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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-04-01 · 614 added, 668 removed, 260 unchanged (83% of the section changed)

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FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

Notes to Consolidated Financial Statements

of Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets as of December 31, 2022 and 2021

Statements of Operations for the Years Ended December 31, 2022 and 2021

Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2022 and 2021

Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

to Consolidated Financial Statements

of Independent Registered Public Accounting Firm

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of Hillstream BioPharma, Inc.:

on the Consolidated Financial Statements

on the Financial Statements

have audited the accompanying consolidated balance sheets of Hillstream BioPharma, Inc.

(the “Company”) as of December 31,

2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each

of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021 and 2020, and the results of their operations and their cash flows for each of the two years in the period ended December 31,

2021, in conformity with accounting principles generally accepted in the United States of America.

(“Company”) as of December 31, 2022

and 2021, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for

each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period

ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Concern Uncertainty

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

1 to the financial statements, the Company has incurred recurring losses and negative cash flows from operations and is dependent on

additional financing to fund operations.

These conditions raise substantial doubt about its ability to continue as a going concern.

plans regarding these matters are also described in Note 1.

The financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

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conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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current assets

and Stockholders’ Deficit

AND STOCKHOLDERS’ EQUITY (DEFICIT)

portion of related-party convertible notes, net

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Related-party

convertible notes, net, less short-term portion

convertible notes, net of short-term portion

and contingencies (see Note 9)

Stockholders’

stock, $ 0.0001 par

value, 10,000,000 shares

issued and outstanding as of December 31, 2021 and 2020

stock, $ 0.0001 par

value, 250,000,000 shares

6,357,314 shares

issued and outstanding as of December 31, 2021 and 2020

equity (deficit)

stock, $ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021

stock, $ 0.0001 par value, 250,000,000 shares authorized, 11,604,970 and 6,357,314 shares issued and 11,514,144 and 6,357,314 shares

outstanding as of December 31, 2022 and 2021, respectively

paid-in capital

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( 6,911,250 )

stockholders’ deficit

( 4,684,902 )

stock, at cost, 90,826 and 0 shares held in treasury as of December 31, 2022 and 2021, respectively

stockholders’ equity (deficit)

( 4,684,902 )

liabilities and stockholders’ deficit

accompanying footnotes are an integral part of these consolidated financial statements.

liabilities and stockholders’ equity (deficit)

accompanying notes are an integral part of these consolidated financial statements.

BIOPHARMA, INC.

STATEMENTS OF OPERATIONS

the Years Ended

the Years Ended December 31,

and development

in-process research and development

and administrative

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income (expenses)

( 1,591,244 )

in redemption value

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$ ( 8,473,182 )

$ ( 2,206,643 )

Net loss per share

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number of common shares outstanding:

accompanying footnotes are an integral part of these consolidated financial statements.

accompanying notes are an integral part of these consolidated financial statements.

BIOPHARMA, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

THE YEARS ENDED DECEMBER 31, 2022 AND 2021

Stockholders’

at December 31, 2019

$ ( 2,085,499 )

$ ( 1,622,200 )

of shares for the acquisition of Farrington Therapeutics LLC

based compensation

dividend upon debt exchange

December 31, 2020

$ ( 4,704,607 )

$ ( 3,717,528 )

at December 31, 2020

( 2,206,643 )

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based compensation

Balance, December

( 6,911,250 )

( 4,684,902 )

at December 31, 2021

( 8,473,182 )

accompanying footnotes are an integral part of these consolidated financial statements.

Exercise of stock

based compensation

issuance pursuant to services agreement

public offering, net of issuance costs of $ 2,054,918

public offering, net of issuance costs

of related-party convertible notes

of treasury stock, at cost

December 31, 2022

$ ( 15,384,432 )

accompanying notes are an integral part of these consolidated financial statements.

BIOPHARMA, INC.

STATEMENT OF CASH FLOWS

the years ended

STATEMENTS OF CASH FLOWS

the Years Ended December 31,

flows from operating activities:

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to reconcile net loss to net cash used in operating activities:

research and development expense

of debt discount

based compensation

issuance pursuant to services agreement

Interest and original issuance discount on promissory notes

in fair value of redemption liability

( 1,832,651 )

in operating accounts:

in prepaid expenses and other current assets

in accounts payable and accrued expenses

in accrued interest

expenses and other current assets

(decrease) in:

cash used in operating activities

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flows from financing activities:

of stock options

of treasury stock at cost

from issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs

of deferred offering costs

from promissory notes

Repayments on promissory notes

from related party convertible notes

offering costs

cash provided by financing activities

(decrease) increase in cash

- beginning of year

- end of year

disclosure of non-cash investing and financing activities:

issued upon acquisition

interest roll-over to new notes payable

to founder converted to note payable

increase (decrease) in cash

beginning of period

end of period

disclosure of non-cash financing activities:

of related party convertible notes:

party convertible note principal converted to common stock upon initial public offering

party convertible note accrued interest converted to common stock upon initial public offering

liability converted to common stock upon initial public offering

deferred offering costs

accompanying footnotes are an integral part of these consolidated financial statements.

interest rollover to new notes payable

accompanying notes are an integral part of these consolidated financial statements.

BIOPHARMA, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – Description of Business and Liquidity

OF BUSINESS AND LIQUIDITY

of Operations

BioPharma, Inc.

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and together with HBI and HB, the “Company”).

Company is a pre-clinical biotechnology company developing novel therapeutic candidates targeting ferroptosis, an emerging new anti-cancer

mechanism resulting in iron mediated cell death (“IMCD”) for treatment resistant cancers.

The Company’s most advanced

product candidate is HSB-1216, an IMCD modulator, targeting a variety of solid tumors.

The active drug in HSB-1216 was found to reduce

tumor burden in a clinical pilot study in Germany in treatment resistant cancers, including triple negative breast cancer and epithelial

The Company’s goal is to file an investigational new drug application (“IND”) with the U.S.

and Drug Administration (“FDA”) in 2023 and start a clinical study with HSB-1216 in 2023;

however, no assurance can

be provided that the Company’s IND will be accepted by the FDA in 2023, if at all.

If the IND is accepted by the FDA, the HSB-1216

clinical study will focus on expanding upon the clinical pilot study conducted in Germany.

If the Company is able to start the clinical

study with HSB-1216 in 2023, the Company anticipates that initial data from such trial will be released either at the end of 2023 or

The Company uses Quatramer™, the proprietary tumor targeting platform, to enhance the uptake of HSB-1216 in the tumor

microenvironment with an extended duration of action and minimal off-target toxicity.

In addition, Trident Artificial Intelligence, the

Company’s artificial intelligence precision medicine platform, is used to identify biomarkers in its clinical programs to target

specific patient segments.

The discovery of regulated cell death processes, such as apoptosis and autophagy, has enabled novel target

discovery for drug development.

Ferroptosis, a form of IMCD, is an emerging regulated cell death process which decreases intracellular

iron or the Labile Iron Pool (“LIP”).

Cancer cells increase the LIP leading to unregulated cell growth and metabolism.

the LIP, induces iron-led reactive oxygen species production and lipid peroxidation, two key hallmarks of ferroptosis/IMCD.

binds iron in the cytoplasm of cancer cells and decreases the LIP, thereby inducing ferroptosis/IMCD, leading to regulated cell death.

Areas of interest for the development of HSB-1216 are as a treatment of solid tumors, including triple negative breast cancer,

uveal melanoma, glioblastoma multiforme, head and neck squamous cell carcinoma and other treatment resistant cancers with high unmet

HBI is a pre-clinical biotechnology company developing novel therapeutic

candidates targeting ferroptosis, an emerging new anti-cancer mechanism resulting in iron mediated cell death (“IMCD”), and

targeted immuno-oncology novel biologics, for the treatment drug resistant cancers.

The Company’s most advanced product candidate,

HSB-1216, is an IMCD inducer, targeting a variety of solid tumors.

In a clinical pilot study conducted at the University of Heidelberg,

Germany, the active drug in HSB-1216 was found to reduce tumor burden in treatment resistant cancers, including triple negative breast

cancer and epithelial carcinomas.

The Company utilizes Quatramer™, its proprietary tumor targeting platform, to enhance the uptake

of HSB-1216 in the tumor microenvironment with an extended duration of action and minimal off-target toxicity.

The Company’s goal

is to submit an investigational new drug application (“IND”) to the U.S.

Food and Drug Administration (“FDA”)

and initiate a clinical study with HSB-1216 in the second half of 2023;

however, no assurance can be provided that the Company’s

IND will be accepted by the FDA in 2023, if at all.

If the Company’s IND is accepted by the FDA, the Company’s HSB-1216 clinical

studies will focus on expanding upon the clinical pilot study conducted in Germany.

If the Company able to initiate its clinical study

with HSB-1216 in the second half of 2023, it anticipates that clinical data from such trial will be released either late 2024 or early

and Going Concern

accompanying consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates,

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For the year ended December

31, 2021, the Company incurred operating losses in the amount of approximately $ 3.2

million and had an accumulated deficit

of approximately $ 6.9

million at December 31, 2021.

The Company financed its working

capital requirements through December 31, 2021 primarily through the issuance of convertible promissory notes payable issued to

related parties.

January 14, 2022, the Company closed its initial public offering (“IPO”) of 3,750,000

shares of the Company’s common stock at

a public offering price of $ 4.00

The gross proceeds to the Company

from the IPO were $ 15.0

million, prior to deducting underwriting discounts,

commissions, and other offering expenses.

The net proceeds to the Company from the IPO were approximately $ 13.0

The Company granted the underwriters

a 45-day option to purchase up to an additional 562,500

shares of common stock at the public offering

price less discounts and commissions, to cover over-allotments;

however, this option expired unexercised.

Additionally, and as

a result of the completion of the IPO, all of the related party convertible debt and accrued interest was converted into an aggregate

shares of the Company’s common stock

pursuant to the terms of the convertible notes.

The shares of the Company’s common stock began trading on The Nasdaq

Capital Market on January 12, 2022 under the ticker symbol “HILS”.

Company believes its cash on hand after the completion of the IPO is sufficient to meet its operating obligations and capital

requirements for at least twelve months from the issuance of these financial statements.

Thereafter, the Company may need to raise further

capital through the sale of additional equity or debt securities or other debt instruments to support its future operations.

31, 2022, the Company incurred operating losses in the amount of approximately $ 6.9 million, expended approximately $ 6.6 million in cash

used in operating activities, and had an accumulated deficit of approximately $ 15.4 million as of December 31, 2022.

The Company financed

its working capital requirements through December 31, 2022 primarily through the issuance of common stock in its initial public offering

Net proceeds to the Company from the IPO were approximately $ 13.0 million.

See Note 5 to the consolidated financial

statements for details regarding the IPO.

The shares of the Company’s common stock began trading on The Nasdaq Capital Market on

January 12, 2022 under the ticker symbol “HILS.”

on the Company’s limited operating history, recurring negative cash flows from operations, current plans and available resources,

the Company will need substantial additional funding to support future operating activities.

The Company has concluded that the prevailing

conditions and ongoing liquidity risks faced by the Company raise substantial doubt about the Company’s ability to continue as

a going concern for at least one year following the date these financial statements are issued.

The accompanying consolidated financial

statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Company may seek to raise additional funding through the sale of additional equity or debt securities, enter into strategic partnerships,

grants or other arrangements or a combination of the foregoing to support its future operations.

There can be no assurance that the Company

will be able to obtain additional capital on terms acceptable to the Company, on a timely basis or at all.

The failure to obtain sufficient

additional funding could adversely affect the Company’s ability to achieve its business objectives and product development timelines

and may result in the Company delaying or terminating clinical trial activities

which could have a material adverse effect on the Company’s results of operations.

Risks and Uncertainties

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approvals or clearances.

December 2019, a novel strain of coronavirus (“COVID-19”) was reported globally.

The World Health Organization declared COVID-19

to constitute a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11,

In March 2020, individual states mandated “stay at home orders”, restricted access to hospitals, prohibited elective

surgeries and instituted other restrictions in connection with the COVID-19 outbreak.

The extent of the impact of COVID-19 on the Company’s

operational and financial performance will depend on future developments, including access to products, potential disruptions

in global freight networks, domestic and foreign government actions and changes in demand based on the duration and severity of the COVID-19

As of December 31, 2021, the Company’s operations have not been materially affected by COVID-19.

2 - Basis of Presentation and Summary of Significant Accounting Policies

OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Considerations

March 11, 2020, the World Health Organization characterized the outbreak of a novel strain of coronavirus (“COVID-19”) as

a pandemic, prompting many national, regional, and local governments to implement preventative or protective measures, such as travel

and business restrictions, temporary store closures and capacity limitations, and wide-sweeping quarantines and stay-at-home orders.

As a result, COVID-19 and the related restrictive measures have had a significant adverse impact upon many sectors of the economy.

a result of the COVID-19 pandemic, the Company had to delay the start of its IND enabling studies for over a year.

As the COVID-19 situation

continues to evolve, the Company intends to closely monitor the impact of the COVID-19 pandemic on all aspects of its business, including,

but not limited to, impacts on third-party contractors, suppliers, vendors and employees.

The Company believes that the ultimate impact

of the COVID-19 pandemic on operating results, cash flows, and financial condition is likely to be determined by factors which are uncertain,

unpredictable, and outside of the Company’s control.

The situation surrounding COVID-19 remains fluid, and if disruptions arise,

they could have a material adverse impact on the Company’s business.

2 – Summary of Significant Accounting Policies

of Presentation

accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted

in the United States of America (“US GAAP”).

accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the

United States of America (“U.S.

The Company operates in one segment.

September 16, 2021, the Company effectuated a reverse split of shares of its common stock at a ratio of 1-for-26.4

pursuant to an amendment

to the Company’s Certificate of Incorporation, as amended, filed with the Delaware Secretary of State and approved by the

Company’s board of directors and stockholders.

The par value of the Company’s common stock was not adjusted as a result

of the reverse split.

All issued and outstanding common stock share and per share amounts contained in the financial statements have

been retroactively adjusted to reflect this reverse split for all periods presented.

September 16, 2021, the Company effectuated a reverse split of shares of its common stock at a ratio of 1-for-26.4 pursuant to an amendment

to the Company’s Certificate of Incorporation, as amended, filed with the Delaware Secretary of State and approved by the Company’s

board of directors and stockholders.

The par value of the Company’s common stock was not adjusted as a result of the reverse split.

All issued and outstanding common stock share and per share amounts contained in the consolidated financial statements have been retroactively

adjusted to reflect this reverse split for all periods presented.

of Consolidation

consolidated financial statements include the accounts of Hillstream BioPharma, Inc.

and its wholly-owned subsidiaries, HB Pharma Corp.,

Nanoproteagen and Farrington.

All significant intercompany balances and transactions have been eliminated in consolidation.

consolidated financial statements include the accounts of HBI and its wholly-owned subsidiaries, HB and Farrington.

All significant intercompany

balances and transactions have been eliminated in consolidation.

preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and related disclosures in the financial statements and accompanying notes.

Management bases

its estimates on historical experience and on assumptions believed to be reasonable under the circumstances.

The estimation process often

may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls

within that range of reasonable estimates.

reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements

and the reported amounts of revenue and expenses during the reporting period.

Management bases its estimates on historical experience

and on assumptions believed to be reasonable under the circumstances.

The estimation process often may yield a range of potentially reasonable

estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates.

Estimates are used in the following areas, among others:

research and development expense

recognition, valuation of common shares and stock options, allowances of deferred tax assets, valuation of debt related instruments,

accrued expenses and liabilities, and cash flow assumptions regarding going concern considerations.

Company from time to time during the period covered by these financial statements may have had bank account balances in excess of federally

insured limits.

valuation of common shares and stock options prior to the IPO, allowances of

deferred tax assets, valuation of debt related instruments, and cash flow assumptions regarding going concern considerations.

management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.

Concentration

of Credit Risk

Company maintains cash balances with various financial institutions.

Account balances at these institutions are insured by the Federal

Deposit Insurance Corporation up to $ 250,000 per depositor.

At various times during the year, bank account balances may have been in

excess of federally insured limits.

The Company has not experienced losses in such accounts.

The Company believes that it is not subject to unusual credit

risk beyond the normal credit risk associated with commercial banking relationships.

Company believes that it is not subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

and Development

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These estimates include the level of services performed

by third parties, patient enrolment in clinical trials, administrative costs incurred by third parties, and other indicators of the services

Substantially all of the prepaid expenses at December 31, 2021 relate to a manufacturing services agreement.

Substantially

all of the prepaid expenses at December 31, 2020 relate to the purchase of an active pharmaceutical ingredient.

in-process research and development

Company has acquired, and may in the future acquire, rights to develop and commercialize new product candidates and/or other in-process

research and development assets.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 730-10-25-1, Research and Development, the up-front acquisition or licensing payments are

expensed as acquired in-process research and development provided that the drug has not achieved regulatory approval for marketing, and,

absent obtaining such approval, has no alternative future use.

by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the

services completed.

Approximately $ 61,000 of prepaid expenses at December 31, 2022 and 2021 relate to a manufacturing services agreement.

Based Compensation

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fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

31, 2021, the Company was a private company and lacked company-specific historical and implied volatility information.

Therefore, it estimated its expected stock volatility based on the historical data regarding the volatility of a publicly traded

set of peer companies.

The expected term of stock options granted was between five and seven years.

The risk-free interest rate

was determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately

equal to the expected term of the award.

Prior to January

12, 2022, the Company was a private company and the Company’s common stock has been publicly traded since that date.

the Company has lacked company-specific historical and implied volatility information.

Therefore, it has estimated its expected stock

volatility based on the historical data regarding the volatility of a publicly traded set of peer companies.

The expected term of stock

options granted was between five and seven years.

The risk-free interest rate was determined by reference to the U.S.

Treasury yield

curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Stock Valuations

Company was required to periodically estimate the fair value of common stock with the assistance of an independent third-party valuation

expert when issuing stock options and computing its estimated stock-based compensation expense and value of shares issued in acquiring

product candidates.

The assumptions underlying these valuations represented management’s best estimates, which involved inherent

uncertainties and the application of significant levels of management judgment.

In order to determine the fair value, the Company considered,

among other things, contemporaneous valuations of the Company’s common stock, the Company’s business, financial condition

and results of operations, including related industry trends affecting its operations;

the likelihood of achieving various liquidity

to the IPO, the Company was required to periodically estimate the fair value of common stock with the assistance of an independent third-party

valuation expert when issuing stock options and computing its estimated stock based compensation expense and value of shares issued in

acquiring product candidates.

The assumptions underlying these valuations represented management’s best estimates, which involved

inherent uncertainties and the application of significant levels of management judgment.

In order to determine the fair value, the Company

considered, among other things, contemporaneous valuations of the Company’s common stock;

the Company’s business, financial

condition and results of operations, including related industry trends affecting its operations;

the likelihood of achieving various

liquidity events;

the lack of marketability of the Company’s common stock;

the market performance of comparable publicly traded companies;

the market performance of comparable publicly traded

and global economic and capital market conditions.

After the closing of the Company’s IPO on January 14, 2022,

the fair value of common stock is determined by using the closing price of the Company’s common stock on The Nasdaq Capital Market.

Company’s board of directors has authorized the repurchase of up to $ 1

million of shares of the Company’s common stock, from time to time, ending December 31, 2022, in the open market or through

privately-negotiated transactions, at such times and at such prices as the Company’s management may decide.

Treasury stock

purchases are accounted for under the cost method whereby the entire cost of the acquired common stock is recorded as treasury

Discount and Derivative Instruments

initial fair value of the redemption feature relating to the convertible debt instruments is treated as a debt discount and amortized

initial fair value of the redemption feature relating to the convertible debt instruments was treated as a debt discount and was amortized

over the term of the related debt using the straight-line method, which approximates the interest method.

If a loan is paid in full,

any unamortized financing costs will be removed from the related accounts and charged to operations.

Amortization of debt discount is

recorded as a component of interest expense.

In accordance with Accounting Standards Update (“ASU”) 2015-03, Interest

— Imputation of Interest , the unamortized debt discount is presented in the accompanying balance sheet as a direct deduction

from the carrying amount of the related debt.

Company accounts for derivative instruments in accordance with ASC 815, Derivative and Hedging , which establishes accounting and

reporting standards for derivative instruments, including certain derivative instruments embedded in other financial instruments or contracts

and requires recognition of all derivatives on the balance sheet at fair value.

The Company’s derivative financial instrument consists

of an embedded feature contained in the Company’s convertible debt that is bifurcated and accounted for separately.

Amortization of debt discount

is recorded as a component of interest expense.

If a loan is paid in full, any unamortized debt discounts will be removed from the related

accounts and charged to operations.

As the convertible debt was converted into common stock at the date of the IPO, the unamortized debt

discount was charged to interest expense.

In accordance with Financial Accounting Standards Board

(“FASB”) Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest , the unamortized

debt discount at December 31, 2021 was presented in the accompanying consolidated balance sheet as a direct deduction from the carrying

amount of the related debt.

Company accounts for derivative instruments in accordance with FASB Accounting Standards Codification

(“ASC”) 815, Derivative and Hedging , which establishes accounting and reporting standards for derivative instruments,

including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives

on the balance sheet at fair value.

The Company’s derivative financial instrument consisted of an embedded feature contained in

the Company’s convertible debt that was bifurcated and accounted for separately.

See Note 3 to the consolidated financial statements

for further details.

Value Measurements

Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value

and clarifies the definition of fair value within that framework.

ASC 820 defines fair value as an exit price, which is the price that

would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly

transaction between market participants on the measurement date.

The fair value hierarchy established in ASC 820 generally requires an

entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Observable inputs

reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained

from sources independent of the reporting entity.

Unobservable inputs reflect the entity’s own assumptions based on market data

and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to

be developed based on the best information available in the circumstances.

carrying value of the Company’s prepaid expenses, accounts payable and accrued expenses approximate fair value because of the short-term

maturity of these financial instruments.

Company applies FASB ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair

value and clarifies the definition of fair value within that framework.

ASC 820 defines fair value as an exit price, which is the price

that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an

orderly transaction between market participants on the measurement date.

The fair value hierarchy established in ASC 820 generally requires

an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market

data obtained from sources independent of the reporting entity.

Unobservable inputs reflect the entity’s own assumptions based

on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability

and are to be developed based on the best information available in the circumstances.

carrying value of the Company’s prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the

short-term maturity of these financial instruments.

The redemption feature of the debt instruments is recorded at fair value.

4 to the consolidated financial statements for further details.

valuation hierarchy is composed of three levels.

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The levels within the valuation hierarchy are described below:

and liabilities with unadjusted, quoted prices listed on active market exchanges.

Inputs to the fair value measurement are observable

inputs, such as quoted prices in active markets for identical assets or liabilities.

to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms,

as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no

market data exists for the assets or liabilities.

Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for

identical, unrestricted assets or liabilities.

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

These include

quoted prices for assets or liabilities recently traded in active markets, with similar underlying terms, as well as direct or indirect

observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals, as well as quoted prices

for identical or similar assets or liabilities in markets that are not active.

Unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for

the assets or liabilities, that reflect the reporting entity’s own assumptions.

Offering Costs

offering costs consisted of legal, accounting, printing, and filing fees that the Company capitalized which will be offset against the

proceeds from the IPO.

Company accounts for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes (“ASC 740”).

Deferred tax assets and liabilities are recognized 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.

tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

differences are expected to be recovered or settled.

The effect on the deferred tax assets and liabilities of a change in tax rate is

recognized in the period that includes the enactment date.

A valuation allowance has been recognized for all periods since it is “more

likely than not” that some portion or all of the deferred tax assets will not be realized in future periods.

Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions.

The standard applies to all tax positions and

clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement.

offering costs consisted of legal, accounting, printing, and filing fees that the Company capitalized which were offset against the proceeds

from the IPO.

Company accounts for income taxes using the asset-and-liability method in accordance with FASB ASC 740, Income Taxes (“ASC

Deferred tax assets and liabilities are recognized 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.

income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and

liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances.

Valuation allowances are recorded

to reduce certain deferred tax assets when, in management’s estimation, it is more-likely-than-not that a tax benefit will not

A valuation allowance has been recognized for all periods since it is more-likely-than-not that some portion or all of the

deferred tax assets will not be realized in future periods.

Company follows the guidance in FASB ASC Topic 740-10 in assessing uncertain tax positions.

The standard applies to all tax positions

and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement.

The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical

7 unchanged sentences

related to tax positions in income tax expense .

At December 31, 2021 and 2020, the Company had no unrecognized uncertain income tax positions,

and therefore no amounts have been recognized in the consolidated financial statements.

At December 31, 2022 and 2021, the Company had no unrecognized uncertain income

tax positions, and therefore no amounts have been recognized in the consolidated financial statements.

Loss per Share

Company reports loss per share in accordance with ASC 260-10, Earnings Per Share , which provides for calculation of basic and

diluted earnings per share.

Basic earnings per share includes no dilution and is computed by dividing net income or loss available to

common stockholders by the weighted average common shares outstanding for the period.

Company reports loss per share in accordance with FASB ASC 260-10, Earnings Per Share , which provides for calculation of basic

and diluted earnings per share.

Basic earnings per share includes no dilution and is computed by dividing net income or loss available

to common stockholders by the weighted average common shares outstanding for the period.

Diluted earnings per share reflect the potential

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however, potential common shares are excluded if their effect is anti-dilutive.

dilutive securities not included in the computation of earnings (loss) per share for the years ended December 31, 2021 and 2020 included

options to purchase 903,468

shares of common stock, respectively.

of shares issuable upon the conversion of convertible debt and accrued interest (which was 1,225,384

shares at the IPO date of January 14, 2022) is

not included in the denominator since their inclusion would be anti-dilutive.

All common share amounts and per share amounts have been

adjusted to reflect a 1-for-26.4

reverse stock split of the Company’s common stock effectuated

on September 16, 2021.

Management concluded that the deemed dividend (see Note 4) is analogous to a return on equity classified

preference shares, therefore the deemed dividend is added to the net loss for purposes of the basic and diluted loss per share calculation.

Accordingly, the numerator of the loss per share calculation (basic and diluted) is $ 2,619,108

for the year ended December 31, 2020.

accounting pronouncements not yet adopted:

dilutive securities not included in the computation of loss per share for the years ended December 31, 2022 and 2021 included options

to purchase 1,628,813 and 903,468 shares of common stock, respectively.

All common share amounts as of December 31, 2022 and 2021 and

per share amounts for the years ended December 31, 2022 and 2021 have been adjusted to reflect a 1-for-26.4 reverse stock split of the

Company’s common stock effectuated on September 16, 2021.

Other potentially dilutive securities also not included in the computation

of loss per share for the year ended December 31, 2022 included warrants to purchase 187,500 shares of the Company’s common stock.

Adopted Accounting Pronouncements

Company has evaluated all recent accounting pronouncements and believes that none of them will have a material effect on the Company’s

financial position, results of operations or cash flows except as discussed below.

February 2016, the FASB issued ASU No.

2016-02, “ Leases (Topic 842) ” which replaces the existing guidance in ASC 840

This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases

or operating leases.

Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding

lease liability.

For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating

leases, the lessee would recognize a straight-line total lease expense.

This ASU is effective for fiscal years beginning after December

15, 2021 and for interim periods within those fiscal years.

The Company will evaluate the impact of adoption of this ASU when it enters

into a lease arrangement.

with Conversion and Other Options and Derivatives and Hedging

FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging

– Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s

Own Equity , to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity.

The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the

existing guidance that requires entities to account for beneficial conversion features and cash conversion features in equity, separately

from the host convertible debt or preferred stock.

The guidance in ASC 470-20 applies to convertible instruments for which the embedded

conversion features are not required to be bifurcated from the host contract and accounted for as derivatives.

In addition, the amendments

revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that

are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required

for equity classification.

These amendments are expected to result in more freestanding financial instruments qualifying for equity classification

(and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract.

The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share , to require entities to calculate diluted

earnings per share (“EPS”) for convertible instruments by using the if-converted method.

In addition, entities must

presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

The amendments

in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer, excluding smaller reporting companies as defined

by the Securities and Exchange Commission (“SEC”), for fiscal years beginning after December 15, 2021.

For all other

entities, the amendments are effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted, but no earlier

than fiscal years beginning after December 15, 2020.

The Company is currently evaluating the impact this standard will have on its financial

financial position, results of operations, or cash flows, including as described below.

May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic

Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic

The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written

call options.

This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods

within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact this standard will have

on its financial statements.

accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants,

and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated

financial statement presentation or disclosures.

470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity

(Subtopic 815-40).

This ASU addresses an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified

written call options.

This amendment is effective for fiscal years beginning after December 15, 2021, including interim periods within

those fiscal years, and was effective for the Company beginning January 1, 2022.

This ASU did not have a material impact on the Company’s

consolidated financial statement presentation.

October 2020, the FASB issued ASU 2020-10, Codification Improvements .

4 unchanged sentences

affect the application of the guidance in cases in which the original guidance may have been unclear.

This is effective for the Company

for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022.

amendment is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and was

effective for the Company beginning January 1, 2022.

This ASU did not have a material impact on the Company’s consolidated financial

statement presentation.

Accounting Pronouncements Not Yet Adopted

with Conversion and Other Options and Derivatives and Hedging

FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

(“ASU 2020-06”), to reduce complexity in applying US GAAP to certain financial instruments with characteristics of liabilities

The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by

removing the existing guidance that requires entities to account for beneficial conversion features and cash conversion features in equity,

separately from the host convertible debt or preferred stock.

The guidance in FASB ASC Subtopic 470-20 applies to convertible instruments

for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives.

In addition, the amendments revise the scope exception from derivative accounting in FASB ASC Subtopic 815-40 for freestanding financial

instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity,

by removing certain criteria required for equity classification.

These amendments are expected to result in more freestanding financial

instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features

requiring separate accounting from the host contract.

The amendments in ASU 2020-06 further revise the guidance in FASB ASC 260, Earnings

Per Share , to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the

if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may

be settled in cash or shares.

The amendments in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer,

excluding smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2021.

For all other entities,

including the Company, the amendments are effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2020-10 to have a material impact on its consolidated

financial statements.

3 - Acquisition

November 12, 2020, the Company acquired 100 %

of the member interests of Farrington, an early-stage biotech company which owned a next generation anthracycline, HSB-888, for pediatric

osteosarcoma.

Pursuant to an Exchange Agreement, the Company issued 75,757

shares of its common stock to the seller as consideration

for the purchase.

The transaction did not meet the definition of a business combination for financial reporting purposes, since there

were no business inputs, employees acquired, processes or outputs at the time of the transaction.

The fair value of the common stock

issued was estimated to be approximately $ 289,200 ,

for which the single asset was recognized as a component of acquired in-process research and development expense in the accompanying

consolidated statements of operations in the year ended December 31, 2020.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

3 – Convertible Notes - Related Parties

NOTES - RELATED PARTIES

in May 2017, the Company entered into Subordinated Convertible Promissory Note Agreements (the “Agreements”) with certain

1 unchanged sentence

Convertible Promissory Notes (individually the “Note” or together, the “Notes”) to the Holders, principally all

to the Chief Executive Officer and founder of the Company, a member of the Company’s board of directors and third parties

that are family members of the founder and Chief Executive Officer.

Interest on the unpaid principal balance accrues

at a rate of 5 %

per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.

Unless earlier converted into shares of

the Company’s common stock or preferred stock (collectively, the “Equity Securities”), the principal and accrued interest

shall be due and payable by the Company on demand by the Holders at any time after the earlier of (i) the Maturity Date (as defined in

each Agreement) and (ii) the closing of the Next Equity Financing.

“Next Equity Financing” means the next sale, or series

of related sales, by the Company of its Equity Securities pursuant to which the Company receives gross proceeds of not less than $ 5,000,000

for Notes issued in 2017 and through November

2020 and $ 7,500,000

for Notes issued after November 2020 (including

the aggregate amount of debt securities converted into Equity Securities upon conversion or cancellation of the Notes).

general, the stated maturity date was two

years from the date of issuance, except for the

Notes entered into in December 2020 and thereafter (in the aggregate principal amount of approximately $ 2,135,000 )

which have a stated maturity date of three

For Notes entered into in 2017 and through

September 2018, the default interest rate of 20 %

was added to the Notes for the period after the maturity date.

Notes will automatically convert into the type of Equity Securities issued in the Next Equity Financing upon closing.

The number of shares

of such Equity Securities to be issued will be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued

interest due on the Note on the date of conversion by the lesser of (i)

80% of the price paid per share for Equity Securities by the investors in the Next Equity Financing, or (ii) an equity valuation of $ 25

for Notes issued after December 2020).

No Next Equity Financing occurred through December 31, 2021;

however on January 14, 2022,

all outstanding Notes and accrued interest were converted into an aggregate of 1,225,384

of the Company’s common stock as the IPO qualified as a Next Equity Financing.

embedded features contained in the Notes in the aggregate are embedded derivative instruments, which were recorded as a debt discount

and derivative liability at the issuance date at their estimated fair value for all Notes of approximately $ 2,421,000 .

Accretion of debt discount for the Notes was recorded as interest expense was approximately $ 667,000

and $ 145,000

for the years ended December 31, 2021 and 2020,

respectively.

Accrued interest expense associated with the Notes at December 31, 2021 and December 31, 2020 amounted to approximately

and $ 73,000 ,

respectively.

Interest expense, including accretion of the debt discount, amounted to approximately $ 831,000

and $ 246,000

for the years ended December 31, 2021 and 2020,

respectively.

of December 31, 2021 and 2020, all convertible debt instruments which had matured had been rolled over into new notes as described below.

to the Chief Executive Officer (“CEO”) and founder of the Company, a member of the Company’s board of directors and

third parties that are family members of the founder and CEO.

Interest on the unpaid principal balance accrued at a rate of 5 % per annum,

computed on the basis of the actual number of days elapsed and a year of 365 days.

Unless earlier converted into shares of the Company’s

common stock or preferred stock (collectively, the “Equity Securities”), the principal and accrued interest was to be due

and payable by the Company on demand by the Holders at any time after the earlier of (i) the Maturity Date (as defined in each Agreement)

and (ii) the closing of the Next Equity Financing.

“Next Equity Financing” means the next sale, or series of related sales,

by the Company of its Equity Securities pursuant to which the Company received gross proceeds of not less than $ 5.0 million for Notes

issued in 2017 and through November 2020 and $ 7.5 million for Notes issued after November 2020 (including the aggregate amount of debt

securities converted into Equity Securities upon conversion or cancellation of the Notes).

The Company’s IPO qualified as a Next

Equity Financing.

general, the stated maturity date was two years from the date of issuance, except for the Notes issued in December 2020 and thereafter

(in the aggregate principal amount of approximately $ 2.1 million) which had a stated maturity date of three years .

For Notes issued in

2017 and through September 2018, the default interest rate of 20 % was added to the Notes for the period after the stated maturity date.

Notes were to automatically convert into the type of Equity Securities issued in the Next Equity Financing upon closing.

The number of

shares of such Equity Securities to be issued was equal to the quotient obtained by dividing the outstanding principal and unpaid accrued

interest due on the Note on the date of conversion by the lesser of (i) 80% of the price paid per share for Equity Securities by the

investors in the Next Equity Financing, or (ii) an equity valuation of $ 25 million ($ 50 million for Notes issued after December 2020).

On January 14, 2022, all outstanding Notes and accrued interest were converted into an aggregate of 1,225,384 shares of the Company’s

common stock as the IPO qualified as a Next Equity Financing.

embedded features contained in the Notes in the aggregate were embedded derivative instruments, which were recorded as a debt discount

and derivative liability at the issuance date at their estimated fair value for all Notes of approximately $ 2.4 million.

of debt discount for the Notes recorded as interest expense was approximately $ 1.6 million and $ 667,000 for the years ended December

31, 2022 and 2021, respectively.

The amount for the year ended December 31, 2022 contains amortization charged to interest expense of

approximately $ 34,000 up to the date of the IPO and the full amount of the unamortized debt discount of approximately $ 1.5 million charged

to interest expense on the date of the IPO.

interest expense associated with the Notes at December 31, 2021 was approximately $ 180,000 .

Accrued interest at the date of the IPO was

approximately $ 187,000 and was converted into common stock as the IPO qualified as a Next Equity Financing.

Total interest expense, including

accrued interest and amortization of the debt discount, amounted to approximately $ 1.6 million and $ 831,000 for the years ended December

31, 2022 and 2021, respectively.

carrying value of the outstanding related-party convertible notes at December 31, 2021 was as follows:

of Convertible Debt

amount outstanding

debt discount, net of accretion

debt discount, net of accumulated amortization

( 1,569,003 )

carrying value

Total carrying value

September 27, 2020, the Company agreed to issue a related party Note holder notes (“Exchange Notes”) in exchange for seven

Notes payable which were in default (“Original Notes”) at such time by more than 90 days.

The Original Notes had a principal

amount of approximately $ 265,000

and accrued interest of $ 37,000

at December 31, 2019.

As of September 27, 2020,

the aggregate outstanding principal was approximately $ 265,000

and accrued interest, which included the default

interest rate of 20 %

as described above, was approximately $ 71,000 .

The Exchange Notes took the then principal and accrued interest of the Original Notes and added an original issue discount of 37.5 %

to determine the new principal amount which amounted to an aggregate of $ 537,968 .

The Company accounted for this transaction as a debt extinguishment, and the incremental amount of the principal of the Exchange Notes

payable of $ 201,737

was recorded to accumulated deficit (analogous

to a “deemed dividend”) in the year ended December 31, 2020, since the Exchange Notes are with related parties, and included

in the calculation of loss per share.

September 27, 2020, the Company issued certain related party Noteholders notes (“September Exchange Notes”) in exchange for

five Notes payable, which were in default.

As of such date, the aggregate outstanding principal and interest was approximately $ 26,000 ,

which included the default interest rate of 20 %

as described above.

The September Exchange Notes in the aggregate principal amount of approximately $ 26,000

were issued with substantially the same terms

as the Original Notes.

There were no accounting entries required upon the re-issuance of such Exchange Notes.

October 1, 2020, all Notes which matured, and were not repaid or converted, were rolled over on substantially the same terms as the Original

Notes (“Rolled Over”).

Approximately $ 805,000

of such Original Notes were Rolled Over through

December 31, 2021, of which approximately $ 166,000

occurred prior to December 31, 2020 and $ 639,000

occurred between January 1, 2021 and December

Since the terms of the new notes are not substantially different from the Original Notes, this was not accounted for as a debt

modification or debt extinguishment.

October 1, 2020, all Notes which matured, and were not repaid or converted, were rolled over, including the default interest rate of

20 % as disclosed above.

Approximately $ 805,000 of such Notes were rolled over through December 31, 2021, of which approximately $ 166,000

occurred prior to December 31, 2020 and approximately $ 639,000 occurred between January 1, 2021 and December 31, 2021.

Since the terms

of the new notes were not substantially different from the Notes, this was not accounted for as a debt modification or debt extinguishment.

4 – Redemption Liability

2 unchanged sentences

This PWERM was determined to be the most appropriate method of estimating the value of

possible redemption or conversion outcomes over time, since the Company has not entered into a priced equity round through December 31,

possible redemption or conversion outcomes over time, since the Company had not entered into a priced equity round through December 31,

The significant assumptions utilized in these calculations are the possible exit scenarios (either a conversion of the principal

and accrued interest of the Notes in the event of a Next Equity Financing, a repayment of the Notes and accrued interest in the event

of a Corporate Transaction (as defined in the Notes) or a repayment of the Notes and accrued interest at maturity), the pre-money valuation

of the Company’s common stock, the probabilities of such exit events occurring and discounts/premiums available to the noteholders

at such measurement dates.

At December 31, 2020, the Company assumed a 40% probability of a Next Equity Financing event occurring

at IPO pricing.

At December 31, 2020, the Company assumed a 5% probability of a Corporate Transaction.

The calculation of the redemption

liability at December 31, 2021 is based upon the actual incremental value derived by the Holders at the IPO date.

The calculation

of the redemption liability also used the following assumptions during the years:

OF ASSUMPTIONS OF REDEMPTION LIABILITY

ranges pre-money valuation at time of Next Equity Financing

coupon interest rate on Notes

term to exit event

fair value of the redemption liability is re-measured at each period and is summarized as follows:

OF FAIR VALUE OF THE REDEMPTION LIABILITY

and accrued interest of the Notes in the event of a Next Equity Financing (see Note 3 to the consolidated financial statements), a repayment

of the Notes and accrued interest in the event of a corporate transaction (as defined in the Notes) or a repayment of the Notes and accrued

interest at maturity), the pre-money valuation of the Company’s common stock, the probabilities of such exit events occurring,

and discounts/premiums available to the Holders at such measurement dates.

The calculation of the redemption liability at December 31,

2021 was based upon the actual incremental value derived by the Holders at the IPO date.

The fair value of the redemption liability is

re-measured at each period and is summarized as of December 31, 2021 as follows:

of Fair Value of Redemption Liability

Beginning balance as

of December 31, 2020

embedded redemption value

1 unchanged sentence

( 1,832,651 )

Ending balance

change in fair value of a gain of $ 1,832,651

and loss of $ 362,486

for the years ended December 31, 2021 and 2020,

respectively, is recorded as a component of other income (expenses), net in the accompanying consolidated statements of operations.

balance as of December 31, 2021

change in fair value of a gain of approximately $ 1.8

million as of December 31, 2021, was recorded as a component of other income (expenses) in the accompanying consolidated statements of

The balance of approximately $ 980,000 as of December 31, 2021 and as of the

date of the IPO was converted into common stock in connection with the related-party convertible debt to which it related.

5 – Common Stock

to an amendment to the Company’s Certificate of Incorporation filed in April 2019, the Company increased the number of authorized

shares of common stock to 250,000,000 shares.

See the Net Loss Per Share section of Note 2 to the consolidated financial statements for

a discussion of the reverse stock split effectuated on September 16, 2021.

January 14, 2022, the Company closed the IPO pursuant to which it issued 3,750,000 shares of its common stock at a public offering price

of $ 4.00 per share.

The gross proceeds to the Company from the IPO were $ 15.0 million, prior to deducting underwriting discounts of approximately

$ 1.1 million and commissions and other offering expenses of approximately $ 1.0 million.

Other offering expenses include deferred offering

costs of approximately $ 547,000 that were capitalized prior to December 31, 2021 and additional costs incurred prior to the date of the

The net proceeds to the Company from the IPO were approximately $ 13.0 million.

The Company granted the underwriters a 45-day option

to purchase up to an additional 562,500 shares of common stock at the public offering price less discounts and commissions, to cover

over-allotments;

however, this option expired unexercised.

Additionally, and as a result of the completion of the IPO, all of the Company’s

convertible debt and accrued interest was converted into an aggregate of 1,225,384 shares of the Company’s common stock pursuant

to the terms of the Notes.

Outstanding principal of approximately $ 3.7 million, accrued interest of approximately $ 187,000 , and a redemption

liability of approximately $ 980,000 were converted to common stock as the IPO qualified as a Next Equity Financing.

In addition, the

Company issued warrants in connection with the IPO.

See Note 6 to the consolidated financial statements for a discussion of the warrants

February 16, 2022, the Company entered into an agreement for marketing and investor related consulting services.

Pursuant to the agreement,

compensation includes a monthly fee and an upfront issuance of shares of the Company’s common stock.

On the effective date of February

16, 2022, the Company issued 31,746 shares of common stock with a per share value of $ 3.15 and a total value of $ 100,000 as compensation

June 9, 2022, the Company’s Board of Directors authorized the repurchase of up to $ 1.0 million of shares of the Company’s

common stock until December 31, 2022.

On June 10, 2022, the Company entered into a Repurchase Agreement (the “Repurchase Agreement”)

with a financial institution pursuant to which such financial institution may purchase shares of the Company’s common stock upon

the terms and conditions set forth in such agreement, including in accordance with the guidelines specified in Rules

10b5-1 and 10b-8 under the Securities Exchange Act of 1934, as amended .

the Company’s common stock were able to be repurchased in open market or through privately-negotiated transactions.

to the Repurchase Agreement, the financial institution ceased purchasing shares of the Company’s common stock at the earlier of

(i) the close of trading on December 31, 2022, (ii) the completion of repurchases up to the approved

amount and (iii) the date upon which the Company gives notice of termination of the Repurchase Agreement to the financial institution.

The Company determined the timing and amount of any repurchases based upon its evaluation of market conditions, applicable SEC guidelines

and regulations, and other factors.

the year ended December 31, 2022, the Company purchased 90,826 shares of its common stock for a total purchase cost of approximately

6 – Stock Based Compensation

BASED COMPENSATION

Plans and Options

the Company’s 2017 Stock Incentive Plan (the “2017 Stock Incentive Plan”) the Company may grant incentive stock options,

1 unchanged sentence

units to employees, directors, and consultants of the Company and its affiliates.

shares of the Company’s common stock may

be issued pursuant to the 2017 Stock Incentive Plan.

Company has granted options to acquire 92,801

shares of common stock at $ 13.20

per share under the 2017 Stock Incentive Plan,

remains available for issuance.

At each of December

31, 2021 and December 31, 2020, there were options outstanding to acquire 92,801

shares of common stock.

As of December 31, 2021,

all such options were fully vested, and the weighted average remaining contractual life for such options was approximately 6.2

Up to 94,696 shares of the Company’s common stock

may be issued pursuant to the 2017 Stock Incentive Plan.

Company has granted options to acquire 92,801 shares of common stock at $ 13.20 per share under the 2017 Stock Incentive Plan, and 1,895

shares remain available for issuance.

At both December 31, 2022 and 2021, there were options outstanding to acquire 92,801 shares of

common stock.

As of both December 31, 2022 and 2021, all such options were fully vested, and the weighted average remaining contractual

life for such options was approximately 5.2 and 6.2 years, respectively.

July 2019, the Company authorized a new plan (the “2019 Stock Incentive Plan”).

The Company initially reserved 284,090

shares of its common stock for issuance pursuant

to the 2019 Stock Incentive Plan in the form of incentive stock options, non-statutory stock options, rights to purchase common stock,

stock appreciation rights, restricted stock, restricted stock, performance shares and performance units to employees, directors and consultants

of the Company and its affiliates.

On August 30, 2019, the Company approved an increase in the number of shares authorized for issuance

under the 2019 Stock Incentive Plan by 2,575,757

In January 2021, the Company approved

an increase in the number of shares reserved for issuance under the 2019 Stock Incentive Plan by 574,494

The Company initially reserved 284,090 shares

of its common stock for issuance pursuant to the 2019 Stock Incentive Plan in the form of incentive stock options, non-statutory stock

options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees,

directors, and consultants of the Company and its affiliates.

On August 30, 2019, the Company approved an increase in the number of shares

authorized for issuance under the 2019 Stock Incentive Plan by 2,575,757 shares.

In January 2021, the Company approved an increase in

the number of shares reserved for issuance under the 2019 Stock Incentive Plan by 574,494 shares.

On May 31, 2021, the Company approved

an increase in the number of shares reserved for issuance under the 2019 Stock Incentive Plan by 467,171

At December 31, 2021, a total of 3,901,512

shares are authorized for issuance under the

2019 Stock Incentive Plan.

Company has granted options to acquire 2,420,514

shares of common stock under the 2019 Stock Incentive

Plan, and 1,480,998

remain available for issuance at December 31,

The shares issued in 2021 and 2020 and the shares exercised under the 2019 Stock Incentive Plan are included in the table below.

At December 31, 2021, there are stock options outstanding to acquire 810,667

shares of common stock with a weighted average

exercise price of $ 3.25

and a weighted average contractual term of

an increase in the number of shares reserved for issuance under the 2019 Stock Incentive Plan by 467,171 shares.

At both December 31,

2022 and 2021, a total of 3,901,512 shares were authorized for issuance under the 2019 Stock Incentive Plan.

Company has granted options to acquire 3,386,385 and 2,420,514 shares of common stock under the 2019 Stock Incentive Plan, and 515,127

and 1,480,998 shares of common stock remain available for issuance under the 2019 Stock Incentive Plan at December 31, 2022 and 2021,

respectively.

There are stock options outstanding to acquire 1,536,012 and 810,667 shares of common stock with weighted average exercise

prices of $ 3.80 and $ 3.25 and weighted average contractual terms of 8.4 years and 8.0 years at December 31, 2022 and 2021, respectively.

following table summarizes stock-based activities under the 2017 Stock Incentive Plan and 2019 Stock Incentive Plans:

of Stock Option Activity

Underlying Options

Average Contractual Terms

at December 31, 2020

Forfeited/cancelled

at December 31, 2020

Forfeited/cancelled

Outstanding at December

Exercisable options

at December 31, 2022

options at December 31, 2022

and expected to vest at December 31, 2022

following table summarizes the exercise price range as of December 31, 2021:

following table summarizes the exercise price range as of December 31, 2022 and 2021:

of Exercise Price Range

2 unchanged sentences

value of each stock option is then expensed over the requisite service period, which is generally the vesting period (ranging between

immediate vesting and 4 years).

immediate vesting and four years).

The determination of fair value using the Black-Scholes model is affected by the Company’s share

price as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, risk-free interest

rate and forfeitures.

price as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, expected life,

risk-free interest rate and forfeitures.

options granted during the years ended December 31, 2022 and 2021 were valued using the Black-Scholes option-pricing model with the following

weighted average assumptions:

OF BLACK-SCHOLES OPTION PRICING MODEL WEIGHTED AVERAGE ASSUMPTIONS

of Options Weighted Average Assumptions

the years ended December 31,

interest rate

1 unchanged sentence

life of options in years

fair value of common stock

fair value of options granted

in the above table are stock options granted in 2019 to purchase 231,058 shares of the Company’s common stock at an exercise price

of $ 0.08 per share, which vest upon a specified performance condition.

These stock options vested at the date of the Company’s

IPO, which was the specified performance condition.

weighted average grant date fair value of stock options granted during the years ended December 31, 2022 and 2021 was approximately $ 2.70

respectively.

The weighted average fair value of stock options vested in the years ended December 2021 and 2020 was approximately $ 5.47

respectively.

based compensation expense was approximately $ 1,239,000

included in research and development expense

and $ 708,000

included in general and administrative expenses)

and approximately $ 234,000

included in research and development expense

and $ 110,000

included in general and administrative expenses)

for the years ended December 2021 and 2020, respectively, and is included in the accompanying consolidated statements of operations.

At December 31, 2021, the total unrecognized compensation expense related to non-vested options was approximately $ 75,000

and is expected to be recognized over the remaining

weighted average service period of approximately 0.5

in the above table are stock options granted in 2019 to purchase 231,058

shares of the Company’s common stock

at an exercise price of $ 0.079

per share and stock options granted in 2020 to

purchase 14,204

shares of common stock at an exercise price of

per share, which vest upon a specified performance

Since the occurrence of this condition was not considered probable as of December 31, 2021 and 2020, the Company has not recognized

any expense for such grants through December 31, 2021.

March 2021, the

Company modified the stock option exercise price for stock options granted during 2020, increasing the exercise price of such stock options

from $0.18 or $2.598 to $0.314 or $3.817 per share, respectively.

increase in the stock option exercise price was accounted for as a modification of the stock grant in 2021;

however, the impact

on the Company’s consolidated statements of operations was immaterial.

7 – Stockholders’ deficit

STOCKHOLDERS’

to an amendment to the Company’s Certificate of Incorporation filed in April 2019, the Company increased the number of authorized

shares of common stock to 250

million shares.

See Note 2 for a discussion of the reverse

the year ended December 31, 2020, the Company issued 75,757

shares of common stock for the Farrington acquisition

transaction described in Note 3.

and $ 5.48 , respectively.

The weighted average fair value of stock options vested during the years ended December 31, 2022 and 2021 was

approximately $ 1.25 and $ 5.47 , respectively.

stock based compensation expense included in the accompanying consolidated statements of operations was as follows:

of Stock Based Compensation Expense

the years ended December 31,

and development

and administrative

stock based compensation

December 31, 2022, the total unrecognized compensation expense related to non-vested options was approximately $ 1.9 million and is expected

to be recognized over the remaining weighted average service period of approximately 2.8 years.

March 2021, the Company modified the stock option exercise price for stock options granted during 2020, increasing the exercise price

of such stock options (after adjusting for the 1-for-26.4 reverse stock split) from $0.18 or $2.60 to $0.31 or $3.82 per share, respectively .

The increase in the stock option exercise price was accounted for as a modification of the stock grant in 2021;

however, the impact on

the Company’s consolidated statements of operations was immaterial.

connection with the IPO, the Company issued warrants to purchase such number of shares of the Company’s common stock equal to

5% of the total shares of common stock issued in the IPO.

The warrants are exercisable at

per share, were not exercisable within the first six months after issuance, and may, under certain circumstances, be exercised on a

cashless basis.

The exercise price of the warrants is subject to standard antidilutive provision adjustments for stock splits, stock

combinations, or similar events affecting the Company’s common stock.

The Company has determined that these warrants should be

classified as equity instruments since they do not require the Company to repurchase the underlying common stock and do not require

the Company to issue a variable amount of common stock.

In addition, these warrants are indexed to the

Company’s common stock and do not have any unusual antidilution rights.

Terms of the warrants outstanding at December

31, 2022 are as follows:

7 – Income Taxes

Company does not have any significant current income taxes due because of the losses generated in each period.

income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting

purposes and the amounts used for income tax purposes.

The Company’s deferred tax assets relate primarily to its net operating

loss carryforwards and other balance sheet basis differences.

In accordance with ASC 740, the Company recorded a valuation allowance

to fully offset the gross deferred tax asset because it is not more likely than not that the Company will realize future benefits associated

with these deferred tax assets at December 31, 2021 and 2020.

The valuation allowance increased by approximately $ 652,000

and $ 589,000

for the years ended December 31, 2021 and 2020,

respectively.

components of the Company’s deferred tax assets at December 31, 2021 and 2020 are as follows:

Company does not have any significant current income taxes due because of the losses generated in each year.

income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and income tax purposes.

The Company’s deferred tax assets relate primarily to its net operating loss carryforwards

and other balance sheet basis differences.

In accordance with FASB ASC 740, the Company recorded a valuation allowance to fully offset

the gross deferred tax asset because it is not more likely than not that the Company will realize future benefits associated with these

deferred tax assets at December 31, 2022 and 2021.

The valuation allowance increased by approximately $ 2.3 million and $ 652,000 for the years

ended December 31, 2022 and 2021, respectively.

significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows:

of Significant Components of Company’s Deferred Tax Assets

tax asset (liabilities) related to:

net operating loss carryforward

9 unchanged sentences

federal income

tax rate of 21 %

to loss before income tax benefit as a result of non-deductible expenses, tax credits generated and increases in the Company’s

valuation allowance.

tax rate of 21 % to loss before income tax benefit as a result of non-deductible expenses, tax credits generated, and increases in the

Company’s valuation allowance.

of Effective Income Tax Expense

the years ended December 31,

tax benefit at the federal statutory rate

8 unchanged sentences

After consideration of the available evidence, both

positive and negative, the Company determined that valuation allowances of $ 1,827,000

million and $ 1,175,000

at December 31, 2021 and 2020, respectively, were necessary to reduce the deferred tax assets to the amount that

will more likely than not be realized.

December 31, 2021, the Company had available net operating loss carryforwards of approximately $ 3.3

million for federal income tax purposes,

all of which was generated after 2017 and can be carried forward indefinitely under the Tax Cuts and Jobs Act.

At December 31, 2021,

the Company had approximately $ 46

thousand of federal research and development

positive and negative, the Company determined that valuation allowances of approximately $ 3.9 million and $ 1.8 million at December 31,

2022 and 2021, respectively, were necessary to reduce the deferred tax assets to the amount that will more likely than not be realized.

both December 31, 2022 and 2021, the Company had available net operating loss carryforwards of approximately $ 9.3 million and $ 3.3 million,

respectively, for federal income tax purposes, all of which was generated after 2017 and can be carried forward indefinitely under the

Tax Cuts and Jobs Act.

At both December 31, 2022 and 2021, the Company had approximately $ 81,000 of federal research and development

(“R&D”) tax credit carryforwards.

If not utilized, the federal R&D credits will begin to expire in 2038.

also had $ 3.3

million of state net operating losses

that will begin to expire in 2037.

also had $ 10.3 million of state net operating losses that will begin to expire in 2037.

382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available

5 unchanged sentences

it is likely that such an ownership change occurred during 2021.

March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund

a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response to the COVID-19

pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements include removal

of certain limitations on utilization of NOLs, increasing the loss carryback period for certain losses to five years, and increasing

the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

has concluded that the CARES Act did not have a material impact on its financial position, results of operations, or cash flows.

March 27, 2020, the United States Department of the Treasury enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES

The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States

economy and fund a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response

to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements

include removal of certain limitations on utilization of NOLs, increasing the loss carryback period for certain losses to five years,

and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and

The Company has concluded that the CARES Act did not have a material impact on its financial position, results of operations,

or cash flows.

December 27, 2020, the United States enacted the Consolidated Appropriations Act which extended many of the benefits of the CARES Act

3 unchanged sentences

8 – Related-party Transactions

PARTY TRANSACTIONS

described in Note 4, the Company entered into the Notes with the Holders commencing in May 2017.

The Holders of substantially all of

the Notes are the Company’s founder and Chief Executive Officer, a member of the Company’s board of directors

and third parties that are family members of the founder and Chief Executive Officer.

addition to the above Notes, the Company has amounts due to the founder and Chief Executive Officer that totaled $ 200,000

at December 31, 2021 and December 31, 2020 for

accrued compensation.

There are no established terms for repayment of such amounts.

the year ended December 31, 2020, expenses paid on behalf of the Company by the Chief Executive Officer of $ 55,068

were converted into a convertible promissory

note and is included in convertible notes-related parties on the accompanying balance sheet.

described in Note 3 to the consolidated financial statements, the Company entered into the Notes with the Holders commencing in May 2017.

The Holders of substantially all of the Notes were the Company’s founder and CEO, a member of the Company’s board of directors,

and third parties that are family members of the founder and CEO.

The Notes were converted into

shares of the Company’s common stock on January 14, 2022 in connection with the closing of the IPO.

addition to the above Notes, the Company had amounts due to the founder and CEO that totaled $ 200,000 at December 31, 2021 for accrued

compensation.

See Note 9 to the consolidated financial statements.

On April 1, 2022, the founder and CEO received the full amount of

January 4, 2022 and January 6, 2022, the Company issued unsecured promissory notes in the aggregate principal amount of approximately

$ 139,000 (including an original issuance discount of an aggregate of approximately $ 14,000 )

to three related-party investors.

The notes were to accrue interest at a rate of 12 % per annum and mature upon the earlier of (i) June

30, 2022, and (ii) the closing of a subsequent equity financing.

“Subsequent equity financing” means the next sale (or series

of related sales) by the Company of its equity securities following the date of the notes pursuant to which the Company receives gross

proceeds of not less than $ 5.0 million.

The notes were repaid in full on January 21, 2022 following the Company’s IPO on January

14, 2022 as the IPO was considered a subsequent Equity Financing.

Additionally,

on April 18, 2022, the founder and CEO exercised options to purchase up to 240,526 shares of the Company’s common stock at a weighted

average exercise price of $ 0.10 per share for a total of approximately $ 24,000 .

9 – Commitments and Contingencies

AND CONTINGENCIES

Molecule Analogues

December 30, 2019, the

Company acquired a series of small molecule analogues pursuant to an asset purchase agreement (“APA”).

Pursuant to the APA,

the Company is required to make a payment of $50,000 upon raising of at least $2 million in funding, and up to $1.75 million based

upon successfully meeting clinical and sales milestones.

of December 31, 2021, such fund-raising requirement was not met and no

payments were made pursuant to the APA.

included, in accounts payable at December 31, 2021 and December 31, 2020, the $ 50,000

required initial payment.

Milestone based payments,

if any, will be expensed as incurred.

January 2019, the Company entered into a three-year employment agreement with its Chief Executive Officer which provides a specified

base salary and bonus.

The employment agreement also provides the Chief Executive Officer with certain benefits while employed and if

employment ceases.

December 30, 2019, the Company acquired a series of small molecule analogues pursuant to an Asset Purchase Agreement (“APA”).

Pursuant to the APA, the Company is required to make a payment of $50,000 upon raising of at least $2.0 million in funding, and up to

approximately $1.75 million based upon successfully meeting clinical and sales milestones.

As of December 31, 2022 and 2021, such fund-raising

requirement was not met and no payments were made pursuant to the APA.

The Company included, in accounts payable at both December 31,

2022 and 2021, the $ 50,000 required initial payment.

Milestone based payments, if any, will be expensed as incurred.

Research Collaboration and Product License Agreement

with Minotaur Therapeutics, Inc.

(“Minotaur”) and Commercial License Agreement with Taurus Biosciences, LLC (“Taurus”)

Hillstream has entered into a research collaboration and product license

agreement with Minotaur and a commercial license agreement with Taurus to advance Picobodies against novel, unreachable and undruggable

epitopes in high-value validated targets starting with PD-1.

The research and collaboration agreement and product license agreement is

for the development of proprietary targeted biologics, Knob Quatrabodies™ (HSB-1940), against PD-1.

The technologies of Hillstream

and Minotaur will be combined under the license from Taurus to discover, develop and advance biotherapeutics against high-value validated

Picobodies are bovine-derived antibody “knob” domains comprised of cysteine-rich ultralong complementary determining

region H3 sequences of 30-40 amino acids weighing ~3-4KDa, which have the potential to access challenging epitopes better than full size

antibodies can.

By combining Quatramers with their long half-life coated with a PD-1 Picobody™ to create HSB-1940, Hillstream believes

it could more efficiently target novel epitopes with greater binding affinity than approved anti-PD-1 antibodies.

Hillstream believes

that targeting PD-1 is a step toward enabling Hillstream to enter the rapidly growing IO therapeutics market with additional targets thereafter.

The research collaboration with Minotaur includes an up-front payment of

Hillstream shall fund the discovery and characterization study performed by Minotaur as set forth in a statement of work and

For example, the statement of work includes protein target expression and purification, cow immunization, phage display and hit

identification and knob expression.

Each target is estimated to be completed in 32 weeks.

There are development and regulatory milestones

on a target by target basis.

There will be a milestone payment of $ 1,000,000 for each first product directed against a target and first

regulatory approval in the U.S.

In addition, there will be single digit royalties on net sales for up to ten years.

Taurus agreement contains single digit royalties on net product sales and development milestone payments tied to advancement through clinical

trials and final regulatory approval.

January 2019, the Company entered into a three-year employment agreement with its CEO which provides a specified base salary and bonus.

The employment agreement also provides the CEO with certain benefits while employed and if employment ceases.

The Company accrued $ 200,000

in 2019 related to the Chief Executive Officer’s

base salary as per the employment agreement, which is included in due to founder, which remains outstanding as of December 31, 2021.

bonus was approved by the board of directors

of the Company for any period through December 31, 2021.

January 2020, the Company amended the employment agreement pursuant to which, in lieu of a cash base salary, the Chief Executive Officer

will be compensated with stock options to purchase 7,575

shares of common stock per month (at an exercise

price based upon the most recent 409A valuation) effective January 1, 2020 until the Company receives a minimum of $ 3,000,000

of gross proceeds from the sale of the Company’s

securities, after which time, cash compensation, pursuant to the employment agreement, shall be paid.

January 1, 2021, the Company amended the employment agreement with its Chief Executive Officer to provide a revised base salary pre-funding

(as defined in the employment agreement).

In lieu of cash base salary, the Chief Executive Officer will be compensated with stock options

to purchase 18,939

shares of the Company’s common stock per

month (an exercise price of $ 7.82

per share) effective January 1, 2021 until

funding meets or exceeds $ 5,000,000 ,

after which time, cash compensation, pursuant to his employment agreement, shall be paid.

The amended employment agreement also provides

for a future base salary for the Chief Executive Officer after the Company receives funding greater than $ 5,000,000

or completes an initial public offering or similar

transaction as set forth in the employment agreement.

In addition, if the Chief Executive Officer acts as the “finder” of

an investor who purchases more than $ 5,000,000

of the Company’s equity, he will receive

a grant of stock options to acquire 757,575

shares of common stock of the Company at an exercise

price equal to the most recent fair value of the Company’s common stock.

This grant has not been earned as of December 31, 2021.

in 2019 related to the CEO’s base salary as per the employment agreement, which was included in due to founder as of December 31,

2021, which was paid in full on April 1, 2022.

No bonus was approved by the board of directors of the Company for any period through

December 31, 2022.

January 2020, the Company amended the employment agreement pursuant to which, in lieu of a cash base salary, the CEO was to be compensated

with stock options to purchase 7,575 shares of the Company’s common stock per month (at an exercise price based upon the Company’s

most recent 409A valuation at the date of the grant) effective January 1, 2020 until the Company received a minimum of $ 3.0 million of

gross proceeds from the sale of its securities, after which time, cash compensation, pursuant to the employment agreement, would be paid.

January 1, 2021, the Company amended the employment agreement with its CEO to provide a revised base salary pre-funding (as defined in

the employment agreement).

In lieu of cash base salary, the CEO was to be compensated with stock options to purchase 18,939 shares of

the Company’s common stock per month at an exercise price of $ 7.82 per share effective January 1, 2021 until funding meets or exceeds

$ 5.0 million, after which time, cash compensation, pursuant to his employment agreement, would be paid.

The amended employment agreement

also provides for a future base salary for the CEO after the Company receives funding greater than $ 5.0 million or completes an initial

public offering or similar transaction as set forth in the employment agreement.

In addition, if the CEO acts as the “finder”

of an investor who purchases more than $ 5.0 million of the Company’s equity, he will receive a grant of stock options to acquire

757,575 shares of common stock of the Company at an exercise price equal to the most recent fair value of the Company’s common

stock at the time of grant.

June 1, 2021, the Company entered into an Amended and Restated Employment Agreement, as amended on September 24, 2021 (the “Amended

and Restated Employment Agreement”) with the Company’s President and Chief Executive Officer.

The term of the Amended and

Restated Employment Agreement will commence upon the closing of the Company’s initial public offering of its securities and continues

for a period of five years and automatically renews for successive one-year periods at the end of each term unless either party provides

written notice of their intent not to review at least 60 days prior to the expiration of the then effective term.

Pursuant to the Amended

and Restated Employment Agreement, the Chief Executive Officer will receive an annual base salary of $ 485,000 ,

which may be increased from time to time, and shall be eligible to receive an annual cash bonus equal to 55 %

of his then base salary based upon the achievement of Company and individual performance targets established by the Company’s board

of directors.

and Restated Employment Agreement”) with the Company’s CEO.

The term of the Amended and Restated Employment Agreement commenced

upon the closing of the Company’s IPO and continues for a period of five years and automatically renews for successive one-year

periods at the end of each term unless either party provides written notice of their intent not to renew at least 60 days prior to the

expiration of the then effective term.

Pursuant to the Amended and Restated Employment Agreement, the CEO will receive an annual base

salary of $ 485,000 , which may be increased from time to time, and shall be eligible to receive an annual cash bonus equal to 55 % of his

then base salary based upon the achievement of Company and individual performance targets established by the Company’s board of

In addition, in the first year in which the Company’s market capitalization (as defined in the Amended and Restated

Employment Agreement) equals or exceeds (i)

$250 million, the Chief Executive Officer shall receive a cash payment of $150,000;

(ii) $500 million, the Chief Executive Officer shall

receive a cash payment of $350,000;

and (iii) $1 billion, the Chief Executive Officer shall receive a cash payment of $750,000.

on or as soon as reasonably practicable following the date of the consummation the Company’s initial public offering of its securities,

the Chief Executive Officer shall be granted 757,575

shares of the Company’s common stock at the public

offering price per share of common stock sold in the Company’s initial public offering of its securities which shall vest over

a 48-month period commencing 12 months after the date of grant.

This shall be in addition to any additional equity-based compensation

awards the Company may grant the Chief Executive Officer from time to time.

Employment Agreement) equals or exceeds (i) $250 million , the CEO shall receive a cash payment of $150,000;

(ii) $500 million, the CEO

shall receive a cash payment of $350,000;

and (iii) $1.0 billion , the CEO shall receive a cash payment of $750,000 .

Furthermore, following

the date of the Company’s IPO, the CEO was issued an option to purchase 757,575 shares of the Company’s common stock at an

exercise price of $ 4.00 per share, which options shall vest over a 48-month period commencing 12 months after the date of grant.

shall be in addition to any additional equity-based compensation awards the Company may grant the CEO from time to time.

10 – Subsequent Events

January 14, 2022, the Company closed its IPO pursuant to which it issued 3,750,000

shares of the Company’s common stock at

a public offering price of $ 4.00

The gross proceeds to the Company

from the IPO were $ 15,000,000 ,

prior to deducting underwriting discounts, commissions, and other offering expenses.

The net proceeds to the Company from the IPO

The Company granted the underwriters

a 45-day option to purchase up to an additional 562,500

shares of common stock at the public offering

price less discounts and commissions, to cover over-allotments;

however, this option expired unexercised.

Additionally, and as

a result of the completion of the IPO, all of the Company’s convertible debt and accrued interest was converted into an

aggregate of 1,225,384

shares of the Company’s common stock

pursuant to the terms of the convertible notes.

January 4, 2022 and January 6, 2022, the Company issued unsecured promissory notes in the aggregate principal amount of $ 138,887

(including an original issuance discount of an

aggregate of $ 13,887 )

to three related-party investors.

The notes accrue interest at a rate of 12 %

per annum and mature upon the earlier of (i) June 30, 2022, and (ii) the closing of a Subsequent Equity Financing.

Equity Financing” means the next sale (or series of related sales) by the Company of its Equity Securities following the date of

the notes pursuant to which the Company receives gross proceeds of not less than $ 5,000,000 .

The notes were repaid in full on January 21, 2022.

Stock option grant

January 14, 2022, the Company granted its Chief Executive Officer a stock option to purchase up to 757,575

shares of the Company’s common stock

at an exercise price of $ 4.00

per share in accordance with his employment

March 21, 2022, the Company granted options to purchase up to an aggregate of 247,500

shares of the Company’s common stock

at an exercise price of $ 1.33

per share to the independent members of

the Company’s board of directors and members of the Company’s Scientific Advisory Board.

January 1, 2023, the Company granted its Chief Executive Officer stock options to purchase up to 515,127

shares of common stock of the Company at an exercise price of $ 0.39

per share in lieu of half of his salary for 2023.

On February 27, 2023, the Company filed a Certificate of Cancellation with

the Delaware Secretary of State with respect to Farrington Therapeutics LLC.

as noted above, there were no material subsequent events that required recognition or additional disclosure in these consolidated

financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data