions, including with respect to the effectiveness of a registration statement covering the shares of common stock underlying such warrants, and will expire five years after the completion of the merger or earlier upon redemption or liquidation (see Note 2 and Note 7).

In connection with the merger, certain stockholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 4,618,607 shares of common stock for gross redemption payments of $47.2 million. In addition, a number of investors purchased an aggregate of 1,452,000 shares of common stock (the “PIPE Shares”), for a purchase price of $10.00 per share, as applicable, for an aggregate purchase price of $14.5 million pursuant to separate subscription agreements. The PIPE transaction closed simultaneously with the consummation of the merger. In connection with the Business Combination, we incurred

~~direct~~We ~~and~~had ~~incremental~~a ~~costs~~third ofvendor that accounted for approximately $926.27% ~~million~~and ~~related~~19.7% toof the ~~equity~~general ~~issuance,~~and ~~consisting~~administrative ~~primarily~~expenses offor ~~investment~~the ~~banking,~~three ~~legal~~and six months ended June 30, ~~accounting~~2023, ~~and~~respectively. ~~other~~This ~~professional~~same ~~fees,~~vendor ~~which~~accounted wefor ~~recorded~~approximately to15.4% ~~additional~~of ~~paid-in~~the ~~capital~~total asaccounts apayable ~~reduction~~and accrued liabilities as of ~~proceeds~~June 30, 2023.

~~The merger is accounted for as a reverse recapitalization in accordance with U~~3.S. ~~GAAP.~~Brookline ~~Under~~Merger this method of accounting, BCAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the merger was treated as the equivalent of Legacy Apexigen issuing stock for the net assets of BCAC, accompanied by a recapitalization. The net assets of BCAC are stated at historical cost, with no goodwill or intangible assets recorded.

~~Prior~~Under to the ~~merger,~~Brookline ~~Legacy~~Business ~~Apexigen~~Combination ~~and~~Agreement with BCAC, ~~filed~~Legacy ~~separate~~Apexigen ~~standalone~~was ~~federal,~~valued ~~state,~~at ~~and~~$205.0 ~~local~~million ~~income~~on ~~tax~~a ~~returns.~~fully Asdiluted abasis, ~~result~~net of ~~the~~exercise ~~merger,~~proceeds wefor ~~will~~Legacy ~~file~~Apexigen’s apre-closing ~~consolidated~~stock ~~income~~options. ~~tax~~On ~~return.~~July ~~Although~~29, ~~for legal purposes~~2022, ~~BCAC acquired~~ Legacy Apexigen, and ~~the merger represents a reverse acquisition for federal income tax purposes.~~ BCAC ~~will~~consummated be the ~~parent~~Brookline ofMerger ~~the consolidated group~~ with Legacy Apexigen assurviving asuch ~~subsidiary,~~merger ~~but~~as ina ~~the~~wholly-owned ~~year~~subsidiary of ~~the~~BCAC. Also at closing of the ~~merger~~Brookline Merger, ~~Legacy~~BCAC ~~Apexigen~~changed ~~will~~its ~~file~~name ato ~~full-year~~Apexigen, ~~tax~~Inc. ~~return~~and ~~with~~Legacy ~~BCAC~~Apexigen ~~joining~~changed inits ~~the~~name ~~return~~to ~~the~~Apexigen ~~day~~America, ~~after the closing date of the merger~~Inc.

Upon the closing of the ~~merger~~Brookline Merger, we ~~received~~amended ~~gross~~and ~~proceeds~~restated ofour ~~$19.0~~certificate ~~million~~of ~~from~~incorporation ~~the~~to, ~~merger~~among ~~and~~other ~~PIPE financing~~things, ~~offset~~increase bythe ~~transaction~~total ~~costs~~number of ~~$9.2~~authorized ~~million~~shares ~~recorded~~of incapital ~~2022~~stock ~~and~~to ~~BCAC's~~1,020,000,000 ~~Extension~~shares, ~~and~~of ~~Working~~which ~~Capital~~1,000,000,000 ~~Notes~~shares ~~repayment~~were ofdesignated common stock, $0.90001 ~~million.~~par ~~The~~value ~~following~~per ~~table~~share, ~~reconciles~~and ~~the elements~~ of ~~the~~which ~~merger~~20,000,000 toshares ~~the~~were ~~consolidated~~designated ~~statements~~preferred ofstock, ~~cash~~$0.0001 ~~flows~~par ~~and~~value ~~the~~per ~~consolidated statement of changes in stockholders’ equity (in thousands):~~share.

Cash - BCAC's trust (net of redemption)	$	4,435
Cash - Private offering		14,520
Less: BCAC's Extension and Working Capital Notes repayment in 2022		(861	)
Proceeds from merger and private offering for the year ended December 31, 2022		18,094
Less: transaction costs paid in 2022		(9,221	)
Net proceeds from merger and private offering for the year ended December 31, 2022		8,873
Less: transaction costs paid in 2021		(11	)
Plus: net assets of BCAC		(394	)
Merger and private offering for the year ended December 31, 2022	$	8,468

Immediately prior to the closing of the Brookline Merger, each issued and outstanding share of Legacy Apexigen’s convertible preferred stock, was converted into shares of common stock based on a one-to-one ratio (see Note 7). The Brookline Merger is accounted for with a retrospective application that results in 145,130,628 shares of convertible preferred stock converting into the same number of shares of Legacy Apexigen’s common stock.

~~The~~Upon ~~number~~the consummation of ~~shares~~the Brookline Merger, each share of Legacy Apexigen common stock issued ~~immediately~~and ~~following~~outstanding was canceled and converted into the ~~consummation~~right to receive 0.102448 shares (the “Brookline Exchange Ratio”) of BCAC’s common stock (the ~~merger~~“Per ~~was:~~Share Merger Consideration”).

Common stock, outstanding prior to merger	5,061,592
Less: redemption of BCAC shares	(4,618,607	)
Common stock of BCAC	442,985
BCAC Sponsor shares	1,190,979
BCAC Representative shares	57,500
Shares issued in private offering	1,452,000
Business combination and private offering shares	3,143,464
Legacy Apexigen shares	18,147,032
Total shares of common stock immediately after merger	21,290,496
Exercise of Legacy Apexigen common stock warrant	4,539
Shares issued to Lincoln Park (Note 6)	150,000
Total shares of common stock on July 29, 2022	21,445,035

Outstanding stock options, whether vested or unvested, to purchase shares of Legacy Apexigen’s common stock granted under the 2010 Equity Incentive Plan and the 2020 Equity Incentive Plan (“Legacy Options”) (see Note 8) converted into stock options for shares of our common stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the Brookline Merger, after giving effect to the Brookline Exchange Ratio.

Outstanding warrants to purchase shares of common stock remained outstanding after the closing of the Brookline Merger. The ~~number~~warrants became exercisable 30 days after the completion of ~~Legacy~~the ~~Apexigen's~~Brookline Merger, subject to other conditions, including with respect to the effectiveness of a registration statement covering the shares ~~was~~of ~~determined~~common asstock ~~follows:~~underlying such warrants, and will expire five years after the completion of the Brookline Merger or earlier upon redemption or liquidation (see Note 2 and Note 7).

	Legacy Apexigen Shares		Legacy Apexigen Shares, effected for Exchange Ratio
Balance as of December 31, 2020		30,521,693		3,126,980
Recapitalization applied to Convertible Preferred Stock outstanding at December 31, 2020		145,130,628		14,868,374
Exercise of common stock options - 2021		548,972		56,238
Exercise of common stock options - 2022 (pre-Closing)		702,074		71,922
Exercise of common stock restricted awards - 2022 (pre-Closing)		229,556		23,518
Total Legacy Apexigen shares as of July 29, 2022		177,132,923		18,147,032

In connection with the Brookline Merger, certain stockholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 4,618,607 shares of common stock for gross redemption payments of $47.2 million. In addition, a number of investors purchased an aggregate of 1,452,000 shares of common stock (the “PIPE Shares”), for a purchase price of $10.00 per share, as applicable, for an aggregate purchase price of $14.5 million pursuant to separate subscription agreements. The PIPE transaction closed simultaneously with the consummation of the Brookline Merger. In connection with the Brookline Merger and private offering in July 2022 (see Note 6), we incurred direct and incremental costs of approximately $9.2 million related to the equity issuance, consisting primarily of investment banking, legal, accounting, and other professional fees, which we recorded to additional paid-in capital as a reduction of proceeds.

The Brookline Merger is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, BCAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Brookline Merger was treated as the equivalent of Legacy Apexigen issuing stock for the net assets of BCAC, accompanied by a recapitalization. The net assets of BCAC are stated at historical cost, with no goodwill or intangible assets recorded.

Prior to the Brookline Merger, Legacy Apexigen and BCAC filed separate standalone federal, state, and local income tax returns. As a result of the Brookline Merger, we will file a consolidated income tax return. Although, for legal purposes, BCAC acquired Legacy Apexigen, and the Brookline Merger represents a reverse acquisition for federal income tax purposes. BCAC will be the parent of the consolidated group with Legacy Apexigen as a subsidiary, but in the year of the closing of the Brookline Merger, Legacy Apexigen will file a full-year tax return with BCAC joining in the return the day after the closing date of the Brookline Merger.

Upon closing of the Brookline Merger, we received gross proceeds of $19.0 million from the Brookline Merger and PIPE financing, offset by transaction costs of $9.2 million recorded in 2022 and BCAC’s Extension and Working Capital Notes repayment

of $0.9 million. The following table reconciles the elements of the Brookline Merger to the consolidated statements of cash flows and the consolidated statement of changes in stockholders’ equity (in thousands):


Cash - BCAC’s trust (net of redemption)	$	4,435
Cash - Private offering		14,520
Less: BCAC’s Extension and Working Capital Notes repayment in 2022		(861	)
Proceeds from Brookline Merger and private offering for the year ended December 31, 2022		18,094
Less: transaction costs paid in 2022		(9,221	)
Net proceeds from Brookline Merger and private offering for the year ended December 31, 2022		8,873
Less: transaction costs paid in 2021		(11	)
Plus: net assets of BCAC		(394	)
Brookline Merger and private offering for the year ended December 31, 2022	$	8,468

The number of shares of common stock issued immediately following the consummation of the Brookline Merger was:


Common stock, outstanding prior to Brookline Merger	5,061,592
Less: redemption of BCAC shares	(4,618,607	)
Common stock of BCAC	442,985
BCAC Sponsor shares	1,190,979
BCAC Representative shares	57,500
Shares issued in private offering	1,452,000
Brookline Merger and July 2022 private offering shares	3,143,464
Legacy Apexigen shares	18,147,032
Total shares of common stock immediately after Brookline Merger	21,290,496
Exercise of Legacy Apexigen common stock warrant	4,539
Shares issued to Lincoln Park (Note 6)	150,000
Total shares of common stock on July 29, 2022	21,445,035

The number of Legacy Apexigen’s shares was determined as follows:


	Legacy Apexigen Shares		Legacy Apexigen Shares, effected for Brookline Exchange Ratio
Balance as of December 31, 2020		30,521,693		3,126,980
Recapitalization applied to Convertible Preferred Stock outstanding at December 31, 2020		145,130,628		14,868,374
Exercise of common stock options - 2021		548,972		56,238
Exercise of common stock options - 2022 (pre-Closing)		702,074		71,922
Exercise of common stock restricted awards - 2022 (pre-Closing)		229,556		23,518
Total Legacy Apexigen shares as of July 29, 2022		177,132,923		18,147,032

4. Fair Value Measurement

We record financial assets and liabilities at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. We categorize assets and liabilities recorded at fair value in the consolidated financial statements based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of ~~March~~June 3130, 2023, our cash equivalents consisted of money market funds with less than a three-month maturity. Our short-term investments was zero as of ~~March~~June 3130, 2023. Money market funds are classified as Level 1 because they are valued using quoted market prices. As of December 31, 2022, we had short-term investments consisted of U.S. treasury securities and they are classified as Level 1 because they are valued using quoted market prices.

In certain cases where there is limited activity or less transparency around the inputs to valuation, we classify securities as Level 3. Level 3 liabilities consist of derivative warrant liabilities.

The following tables set forth the financial instruments that we measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	March 31, 2023
	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	98,~~549~~039	$	-	$	-	$	98,~~549~~039
Total	$	98,~~549~~039	$	-	$	-	$	98,~~549~~039
Financial liability:
Derivative warrant liabilities	$	-	$	-	$	10-	$	10-
Total	$	-	$	-	$	10-	$	10-


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	14,671	$	-	$	-	$	14,671
U.S. treasury securities		1,997		-		-		1,997
Total	$	16,668	$	-	$	-	$	16,668
Financial liability:
Preferred stock warrant liability	$	-	$	-	$	11	$	11
Total	$	-	$	-	$	11	$	11

The derivative warrant liabilities had a fair value of ~~$10,000~~zero and $11,000 as of ~~March~~June 3130, 2023 and December 31, 2022, respectively. We estimate the fair value of the derivative warrant liabilities using a Black-Scholes option-pricing model, which assumptions are related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock warrants based on historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which we anticipate remaining at zero.

The following tables summarize the estimated fair value of our marketable securities and the gross unrealized holding gains and losses (in thousands):


	June 30, 2023
			Unrealized
	Amortized Cost		Gains		Losses		Estimated Fair Value
Cash and cash equivalents:
Cash	$	1,330	$	-	$	-	$	1,330
Money market funds		8,039		-		-		8,039
Total cash and cash equivalents	$	9,369	$	-	$	-	$	9,369

	March 31, 2023
			Unrealized
	AmortizedCost		Gains		Losses		EstimatedFair Value
Cash and cash equivalents:
Cash	$	3,181	$	-	$	-	$	3,181
Money market funds		9,549		-		-		9,549
Total cash and cash equivalents	$	12,730	$	-	$	-	$	12,730


	December 31, 2022
			Unrealized
	Amortized Cost		Gains		Losses		Estimated Fair Value
Cash and cash equivalents:
Cash	$	131	$	-	$	-	$	131
Money market funds		14,671		-		-		14,671
Total cash and cash equivalents	$	14,802	$	-	$	-	$	14,802
Marketable securities:
U.S. treasury securities	$	1,997	$	-	$	-	$	1,997
Total marketable securities	$	1,997	$	-	$	-	$	1,997

5. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	March 31,2023		December 31,2022
	June 30,2023		December 31,2022
Prepaid clinical development expenses	$	~~1,091~~959	$	1,128
Prepaid insurance expenses		~~606~~210		970
Other prepaid expenses and current assets		~~426~~286		520
Total prepaid expenses and other current assets	$	21,~~123~~455	$	2,618

Property and Equipment, Net

We moved to a new office in March 2023 and do not use any significant property and equipment as of ~~March~~June 3130, 2023. ~~Laboratory~~During ~~equipment~~the ~~was~~three months ended March 31, 2023, we sold our laboratory equipment for $150,000 and disposed of our remaining property and equipment ~~were~~as ~~disposed~~we ~~during~~prepared ~~the~~to ~~three~~vacate ~~months~~our ~~ended~~prior ~~March~~office ~~31,~~and ~~2023~~laboratory space. ~~Gain~~We recognized a gain on disposals ~~was~~of approximately $16,000 from the sale of our laboratory equipment for the three months ended March 31, 2023. Property and equipment, net, consists of the following (in thousands):

	March 31,2023		December 31,2022
	June 30,2023		December 31,2022
Laboratory equipment	$	-	$	909
Furniture and fixtures		-		28
Office equipment		-		25
Software		-		12
Total property and equipment		-		974
Less: accumulated depreciation		-		(824	)
Total property and equipment, net	$	-	$	150

Depreciation expense for property and equipment was zero and $28,000 for the three months ended June 30, 2023 and 2022, respectively, and $17,000 and $2855,000 for the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	March 31,2023		December 31,2022
	June 30,2023		December 31,2022
Accrued clinical trial and manufacturing costs	$	43,~~201~~850	$	4,340
Accrued personnel costs		~~494~~601		497
Other accrued liabilities		799		522
Accrued legal expenses		335		84
Total accrued liabilities	$	5,494	$	5,359
Other accrued liabilities		576		438
Total accrued liabilities	$	5,362	$	5,359

~~6. Stockholder's Equity~~17

6. Stockholder’s Equity

Preferred Stock

As discussed in Note 3, Brookline Merger, we retroactively adjusted the shares issued and outstanding prior to July 29, 2022 to give effect to the ~~exchange~~Brookline ~~ratio~~Exchange Ratio established in the Brookline Business Combination Agreement to determine the number of shares of common stock into which they were converted.

Prior to the ~~Business~~Brookline ~~Combination~~Merger, Legacy Apexigen had shares of $0.001 par value Series A-1, Series A-2, Series B, and Series C preferred stock outstanding, all of which were convertible into shares of common stock of Legacy Apexigen on a 1:1 basis, subject to certain anti-dilution protections. Upon the closing of the ~~merger~~Brookline Merger, the outstanding shares of preferred stock were converted into common stock of Legacy Apexigen, and then into common stock of Apexigen at a ratio of 1:0.102448, the exchange rate established in the Brookline Business Combination Agreement.

	July 29, 2022 (Closing Date)
Convertible Preferred Stock	Preferred Stock Shares		Brookline Exchange Ratio		Common Stock Shares
Series A-1 (pre-combination)		39,196,116		0.102448		4,015,564
Series A-2 (pre-combination)		12,625,343		0.102448		1,293,442
Series B (pre-combination)		14,218,546		0.102448		1,456,662
Series C (pre-combination)		79,090,623		0.102448		8,102,706
Total		145,130,628				14,868,374

As of ~~March~~June 3130, 2023, we are authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share. The board of directors (the "“Board"”) has the authority to issue preferred stock and to determine the rights, privileges, preferences, restrictions, and voting rights of those shares. As of ~~March~~June 3130, 2023, we had no shares of preferred stock outstanding.

Common Stock

The holders of common stock are entitled to one vote per share on all matters to be voted on by the stockholders of Apexigen. Subject to the preferences that may be applicable to any outstanding shares of the convertible preferred stock, the holders of the common stock are entitled to receive ratably such dividends, if any, as the Board may declare. The Board has declared no dividends to date.

At ~~March~~June 3130, 2023, we had reserved the following shares of common stock for the following purposes:

Equity awards issued and outstanding			5,~~172~~173,~~649~~387
Equity awards available for future grants			1,~~853~~672,~~805~~531
Shares available for Employee Stock Purchase Plan			~~483~~466,801
Common stock warrants			5,~~824~~819,~~314~~934
Total common stock reserved for issuance			13,~~334~~132,~~569~~653

Private Offerings

In March 2022, we entered into subscription agreements with certain investors for a private investment in public equity transaction (“2022 PIPE”) to close concurrently with the ~~merger~~Brookline Merger (see Note 3). In July 2022, we received aggregate gross proceeds of $19.0 million funded by $4.5 million in cash held in BCAC’s trust account net of redemption and $14.5 million from the 2022 PIPE. The aggregate gross proceeds were offset by transaction costs of $9.2 million and payments of previous BCAC'’s debts totaled $0.9 million. The PIPE investors (“2022 PIPE Investors") received an aggregate of 1,452,000 unit (each a “2022 PIPE Unit”) at a purchase price of $10.00 per unit. Each 2023 PIPE Unit consists of one share of common stock and one-half of one warrant. Each whole warrant entitles the 2022 PIPE Investors to purchase one share of common stock at exercise price of $11.50 per share during the period commencing six months after July 29, 2022 and terminating on five-year anniversary of July 29, 2022, or earlier upon redemption or liquidation.

17In January 2023, we received aggregate gross proceeds of $2.8 million from a private investment in public equity transaction (“2023 PIPE”). The aggregate gross proceeds were offset by transaction costs of $0.7 million recorded in 2023, where $0.6 million were paid during the six months ended June 30, 2023 and approximately $43,000 were accrued as of June 30, 2023. The PIPE investors (“2023 PIPE Investors”) received an aggregate of 1,995,708 unit (each a “2023 PIPE Unit”) at a purchase price of $1.40 per unit. Each 2023 PIPE Unit consists of one share of common stock and one warrant. Each warrant entitles the 2023 PIPE Investors to purchase one share of common stock at an exercise price of $1.40 per share during the period commencing six months after January

million. The PIPE investors ("2022 PIPE Investors") received an aggregate of 1,452,000 unit (each a “2022 PIPE Unit”) at a purchase price of $10.00 per unit. Each 2023 PIPE Unit consists of one share of common stock and one-half of one warrant. Each whole warrant entitles the 2022 PIPE Investors to purchase one share of common stock at exercise price of $11.50 per share during the period commencing six months after July 29, 2022 and terminating on five-year anniversary of July 29, 2022, or earlier upon redemption or liquidation.18

In January 2023, we received aggregate gross proceeds of $2.8 million from a private investment in public equity transaction ("2023 PIPE"). The aggregate gross proceeds were offset by transaction costs of $0.7 million recorded in 2023, where $0.3 million were paid and $0.4 million were accrued as of March 31, 2023. The PIPE investors ("2023 PIPE Investors") received an aggregate of 1,995,708 unit (each a “2023 PIPE Unit”) at a purchase price of $1.40 per unit. Each 2023 PIPE Unit consists of one share of common stock and one warrant. Each warrant entitles the 2023 PIPE Investors to purchase one share of common stock at an exercise price of $1.40 per share during the period commencing six months after January 30, 2023 and terminating on July 30, 2028, or earlier upon redemption or liquidation. We also entered into a letter agreement with the placement agent, pursuant to which it served as the exclusive placement agent for us in connection with the 2023 PIPE. We paid the placement agent a cash fee equal to 7% of the aggregate gross proceeds from the 2023 PIPE. The placement agent received warrants to purchase up to 99,785 shares of common stock on substantially the same terms as the 2023 PIPE warrants, except that the placement agent'’s warrants have an exercise price equal to 125% of the price paid by investors in the 2023 PIPE, or $1.75 per share of common stock.

Lincoln Park

In conjunction with the ~~merger~~Brookline Merger, we entered into an equity line agreement and a registration rights agreement (“RRA”) with Lincoln Park in March 2022, which provides that we may sell to Lincoln Park up to $50.0 million of shares (the “Purchase Shares”) of our common stock. The aggregate number of shares that we can sell to Lincoln Park under the equity line agreement may not exceed 4.99% of the outstanding common stock, subject to certain exceptions set forth in the equity line agreement.

At the closing of the ~~merger~~Brookline Merger, we issued 150,000 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the equity line agreement. On the date that is 90 calendar days after the ~~merger~~Brookline Merger, we were obligated to issue additional commitment shares to Lincoln Park, calculated as the lesser of (i) $1.5 million of shares of common stock at a price per share equal to the arithmetic average of the closing sale price for our common stock during the ten consecutive business days immediately preceding the share delivery date and (ii) 500,000 shares of common stock. We issued 500,000 additional commitment shares to Lincoln Park in October 2022 and the liability was remeasured. Change in fair value of liability for common stock to be issued was approximately $205,000 for the year ended December 31, 2022.

Subject to the terms of the equity line agreement, we have the right, in our sole discretion, to present Lincoln Park with a purchase notice (a “Regular Purchase Notice”), provided that the closing stock price of the common stock on the Nasdaq is not below $3.00 per share. Each Regular Purchase Notice would direct Lincoln Park to purchase up to $500,000 of Purchase Shares (a “Regular Purchase”), which amounts may be increased under certain circumstances. Lincoln Park’s obligation under any single Regular Purchase generally will not exceed $1.0 million. The equity line agreement provides for a purchase price per Purchase Shares for each Regular Purchase (the “Purchase Price”) equal to the lesser of (i) the lowest sale price of the common stock on the Nasdaq on the purchase date of such shares; and (ii) the average of the three lowest closing sale prices for the common stock traded on the Nasdaq during the ten consecutive business days ending on the business day immediately preceding the purchase date of such shares.

In addition, on any date on which we submit a Regular Purchase Notice for the maximum amount allowed for such a Regular Purchase to Lincoln Park, we also have the right, in our sole discretion, to present Lincoln Park with an accelerated purchase notice (an “Accelerated Purchase Notice”), directing Lincoln Park to purchase an amount of Purchase Shares (an “Accelerated Purchase”), which number of Purchase Shares will not exceed the lesser of (i) 300% of the number of shares purchased pursuant to such Regular Purchase Notice and (ii) 30% of the total volume of shares of the common stock traded on the Nasdaq during the Accelerated Purchase period. The purchase price per Purchase Share for each such Accelerated Purchase will be equal to the lesser of 95% of (i) the volume-weighted average price of the common stock on the Nasdaq during the applicable Accelerated Purchase period on the applicable Accelerated Purchase date; and (ii) the closing sale price of the common stock on the Nasdaq on the applicable Accelerated Purchase date. Lincoln Park has no obligation to purchase shares under the equity line agreement unless we comply with the terms of the RRA.

In September 2022, we received aggregate proceeds of $2.5 million from Regular Purchases of 616,684 shares of common stock under the equity line agreement. For the six months ended June 30, 2023, we did not meet the aforementioned requirements for Lincoln Park to purchase common stock under the equity line agreement.

7. Public and Private Warrants

Prior to the ~~merger~~Brookline Merger, BCAC issued 2,875,000 shares of public warrants and 123,500 shares of private warrants in connection with BCAC'’s initial public offering. In connection with the closing of the 2022 and 2023 PIPE transactions on July 29, 2022 and January 30, 2023, respectively (see Note 6), we issued 726,000 and 2,095,493 public warrants, respectively. As of ~~March~~June 3130, 2023, we had 1,995,708 public warrants outstanding with an exercise price of $1.40, 99,785 public warrants outstanding with an exercise price of $1.75 per share, 3,601,000 public warrants outstanding with an exercise price of $11.50 per share, and 123,500 private placement warrants outstanding with an exercise price of $11.50 per share. Each of these warrants with an exercise price of $11.50 became exercisable on August 28, 2022, which was 30 days after July 29, 2022, and will expire on the fifth anniversary of July 29, 2022, or earlier upon redemption or liquidation. Each of these warrants with an exercise price of $1.40 or $1.75 become ~~exercisable commencing six months after January 30, 2023, and will expire on July 30, 2028, or earlier upon redemption or liquidation.~~

exercisable commencing six months after January 30, 2023, and will expire on July 30, 2028, or earlier upon redemption or liquidation.

We may call the public warrants for redemption:

•

in whole or in part;

•

at a price of $0.01 per warrant;

•

upon a minimum of 30 days’ prior written notice of redemption; and

•

if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period on the third trading day prior to the date on which we send the notice of redemption to the warrant holders.

If we call the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the warrant agreement.

The private placement warrants are identical to the public warrants, except that none of the private placement warrants will be redeemable so long as they are held by the initial purchasers or any of their permitted transferees. As of June 30, 2023, the private placement warrants had been transferred from the initial purchaser to other individuals, at which time the terms of the private placement warrants became identical to the public warrants. As a result, the derivative warrant liabilities were revalued on the transfer date and reclassified to additional paid-in capital. The change in fair value of derivative warrant liability on the transfer date was not significant.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price.

In connection with the 2022 PIPE and 2023 PIPE (see Note 6), we issued public warrants to purchase 726,000 ~~shares~~ and 2,095,493 shares of the Company'’s common stock, on July 29, 2022 and January 30, 2023, respectively. We measured the public warrants based on the estimated grant date fair value. We included the fair value of the 2022 and 2023 public warrants, ~~totaled~~totaling $3.5 million and $1.1 million, respectively, as a component of the private offering within the additional paid-in capital in the consolidated statements of stockholders'’ equity for the year ended December 31, 2022 and for the three months ended March 31, 2023. The fair values of the 2022 and 2023 public warrants ~~totaled~~totaling $3.5 million and $1.1 million, respectively, were also a non-cash financing activity for the year ended December 31, 2022 and for three months ended March 31, 2023. In determining the fair value of the public warrants, we used the Black-Scholes option-pricing model and the following assumptions:


	July 29, 2022			January 30, 2023
Expected term (years)		5.00			5.00
Expected volatility		87.90	%		82.40	%
Risk-free interest rate		2.70	%		3.60	%
Expected dividend		0.00	%		0.00	%

The assumptions used to determine the fair value of the public warrants are as follows:

•

Expected volatility: Because our stock is recently traded in an active market, we calculate volatility by using the historical volatilities of the common stock of comparable publicly traded companies. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the public warrants.

•

Risk-free interest rate: we base the risk-free interest rate from the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term.

•

Expected term: we determine the expected life of public warrants over the period when the share public warrants are vested and ending on the date when the share public warrants would expire.

•

19Expected dividend yield: we have never paid cash dividends on our common stock and do not have plans to pay cash dividends in the future. Therefore, we use an expected dividend yield of zero.

~~Expected dividend yield: we have never paid cash dividends on its common stock and do not have plans to pay cash dividends in the future. Therefore, we use an expected dividend yield of zero.~~20

8. Equity Plans and Related Equity Activities

Equity Incentive Plans

In December 2010, we adopted the 2010 Stock Incentive Plan and 2010 Equity Incentive Plan, both of which expired in 2020. In August 2020, we adopted the 2020 Equity Incentive Plan. Upon the close of the ~~merger~~Brookline Merger, we adopted the 2022 Equity Incentive Plan (the “2022 Plan”, and together with, the 2020 Equity Incentive Plan, the 2010 Stock Incentive Plan and the 2010 Equity Incentive Plan, collectively, the “Plans”). No further grants will be made under the 2020 Equity Incentive Plan. The 2022 ~~Equity Incentive~~ Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit, performance stock awards, and other forms of equity awards as described in the 2022 ~~Equity Incentive~~ Plan.

Initially, the maximum number of shares of common stock reserved for issuance under the 2022 ~~Equity Incentive~~ Plan was 2,573,405 shares, plus any shares that may be added to the 2022 Plan’s reserve if awards from the 2010 Equity Incentive Plan or 2020 Equity Incentive Plan expire, are canceled or otherwise terminate, up to a maximum of 3,461,319 shares added from such expirations, cancellations, and terminations. As of ~~March~~June 3130, 2023, Apexigen had reserved 76,~~026~~845,~~454~~918 shares of common stock for the issuance of incentive and non-statutory stock options to purchase common stock, stock awards, and restricted stock awards to employees, directors, and consultants under the Plans. The number of shares of common stock reserved for issuance under the 2022 ~~Equity Incentive~~ Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2023 through January 1, 2032, in an amount equal to the lesser of (1) 5.0% of the total number of shares of common stock outstanding on the last day of the calendar month before the date of each automatic increase, (2) 3,216,756 shares, or (3) such number of shares determined by the administrator of the 2022 Plan. On January 1, 2023, the number of shares of common stock reserved for issuance under the 2022 Plan automatically increased by 1,132,300 shares.

The Board determines the period over which options become exercisable and options generally vest over a four-year period. No option will become exercisable after the expiration of ten years from the date of grant. The term of an incentive stock option (“ISO”) granted to a 10% stockholder will not exceed five years from the date of the grant. The exercise price of an ISO and non-statutory stock option (“NSO”) will not be less than 100% of the estimated fair value of the shares on the date of grant, and the exercise price of an ISO and NSO granted to a 10% stockholder will not be less than 110% of the estimated fair value of the shares on the date of grant.

InEquity ~~February~~Plan ~~2021,~~Activities we entered into a consulting agreement with a Board member and granted an option (the “Stock Option”) to acquire 20,489 shares of common stock. The Stock Option vests upon the achievement of certain performance milestones and has a ten-~~year~~ ~~term. Based on the guidance in ASC Topic 718, Stock Compensation, we concluded that the Stock Option is a performance-based stock option. As determined by the~~ Board, we achieved one of the performance milestones under the Stock Option during 2021. As a result, 5,122 options vested in 2021, and we recognized $20,000 of stock-based compensation expense in 2021. No other performance milestone had been achieved as of March 31, 2023. The unrecognized stock-based compensation expense for this option as of March 31, 2023 was approximately $60,000. Members

In ~~September~~February ~~2022~~2021, we entered into a consulting agreement with a Board member and granted ~~options~~an option (the “Stock Option”) to ~~purchase~~acquire ~~700~~20,~~000~~489 shares of common stock. toThe ~~our~~Stock ~~non-executive~~Option ~~Board~~vests ~~members~~upon atthe anachievement ~~exercise~~of ~~price~~certain ofperformance $2milestones and has a ten-year term.65 ~~per~~Based ~~share~~on ~~pursuant~~the toguidance ~~our~~in ~~Outside~~ASC ~~Directors~~Topic 718, Stock Compensation, ~~Policy.~~we ~~These~~concluded ~~options~~that ~~vest~~the ~~over~~Stock 3Option ~~years~~is ina ~~equal~~performance-based ~~annual~~stock ~~installments~~option. ~~The~~As ~~weighted~~determined ~~average~~by ~~grant~~the ~~date~~Board, ~~fair~~we ~~value~~achieved ~~per~~one ~~options~~of ~~was~~the ~~$1.96~~performance ~~and~~milestones under the ~~fair~~Stock ~~value~~Option ofduring ~~these~~2021. ~~options~~As isa ~~approximately~~result, ~~$1.3~~5,122 ~~million.~~options ~~$0.1~~vested ~~million~~in ~~was~~2021, ~~recorded~~and aswe recognized $20,000 of stock-based compensation expense ~~during~~in ~~the~~2021. ~~three~~No ~~months~~other ~~ended~~performance ~~March~~milestone 31had been achieved as of June 30, 2023. The unrecognized stock-based compensation expense for ~~these~~this option as of ~~March~~June 3130, 2023 iswas approximately $160,000.1 ~~million.~~

In ~~October~~September 2022, we granted ~~restricted~~options ~~stock~~to ~~units~~purchase ~~for 243~~700,~~618~~000 shares of common stock to ~~various~~our ~~employees.~~non-executive ~~The~~Board ~~weighted~~members ~~average~~at ~~grant~~an ~~date~~exercise ~~fair~~price ~~value~~of ~~per restricted stock units was~~ $2.4665 ~~and~~per ~~the~~share ~~fair~~pursuant ~~value~~to ofour ~~these~~Outside ~~restricted~~Director ~~stock~~Compensation ~~units is approximately $0~~Policy.6 ~~million.~~These Weoptions ~~amortize~~vest ~~the fair value of the units on a straight-line basis~~ over ~~its~~3 ~~vesting~~years ~~periods. The restricted stock units are 50% vested~~ in ~~December~~equal ~~2022~~annual ~~and 50% vested in June 2023~~installments. ~~Additionally,~~The ~~any~~weighted ~~unvested~~average ~~restricted~~grant ~~stock~~date ~~units~~fair ~~shall~~value beper ~~fully~~option ~~vested~~was ~~upon satisfaction of severance conditions~~$1.96 ~~On December 15, 2022, 121,804 shares were vested~~ and ~~issued for common stock and 41,136 shares were forfeited to cover tax related withholdings. 10,823 shares were vested and issued for common stock during~~ the ~~three~~fair ~~months~~value ~~ended March 31, 2023 upon satisfaction~~ of ~~severance~~these ~~conditions.~~options ~~Tax~~is ~~related withholdings of the vested restricted stock units during the three months ended March 31, 2023 was~~ approximately $~~6,000,~~1.3 ~~which~~million. ~~equivalent~~We torecorded ~~6,993 shares of restricted stock units forfeited to cover the tax related withholdings.~~ $0.21 million ~~was recorded~~ as ~~operating~~stock-based compensation expense during the three months ended ~~March~~June 3130, 2023. The unrecognized stock-based compensation expense for these ~~restricted~~options ~~stock units~~ as of ~~March~~June 3130, 2023 is approximately $01.1 million.

InEquity ~~March~~Plan ~~2023,~~Activities we- ~~granted~~Restricted ~~restricted~~Stock ~~stock~~Units ~~units ("RSUs") for 482,500 shares of common stock to various employees. The weighted average grant date fair value per RSU was $0.52 and the fair value of these RSUs is approximately $0.3 million. We~~

20In October 2022, we granted restricted stock units ("RSUs") for 243,618 shares of common stock to various employees, all of which were fully vested as of June 30, 2023. The weighted average grant date fair value per RSU was $2.46 and the fair value of these RSUs is approximately $0.6 million. We amortize the fair value of the RSUs on a straight-line basis over the applicable vesting periods. 50% of these RSUs vested in December 2022 and the remaining 50% vested in June 2023. On December 15, 2022, 80,668 shares were vested and issued for common stock, and 41,136 shares were forfeited to cover tax related withholdings. On December 16, 2022, 1,279 shares were cancelled. 12,942 shares were vested and issued for common stock during the six months ended June 30, 2023 upon satisfaction of severance conditions and 8,454 shares were forfeited to cover tax related withholdings. On June 15, 2023, 64,448 shares were vested and issued for common stock and 34,691 shares were forfeited to cover tax related withholdings. We recorded $0.1 million and $0.3 million as operating expense related to these RSUs during the three and six months ended June 30, 2023, respectively.

In March 2023, we granted RSUs for 482,500 shares of common stock to certain of our employees. The weighted average grant date fair value per RSU was $0.52 and the fair value of these RSUs is approximately $0.2 million. We amortize the fair value of the RSUs on a straight-line basis over its vesting periods. The RSUs vest based on different milestones or periods. Additionally, any unvested RSUs shall be fully vested upon satisfaction of severance conditions. ~~Approximately $~~5,~~000~~922 ~~was~~shares ~~recorded~~were asvested ~~operating~~and ~~expense~~issued ~~during~~for ~~the~~common ~~three months ended March 31, 2023. The unrecognized~~ stock~~-based~~ ~~compensation expense for these RSUs as of March 31, 2023 was approximately $0.2 million.~~

~~Equity Plans' Activities~~21

~~There were no options granted~~ during the ~~three~~six months ended ~~March~~June 3130, 2023. ~~During~~upon ~~the~~satisfaction ~~three months ended March 31, 2022, we granted options to purchase 524,253 shares~~ of ~~common~~severance ~~stock~~conditions ~~with~~and ~~a weighted-average exercise price of $~~4~~.79 per share. For the options granted during the three months ended March 31~~,078 ~~2022,~~shares wewere ~~expect~~forfeited to ~~recognize~~cover ~~$1.8~~tax ~~million of stock-based compensation over the~~ related ~~vesting period~~withholdings. ~~The~~On ~~weighted-average~~May ~~grant~~23, ~~date~~2023, ~~fair value of options granted during the three months ended March 31~~108,047 ~~2022~~shares ~~was~~were ~~$3.42~~vested ~~per share. During the three months ended March 31, 2023~~ and ~~2022,~~issued ~~options~~for tocommon ~~purchase~~stock ~~80,751 shares~~ and ~~580~~55,~~333~~953 shares, were ~~canceled,~~forfeited ~~with~~to acover ~~weighted-average~~tax ~~exercise~~related ~~price of $3~~withholdings.74 ~~and~~We recorded $20.301 ~~per~~million ~~share,~~as ~~respectively.~~operating ~~There~~expense ~~were~~related noto ~~options~~these ~~exercised~~RSUs during the three and six months ended ~~March~~June 3130, 2023. ~~For~~The ~~the~~unrecognized ~~three~~stock-based ~~months~~compensation ~~ended~~expense ~~March~~for ~~31,~~these ~~2022,~~RSUs ~~the~~as ~~aggregate intrinsic value~~ of ~~the~~June ~~options~~30, ~~exercised~~2023 was approximately $0.1 million.

In May 2023, we granted RSUs for 400,000 shares of common stock to an executive. The weighted average grant date fair value per RSU was $0.42 and the fair value of these RSUs is approximately $0.2 million. The RSUs vest upon the achievement of certain performance milestones. No milestone was achieved as of June 30, 2023. The unrecognized stock-based compensation expense for these RSUs as of June 30, 2023 was approximately $0.2 million.

Equity Plan Activities - Stock Options

There were no options granted during the six months ended June 30, 2023. During the six months ended June 30, 2022, we granted options to purchase 552,937 shares of common stock with a weighted-average exercise price of $4.94 per share. For the options granted during the six months ended June 30, 2022, we expect to recognize $1.8 million of stock-based compensation over the related vesting period. The weighted-average grant date fair value of options granted during the six months ended June 30, 2022 was $3.28 per share. During the six months ended June 30, 2023 and 2022, options to purchase 254,132 shares and 591,498 shares, respectively, were canceled, with a weighted-average exercise price of $3.59 and $2.34 per share, respectively. There were no options exercised during the six months ended June 30, 2023. For the six months ended June 30, 2022, the aggregate intrinsic value of the options exercised was $0.1 million.

Equity Stock Purchase Plan

In August 2022, we adopted the Apexigen, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides eligible employees with a means of acquiring shares of our common stock at a discounted purchase price using their own accumulated payroll deductions. Under the terms of the ESPP, eligible employees can elect to have up to 15% of their eligible compensation, up to a maximum of $25,000 per year, withheld to purchase shares of common stock for a purchase price equal to 85% of the lower of the fair market value per share of common stock on (i) the commencement date of the 24-month offering period or (ii) the respective purchase date.

As of ~~March~~June 3130, 2023, Apexigen had reserved ~~483~~466,801 shares of common stock under purchase rights granted to our eligible employees or to eligible employees of any of our designated affiliates. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2023 through January 1, 2032, by the lesser of (1) 1.0% of the total number of shares of common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (2) 536,126 shares; provided that before the date of any such increase, our Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). On January 1, 2023, the number of shares of common stock reserved for issuance under the ESPP automatically increased by 226,460 shares.

The initial offering period commenced in November 2022. As of ~~March~~June 3130, 2023, no17,000 shares of common stock were purchased under the ESPP. There was approximately $3736,000 of stock-based compensation expense related to the ESPP ~~recognized~~reversed during the ~~three~~six months ended ~~March~~June 3130, 2023 due to withdrawals. As of ~~March~~June 3130, 2023, there was ~~$0.1~~no ~~million of~~ unrecognized stock-based compensation cost related to ESPP~~, which we expect to recognize over a weighted average period of 1~~.6 ~~years.~~ As of ~~March~~June 3130, 2023, ~~483~~466,801 shares were available under the ESPP for future issuance.

Stock-Based Compensation

Stock-based compensation is included in the consolidated statements of operations and comprehensive loss in research and development and general and administrative expense depending on the nature of the services provided. The following table illustrates stock-based compensation expense related to stock options granted under the Plans recognized for the three and six months ended ~~March~~June 3130, 2023 and 2022 (in thousands):

	Three Months EndedMarch 31,
	Three Months EndedJune 30,				Six Months EndedJune 30,
	2023		2022		2023		2022
Research and development	$	9746	$	~~119~~139	$	144	$	258
General and administrative		~~390~~307		~~302~~229		696		531
Total stock-based compensation	$	~~487~~353	$	~~421~~368	$	840	$	789

As of March 31, 2023, there was $3.6 million of unrecognized stock-based compensation cost related to stock options granted to employees and others under the Plans, which we expect to recognize over a weighted average period of 2.4 years. 22

21As of June 30, 2023, there was $3.1 million of unrecognized stock-based compensation cost related to stock options granted to employees and others under the Plans, which we expect to recognize over a weighted average period of 2.2 years.

9. Commitments and Contingencies

Indemnification

As permitted under Delaware law and in accordance with our bylaws, we have agreed to indemnify our officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at our request in such capacity. The term of the indemnification period is equal to the officer’s or director’s lifetime.

The maximum amount of potential future indemnification is unlimited. However, we currently hold director and officer liability insurance, which limits our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period presented.

We have certain agreements with service providers and other parties with which we do business that contain indemnification provisions pursuant to which we have agreed to indemnify the party against certain types of third-party claims. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Since these agreements were effective after ~~March~~June 3130, 2023, there were no payments made by us under these agreements as of ~~March~~June 3130, 2023. As of ~~March~~June 3130, 2023, there was not a reasonable possibility that we had incurred a material loss with respect to indemnification of such parties. We had not recorded any liability for costs related to indemnification through ~~March~~June 3130, 2023.

Clinical Collaborations

We have entered into a number of collaboration arrangements for the clinical development of sotigalimab with companies and academic and non-profit institutions. These arrangements specify whether we or the collaborator bears the cost of the clinical trials, and in the case of combination therapies, typically the collaborators provide the supply of such drug products while we supply sotigalimab. Our applicable share of the costs of these clinical collaborations are reflected as research and development expenses.

Upon achievement of certain regulatory and clinical milestones related to the development of sotigalimab in pancreatic cancer, we will be obligated to pay an aggregate of up to $9.5 million in cash and shares of common stock. Because we are not currently advancing the development of sotiga in pancreatic cancer, none of these milestones were probable as of ~~March~~June 3130, 2023, and no amounts have been recognized.

Severance

The Board approved severance plans for certain executive officers and employees in 2022 and May 2023. The severance liability is contingent upon multiple triggers, including a change-in-control event and involuntary termination within 12 months of a change-in-control event. When these severance conditions become probable, we may be obligated to pay up to $5.3 million in cash to such eligible executive officers and employees under the severance plans. Because the Pyxis Merger (see Note 1) is not yet completed and terminations are not yet determined, the severance liability was not probable as of June 30, 2023, and no amounts have been recorded.

Other

No liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded as it is not probable that a liability has been incurred and the amount cannot be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. We enter into contracts in the normal course of business with contract research organizations for preclinical studies and clinical trials and contract manufacturing organizations for the manufacture of clinical trial materials.

10. Income Taxes

The effective tax rate for the three and six months ended ~~March~~June 3130, 2023 and 2022 was zero. The difference between the effective income tax rate and the U.S. federal statutory rate of 21% is primarily attributable to recording valuation allowances to offset deferred tax assets arising from federal and state net operating losses.

11. Net Loss Per Share

The following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

	As of March 31,
	As of June 30,
	2023		2022
Stock options		5,172,649		3,447,426
Equity awards		5,173,387		3,447,426
Common stock warrants		5,~~824~~819,~~314~~934		13,361
Total common stock reserved for issuance		10,~~996~~993,~~963~~321		3,460,787

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12. Subsequent Event

On April 11, 2023, we received a written notice from the Listing Qualifications Staff of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that it has not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1) for a period of 30 consecutive business days (the “Notice”). This Notice has no immediate effect on the listing of our stock on the Nasdaq Capital Market.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a compliance period of 180 calendar days from the date of the Notice to regain compliance with the minimum closing bid price requirement. If we do not regain compliance during the compliance period, we may be afforded a second 180 calendar day period to regain compliance. To qualify, we must meet the continued listing requirement for market value of publicly-held shares and all other initial listing standards for the Nasdaq Capital Market (with the exception of the minimum bid price requirement) and notify Nasdaq of our intent to cure the deficiency by effecting a reverse stock split if necessary. If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, our stock will be subject to delisting.

We can achieve compliance with the minimum bid price requirement if, during either compliance period, the closing bid price per share of our stock is at least $1.00 for a minimum of ten consecutive business days.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provide information which Apexigen’s management believes is relevant to an assessment and understanding of Apexigen’s results of operations and financial condition. You should read the following discussion and analysis of Apexigen’s results of operations and financial condition together with Apexigen’s consolidated financial statements and related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the year ended December 31, 2022. In addition to historical financial information, this discussion contains forward-looking statements based upon Apexigen’s current expectations that involve risks and uncertainties, including those described in the section titled, “Special Note Regarding Forward-Looking Statements.” Apexigen’s actual results could differ materially from such forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in this Quarterly Report on Form 10-Q. Unless otherwise indicated or the context otherwise requires, references included in this section to “Apexigen,” “Apexigen’s, “the Company,” “the Company'’s,” “we,” “our,” “us,” and “its” refer to Apexigen.

Business Overview

We are a clinical-stage biopharmaceutical company focused on discovering and developing a new generation of antibody therapeutics for oncology, with an emphasis on new immuno-oncology agents designed to harness the patient’s immune system to combat and eradicate cancer. We and our licensees are researching and developing several protein therapeutics that were discovered using our APXiMAB antibody platform. We have one clinical-stage candidate, sotigalimab (“sotiga” or “APX005M”) that we are developing. We also have several preclinical and research stage antibodies we discovered using our APXiMAB platform that we are not currently advancing as we focus our resources on completing ongoing clinical development and conducting manufacturing activities to support our sotiga program. Our licensees are advancing five product candidates in clinical development that were enabled by discoveries from our APXiMAB platform.

Our clinical-stage candidate, ~~sotigalimab~~sotiga, is a humanized agonist antibody that targets and activates CD40, a co-stimulatory receptor that is essential for activating both the innate and adaptive arms of the immune system, to stimulate an anti-tumor immune response. ~~Sotigalimab~~Sotiga is currently in Phase 2 clinical development for the treatment of solid tumors such as soft tissue sarcomas, ~~esophageal~~ and ~~gastroesophageal junction (“GEJ”) cancers and~~ melanoma in combination with chemotherapy, radiation therapy and immunotherapy.

Our APXiMAB platform was used to enable the discovery of multiple protein therapeutic product candidates against a variety of molecular targets, including targets that are difficult to drug with conventional antibody technologies. In addition to the product candidates that we wholly own, several product candidates discovered through the use of the APXiMAB platform are in clinical development by our licensees. The most advanced of these programs is Novartis’ Beovu® (brolucizumab-dbll) product, which received FDA approval in 2019 and is marketed in over 70 countries. Two other programs being developed by our licensees are in later-stage development; Simcere’s suvemcitug (BD0801) is in Phase 3 clinical development in ovarian cancer and Mabwell’s 9MW0211 is in an adaptive, pivotal Phase 2/3 clinical trial in wet age-related macular degeneration (“AMD”). There is no guarantee that any of the product candidates discovered using our APXiMAB antibody platform, whether developed by us or our licensees, will receive regulatory approval.

In March 2022, Brookline Capital Acquisition Corp. (“BCAC”) and Apexigen America, Inc., which was then known as Apexigen, Inc. (“Legacy Apexigen”), entered into a business combination agreement (“Brookline Business Combination Agreement”) pursuant to which BCAC and Legacy Apexigen agreed to combine, with Legacy Apexigen’s equityholders owning a majority of the equity in the combined public company. The transactions contemplated under the Brookline Business Combination Agreement (the “~~Business~~Brookline ~~Combination~~Merger”) closed in July 2022. At that time, a subsidiary of BCAC merged with and into Legacy Apexigen with Legacy Apexigen surviving the ~~business~~Brookline ~~combination~~Merger as a wholly owned subsidiary of BCAC. Additionally, BCAC changed its name to Apexigen, Inc. and Legacy Apexigen changed its name to Apexigen America, Inc.

We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the issuance of stock as well as through proceeds from license agreements. Our net losses were $6.10 million and $98.01 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and $12.1 million and $17.1 million for the six months ended June 30, 2023 and 2022, . We expect to continue to incur significant losses for the foreseeable future. As of ~~March~~June 3130, 2023, we had an accumulated deficit of $~~182~~188.89 million.

On February 27, 2023, we announced that we were implementing a corporate restructuring to extend our cash runway as we ~~review~~reviewed and ~~explore~~explored strategic alternatives. As part of the restructuring, which was approved by our Board on February 23, 2023, we announced plans to ~~reduce~~eliminate ~~the size of our workforce by 55%, impacting~~ up to 11 of our 20 employee positions. We eliminated ~~eight~~nine employee positions as of ~~March~~June 3130, 2023 ~~and do not expect to eliminate any additional positions in the second or third quarter of 2023~~. As a result of the restructuring, we incurred severance costs of $0.31 million and $0.4 million during the three and six months ended ~~March~~June 3130, 2023, respectively. We expect our operating expenses to decrease in the near term as we have paused enrollment in our clinical trials with the exception of the investigator-sponsored trial in patients with dedifferentiated liposarcoma and otherwise slowed or paused the

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~~paused the~~ advancement of our programs in order to reduce our expenses as we pursue strategic alternatives. We expect our operating expenses would increase if we were to resume advancing the development of our programs and pursuing regulatory approvals for and preparing for the potential commercialization of our product candidates, in particular in the near term to advance sotiga into additional and potentially registration-enabling clinical trials. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

WeIf ~~will~~we ~~need~~do ~~substantial~~not ~~additional~~consummate ~~funding~~the toPyxis ~~support~~Merger ~~our~~(as ~~continuing~~defined ~~operations~~below), inwe ~~addition~~would toneed ~~the~~substantial ~~gross~~additional ~~proceeds~~funding ofto ~~$2.8~~support ~~million~~our ~~received~~continuing ~~from~~operations ~~a private placement equity offering in January 2023 (see Note 6),~~ and to pursue our long-term development strategy. We ~~may~~would need to seek additional funding through the issuance of common stock, other equity or debt financings, or collaborations or partnerships with other companies if we were to independently continue our operations. The amount and timing of our future funding requirements ~~will~~would depend on many factors, including the pace and results of our clinical development efforts for our product candidates and other research, development, manufacturing, and commercial activities.

Recent Developments

On May 23, 2023, we entered into an Agreement and Plan of Merger (the “Pyxis Merger Agreement”) with Pyxis Oncology, Inc. (“Pyxis Oncology”) and Ascent Merger Sub Corp., a wholly-owned subsidiary of Pyxis Oncology (“Merger Sub”), pursuant to which Merger Sub will merge with us (the “Pyxis Merger”), with Apexigen surviving such merger as a wholly-owned subsidiary of Pyxis Oncology. The Pyxis Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. On June 30, 2023, we filed a definitive merger proxy statement announcing a special meeting of Apexigen stockholders to be held virtually on August 22, 2023. Holders of our common stock as of the close of business on June 28, 2023 (the “Record Date”) are entitled to vote at the special meeting. The completion of the Pyxis Merger is subject to the satisfaction or waiver of certain closing conditions, including the approval of the adoption of the Pyxis Merger Agreement by a majority of our outstanding shares of common stock as of the Record Date. At the closing, each share of Apexigen’s common stock, equity awards, and warrants will automatically be converted into the right to receive 0.1725 (the “Exchange Ratio”) shares of Pyxis Oncology’s common stock, equity awards, and warrants, respectively.

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of sotiga, our lead product candidate, as well as APX601 and other preclinical product candidates. We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. We expense the prepaid amounts as the related goods are delivered or the services are performed.

Research and development expenses include:

•

Expenses incurred under agreements with third-party contract research organizations for clinical development;

•

Costs related to production of drug substance, drug product and clinical supply, including fees paid to third-party contract manufacturers;

•

Laboratory and vendor expenses related to the execution of preclinical activities;

•

Employee-related expenses, which include salaries, benefits and stock-based compensation; and

•

Facilities, depreciation and amortization, insurance and other direct and allocated expenses incurred in our research and development activities

The following table summarizes our research and development expenses incurred for the periods presented (in thousands):

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Unaudited)
Clinical development	$	~~662~~472	$	1,~~829~~599	$	1,136	$	3,428
Contract manufacturing		~~551~~402		32,~~128~~278		954		5,406
Discovery and non-clinical		5718		~~425~~400		74		825
Personnel costs		~~1,260~~670		1,~~478~~403		1,928		2,881
Other allocated indirect costs		~~407~~191		~~248~~325		597		573
Total research and development expenses	$	21,~~937~~753	$	76,~~108~~005	$	4,689	$	13,113

We expect our research and development expenses to decrease in the near-term as we complete the clinical trials that have been ongoing and we begin to realize the effects of cost-reduction efforts in personnel costs, discovery and nonclinical expenses undertaken in 2022 and early 2023. Also, we expect our contract manufacturing costs in the near-term to be lower than in 2022 as we have completed the drug substance and drug product manufacturing activities for sotiga and APX601 that were underway in 2022, and we do not expect to initiate any new drug substance or drug product manufacturing runs in the near term. We anticipate the clinical development of sotiga, including potentially into a registration-enabling clinical trial, would involve significant costs. To support the advancement of the sotiga clinical development program, we are actively seeking a global development and commercialization collaboration partner. We believe that such a global collaboration would substantially reduce our development and manufacturing costs related to the sotiga program, which would provide us with the opportunity to advance certain other product candidates in our pipeline. If we successfully execute such a collaboration for the development and commercialization of sotiga, we expect to then invest in advancing APX601 through an IND filing and into Phase 1 clinical development, and begin IND-enabling activities for our APX801 program.

General and Administrative Expenses

General and administrative expenses consist of salaries, benefits, and stock-based compensation expense for personnel in executive, operations, legal, human resources, finance and administrative functions, professional fees for legal, patent, consulting, accounting and audit services, and allocated expenses for technology and facilities. We expense general and administrative costs in the periods which they are incurred.

We expect increases in our general and administrative expenses as we anticipate transaction costs such as legal, audit, banker, and other consulting fees associated with the Pyxis Merger. Generally, we expect that our general and administrative expenses will increase as we anticipate toincurring ~~incur~~ expenses related to compliance with the rules and regulations of the SEC, Sarbanes-Oxley Act and the listing standards of Nasdaq, additional corporate, director and officer insurance expenses, increased legal, audit and consulting fees and greater investor relations expenses. ~~As a result, we expect that the general and administrative expenses will increase in future periods in the near-term.~~

Other Income, Net

Other income, net primarily relates to interest income on our cash and cash equivalents and short-term investments, change in fair value of derivative warrant liabilities, and fees related to our short-term investments.

2627

Results of Operations

Comparison of the Three and Six Months Ended ~~March~~June 3130, 2023 and 2022

The following table presents our consolidated statement of operations data for the three and six months ended ~~March~~June 3130, 2023 and 2022, and the dollar and percentage change between the two periods (in thousands):

	Three Months Ended March 31,
	Three Months Ended June 30,												Six Months Ended June 30,
	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
	(Unaudited)												(Unaudited)
Operating expenses:
Research and development	$	21,~~937~~753		$	76,~~108~~005		$	(4,~~171~~252	)		-5971	%	$	4,689		$	13,113		$	(8,424	)		-64	%
General and administrative		34,~~279~~405			12,~~986~~139			12,~~293~~266			65106	%		7,684			4,124			3,560			86	%
Total operating expenses		6,~~216~~158			98,~~094~~144			(21,~~878~~986	)		-3224	%		12,373			17,237			(4,864	)		-28	%
Loss from operations		(6,~~216~~158	)		(98,~~094~~144	)		21,~~878~~986			-3224	%		(12,373	)		(17,237	)		4,864			-28	%
Other income, net		~~163~~111			5240			~~111~~71			~~213~~178	%		273			91			182			200	%
Net loss	$	(6,~~053~~047	)	$	(98,~~042~~104	)	$	2,~~989~~057			-3325	%	$	(12,100	)	$	(17,146	)	$	5,046			-29	%

Costs and Expenses

Research and Development

Research and development expenses decreased by $4.23 million, or 5971%, to $21.98 million for the three months ended ~~March~~June 3130, 2023 from $76.10 million for the three months ended ~~March~~June 3130, 2022. The decrease primarily relates to a decrease of $1.21 million in clinical development expenses, a decrease of $21.69 million in contractual manufacturing, a decrease of $0.7 million in personnel costs, and a decrease of $0.46 million in discovery and other non-clinical expenses. The decreases are due to completion of the clinical trials, completion of manufacturing runs, and the impacts from our cost-reduction efforts ~~in discovery~~.

Research and development expenses decreased by $8.4 million, or 64%, to $4.7 million for the six months ended June 30, 2023 from $13.1 million for the six months ended June 30, 2022. The decrease primarily relates to a decrease of $2.2 million in clinical development expenses, a decrease of $4.4 million in contractual manufacturing, a decrease of $1.0 million in personnel costs, and a decrease of $0.8 million in discovery and other non-clinical expenses. The decreases are due to completion of the clinical trials, completion of manufacturing runs, and the impacts from our cost-reduction efforts.

General and Administrative

General and administrative expenses increased by $12.3 million, or 65106%, to $34.34 million for the three months ended ~~March~~June 3130, 2023 from $2.01 million for the three months ended ~~March~~June 3130, 2022. The increase is attributable to a $01.25 million increase in ~~expenses~~transaction ~~from the restricted stock units~~costs, a $0.4 million increase in business insurance expenses, and a $0.4 million increase in amortization of deferred financing costs~~, a $0~~.~~1 million increase in legal expenses and a $0.2 million increase in transaction costs.~~

General and administrative expenses increased by $3.6 million, or 86%, to $7.7 million for the six months ended June 30, 2023 from $4.1 million for the six months ended June 30, 2022. The increase is attributable to a $1.7 million increase in transaction costs associated with the Pyxis Merger, a $0.7 million increase in business insurance expenses, a $0.9 million increase in amortization of deferred financing costs, $0.2 million increase in compensation, and $0.1 million increase in severance.

Other Income, Net

Other income, net, increased by $0.1 million for the three months ended ~~March~~June 3130, 2023 as compared to the equivalent prior year period. The increase is primarily attributable to the increase in interest income.

Other income, net, increased by $0.2 million for the six months ended June 30, 2023 as compared to the equivalent prior year period. The increase is primarily attributable to the increase in interest income.

Liquidity and Capital Resources

Since inception through ~~March~~June 3130, 2023, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net losses were $6.10 million and $98.01 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and $12.1 million and $17.1 million for the six months ended June 30, 2023 and 2022, respectively. As of ~~March~~June 3130, 2023, we had an accumulated deficit of $~~182~~188.89 million. We have funded our operations to date primarily through the issuance of stock as well as through proceeds from license agreements and borrowings under a debt arrangement. We will continue to be dependent upon equity and debt financings or collaboration-related revenue until we are able to generate positive cash flows from our operations. As of ~~March~~June 3130, 2023, we had $129.74 million in cash and cash equivalents and expect to fund our operations into the fourth quarter of 2023 based on current operations without receiving any additional proceeds under our equity line agreement with Lincoln Park or any proceeds from any other potential financing or business development transactions. Our cash and cash equivalents consist primarily of bank deposits and money market funds. Based on our research and development activities and plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate the business effectively, which raises substantial doubt as to our ability to continue as a going concern.

into the fourth quarter of 2023 based on current operations without receiving any additional proceeds under our equity line agreement with Lincoln Park or any proceeds from any other potential financing or business development transactions. Our cash and cash equivalents consist primarily of bank deposits and money market funds. Based on our research and development activities and plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate the business effectively, which raises substantial doubt as to our ability to continue as a going concern.

Funding Requirements

Our primary use of cash and cash equivalents is to fund operating expenses, which consist primarily of research and development expenditures related to our programs, and to a lesser extent, general and administrative expenditures. In connection with the restructuring, we have completed or otherwise paused enrollment in our clinical trials with the exception of the investigator-sponsored trial in patients with dedifferentiated liposarcoma and otherwise slowed or paused the advancement of our other product candidates in order to reduce our expenses as we ~~pursue~~pursued strategic alternatives and therefore expect our operating expenses to decrease in the near term. At this time, due to the inherently unpredictable nature of clinical development, we cannot reasonably estimate the costs we will incur and the ~~impact~~timelines required to complete development, obtain marketing approval, and commercialize our current product candidate or any future product candidates. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or our current or any future license agreements that we may enter into or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecast the timing and amounts of milestone, royalty and other revenue from licensing activities, which future product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

COVID-19 pandemic, we cannot reasonably estimate the costs we will incur and the timelines required to complete development, obtain marketing approval, and commercialize our current product candidate or any future product candidates. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or our current or any future license agreements that we may enter into or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecast the timing and amounts of milestone, royalty and other revenue from licensing activities, which future product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our future funding requirements will depend on many factors, including the following:

•

the progress, timing, scope, results and costs of our clinical trials and preclinical studies for our product candidates, including the ability to enroll patients in a timely manner for our clinical trials;

•

the costs of obtaining clinical and commercial supplies and validating the commercial manufacturing process for sotigalimab and any other product candidates;

•

our ability to successfully commercialize sotigalimab and any other product candidates;

•

the cost, timing and outcomes of regulatory approvals;

•

the extent to which we may acquire or in-license other product candidates and technologies;

•

the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreement;

•

the extent to which we receive royalty payments though our current or any future partnership arrangements;

•

our ability to attract, hire and retain qualified personnel;

•

the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and

•

our activities to evaluate and pursue strategic alternatives.

As an early-stage biopharmaceutical company, we do not have any products approved for sale and have not generated any revenue from product sales. Due to the company being in the development stage, we have generated operating losses in all periods presented. We expect to incur losses in the future as we continue our research and development activities. Based on our research and development plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt as to our ability to continue as a going concern. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us.

In addition to the proceeds that we received from the private placement in January 2023, weand ~~may~~if ~~seek additional funds through~~ the ~~sale~~contemplated ~~and~~merger ~~issuance of shares of our common stock in private or public offerings, other equity or debt financings, our equity line agreement~~ with ~~Lincoln~~Pyxis ~~Park,~~Oncology ~~collaborations~~is ornot ~~partnerships with third parties~~completed, ~~or other transactions to monetize assets, including our right to receive milestone payments and royalties under our out-license arrangements. We cannot assure that~~ we ~~will~~may ~~succeed~~seek ~~in acquiring~~ additional ~~funding~~funds atthrough ~~levels sufficient to fund our operations or on terms favorable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce~~ the ~~scope~~sale ~~of or suspend one or more of our clinical trials or preclinical studies or research~~ and ~~development~~issuance ~~programs. Because~~ of ~~the~~shares ~~numerous risks and uncertainties associated with the development and commercialization~~ of our ~~product~~common ~~candidates,~~stock wein ~~are unable to estimate the amount of increased capital outlays and operating expenditures associated with our current and planned research, development and manufacturing activities.~~

28private or public offerings, other equity or debt financings, our equity line agreement with Lincoln Park, collaborations or partnerships with third parties, or other transactions to monetize assets, including our right to receive milestone payments and royalties under our out-license arrangements. We cannot assure that we will succeed in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical trials or preclinical studies or research and development programs. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amount of increased capital outlays and operating expenditures associated with our current and planned research, development and manufacturing activities.

To the extent that we raise additional capital through strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our then-existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Cash Flows

The following table summarizes our cash flow data for the periods presented (in thousands):

	Three Months EndedMarch 31,
	Six Months EndedJune 30,
	2023			2022
	(Unaudited)
Net cash used in operating activities	$	(69,~~762~~763	)	$	(814,~~340~~142	)
Net cash provided by investing activities		2,150			2,~~520~~919
Net cash provided by (used in) financing activities		2,~~540~~180			(72576	)

Comparison of the ~~Three~~Six Months Ended ~~March~~June 3130, 2023 and 2022

Operating Activities

For the ~~three~~six months ended ~~March~~June 3130, 2023, cash used in operating activities was $69.8 million, which consisted of a net loss of $612.1 million, ~~and~~partially offset by a net change of $10.91 million in our net operating assets and liabilities, ~~partially~~and ~~offset~~ by non-cash charges of $12.2 million. The change in our net operating assets and liabilities was primarily due to a ~~decrease of~~ $21.82 million decrease in ~~accounts~~prepaid ~~payable~~expenses and ~~accrued~~other ~~expenses~~current assets and a ~~decrease of~~ $0.1.0 million increase in ~~lease~~deferred ~~liabilities~~revenue, partially offset by a decrease of $02.50 million ~~decrease~~ in ~~prepaid~~accounts ~~expenses~~payable and ~~other~~accrued ~~current~~expenses ~~assets~~ and a decrease of $0.51 million ~~increase~~ in ~~deferred~~lease ~~revenue~~liabilities. The non-cash charges are primarily comprised of $0.58 million for stock-based compensation expense, $0.49 million for amortization of deferred financing costs, $0.24 million for expense from ~~exercise~~vesting of restricted stock awards, and $0.1 million for non-cash lease expense.

For the ~~three~~six months ended ~~March~~June 3130, 2022, cash used in operating activities was $814.31 million, which consisted of a net loss of $917.01 million, partially offset by non-cash charges of $01.61 million and a net change of $02.10 million in our net operating assets and liabilities. The non-cash charges are primarily comprised of $0.48 million for stock-based compensation expense, $0.2 million for non-cash lease expense, and $0.1 million for ~~lease~~depreciation expense. The change in our net operating assets and liabilities was primarily due to an increase of $01.52 million in ~~deferred~~accounts ~~revenue~~payable ~~offset~~and byaccrued expenses and a ~~decrease~~$1.0 ofmillion increase in deferred revenue, partially offset by $0.4,2 million decrease in ~~accounts~~lease ~~payable~~liabilities.

Investing Activities

For the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, cash provided by investing activities was $2.2 million and $2.59 million, respectively. The change in cash flows from investing activities was principally from the timing of purchases and sales of marketable securities.

Financing Activities

Net cash provided by financing activities for the ~~three~~six months ended ~~March~~June 3130, 2023 was $2.52 million and consisted primarily of the gross proceeds from the private offering, partially offset by the payments of transaction costs. Net cash used in financing activities for the ~~three~~six months ended ~~March~~June 3130, 2022 was ~~not~~$0.6 ~~significant~~million for the payments of transaction costs.

Contractual Obligations

We lease our principal facility under a non-cancelable agreement with a lease term ending in ~~August~~September 2023.

In addition, we have entered into certain licensing agreements pursuant to which we will owe ~~royalty~~contingent payments if and when we sublicense or commercialize certain of our products, as well as certain collaboration agreements pursuant to which we may in the future owe certain amounts to our collaboration partners upon the achievement of certain milestones. Because these obligations are uncertain, and their timing and amount are not known, they are not included in the table above. These agreements are described in more detail in the section titled “Licensing and Other Arrangements” below.

We also enter into agreements in the normal course of business with contract research organizations for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes, which are generally cancelable upon written notice. These obligations and commitments are also not included in the table above.

Licensing and Other Arrangements

We have entered into ~~royalty-bearing~~ license agreements and partnership agreements., ~~Under~~including the ~~terms~~agreement ofwith ~~these~~Novartis ~~agreements~~ described below, under which we have the right to ~~collect~~receive, or are obligated to pay, certain ~~milestone~~contingent payments and royalties upon the achievement of specified ~~pre-clinical,~~milestones ~~clinical~~ or ~~commercial~~net ~~milestones~~sales. With the exception of the agreement with Novartis described below, we do not anticipate any potential payments under these agreements in the foreseeable future, if at all.

Beovu® and Antibody Candidate Discovery and Development Agreement with Novartis

We have an agreement with Novartis relating to antibodies that Epitomics generated that target certain molecules which were used to develop antibody product candidates. Under the agreement, Novartis has a non-exclusive, irrevocable, worldwide, sublicensable, royalty-bearing and perpetual license to our rights in certain intellectual property to develop and commercialize those drug product candidates. Pursuant to the terms of the agreement, the upfront fee and all milestone payments due upon the achievement of certain pre-clinical and clinical development milestones have been paid. Novartis remains obligated to pay us a very low single-digit royalty on net sales of the Beovu (brolucizumab-dbll) product for therapeutic uses by Novartis, its affiliates or licensees.

In October 2019, Novartis’ Beovu product was approved for commercial sale. Novartis has disputed its obligation to pay Beovu royalties to us and continues to pay us royalties under protest. As a result, we have determined that any sales-based royalty revenue that we may earn under this agreement is currently fully constrained. We have recorded the Beovu royalty proceeds as deferred revenue in the consolidated balance sheets. Deferred revenue totaled $6.27 million and $5.7 million as of ~~March~~June 3130, 2023 and December 31, 2022, respectively.

Other Agreements

We have entered into certain other partnership program agreements that may eventually lead to royalty payments or other payments to us, but we do not anticipate any potential payments under these agreements in the foreseeable future, if at all.

Clinical Collaborations

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future significant effect on our financial condition, results of operations, liquidity or cash flows.

Major ~~Vendor~~Vendors

We had aone major vendor that accounted for approximately 1518.02% and 4236.1% of the research and development expenses for the three months ended ~~March~~June 3130, 2023 and 2022, respectively. ~~The~~and ~~same vendor also accounted for~~ approximately 1116.52% and 2439.84% of the ~~total~~research ~~accounts~~and ~~payable~~development ~~and~~expenses ~~accrued~~for ~~liabilities~~the assix ofmonths ~~March~~ended 31June 30, 2023 and ~~December 31,~~ 2022, respectively. ~~Moreover,~~The ~~there~~same ~~is another~~ vendor ~~that~~also accounted for approximately 438.30% and 3324.68% of the total accounts payable and accrued liabilities as of ~~March~~June 3130, 2023 and December 31, 2022, respectively,. ~~but we did not incur any expenses with this vendor during the three months ended March 31~~Moreover, ~~2023~~there ~~and 2022.~~

~~We had additional two vendors that accounted for approximately 12.8% and 10.1% of the general and administrative expenses for the three months ended March~~ 31~~, 2023, respectively. The same vendors did not account for a major portion of accounts payable and accrued liabilities as of March 31, 2023.~~

is a second vendor that accounted for approximately 41.1% and 33.6% of the total accounts payable and accrued liabilities as of June 30, 2023 and December 31, 2022, respectively, but we did not incur any expenses with this vendor during the three and six months ended June 30, 2023 and 2022.

We had a third vendor that accounted for approximately 26.7% and 19.7% of the general and administrative expenses for the three and six months ended June 30, 2023, respectively. This same vendor accounted for approximately 15.4% of the total accounts payable and accrued liabilities as of June 30, 2023.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including estimates related to accruals for research and development costs, stock-based compensation and uncertain tax positions. We base our estimates on historical experience and on various other assumptions that we believe to be 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 could differ from those estimates.

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. For further information, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Form 10-Q.

Revenue Recognition

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We have not commenced sales of our product candidates and do not have a product approved for sale as of ~~March~~June 3130, 2023.

We have other license agreements with third parties, under which we may also earn contingent fees including milestone payments based on counterparty performance and royalties on sales. We recognize milestone payments as revenue once the underlying events are probable of being met and there is not a significant risk of reversal. We recognize sales-based royalties as revenue when the underlying sales occur.

For more information on revenue recognition, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Form 10-Q.

Research and Development Expenses

We expense research and development costs as incurred. Research and development consist of costs incurred for the development of sotiga, our lead product candidate, as well as APX601 and other product candidates. Research and development costs consist primarily of external costs related to clinical development, contract manufacturing, preclinical development and discovery as ~~well as personnel costs and allocated overhead, such as rent, equipment, depreciation and utilities. Personnel costs consist of salaries, employee benefits and stock-based compensation.~~

31well as personnel costs and allocated overhead, such as rent, equipment, depreciation and utilities. Personnel costs consist of salaries, employee benefits and stock-based compensation.

We estimate external research and development expenses based on the services performed, pursuant to contracts with commercial and academic institutions that conduct and manage research and development services on our behalf. We record the costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued liabilities in the consolidated balance sheets. These costs are a component of our research and development expenses. We accrue these costs based on factors such as the number of subject visits, the number of active patients, the number of patients enrolled, and estimates of the work completed and other measures in accordance with agreements established with our third-party service providers. As actual costs become known, we adjust our accrued liabilities. We have not experienced any significant differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed may vary from our estimates, resulting in adjustments to expenses in future periods. Changes in these estimates that result in significant changes to our accruals could significantly affect our results of operations.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development are capitalized and then expensed as the related goods are delivered or the services are performed. We evaluate such payments for current or long-term classification based on when they will be realized.

Stock-based Compensation

Stock-based compensation, inclusive of stock options with only a service condition, and stock options with performance conditions, are awarded to our officers, directors, employees, and certain non-employees, in addition to the estimated shares of common stock to be purchased under our Employee Stock Purchase Plan (the “ESPP”).

We account for stock-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation.” We measure all equity awards granted to employees and non-employees based on the estimated grant date fair value. For awards subject to service-based vesting conditions, we recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term. For awards subject to performance-based vesting conditions, we recognize stock-based compensation expense using the accelerated attribution method when it is probable that the performance condition will be achieved. We recognize forfeitures as they occur.

We calculate the fair value of stock options using the Black-Scholes option pricing model and recognize expense using the straight-line attribution approach. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including the fair value of our common stock, the expected term of the awards, expected stock price volatility, the risk-free interest rate for a period that approximates the expected term of the awards and our expected dividend yield.

Expected Term—We determine the expected life of options granted using the “simplified” method. Under this approach, we presume the expected terms to be the mid-point between the weighted-average vesting term and the contractual term of the option. The simplified method makes the assumption that the award recipient will exercise share options evenly over the period when the share options are vested and ending on the date when the share options would expire.

Risk-Free Interest Rate—We base the risk-free interest rate from the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term.

Expected Volatility—Because our stock is recently traded in an active market, we calculate volatility by using the historical volatilities of the common stock of comparable publicly traded companies. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Expected Dividends—We have never paid cash dividends on our common stock and do not have plans to pay cash dividends in the future. Therefore, we use an expected dividend yield of zero.

As of ~~March~~June 3130, 2023, the unrecognized stock-based compensation expense related to equity awards was $3.61 million and is expected to be recognized as expense over a weighted-average period of approximately 2.42 years.

For more information, see Note 8, Stock-Based Compensation, to the consolidated financial statements included elsewhere in this Form 10-Q.

New Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Form 10-Q.

3234

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to certain credit and interest rate risks as part of our ongoing business operations.

Credit Risk

We are exposed to credit risk on our money market funds. Investments that potentially subject us to credit risk consist principally of cash and cash equivalents. We place our cash and cash equivalents with financial institutions with high credit standing and our excess cash in marketable investment grade securities.

Interest Rate Risk

We had cash, cash equivalents and short-term investments of $129.74 million and $16.8 million as of ~~March~~June 3130, 2023 and December 31, 2022, respectively. The primary goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. We believe that we do not have any significant exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents. Declines in interest rates, however, would reduce future investment income. A hypothetical 1.00% (100 basis points) increase in interest rates would not have materially impacted the fair value of our short-term investments as of ~~March~~June 3130, 2023 and December 31, 2022. If overall interest rates had increased or decreased by 1.00% (100 basis points), our interest income would not have been materially affected during the year ended December 31, 2022 or ~~three~~six months ended ~~March~~June 3130, 2023.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and research and development contracts. We do not believe that inflation has had a significant effect on our financial results during the periods presented. However, to the extent that the inflation the United States has recently experienced results in rising interest rates and has other adverse effects on the market, it may adversely affect our future consolidated financial condition and results of operations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period ended ~~March~~June 3130, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective as of ~~March~~June 3130, 2023 to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in U.S. Securities and Exchange Commission (“SEC”) rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended ~~March~~June 3130, 2023 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3335

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

An investment in our common stock involves risks. Prior to making a decision about investing in our common stock, you should consider carefully the risks together with all of the other information contained in this report, including any risks described below. Each of the referenced risks and uncertainties could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our securities. Additional risks not known to us or that we believe are immaterial may also adversely affect our business, operating results and financial condition and the value of an investment in our securities. “Apexigen,” “the Company,” “we,” “us” or “our” refers to Legacy Apexigen prior to the consummation of the ~~Business~~Brookline ~~Combination~~Merger and to Apexigen following the ~~Business~~Brookline ~~Combination~~Merger.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that you should consider before investing in our company, as more fully described below. The principal factors and uncertainties that make investing in our company risky include, among others:

•

The failure to complete the Pyxis Merger in a timely manner, or at all, may adversely affect the business and financial results of Pyxis Oncology and us and each of our respective stock prices.

•

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Pyxis Oncology or us.

•

Uncertainty about the Pyxis Merger may adversely affect the respective business and stock price of Pyxis Oncology and us, whether or not the Pyxis Merger is completed.

•

Our activities to evaluate and pursue strategic alternatives may not be successful.

•

If we do not successfully consummate a strategic transaction, our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that we will need to reserve for commitments and contingent liabilities.

•

We are substantially dependent on our remaining employees to facilitate the consummation of a strategic transaction. We could lose such key employees as a result of the prospects for the company.

•

We have incurred net losses since inception and expect to continue to incur significant net losses for the foreseeable future. In addition, we may be unable to continue as a going concern.

•

We will require substantial additional capital to finance operations. If we are unable to raise such capital when needed or on acceptable terms, we may be forced to delay, reduce, and/or eliminate one or more research and drug development programs or future commercialization efforts.

•

We are in the early stages of clinical drug development and have a limited operating history and no products approved for commercial sale.

•

We are dependent on the success of our product candidates, including our lead product candidate, sotigalimab, which is currently in multiple clinical trials.

•

The clinical trials of our current and any future product candidates may not demonstrate safety and efficacy to the satisfaction of regulatory authorities or otherwise be timely conducted or produce positive results.

•

If our competitors develop and market products that are more effective, safer, or less expensive than our product candidates, we will be negatively impacted.

•

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.

•

The regulatory approval processes of the Food and Drug Administration, European Medicines Agency, and comparable foreign regulatory authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

•

If we are unable to obtain, maintain, enforce, or protect our intellectual property rights in any products we develop or in our technology, if the scope of the intellectual property protection obtained is not sufficiently broad, or if we infringe the intellectual property rights of others, third parties could develop and commercialize products and technology similar or identical to ours, we could be prevented from commercializing our products and we may not be able to compete effectively in our markets.

34Risks Related to the Proposed Pyxis Merger

~~identical~~The failure to ~~ours~~complete the Pyxis Merger in a timely manner, weor ~~could~~at beall, ~~prevented~~may ~~from~~adversely ~~commercializing~~affect ~~our~~the ~~products~~business and wefinancial ~~may~~results ~~not~~of bePyxis ~~able~~Oncology toand ~~compete~~us ~~effectively~~and ineach of our ~~markets~~respective stock prices.

Each of Pyxis Oncology’s and our obligations to consummate the Pyxis Merger are subject to the satisfaction or waiver of certain conditions, including, among other things, (1) adoption of the Pyxis Merger Agreement by our stockholders, (2) the absence of any order or legal restraint that prevents the consummation of the Pyxis Merger, and (3) the approval for listing of the shares of Pyxis Oncology common stock to be issued in connection with the Pyxis Merger on Nasdaq and the effectiveness of a registration statement with respect to such Pyxis Oncology common stock. Each party’s obligation to consummate the Pyxis Merger is also subject to other specified customary conditions, including the representations and warranties of the other party being true and correct as of the date of the Pyxis Merger Agreement and as of the closing date of the Pyxis Merger, generally subject to an overall material adverse effect qualification, and the performance in all material respects by the other party of its obligations under the Pyxis Merger Agreement required to be performed on or prior to the date of the closing of the Pyxis Merger.

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Pyxis Oncology or us.

Upon closing of the Pyxis Merger, each share of our common stock will be converted into the right to receive the Exchange Ratio of 0.1725 of a share of Pyxis Oncology common stock. This Exchange Ratio is fixed in the Pyxis Merger Agreement and will not be adjusted for changes in the market price of either Pyxis Oncology common stock or our common stock. Because the Exchange Ratio will not be adjusted for changes in the market price of Pyxis Oncology common stock, the market value of the shares of Pyxis Oncology common stock that holders of our common stock will be entitled to receive at the effective time of the Pyxis Merger may vary significantly from the market value of the shares of Pyxis Oncology common stock that holders of our common stock would have received if the Pyxis Merger had been completed on any other date, including the date of the Pyxis Merger Agreement. In addition, Pyxis Oncology will issue a number of shares of Pyxis Oncology common stock in connection with the Pyxis Merger based on the number of shares of our common stock outstanding as of the effective time of the Pyxis Merger, which may result in fluctuations in the market price of Pyxis Oncology common stock, including a stock price decline. The amount of shares of Pyxis Oncology common stock issued in connection with the Pyxis Merger will not change based on the price of the shares of Pyxis Oncology common stock or our common stock as of the effective time of the Pyxis Merger or their relative price.

The Pyxis Merger Agreement does not provide for any termination right by either Pyxis Oncology or us solely based on changes in the price or trading volume of Pyxis Oncology common stock or our common stock.

Because the Pyxis Merger will be completed after the date of our special meeting of stockholders, at the time of our special meeting of stockholders, you will not know the exact market value of the Pyxis Oncology common stock that our stockholders and certain other of our equityholders will receive upon completion of the Pyxis Merger.

Uncertainty about the Pyxis Merger may adversely affect the respective business and stock price of Pyxis Oncology and us, whether or not the Pyxis Merger is completed.

Each of Pyxis Oncology and we are subject to risks in connection with the announcement and pendency of the Pyxis Merger, including the pendency and outcome of any legal proceedings against Pyxis Oncology and us, each of our respective directors and others relating to the Pyxis Merger and the risks from possibly foregoing opportunities Pyxis Oncology and we might otherwise pursue absent the proposed Pyxis Merger. Furthermore, uncertainties about the Pyxis Merger may cause current and prospective employees of Pyxis Oncology and us to experience uncertainty about their future with their respective companies. These uncertainties may impair Pyxis Oncology’s and our ability to retain, recruit or motivate key management and other personnel.

In addition, in response to the announcement of the proposed Pyxis Merger, Pyxis Oncology’s and our existing or prospective suppliers or collaboration partners may:

•

delay, defer or cease providing goods or services to Pyxis Oncology and us;

•

delay or defer other decisions concerning Pyxis Oncology and us, or refuse to extend credit terms to Pyxis Oncology and us;

•

cease further joint development activities; or

•

otherwise seek to change the terms on which they do business with Pyxis Oncology and us.

While Pyxis Oncology and we are attempting to address these risks, each of our respective existing and prospective customers, suppliers or collaboration partners may be reluctant to purchase Pyxis Oncology’s and our products, supply Pyxis Oncology and us with goods and services or continue collaborations due to the potential uncertainty about the direction of Pyxis Oncology’s and our product offerings and the support and service of Pyxis Oncology’s and our products after the completion of the Pyxis Merger.

While the Pyxis Merger is pending, we are subject to contractual restrictions that could harm our business, operating results and stock price.

The Pyxis Merger Agreement includes restrictions on the conduct of our business prior to the completion of the Pyxis Merger, generally requiring us to conduct our business in the ordinary course, consistent with past practice, and restricting us from taking certain specified actions absent Pyxis Oncology’s prior written consent. These and other obligations in the Pyxis Merger Agreement may delay or prevent us from or limit our ability to respond effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management and our board of directors think they may be advisable. These restrictions could adversely impact our business, operating results and stock price and our perceived acquisition value, regardless of whether the Pyxis Merger is completed.

The Pyxis Merger Agreement limits our ability to pursue alternative transactions which could deter a third party from proposing an alternative transaction.

The Pyxis Merger Agreement contains provisions that, subject to certain exceptions, limit, among other things, our ability to participate in any negotiations or discussions regarding, or, knowingly, with the intention to encourage or facilitate, furnish any nonpublic information in response to inquiries with respect to an alternative transaction. It is possible that these or other provisions in the Pyxis Merger Agreement might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the outstanding shares of our common stock from considering or proposing an acquisition, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire our common stock than it might otherwise have proposed to pay.

The Pyxis Merger will involve substantial costs.

Pyxis Oncology and we have incurred and expect to continue to incur substantial costs and expenses relating to the Pyxis Merger and the issuance of Pyxis Oncology common stock in connection with the Pyxis Merger, including, as applicable, fees and expenses payable to financial advisors, other professional fees and expenses, insurance premium costs, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. Pyxis Oncology also will incur significant transaction fees and costs in connection with its formulating and implementing integration plans with respect to the two companies. Pyxis Oncology continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in connection with the Pyxis Merger and the integration of the two companies’ businesses. In addition, if the Pyxis Merger is not completed, Pyxis Oncology and we will have incurred substantial expenses for which no ultimate benefit will have been received by either company.

The fairness opinion obtained by our board of directors from our financial advisor will not be updated to reflect changes in circumstances between signing the Pyxis Merger Agreement and the completion of the Pyxis Merger.

Our board of directors has not obtained an updated fairness opinion as of the date of this quarterly report from Ladenburg Thalmann & Co. Inc. (“Ladenburg”), our financial advisor. Changes in the operations and prospects of Pyxis Oncology or us, general market and economic conditions, and other factors that may be beyond the control of Pyxis Oncology and us and upon which the fairness opinion was based, may alter the value of Pyxis Oncology or us or the price of Pyxis Oncology common stock or our common stock by the time the Pyxis Merger is completed.

The fairness opinion does not speak as of the time the Pyxis Merger will be completed or as of any date other than the date of such opinion. We do not anticipate asking Ladenburg to update its fairness opinion.

Certain of our directors and executive officers may have interests in the Pyxis Merger that are or were different from, or in conflict with or in addition to, those of our stockholders generally.

In considering whether to approve the proposals at our special meeting of stockholders, our stockholders should recognize that our directors and officers have interests in the Pyxis Merger that may differ from, or that are in addition to, their interests as our

stockholders. Our board of directors was aware of these interests at the time it approved the Pyxis Merger Agreement. These interests may cause our directors and officers to view the Pyxis Merger differently from how you may view it as a stockholder.

Holders of our common stock will not be entitled to appraisal rights in the Pyxis Merger.

Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction.

Under Section 262(b) of the DGCL, stockholders do not have appraisal rights if the shares of stock they hold, as of the record date for determination of stockholders entitled to vote at the meeting of shareholders to act upon a merger, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders are required by the terms of the merger agreement to receive in exchange for their shares in the merger anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Because our stockholders will receive only shares of Pyxis Oncology common stock which will be listed on Nasdaq and cash in lieu of any fractional shares, Apexigen stockholders will not have any appraisal rights.

Pyxis Oncology or we may waive one or more of the closing conditions to the Pyxis Merger without re-soliciting approval from our stockholders.

To the extent permitted by law, Pyxis Oncology or we may determine to waive, in whole or part, one or more of the conditions to their respective obligations to consummate the Pyxis Merger. We expect to evaluate the materiality of any waiver and its effect on our stockholders in light of the facts and circumstances at the time to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination as to whether to waive any condition to the consummation of the Pyxis Merger, and as to whether to re-solicit approval from our stockholders, will be made by Pyxis Oncology and us at the time of such waiver based on the facts and circumstances as they exist at that time.

After the Pyxis Merger, our stockholders will have a significantly lower ownership and voting interest in Pyxis Oncology than they currently have in us and will exercise less influence over management and policies of the combined company.

Upon completion of the Pyxis Merger and based on 39,414,292 shares of Pyxis Oncology common stock and 24,850,082 shares of our common stock outstanding as of June 28, 2023, it is expected that Pyxis Oncology stockholders and certain other equity holders will own approximately 90% of the outstanding common stock of the combined company and our stockholders and certain other equityholders will own approximately 10% of the outstanding common stock of the combined company. Consequently, our former stockholders will have less influence over the management and policies of the combined company than they currently have over our management and policies.

We and Pyxis Oncology may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Pyxis Merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims could result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Pyxis Oncology’s and our respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Pyxis Merger, then that injunction may delay or prevent the Pyxis Merger from being completed, or from being completed within the expected timeframe, which may adversely affect Pyxis Oncology’s and our respective business, financial position and results of operations.

The following risk factors do not take into account the proposed Pyxis Merger and assume that we remain a stand-alone company except as otherwise noted.

Risks Related to Our Strategic Alternatives Process

Our activities to evaluate and pursue strategic alternatives may not succeed.

In February 2023, we announced that we would explore the potential for an acquisition, company sale, merger, divestiture of assets, licensing, or other strategic transactions. We ~~have~~ engaged Ladenburg Thalmann as our strategic advisory firm to help explore available strategic alternatives for the company.

We have significantly reduced our research and development activities to reduce operating expenses while we ~~evaluate~~evaluated these opportunities. We expect to continue to devote significant time and resources toas ~~identifying~~we ~~and~~complete ~~evaluating~~the ~~strategic~~planned ~~transactions;~~Pyxis ~~however, there can be no assurance that such activities will result in any agreements or transactions that will enhance stockholder value~~Merger. In addition, potential strategic transactions that require stockholder approval may not be approved by our stockholders or, if required, a counterparty’s stockholders. Further, any strategic transaction that is completed ultimately may not deliver the anticipated benefits or enhance stockholder value.

the planned Pyxis Merger requires the approval of our stockholders, which we may not obtain. Further, any strategic transaction that we ultimately complete may not deliver the anticipated benefits or enhance stockholder value.

Any strategic transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:

•

higher than anticipated transaction or integration costs;

•

difficulty and cost in integrating the operations and personnel of any entity with which we may combine;

•

exposure to unknown liabilities;

•

incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;

•

write downs of assets or goodwill or impairment charges;

•

increased amortization expenses;

•

impairment of relationships with key suppliers or vendors due to changes in management and ownership; and

•

the inability to retain our key employees or our other service providers.

Accordingly, there can be no assurance that we will undertake or successfully complete any strategic transactions of the nature described above, including the Pyxis Merger, and any transactions that we do complete may be subject to the foregoing or other risks and could have a material adverse effect on our business, financial condition and prospects.

If we do not successfully consummate a strategic transaction, our board of directors may decide to pursue a dissolution and liquidation of the Company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that we will need to reserve for commitments and contingent liabilities.

There can be no assurance that the process to identify a strategic alternative will result in a successfully consummated transaction. If we do not complete a strategic transaction, our board of directors may decide to pursue a dissolution and liquidation of the Company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution will continue to decrease as we fund our operations while we evaluate our strategic alternatives. In addition, if our board of directors were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of the Company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provisions for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may include (i) regulatory and clinical obligations; (ii) obligations under our employment, retention and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control; and (iii) potential litigation against us, and other various claims and legal actions arising in the ordinary course of business. As a result of this requirement, we may need to reserve a portion of our assets pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of the Company. If we pursue a dissolution and liquidation, our board of directors, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the Company.

reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the Company.

Risks Related to Our Business, Financial Condition, and Need for Additional Capital

We have incurred net losses since inception and expect to continue to incur significant net losses for the foreseeable future. In addition, we may be unable to continue as a going concern.

We have incurred net losses since inception, have not generated any significant revenue to date, and financed our operations prior to the ~~Business~~Brookline ~~Combination~~Merger primarily through the issuance of convertible preferred stock, proceeds from collaborative research and development and out-license agreements, and borrowings under a debt arrangement. Our net loss was $6.10 million and $98.01 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and $12.1 million and $17.1 million for the six months ended June 30, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $182.8 million. To date, we have devoted substantially all of our resources and efforts to research and development. Our clinical-stage pipeline currently consists of multiple product candidates, including our lead product candidate, sotigalimab, and our other internal programs are in preclinical or research development. As a result, we expect that it will be several years, if ever, before we generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial research and development and other expenses in order to develop and market additional potential products. In addition, for certain of our licensees from whom we are entitled to receive royalty payments if they successfully develop and commercialize any products covered by licenses we have with them, there is no guarantee that their product development and commercialization will lead to any such payments even if any such product candidates receive regulatory approval for commercial sale, including Beovu (brolucizumab-dbll), which is commercialized by Novartis, for which we have received sales-based royalties that are currently fully constrained and recorded as deferred revenue on our consolidated balance sheet, as discussed below. 40

InAs ~~connection~~of ~~with~~June ~~the~~30, ~~Business Combination~~2023, we ~~raised~~had ~~approximately~~an accumulated deficit of $19188.09 million. To date, we have devoted substantially all of ~~gross~~our ~~proceeds.~~resources Weand ~~incurred~~efforts ~~approximately~~to $9research and development.2 ~~million~~Our inclinical-stage ~~transaction~~pipeline ~~costs~~currently ~~relating~~consists toof ~~the~~multiple ~~Business~~product ~~Combination~~candidates, ~~consisting~~including ofour ~~banking~~lead product candidate, ~~legal~~sotigalimab, and our other ~~professional~~internal ~~fees~~programs are in preclinical or research development. ~~The~~As ~~total~~a ~~net~~result, ~~cash~~we ~~proceeds~~expect tothat usit ~~were~~will ~~approximately~~be $8several years, if ever, before we generate revenue from product sales.9 ~~million~~Even ~~after~~if we ~~paid~~succeed ~~off~~in ~~the~~receiving ~~Extension~~marketing approval for and ~~Working~~commercializing ~~Capital~~one ~~Notes~~or more of our product candidates, we expect that ~~totaled~~we ~~$0.9~~will ~~million~~continue to incur substantial research and development and other expenses in order to develop and market additional potential products. In addition, for certain of our licensees from whom we ~~raised~~are ~~approximately~~entitled ~~$2.8~~to ~~million~~receive ofroyalty ~~gross~~payments ~~proceeds~~if ~~from~~they ~~the~~successfully ~~private~~develop ~~placement~~and ~~transaction~~commercialize inany ~~January~~products ~~2023.~~covered Weby ~~incurred~~licenses ~~approximately~~we ~~$0.7~~have ~~million~~with inthem, ~~transaction~~there ~~costs~~is ~~relating~~no guarantee that their product development and commercialization will lead to ~~the~~any ~~private~~such ~~placement,~~payments ~~consisting~~even ofif ~~placement~~any ~~agent~~such product candidates receive regulatory approval for commercial sale, ~~legal~~including Beovu (brolucizumab-dbll), which is commercialized by Novartis, for which we have received sales-based royalties that are currently fully constrained and ~~other~~recorded ~~professional~~as ~~fees~~deferred revenue on our consolidated balance sheet, as discussed below.

~~Our~~In ~~condensed~~connection ~~consolidated~~with ~~financial statements for~~ the ~~three~~Brookline ~~months ended March 31~~Merger, ~~2023~~we ~~and~~raised ~~2022,~~approximately ~~included~~$19.0 ~~elsewhere~~million inof ~~this~~gross ~~Quarterly~~proceeds. ~~Report~~We onincurred ~~Form~~approximately ~~10-Q have been prepared assuming we will continue as a going concern~~$9.2 Asmillion ain ~~development~~transaction ~~stage~~costs ~~company,~~relating ~~we expect~~ to ~~incur~~the ~~significant~~Brookline ~~and~~Merger, ~~increasing~~consisting ~~losses~~of ~~until~~banking, ~~regulatory approval is granted for sotigalimab~~legal, ~~our~~and ~~lead~~other ~~product~~professional ~~candidate~~fees. ~~Regulatory~~The ~~approval~~total isnet ~~not~~cash ~~guaranteed~~proceeds ~~and~~to ~~may~~us ~~never~~were beapproximately ~~obtained~~$8.9 ~~Based~~million onafter ~~our~~we ~~research~~paid ~~and~~off ~~development~~the ~~activities~~Extension and ~~plans,~~Working ~~there~~Capital isNotes ~~uncertainty~~that ~~regarding~~totaled ~~our~~$0.9 ~~ability~~million. toIn ~~maintain liquidity sufficient to operate the business effectively~~addition, ~~which~~we ~~raises~~raised ~~substantial~~approximately ~~doubt about our ability to continue as a going concern~~$2.8 Ifmillion weof dogross ~~not receive~~ proceeds ~~under~~from ~~our~~the ~~equity~~private ~~line~~placement ortransaction ~~other~~in ~~potential~~January ~~financing~~2023. orWe ~~business~~incurred ~~development~~approximately ~~transactions,~~$0.7 wemillion ~~anticipate~~in ~~that~~transaction ~~our~~costs ~~current~~relating ~~cash position would only be sufficient~~ to ~~fund~~the ~~our~~private ~~operations~~placement, ~~into~~consisting ~~the~~of ~~fourth~~placement ~~quarter~~agent, oflegal, ~~2023~~and ~~based~~other onprofessional ~~current operations~~fees.

Our condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022, included elsewhere in this Quarterly Report on Form 10-Q have been prepared assuming we will continue as a going concern. As a development stage company, we expect to incur significant and increasing losses until regulatory approval is granted for sotigalimab, our lead product candidate. Regulatory approval is not guaranteed and may never be obtained. Based on our research and development activities and plans, there is uncertainty regarding our ability to maintain liquidity sufficient to operate the business effectively, which raises substantial doubt about our ability to continue as a going concern. If we do not receive proceeds under our equity line or other potential financing or business development transactions, we anticipate that our current cash position would only be sufficient to fund our operations into the fourth quarter of 2023 based on current operations.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter-to-quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our expected future losses will continue to have an adverse effect on our working capital and our ability to achieve and maintain profitability.

We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce, and/or eliminate one or more of our research and drug development programs or future commercialization efforts.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials of, and seek marketing approval for sotigalimab and our other product candidates. In order to support the advancement of the sotigalimab clinical development program, we are actively seeking a global development and commercialization collaboration partner for sotigalimab. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing, and distribution. We also expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations. If we are unable to raise capital when needed or on acceptable terms, or to enter into a collaboration to support the advancement of the sotigalimab development program, we may be forced to delay, reduce, and/or eliminate one or more of our research and drug development programs or future commercialization efforts. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

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efforts. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

We plan to continue to use our cash on hand to fund our development of sotigalimab, and for working capital and other general corporate purposes. This may include additional research, hiring additional personnel, capital expenditures, and the costs of operating as a public company. Advancing the development of our current and any future product candidates will require a significant amount of capital. Our current cash and cash equivalents are not sufficient to fund all of the actions that are necessary to complete the development of sotigalimab or any of our other product candidates. We will be required to obtain further funding through public or private equity offerings, sale of shares of our common stock through utilization of our equity line with Lincoln Park, debt financings, partnership, collaborations, and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. In addition, there are certain conditions and limitations on our ability to utilize our $50,000,000 equity line with Lincoln Park. We are required to satisfy various conditions in order to be able to initiate additional purchases by Lincoln Park under the equity line. Once such conditions are satisfied, the Lincoln Park equity line purchases are subject to volume limitations tied to periodic market prices, ownership limitations limiting Lincoln Park from owning more than 4.99% of our common stock, a minimum closing price of $3.00 per share of common stock at which we can deliver a Regular Purchase notice to Lincoln Park to purchase shares of common stock, and other limitations as specified in the equity line agreement. If any of these conditions are not satisfied or limitations are in effect, we may not be able to fully utilize the Lincoln Park equity line, which would have an adverse impact on our ability to satisfy our capital needs and could materially adversely impact our business. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We are in the early stages of clinical drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

We are an early clinical-stage biopharmaceutical company with a limited operating history. Apexigen was incorporated and commenced operations in 2010 following a spin-out transaction from its parent company. We have no products approved for commercial sale and have not generated any revenue from commercial product sales. Our operations to date have been limited to performing research and development activities in support of our product development and licensing efforts, hiring personnel, raising capital to support and expand such activities, providing general and administrative support for these operations, developing potential product candidates, conducting preclinical studies and clinical trials, including clinical trials of sotigalimab, our lead product candidate, and our other wholly owned product candidates, and entering into, and performing our obligations under, licensing arrangements that have resulted in additional product candidates in clinical development or commercialization by our licensees. Other than sotigalimab, all of our wholly owned programs are in preclinical or research development. We have not yet demonstrated our ability to successfully complete any large-scale pivotal clinical trials, obtain marketing approvals, manufacture a drug on a commercial scale or arrange for a third party to do so on our behalf, or conduct sales and marketing activities. In addition, only one of our licensees has obtained marketing approvals for product candidates we have out-licensed. As a result, it may be more difficult for you to accurately predict our future success or viability than it could be if we had a longer operating history.

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors and risks frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields. We also would need to transition from a company with a research and development focus to a company capable of supporting commercial activities after approval of any of our product candidates. We have not yet demonstrated an ability to successfully overcome such risks and difficulties, or to make such a transition. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.

Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve a number of objectives.

Our business depends entirely on the successful development and commercialization of our product candidates. We currently generate no revenue from commercial sales of any products. We have no products approved for commercial sale and we do not anticipate generating any revenue from product sales unless and until sometime after we have successfully completed clinical development and received marketing approval for the commercial sale of a product candidate, if ever. In addition, we may not receive significant amounts of royalty revenue, if any, from our licensees for their product candidates if and when such candidates receive regulatory approval for commercial sale and are commercialized, including Beovu, which is commercialized by Novartis, for which we have received sales-based royalties that are currently fully constrained and recorded as deferred revenue on our consolidated balance sheet as discussed below. Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve a number of objectives, including:

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raising substantial additional capital to finance our operations;

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negotiating favorable terms in any partnership, collaboration, licensing, or other arrangements that may be necessary to develop, manufacture, or commercialize our product candidates;

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successful and timely completion of preclinical and clinical development of current and any future product candidates;

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timely receipt of marketing approvals from applicable regulatory authorities for current and any future product candidates for which we successfully complete clinical development;

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the extent of any required post-marketing approval commitments to applicable regulatory authorities;

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developing an efficient and scalable manufacturing process for current and any future product candidates, including establishing and maintaining commercially viable supply and manufacturing relationships with third parties to obtain finished products that are appropriately packaged for sale;

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successful launch of commercial sales following any marketing approval, including the development of a commercial infrastructure, whether in-house or with one or more partners or collaborators;

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a continued acceptable safety profile following any marketing approval;

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commercial acceptance of current and any future product candidates as viable treatment options by patients, the medical community, and third-party payors;

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addressing any competing technological and market developments;

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identifying, assessing, acquiring, and developing new product candidates;

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obtaining and maintaining patent protection, regulatory exclusivity, and other intellectual property-related protection, both in the United States and internationally;

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enforcing and defending our rights in our intellectual property portfolio, including our licensed intellectual property; and

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attracting, hiring, and retaining qualified personnel.

We may never achieve our objectives and, even if we do, may never generate revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to maintain or further our research and development efforts, raise additional necessary capital, grow our business, or continue our operations.

Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates

We depend on the success of our product candidates, including our lead product candidate, sotigalimab, which is currently in multiple clinical trials. If we are unable to obtain approval for and commercialize our product candidates for one or more indications in a timely manner, our business will be materially harmed.

Our success depends on our or our partners'’ or licensees'’ ability to timely complete clinical trials and obtain marketing approval for, and then successfully commercialize, our product candidates, including our lead product candidate, sotigalimab, for one or more indications. Our product candidates are in the early stages of development and we are investing the majority of our efforts and financial resources in the research and development of sotigalimab for multiple indications, both directly through our own efforts and indirectly through clinical collaboration arrangements, including investigator- and cooperative group-sponsored trials (“ISTs”). Our product candidates will require additional clinical development, preclinical and manufacturing activities, marketing approval from government regulators, substantial investment, and significant marketing efforts before we generate any revenue from product sales. We are not permitted to market or promote any product candidates, in a jurisdiction before receiving marketing approval from the relevant regulatory authority, including, for example, the Food and Drug Administration (“FDA”) for marketing in the United States and the European Medicines Agency (“EMA”) for marketing in the European Union, and we may never receive such marketing approvals.

and the European Medicines Agency (“EMA”) for marketing in the European Union, and we may never receive such marketing approvals.

The success of our product candidates will depend on numerous factors, including the following:

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raising additional funds, or entering into collaborations, necessary to complete the clinical development of and to commercialize of our product candidates;

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successful and timely completion of our ongoing clinical trials;

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initiation and successful patient enrollment and completion of additional clinical trials on a timely basis;

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efficacy, safety and tolerability profiles that are satisfactory to the FDA, EMA or any comparable foreign regulatory authority for marketing approval;

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timely receipt of marketing approvals for our product candidates from applicable regulatory authorities;

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the extent of any required post-marketing approval commitments to applicable regulatory authorities;

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the maintenance of existing or the establishment of new supply arrangements with third-party drug product suppliers and manufacturers;

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the maintenance of existing or the establishment of new scaled production arrangements with third-party manufacturers to obtain finished products that are appropriately packaged for sale;

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obtaining and maintaining patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally;

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protection of our rights in our intellectual property portfolio, including our licensed intellectual property;

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successful launch of commercial sales following any marketing approval;

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a continued acceptable safety profile following any marketing approval;

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commercial acceptance by patients, the medical community, and third-party payors; and

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our ability to compete with other therapies.

We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, including trial design, implementation, and timely provision of data in our collaboration based clinical trials and ISTs; potential threats to our intellectual property rights; and the manufacturing, marketing, distribution, and sales efforts of any future collaborator. If we are unable to achieve one or more of the objectives set forth above, our business will be materially harmed.

Our clinical trials may reveal serious adverse events, toxicities, or other side effects of our current and any future product candidates that result in a safety profile that could inhibit regulatory approval or market acceptance of our product candidates.

In order to obtain marketing approval for our current or any future product candidates, we must demonstrate the safety and efficacy of the product candidate for the relevant clinical indication or indications through preclinical studies and clinical trials as well as additional supporting data. If our product candidates are associated with undesirable side effects in preclinical studies or clinical trials, or have unexpected characteristics, we may need to interrupt, delay, or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective.

Although we have conducted various preclinical studies and have data from various early-stage clinical trials, we do not know the predictive value of these studies and trials for our future clinical trials, and we cannot guarantee that any positive results in preclinical studies or previous clinical trials will successfully translate to patients in our future clinical trials. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical testing or previous clinical trials, and many product candidates fail in clinical trials despite promising preclinical or early-stage clinical results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.

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observe results in clinical trials that are unexpected based on preclinical testing or previous clinical trials, and many product candidates fail in clinical trials despite promising preclinical or early-stage clinical results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.

While we believe that sotigalimab has been reasonably well tolerated in our clinical trials, subjects have experienced adverse events that have been considered treatment-related. Some of the more common adverse events included fever, chills, fatigue, asthenia, nausea, vomiting, pruritus, abnormal liver function/gamma gamma-glutamyl transferase/alkaline phosphatase tests, decreased appetite, rash, headache, diarrhea, infusion-related reactions, and cytokine release syndrome (“CRS”). The majority of these events were mild/moderate in severity, responded to symptomatic treatment and/or were transient and resolved with time.

Serious, including sometimes fatal, adverse events (“SAEs”) have been reported in clinical studies with sotigalimab. The majority of these SAEs were considered unrelated to sotigalimab by the investigators. Some SAEs were considered at least possibly related to sotigalimab as well as possibly to other therapies it was combined with.

These possibly related events have included infusion-related reactions, CRS, elevated liver enzymes, bilirubin, fever, and colitis. Less frequent related SAEs reported in one patient each have included kidney injury, hepatic failure, bleeding, immune-mediated encephalitis, myositis, optic neuritis. Many of these SAEs were also considered possibly related to the chemotherapy, radiation or anti-PD(L)1 agent that were used in combination or were assessed as not related to sotigalimab after a safety review by the trial sponsor.

Subjects experienced numerous other SAEs that have been determined to be caused by their health condition or the side effects from other components of the treatment regimens, and not or unlikely related to sotigalimab. Given the high mortality rates of the cancers for which we are initially pursuing development, in particular melanoma, esophageal and gastroesophageal junction (“GEJ”) cancers, sarcoma, and ovarian cancer, and the pretreated nature of many patients in our completed, ongoing and planned clinical trials of sotigalimab, a number of these subjects have died as a result of their cancer or from direct side effects of surgery and other treatment regimens for their cancer. For example, in our clinical trial for esophageal and GEJ cancers, sotigalimab is combined with standard of care neoadjuvant chemotherapy, radiation and surgery. These standard of care treatments alone are associated with significant toxicities including fatal outcomes, and in this study, complications of surgery have resulted in the death of a patient.

We expect that subjects in our ongoing and planned clinical trials for our product candidates may in the future suffer adverse effects (“AEs”), SAEs or other side effects, including those not observed in our preclinical studies or previous clinical trials. Results of these trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our product candidates could result in the delay, suspension, or termination of clinical trials by us or the FDA, EMA or comparable foreign regulatory authority for a number of reasons. Additionally, a number of the subjects in these clinical trials are expected to die during a trial due to the cancers they suffer and any of the treatment regimens they may have previously experienced, which could impact the development of our product candidates. If we elect or are required to delay, suspend, or terminate any clinical trial, the commercial prospects of our product candidates will be harmed and our ability to generate product revenue from this product candidate will be delayed or eliminated. SAEs observed in clinical trials could hinder or prevent market acceptance of our drug candidates. Any of these occurrences may harm our business, prospects, financial condition, and results of operations significantly.

Even in circumstances in which we do not believe that an AE is related to our product candidates, the investigation into the circumstances of such AE may be time-consuming or inconclusive. In particular, patients may face serious medical issues associated with the underlying cancer indications that our product candidates target, as well as AEs from toxicities and other complications related to other study drugs administered alongside or in combination with our product candidates in clinical trials. For example, some of our clinical trials involve combination therapies of our product candidate with other cancer therapies, such as standard-of-care chemotherapy, chemoradiation or anti-PD-(L)1 agents. In these trials, it is difficult to ascertain whether treatment-related AEs are attributable to our product candidates or to the other agents, and the combination of therapies may have a complicating multiplier effect on such AEs that cannot be determined. As a result, while not directly associated with our product candidates, there are attendant risks with the space in which our product candidates operate, and any related investigations may interrupt our development and commercialization efforts, delay our regulatory approval process or impact and limit the type of regulatory approvals our product candidates receive or maintain.

If further SAEs or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, patients may discontinue treatment or withdraw from our trials or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, the EMA, other applicable regulatory authorities or an Institutional Review Board (“IRB”)/Ethics Committee may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage studies have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude a drug from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition, and prospects.

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obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition, and prospects.

Further, if any of our product candidates obtains marketing approval, toxicities associated with our product candidates may also develop after such approval and lead to a requirement to conduct additional clinical safety trials, additional warnings being added to the labeling, significant restrictions on the use of the product, or the withdrawal of the product from the market. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on preclinical studies or early-stage clinical testing.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.

We may not initiate, continue or complete clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA, EMA, or comparable foreign regulatory authorities.

Patient enrollment is a significant factor in the timing of clinical trials, and our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate. Patient enrollment may also be affected by other factors, including:

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size and nature of the patient population;

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severity of the disease under investigation;

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availability and efficacy of approved drugs for the disease under investigation;

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patient eligibility criteria for the trial in question;

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efforts to facilitate timely enrollment in clinical trials;

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patient referral practices of physicians;

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clinicians’ and patients’ awareness of, and perceptions as to the potential advantages and risks of, our product candidates in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

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the ability to monitor patients adequately during and after treatment;

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competing ongoing clinical trials for the same indications as our product candidates;

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proximity and availability of clinical trial sites for prospective patients;

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whether we become subject to a partial or full clinical hold on any of our clinical trials; and

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continued enrollment of prospective patients by clinical trial sites, including delays due to pandemics, wars etc. that can impact patient willingness to participate and travel for investigative therapy and reductions in clinical trial site staff and services.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more of our clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and jeopardize our ability to obtain marketing approval for the sale of our product candidates.

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Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates. Clinical testing is expensive, difficult to design and implement, can take many years to complete, and its ultimate outcome is uncertain. A failure of one or more clinical trials can occur at any stage of the process. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs. In addition, in our clinical trials of sotigalimab that are in combination with other available therapies, the results may be uncertain as to the efficacy of the sotigalimab combination when compared to the efficacy of other therapies that are being applied in the trial.

We do not know whether our future clinical trials will begin on time or enroll patients on time, or whether our ongoing and/or future clinical trials will be completed on schedule or at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

•

obtaining regulatory approval to commence a trial;

•

delays in reaching, or the inability to reach, agreement on acceptable terms with prospective contract research organizations (“CROs”), clinical trial sites, laboratory service providers, companion diagnostic development partners, contract manufacturing organizations, or CMOs, and other service providers we may engage to support the conduct of our clinical trials;

•

obtaining IRB approval at each clinical trial site;

•

recruiting a sufficient number of suitable patients to participate in a trial;

•

patients failing to comply with trial protocol or dropping out of a trial, rendering them not evaluable for study endpoints;

•

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

•

the availability of any applicable combination therapies;

•

developments in the safety and efficacy of any applicable combination therapies;

•

the need to add new clinical trial sites; or

•

delays in the testing, validation and manufacturing of product candidates and the delivery of these product candidates to clinical trial sites.

•

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent receipt of marketing approval or our ability to commercialize our product candidates, including:

•

receipt of feedback from regulatory authorities that requires us to modify the design of our clinical trials;

•

negative or inconclusive clinical trial results that may require us to conduct additional clinical trials or abandon certain drug development programs;

•

regulators or IRBs may not authorize us, our collaborators, or our investigators to commence a clinical trial or to conduct a clinical trial at a prospective site;

•

the number of patients required for clinical trials being larger than anticipated, enrollment in these clinical trials being slower than anticipated, or participants dropping out of these clinical trials at a higher rate than anticipated;

•

third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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•

the suspension or termination of our clinical trials for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects, safety or efficacy concerns, or any particular combination therapy or other unexpected characteristics or risks;

•

the cost of clinical trials of our product candidates being greater than anticipated;

•

for clinical trials testing combination treatment of our product candidates with third-party drug products, delays in procuring such third-party drug products and the delivery of such third-party drug products to clinical trial sites, or the inability to procure such third-party drug products at all; and

•

regulators revising the requirements for approving our product candidates, including as a result of newly approved agents changing the standard of care of an indication.

Any unforeseen events may cause us to be required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, or to be unable to successfully complete clinical trials of our product candidates or other testing. Clinical trial or test results may also not be positive or may be only modestly positive or may have safety concerns. For example, in the APX005M-002 Trial, we enrolled 95 patients with non-small cell lung cancer (“NSCLC”) who were either immunotherapy naïve or who had progressed while on anti-PD(L)1 therapy and treated those patients with sotigalimab in combination with nivolumab. Although we observed a modest number of objective responses in immunotherapy naïve patients and stable disease in patients who had previously progressed on or were refractory to prior anti-PD-(L)1 therapy, the data did not support advancing the development of sotigalimab in these lines of therapy in patients with NSCLC. Any of the foregoing events may cause us to incur unplanned costs, be delayed in obtaining marketing approval, if ever, receive more limited or restrictive marketing approval, be subject to additional post-marketing testing requirements, or have the drug removed from the market after obtaining marketing approval.

The outcome of preclinical testing and early clinical trials that we obtain and that we publish may not predict the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA, or comparable foreign regulatory authorities.

We currently have no products approved for sale and we cannot guarantee that we will ever have marketable drugs. Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any future collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in preclinical studies and early-stage clinical trials does not mean that future larger registration clinical trials will be successful. This is because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA, EMA, and other regulatory authorities despite having progressed through preclinical studies and early-stage clinical trials. In particular, no compound with the mechanism of action of sotigalimab has been commercialized, and the outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later-stage clinical trials. We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety results sufficient to obtain marketing approval to market our product candidates.

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Summary or preliminary data from our clinical trials that we announce or publish may change as new or revised patient data becomes available, and is subject to source verification procedures that could result in material changes in the final data.

As more patient data becomes available, we may publicly disclose new or revised preliminary data from our clinical trials. These preliminary updates are based on analyses of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to evaluate all data fully and carefully. As a result, the summary or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Summary or preliminary data also remain subject to source verification procedures that may result in the final data being materially different from the summary or preliminary data we previously published. As a result, summary or preliminary data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Preliminary data from clinical trials that we conduct may not be indicative of the final results of the trials and 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. Adverse changes between preliminary data and final data could significantly harm our business and prospects. Further, additional disclosure of preliminary data by us or by our competitors in the future could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate, and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. Interested parties may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities, or otherwise regarding a particular product candidate or our business. If the preliminary or topline data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, financial condition, results of operations, and prospects.

In some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, differences in and adherence to the dosing regimen and other trial protocols, use in combination with other therapies, and the rate of discontinuations by clinical trial participants. In addition, we may use patient-reported outcome assessments in some of our clinical trials, which involve patients’ subjective assessments of efficacy of the treatments they receive in the trial. Such assessments can vary widely from day to day for a particular patient, and from patient to patient and site to site within a clinical trial. This subjectivity can increase the uncertainty of, and adversely impact, our clinical trial outcomes.

Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.

Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community. For example, current standard-of-care cancer treatments, such as existing chemotherapy and radiation therapy, are well established in the medical community, and doctors may continue to rely on these treatments. The degree of market acceptance of any of our approved product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the efficacy and safety profile as demonstrated in clinical trials;

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the timing of market introduction of the product candidate as well as competitive products;

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the approval of other new therapies for the same indications;

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the clinical indications for which the product candidate is approved;

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restrictions on the use of our products, if approved, such as boxed warnings, contraindications in labeling, or restrictions on use of our products together with other medications, or a risk evaluation and mitigation strategy (“REMS”), if any, which may not be required of alternative treatments and competitor products;

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the potential and perceived advantages of product candidates over alternative treatments or in combination therapies;

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the cost of treatment in relation to alternative treatments;

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the availability of coverage and adequate reimbursement and pricing by third parties and government authorities;

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relative convenience and ease of administration;

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the effectiveness of sales and marketing efforts;

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

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unfavorable publicity relating to the product candidate.

If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors, and patients, we may generate less revenue from that product candidate than anticipated, which could harm our financial results.

The sizes of the patient populations suffering from some of the diseases we are targeting may be based on estimates that are inaccurate, may be small, or may be smaller than estimated.

We rely on estimates to project the incidence and prevalence of diseases we are targeting and the subset of patients with these diseases who have the potential to benefit from treatment with sotigalimab and our other product candidates. We derive these estimates from a variety of sources, including United States and global cancer databases, scientific literature, surveys of clinics, physician interviews, patient foundations, and market research, and they may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for sotigalimab and any other future product candidates may be more limited than we originally estimated or may not be amenable to treatment with sotigalimab and any other product candidates, if and when approved. For example, in March 2022, the FDA approved nivolumab and relatlimab-rmbw (OpdualagTM) for use in patients with unresectable or metastatic melanoma, which may limit the number of patients with unresectable or metastatic melanoma that have progressive disease during treatment with anti-PD-(L)1 therapy, which would be the target population for a potential registration-enabling study of sotigalimab in combination with a PD-(L)1 inhibitor that we are considering. Even if we obtain significant market share for sotigalimab and any other product candidates, small potential target populations for certain indications means we may never achieve profitability without obtaining market approval for additional indications.

Many of our additional internal programs, including APX601, are at earlier stages of development than sotigalimab and may fail in development or suffer delays, including if we are unable to raise adequate additional funding, that adversely affect their commercial viability.

Other than sotigalimab, all of our internal programs are in preclinical development or at the research stage and may fail in development or suffer delays that adversely affect their commercial viability. These programs may fail to yield product candidates. A product candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for product candidates is high due to risks relating to safety, efficacy, clinical execution, changing standards of medical care, and other unpredictable variables. The results from preclinical testing or early clinical trials of a product candidate may not be predictive of the results that will be obtained in later-stage clinical trials of the product candidate. The success of any product candidates we may develop will depend on many factors, including the following:

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generating sufficient data to support the initiation or continuation of clinical trials;

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obtaining regulatory permission to initiate clinical trials;

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contracting with the necessary parties to conduct clinical trials;

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the successful enrollment of patients in, and the completion of, clinical trials;

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the timely manufacture of sufficient quantities of the product candidate, and any combination therapy, for use in clinical trials; and

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acceptable adverse profile in the clinical trials.

We will need additional funding to continue to advance the development of our other internal programs, including APX601. If we are unable to secure adequate funding to continue such development, we expect that we will be required to delay or stop the development of such programs.

Even if we successfully advance any other product candidates into clinical development, their success will be subject to all of the clinical, regulatory and commercial risks described elsewhere in this “Risk Factors” section. Accordingly, we cannot assure you that we will ever develop, obtain regulatory approval of, commercialize, or generate significant revenue from any product candidate.

Any product candidates we develop may become subject to unfavorable third-party reimbursement practices and pricing regulations.

The availability and extent of coverage and adequate reimbursement by governmental and private payors is essential for most patients to afford the expense of antibody therapeutics like sotigalimab and our other product candidates. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations or reimbursed by government health administration authorities, private health coverage insurers, and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

There is significant uncertainty related to insurance coverage and reimbursement of newly approved products. In the United States, principal decisions about reimbursement for new products are typically made by Centers for Medicare & Medicaid Services (“CMS”), an agency within the U.S. Department of Health and Human Services (“HHS”). CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private payors often follow CMS’s decisions regarding coverage and reimbursement to a substantial degree. However, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Increasingly, third-party payors require that drug companies provide them with predetermined discounts from list prices and challenge the prices charged for medical products. Further, such payors increasingly challenge the price, examine the medical necessity and review the cost effectiveness of medical drug products. There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Various industry stakeholders, including pharmaceutical companies, the Global Colon Cancer Association, and the Pharmaceutical Research and Manufacturers of America, have initiated lawsuits against the federal government asserting that the price negotiation provisions of the Inflation Reduction Act are unconstitutional. The impact of these judicial challenges as well as future legislative, executive, and administrative actions and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear.

Third-party payors may limit coverage to specific drug products on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive studies to demonstrate the medical necessity and cost-effectiveness of our products. Nonetheless, our product candidates may not be considered medically necessary or cost effective. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.

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Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as our product candidates. In many countries, particularly the countries of the European Union, medical product prices are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after a product receives marketing approval. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In general, product prices under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for 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 products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

If we are unable to establish or sustain coverage and adequate reimbursement for any future product candidates from third-party payors, the adoption of those products and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates. Coverage policies and third-party reimbursement rates may change at any time. Even if we attain favorable coverage and reimbursement status for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

If our competitors develop and market products that are more effective, safer, or less expensive than our product candidates, our commercial opportunities will be negatively impacted.

The biotechnology industry is highly competitive and subject to rapid and significant technological change. Moreover, the oncology field is characterized by strong and increasing competition, with a strong emphasis on intellectual property. Products we may develop in the future for the treatment of cancer and any other diseases are likely to face competition from other drugs and therapies, including those of which we may not currently be aware. In addition, our products may need to compete with off-label drugs used by physicians to treat the indications for which we seek approval. This may make it difficult for us to replace existing therapies with our products.

Major multinational pharmaceutical and biotechnology companies, emerging and start-up companies, universities, and other research institutions, could focus their future efforts on developing competing therapies and treatments for any of the indications we are currently targeting or may target in the future. For example, each of Alligator Bioscience AB, Celldex Therapeutics, Inc., Seagen Inc., Lyvgen Biopharma, Eucure Biopharma, a subsidiary of Biocytogen, Hoffmann-La Roche AG, and AbbVie Inc. are developing CD40-based antibody product candidates for solid tumor oncology indications that are in clinical trials, typically in combination therapies, and other companies and institutions have other CD40-based product candidates in development.

Many of these current and potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources, and commercial expertise than we do. Large pharmaceutical and biotechnology companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients, and manufacturing biotechnology products. These companies also have significantly greater research, development, and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical and biotechnology companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. As a result of any of these factors, our competitors may succeed in obtaining approval from the FDA, EMA, or foreign regulatory authorities or discovering, developing, and commercializing products in our field before or more successfully than we do.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for planned clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. In addition, the biotechnology industry is characterized by rapid technological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.

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We have limited resources and are currently focusing our efforts on developing sotigalimab. As a result, we may fail to capitalize on other product candidates or indications that may ultimately have proven to be more profitable.

We are currently focusing our efforts on completing clinical trials of sotigalimab for a variety of indications, including sarcoma, esophageal and GEJ cancers and melanoma. As a result, we may forego or delay pursuit of opportunities for other indications or with other product candidates that may have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable product candidates or profitable market opportunities. Our spending on current and future research and development activities for specific indications may not yield any commercially viable drugs. If we do not accurately evaluate the commercial potential or target markets for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other strategic arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We are developing some of our product candidates for use in combination with standard-of-care as well as emerging or experimental cancer therapies, which exposes us to several risks beyond our control.

We are developing some of our product candidates, including sotigalimab, for use in combination with current standard of care or other emerging or experimental cancer therapies. This exposes us to supply risk to the extent there is not an adequate supply of these therapies for use in combination with our product candidates, either in clinical trials or after any approval, as well as pricing risk if these combination therapies are expensive and the addition of our product candidates would be too costly to support reimbursement or payor coverage. In particular, providers of some of these emerging or experimental therapies have been contributing their therapies to use in combination trials at generally no or limited cost to us. If this were to change, our trial costs could increase substantially. Also, although combinations with an experimental agent that has not been approved may prove to be clinically beneficial, the experimental agent will still need to meet regulatory approval requirements for the combined therapy to become commercially available. In addition, if the standard of care were to evolve or change, the clinical utility of our product candidates could be diminished or eliminated. If any of these were to occur, our business could be materially harmed.

We may use companion diagnostics in the future in our development programs, and if such companion diagnostics for our product candidates are not successfully, and in a timely manner, validated, developed, or approved, we may not achieve marketing approval or realize the full commercial potential of our product candidates.

We may use companion diagnostics in our future product candidate development programs. If such companion diagnostics are developed in conjunction with clinical programs, the FDA, EMA, or comparable regulatory authority may require regulatory approval of a companion diagnostic as a condition to approval of the product candidate. For example, if we use a diagnostic to test which patients are most likely to benefit from our product candidate for the treatment of a particular indication as a criterion for enrollment, then we will likely be required to obtain FDA approval or clearance of the companion diagnostic, concurrent with approval of our product candidate. We may also be required to demonstrate to the FDA the predictive utility of a companion diagnostic, i.e., that the diagnostic selects for patients in whom the therapy will be effective or more effective compared to patients not selected for by the diagnostic. We do not have experience or capabilities in developing or commercializing diagnostics and plan to rely in large part on third parties to perform these functions. We do not currently have any agreement in place with any third party to develop or commercialize companion diagnostics for any of our product candidates. Companion diagnostics are subject to regulation by the FDA, the EMA, and other foreign regulatory authorities as medical devices and require separate regulatory approval or clearance prior to commercialization.

If we or our partners, or any third party, are unable to successfully develop companion diagnostics in the future in our product candidates, or experience delays in doing so:

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the development of our product candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our planned clinical trials;

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our product candidates may not receive marketing approval if their safe and effective use depends on a companion diagnostic; and

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we may not realize the full commercial potential of any product candidates that receive marketing approval if, among other reasons, we are unable to appropriately identify patients targeted by our product candidates.

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characteristics recommended for similar tests that may be used to select patients for treatment with the approved drug to help laboratories identify specific biomarkers for their development of laboratory-developed tests, and to ensure more consistent performance of these tests for drug selection and improved cancer patient care. We will continue to evaluate the impact of the FDA guidance documents and other developments in the diagnostic space on our development plans and strategy. In addition, any future product candidates developed in conjunction with companion diagnostics may be perceived negatively compared to alternative treatments that do not require the use of companion diagnostics, either due to the additional cost of the companion diagnostic, the requirement of samples for testing, or the need to complete additional procedures to identify genetic markers prior to administering our product candidates. If any of these events were to occur, it would significantly harm our business, results of operations and prospects.

Our business entails a significant risk of product liability, and if we do not obtain sufficient insurance coverage, the costs of product liability could have an adverse effect on our business and financial condition.

Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing, and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an FDA, EMA, or other regulatory investigation of the safety and effectiveness of our products, our manufacturing processes and facilities, or our marketing programs. Such regulatory investigation could potentially lead to a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, and substantial monetary awards to trial participants or patients. We would expect to obtain product liability insurance prior to marketing any of our product candidates. Any insurance Apexigen has now or that we may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have an adverse effect on our business and financial condition.

Risks Related to Regulatory Approval and Other Legal Compliance Matters for Our Product Candidates

The regulatory approval processes of the FDA, EMA, and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

The time required to obtain approval by the FDA, EMA, and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity, and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical, or other studies. For example, FDA’s Oncology Center of Excellence initiated Project Optimus to reform the dose optimization and dose selection paradigm in oncology drug development and Project FrontRunner to help develop and implement strategies to support approvals in early clinical setting, among other goals. How the FDA plans to implement these goals and their impact on specific clinical programs and the industry are unclear. We have not submitted for, or obtained regulatory approval for, any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including the following:

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

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the FDA, EMA, or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective, or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;

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the population studied in the clinical program may not be sufficiently broad or representative to assure safety and efficacy in the full population for which we seek approval, including for example due to biologic and genetic differences that might occur in subjects in certain populations such as defined by race or other factors;

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we may be unable to demonstrate to the FDA, EMA, or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio when compared to the standard of care is acceptable;

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

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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a Biologics License Application (“BLA”), New Drug Application (“NDA”), or other submission or to obtain regulatory approval in the United States or elsewhere;

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we may be unable to demonstrate to the FDA, EMA, or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for a proposed indication is acceptable;

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the FDA, EMA, or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

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

Further, development of our product candidates and/or regulatory approval may be delayed for reasons beyond our control. For example, a U.S. federal government shutdown or budget sequestration, such as ones that occurred during 2018 and 2019, or other FDA priorities, such as responding to COVID-19, may result in significant reductions to, or demands on, the FDA’s budget, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.

Our product candidates may cause undesirable side effects or have other properties that could prevent their regulatory approval or result in significant negative consequences.

Adverse events or other undesirable side effects caused by our product candidates 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, EMA, or other comparable foreign regulatory authorities. Drug-related side effects could affect patient recruitment, the ability of enrolled patients to complete the trial, and/or result in potential product liability claims. Regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical trial participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.

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

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regulatory authorities may withdraw approvals of such product and cause us to recall our products;

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regulatory authorities may require additional warnings on the label or impose a more restrictive, narrower indication for use of the agent;

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we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;

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we may be required to create a REMS plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements, such as boxed warning on the packaging, to assure safe use;

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

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our reputation may suffer.

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

For any current and future clinical trials for our product candidates outside the United States, the FDA, EMA, and applicable foreign regulatory authorities may not accept data from such trials.

We conduct clinical trials outside the United States, including in Europe, and we may choose to conduct future clinical trials outside the United States. The acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA, EMA, or applicable foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless the data are applicable to the United States population and United States medical practice, and the trials were performed by clinical investigators of recognized competence and pursuant to Good Clinical Practice (“GCP”) regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have comparable approval requirements, including appropriate examination of the product in the country-specific population. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA, EMA, or any applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA, EMA, or any applicable foreign regulatory authority does not accept such data, it may result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and may result in our product candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will succeed in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA, EMA, or comparable foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in certain countries. If we or any partner we work with fails to comply with the regulatory requirements in international markets or fails to receive applicable marketing approvals, our target market will be reduced, and our ability to realize the full market potential of our product candidates will be harmed.

Even if we apply for and obtain accelerated approval or Breakthrough Therapy, Fast Track or other designation intended to expedite, facilitate or reduce the cost of pursuing development or regulatory review or approval with the FDA or other regulatory authorities for any of our product candidates, there is no guarantee that such designation would lead to faster development, regulatory review, or approval, nor would it increase the likelihood that any such product candidate will receive marketing approval.

If a product candidate is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for such condition or a substantial improvement over available therapy for such condition, a product candidate sponsor may apply for FDA Fast Track or Breakthrough Therapy designation, and there may be other priority designations available under various regulatory bodies. In the future, we may apply for such priority designation depending on the results of our clinical trials. Even though we may apply for and receive a Fast Track, Breakthrough Therapy or other priority designations, such priority designation does not ensure that we will receive marketing approval or that approval will be granted within any particular timeframe. We may not experience a faster development or regulatory review or approval process with the priority designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track or Breakthrough Therapy designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track or Breakthrough Therapy designation alone does not guarantee qualification for the FDA’s priority review procedures. Further, even if any of our products obtain Fast Track or Breakthrough Therapy designation, this may not lead to earlier regulatory approval or commercialization of our products due to the extensive and time-consuming steps necessary to obtain FDA approval and commercialize a product candidate. In December 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act (FDORA), was signed into law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.

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any of our products obtain Fast Track or Breakthrough Therapy designation, this may not lead to earlier regulatory approval or commercialization of our products due to the extensive and time-consuming steps necessary to obtain FDA approval and commercialize a product candidate. In December 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act (FDORA), was signed into law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to extensive regulatory scrutiny.

If any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive requirements imposed by the FDA, EMA, and comparable foreign regulatory authorities, including ensuring that quality control and manufacturing procedures conform to Good Manufacturing Practice (“GMP”) regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with GMP and adherence to commitments made in any BLA, NDA, or Marketing Authorization Application (“MAA”). Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including potentially the requirement to implement a REMS), or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA, EMA, and comparable foreign regulatory authorities. Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have approval. The holder of an approved BLA, NDA, or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. If original marketing approval was obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

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issue warning letters that would result in adverse publicity;

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impose civil or criminal penalties;

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suspend or withdraw regulatory approvals;

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suspend any of our ongoing clinical trials;

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refuse to approve pending applications or supplements to approved applications submitted by us;

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impose restrictions on our operations, including closing our contract manufacturers’ facilities;

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seize or detain products; or

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require a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, this would significantly harm our business, financial condition, results of operations, and growth prospects.

Healthcare legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In particular, in 2010, the Patient Protection and Affordable Care Act (“ACA”) was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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the demand for our products after obtaining any regulatory approval;

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our ability to receive or set a price that we believe is fair for our products;

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our ability to generate revenue and achieve or maintain profitability;

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the level of taxes that we are required to pay; and

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the availability of capital.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement and new payment methodologies. For example, in August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. The prescription drug provisions of the Inflation Reduction Act and other healthcare reforms that may be implemented in the future could lower the price that we receive for any approved product. Various industry stakeholders have initiated lawsuits against the federal government asserting that the price negotiation provisions of the Inflation Reduction Act are unconstitutional. The impact of these judicial challenges, including uncertainties created by the prescription drug price negotiation provisions of the Inflation Reduction Act, as well as future legislative, executive, and administrative actions and agency rules implemented by the government, on us and the pharmaceutical industry as a whole is unclear. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product candidates, if approved.

Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to:

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comply with the laws of the FDA, EMA and other comparable foreign regulatory authorities;

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provide true, complete and accurate information to the FDA, EMA and other comparable foreign regulatory authorities;

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comply with manufacturing standards we have established;

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comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or

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report financial information or data accurately or to disclose unauthorized activities to us.

If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, research, sales, marketing, education and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We plan to adopt a code of business conduct and ethics in connection with this offering, but it is not always possible to identify and deter misconduct by employees and 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 be in compliance with such laws. 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, including the imposition of significant fines or other sanctions.

If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations, and financial conditions could be adversely affected.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be subject to various federal and state fraud and abuse laws. The laws that may impact our operations include the following:

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The federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, 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 a federal healthcare program, such as the Medicare and Medicaid programs. 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. In addition, 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.

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Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, impose criminal and civil penalties, including through civil actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other third-party payors that are false or fraudulent, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.

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The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created new federal criminal statutes that prohibit 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 by any trick or device a material fact or making any ~~materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.~~

materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of individually identifiable health information without appropriate authorization.

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The federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, require manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the HHS under the Open Payments Program, information related to payments or other transfers of value made to covered recipients, as defined by law, including physicians, certain non-physician providers, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

•

Federal consumer protection and unfair competition laws broadly regulate marketplace activities and activities that potentially harm consumers.

Analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer protection, and unfair competition laws may apply to pharmaceutical business practices, including research, distribution, sales, and marketing arrangements, as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers.

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State laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and other potential referral sources.

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State laws also require drug manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensations, and other remuneration, and items of value provided to healthcare professionals and entities.

•

State and foreign laws and regulations also govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under one or more of such laws. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. 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, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. Further, achieving and sustaining compliance with applicable federal and state privacy, security, and fraud laws may prove costly.

If we or any clinical collaborators, CROs, contract manufacturers, or other contractors and suppliers that we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.

We and any clinical collaborators, CROs, contract manufacturers, or other contractors and suppliers that we engage are subject to numerous federal, state, and local environmental, health and safety laws, regulations, and permitting requirements, including:

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those governing laboratory procedures;

•

the generation, handling, use, storage, treatment and disposal of hazardous and regulated materials and wastes;

•

the emission and discharge of hazardous materials into the ground, air and water; and

•

employee health and safety.

Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development, and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty, and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our business activities may be subject to the FCPA and similar anti-bribery and anti-corruption laws.

Our business activities may be subject to the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery or anti-corruption laws, regulations, or rules of other countries in which we operate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the researchers with whom we conduct clinical trials, and the healthcare providers who prescribe pharmaceuticals, are employed by their government, and the purchasers of pharmaceuticals are government entities. As a result, our dealings with these researchers, prescribers, and purchasers are subject to regulation under the FCPA. Recently the ~~Securities and Exchange Commission (“~~SEC”) and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents, contractors or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results and financial condition.

Failure to comply with privacy and data protection laws, regulations, or contractual obligations could lead to government enforcement actions (which could include civil or criminal penalties), private disputes and litigation, and/or adverse publicity and could negatively affect our operating results and business.

We receive, generate, and store significant and increasing volumes of sensitive and personal information, such as employee, personal, patient and collaborator data. In addition, we actively seek access to medical information, including patient data, through research and development partnerships and collaborations or otherwise. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of personal ~~data~~information. We and our partners may be subject to federal, state, and foreign privacy and data protection laws and regulations (i.e., laws and regulations that address privacy and data security). These privacy and data protection laws and regulations continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance.

56In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure, protection, and other processing of health-related and other personal information could apply to our operations or the operations of our partners, including during our clinical trials. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH, which establish privacy and security standards that limit the use and disclosure of individually identifiable health information and require the implementation of administrative, physical, and technological safeguards to protect the privacy of individually identifiable health information and ensure the confidentiality, integrity, and availability of electronic protected health information. Determining whether individually identifiable health information has been handled in compliance with applicable privacy laws, regulations, and standards and our contractual obligations can require complex factual and statistical analyses and may be subject to changing interpretation. Depending on the facts and circumstances, we could be subject to civil and criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Enforcement activity can result in financial liability and reputational harm, and responses to such enforcement activity can consume significant internal resources. We cannot be sure how these regulations will be interpreted, enforced, or applied to our operations. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems. Failure to comply with any of these laws or regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers and other affected individuals, damage to our reputation, and loss of goodwill (both in relation to existing and prospective customers), any of which could have a material adverse effect on our business, financial condition, results of operations, or prospects.

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Although we take measures to protect sensitive data from unauthorized access, use or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or other malicious third parties or viruses or breached due to employee error, malfeasance, or other malicious or inadvertent disruptions. Any such attack, breach, or other security breach or incident, or any interruption, could compromise our networks and the information processed there could be accessed by unauthorized parties, manipulated, publicly disclosed, lost, stolen or otherwise processed without authorization. Any such access, loss, other unauthorized processing, or any other security breach or incident, could result in legal claims or proceedings, and liability under federal or state laws that protect the privacy of personal information, such as HIPAA and HITECH, and regulatory penalties. Notice of certain security breaches must be made to affected individuals, the Secretary of the HHS, and for extensive breaches, notice may need to be made to the media or State Attorneys General. Such a notice could harm our reputation and our ability to compete. The HHS has the discretion to impose penalties without attempting to resolve violations through informal means. In addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. Although we have implemented security measures designed to prevent unauthorized access to patient data, such data is currently accessible through multiple channels, and there is no guarantee we can protect our data from security breaches or incidents, loss, or other unauthorized processing. Unauthorized access, loss, dissemination or other processing could also damage our reputation or disrupt our operations, including our ability to conduct our analyses, deliver test results, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process and prepare company financial information, provide information about our tests and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business. 62

57We may collect, use, transfer, or otherwise process personal information from individuals located in the European Economic Area (“EEA”), Switzerland, and the United Kingdom (collectively, “Europe”) in connection with our business, including in connection with conducting clinical trials in Europe. Additionally, if any of our product candidates are approved, we may seek to commercialize those products in Europe. The collection, use, and other processing of personal information, including health information, in Europe are governed by laws, regulations, and directives, including the General Data Protection Regulation (EU) 2016/679 (“GDPR”). This legislation imposes requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. This legislation imposes significant responsibilities and liabilities in relation to personal data that we process, and we may be required to put in place additional mechanisms ensuring compliance. In particular, with respect to cross-border transfers of personal data, judicial and regulatory developments in Europe have created uncertainty. In a decision issued by the Court of Justice of the European Union (“CJEU”) on July 16, 2020, the CJEU invalidated one mechanism for cross-border personal data transfer, the EU-U.S. Privacy Shield, and imposed additional obligations on companies, including us, relying on standard contractual clauses issued by the European Commission (“SCCs”) for cross-border personal data transfers. The European Commission released new SCCs designed to address the CJEU concerns on June 4, 2021, which are required to be implemented. Additionally, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses (the “UK SCCs”) to support personal data transfers out of the United Kingdom on February 2, 2022, which also are required to be implemented. The European Commission adopted an adequacy decision in relation to the EU-U.S. Data Privacy Framework (“EU-U.S. DPF”) as a cross-border personal data transfer mechanism on July 10, 2023. We have undertaken certain efforts to conform transfers of personal data from Europe to the United States to our understanding of regulatory obligations and applicable guidance of data protection authorities, but the CJEU’s decision, the revised SCCs and UK SCCs, regulatory guidance and opinions, and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal information transferred out of Europe or other regions which may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations, and may adversely impact our business, financial condition and operating results. Any actual or alleged failure to comply with the requirements of the GDPR or other laws, regulations, and directives of jurisdictions and regulators within Europe may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, financial condition and results of operations.

WeIn ~~may collect~~addition, ~~process,~~U.S. ~~use~~states orare ~~transfer~~adopting ~~personal~~new ~~information~~laws ~~from~~or ~~individuals~~amending ~~located~~existing inlaws ~~the European Economic Area (“EEA”), Switzerland,~~ and ~~the United Kingdom (collectively~~regulations, ~~“Europe”)~~requiring ~~Union~~attention into ~~connection~~frequently ~~with~~changing ~~our~~regulatory ~~business,~~requirements ~~including~~applicable into ~~connection~~data ~~with~~related ~~conducting clinical trials in Europe. Additionally, if any of our product candidates are approved, we may seek~~ to ~~commercialize those products in Europe~~individuals. ~~The~~For ~~collection~~example, ~~use,~~California ~~and~~has ~~other~~enacted ~~processing of personal health data in Europe are governed by laws, regulations, and directives, including~~ the ~~General~~California ~~Data~~Consumer ~~Protection~~Privacy ~~Regulation~~Act (~~EU) 2016/679 (~~“~~GDPR~~CCPA”). ~~This~~The ~~legislation~~CCPA ~~imposes~~gives ~~requirements~~California ~~relating~~residents toexpanded ~~having~~rights ~~legal bases for processing personal information relating~~ to ~~identifiable~~access ~~individuals~~ and ~~transferring~~delete ~~such information outside of the EEA, including to the United States, providing details to those individuals regarding the processing of~~ their personal information, ~~keeping~~opt ~~personal~~out ~~information~~of ~~secure,~~certain ~~having data processing agreements with third parties who process~~ personal information, ~~responding~~sharing toand ~~individuals’~~receive ~~requests~~detailed toinformation ~~exercise~~about ~~their~~how ~~rights in respect of~~ their personal information, ~~reporting~~is ~~security~~used ~~breaches~~by ~~involving~~requiring ~~personal~~covered ~~data~~companies to ~~the~~provide ~~competent~~new ~~national~~disclosures ~~data~~to ~~protection~~California ~~authority~~consumers ~~and~~(as ~~affected~~that ~~individuals,~~term ~~appointing~~is ~~data~~broadly ~~protection~~defined ~~officers,~~and ~~conducting~~which ~~data~~can ~~protection~~include ~~impact~~any ~~assessments~~of ~~and~~our ~~record-keeping.~~current ~~This~~or ~~legislation~~future ~~imposes~~employees ~~significant~~who ~~responsibilities~~may ~~and~~be ~~liabilities~~California inresidents ~~relation~~or toany ~~personal~~other ~~data~~California ~~that~~residents wewhose ~~process,~~data ~~and~~ we ~~may~~collect beor ~~required~~process) toand ~~put~~provide insuch ~~place~~residents ~~additional~~new ~~mechanisms~~ways ~~ensuring~~to ~~compliance.~~opt Inout ~~particular,~~of ~~with~~certain ~~respect~~sales ~~to cross-border transfers~~ of personal ~~data,~~information. ~~judicial~~The ~~and~~CCPA ~~regulatory~~provides ~~developments~~for incivil ~~Europe~~penalties ~~have~~for ~~created~~violations, ~~uncertainty.~~as Inwell as a ~~decision~~private ~~issued~~right byof ~~the~~action ~~Court~~for ofdata ~~Justice~~breaches ofthat ~~the~~is ~~European~~expected ~~Union~~to ~~(“CJEU”)~~increase ondata ~~July~~breach ~~16,~~litigation. ~~2020,~~As ~~the~~we ~~CJEU~~expand ~~invalidated~~our ~~one~~operations ~~mechanism~~and ~~for~~trials ~~cross-border~~(both ~~personal~~preclinical ~~data~~or ~~transfer~~clinical), the ~~EU-U.S.~~CCPA ~~Privacy~~may ~~Shield,~~increase ~~and~~our ~~imposed~~compliance ~~additional~~costs ~~obligations~~and onpotential ~~companies,~~liability. ~~including us~~Additionally, ~~relying~~the onCalifornia ~~standard~~Privacy ~~contractual~~Rights ~~clauses~~Act ~~issued by the European Commission~~ (“~~SCCs~~CPRA”) ~~for~~was ~~cross-border~~approved ~~personal~~by ~~data~~California ~~transfers.~~voters ~~The~~in ~~European~~November ~~Commission~~2020, ~~released~~modifying ~~new SCCs designed to address~~ the ~~CJEU~~CCPA ~~concerns~~significantly, onincluding ~~June~~by 4,imposing ~~2021,~~additional ~~which~~obligations ~~are~~relating ~~required~~ to beconsumer ~~implemented.~~data ~~Additionally,~~and ~~the~~expanding ~~United Kingdom~~consumers’s ~~Information~~right ~~Commissioner’s~~with ~~Office~~respect ~~issued new standard contractual clauses (the “UK SCCs”)~~ to ~~support~~certain sensitive personal ~~data~~information. ~~transfers~~The ~~out~~CCPA ofbecame ~~the~~operative ~~United Kingdom~~ on ~~February~~January 21, 2022, ~~which~~with ~~also~~enforcement ~~are required~~ to becommence ~~implemented.~~on WeMarch ~~have~~29, ~~undertaken~~2024, ~~certain~~potentially ~~efforts~~resulting toin ~~conform~~further ~~transfers~~uncertainty ofand ~~personal~~requiring ~~data~~us ~~from Europe~~ to ~~the~~incur ~~United~~additional ~~States~~costs ~~to our understanding of current regulatory obligations~~ and ~~guidance~~expenses ofin ~~data~~an ~~protection~~effort ~~authorities,~~to ~~but~~comply. ~~the CJEU’s decision~~Additionally, ~~the~~other ~~revised~~U.S. ~~SCCs~~states and UKthe ~~SCCs,~~U.S. ~~regulatory~~federal ~~guidance~~government ~~and~~continue ~~opinions, and other developments relating~~ to ~~cross-border~~propose, ~~data transfer may require us to implement additional contractual~~ and ~~technical~~in ~~safeguards~~the ~~for~~case ~~any personal data transferred out~~ of ~~Europe~~certain orstates ~~other~~adopt, ~~regions~~privacy-focused ~~which may increase compliance costs~~legislation, ~~lead~~such toas ~~increased~~laws ~~regulatory~~enacted ~~scrutiny~~in orColorado, ~~liability~~Virginia, ~~may~~Utah, ~~require~~Connecticut, ~~additional~~Florida, ~~contractual~~Montana, ~~negotiations~~Oregon, ~~and~~Texas, ~~may~~Tennessee, ~~adversely impact our business~~Iowa, ~~financial condition~~ and ~~operating results~~Indiana. ~~Any~~Aspects ~~actual or alleged failure to comply with the requirements~~ of ~~the~~these ~~GDPR~~state orlaws ~~other~~remain ~~laws~~unclear, ~~regulations,~~resulting ~~and~~in ~~directives~~further ofuncertainty ~~jurisdictions~~ and ~~regulators~~potentially ~~within~~requiring ~~Europe~~us ~~may~~to ~~result~~modify inour ~~substantial~~data ~~fines,~~practices ~~other~~and ~~administrative~~policies ~~penalties~~ and ~~civil~~to ~~claims~~incur ~~being~~substantial ~~brought~~additional ~~against~~costs ~~us,~~and ~~which~~expenses ~~could~~in ~~have~~an aeffort ~~material~~to ~~adverse effect on our business, financial condition and results of operations~~comply.

InFailure ~~addition, U.S. states are adopting new laws or amending existing laws and regulations, requiring attention~~ to ~~frequently~~comply ~~changing~~with ~~regulatory requirements applicable to data related to individuals~~U. ~~For example, California has enacted the California Consumer Privacy Act (“CCPA”)~~S. ~~The CCPA gives California residents expanded rights to access~~ and ~~delete~~international ~~their~~privacy ~~personal information, opt out of certain personal information sharing~~ and ~~receive~~data ~~detailed~~protection ~~information~~laws ~~about~~or ~~how~~regulations ~~their~~could ~~personal~~result ~~information~~in isgovernment ~~used~~enforcement byactions ~~requiring covered companies to provide new disclosures to California consumers~~ (~~as that term is broadly defined and~~ which ~~can~~could include ~~any~~civil ~~of our current~~ or ~~future~~criminal employees who may be California residents or any other California residents whose data we collect or process) and provide such residents new ways to opt out of certain sales of personal information. The CCPA provides for civil penalties ~~for violations~~), ~~as well as a~~ private ~~right of action for data breaches that is expected to increase data breach~~ litigation., ~~As we expand our operations~~ and ~~trials (both preclinical~~ /or ~~clinical),~~adverse ~~the~~publicity ~~CCPA~~and ~~may~~could ~~increase~~negatively affect our ~~compliance~~operating ~~costs~~results and ~~potential liability~~business. ~~Additionally~~Moreover, apatients ~~new~~about ~~privacy~~whom ~~law,~~we ~~the~~or ~~California~~our ~~Privacy~~partners ~~Rights~~obtain ~~Act (“CPRA”)~~information, ~~was~~as ~~approved~~well byas ~~California~~the ~~voters~~providers inwho ~~November~~share ~~2020.~~this ~~The~~information ~~CPRA created obligations relating to consumer data beginning on January 1, 2022,~~ with ~~enforcement anticipated to commence July 1~~us, ~~2023.~~may ~~The~~contractually ~~CPRA~~limit ~~modifies~~our ~~the~~ability ~~CCPA significantly, potentially resulting in further uncertainty and requiring us~~ to ~~incur~~use ~~additional costs~~ and ~~expenses~~disclose inthe ~~an effort to comply~~information. ~~Additionally,~~Claims ~~other~~that ~~U.S.~~we ~~states~~have ~~and~~violated ~~the~~individuals’ ~~U.S.~~privacy ~~federal~~rights, ~~government~~failed ~~continue~~ to ~~propose,~~comply ~~and~~with ~~in the case of certain states adopt,~~ privacy~~-focused~~ ~~legislation,~~and ~~such~~data asprotection laws ~~enacted~~or inregulations ~~Colorado,~~or ~~Virginia,~~breached ~~Utah~~our ~~and~~contractual ~~Connecticut.~~obligations, ~~Aspects~~even ofif ~~these~~we ~~state~~are ~~laws~~not ~~remain~~found ~~unclear~~liable, ~~resulting~~could inbe ~~further~~expensive ~~uncertainty~~ and ~~potentially~~time-consuming ~~requiring us~~ to ~~modify~~defend ~~our data practices~~ and ~~policies~~could ~~and~~result toin ~~incur~~adverse ~~substantial~~publicity ~~additional~~that ~~costs~~could ~~and~~harm ~~expenses~~our ~~in an effort to comply~~business.

Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, patients about whom we or our partners obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information

Filing Compare · Apexigen, Inc.