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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-03-16 · 243 added, 345 removed, 102 unchanged (85% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

should read the following discussion and analysis of our financial condition and plan of operations together with and our accompanying

8 unchanged sentences

dollars, unless otherwise noted.

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

mechanism resulting in IMCD, and targeted IO novel biologics, for the treatment drug resistant cancers.

Our 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 TNBC and epithelial carcinomas.

We utilize Quatramer™, our proprietary tumor targeting platform, to enhance the uptake of HSB-1216 in the TME with an extended

duration of action and minimal off-target toxicity.

Our goal is to submit an IND to the FDA and initiate a clinical study with HSB-1216

in the second half of 2023;

however, no assurance can be provided that our IND will be accepted by the FDA in 2023, if at all.

IND is accepted by the FDA, our HSB-1216 clinical studies will focus on expanding upon the clinical pilot study conducted in Germany.

If we are able to initiate our clinical study with HSB-1216 in the second half of 2023, we anticipate that clinical data from such trial

will be released either late 2024 or early 2025.

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 LIP, a known factor

required for cell growth.

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

Decreasing the

LIP, induces iron-led ROS production and lipid peroxidation, two key hallmarks of ferroptosis/IMCD, which lead to regulated cell death.

HSB-1216 sequesters iron in the cytoplasm of cancer cells and decreases the LIP, thereby inducing ferroptosis/IMCD, leading to regulated

Areas of interest for the development of HSB-1216 are as a treatment of solid tumors, including SCLC, TNBC, uveal melanoma,

glioblastoma multiforme, head and neck squamous cell carcinoma and other drug resistant cancers with high unmet need.

is a tumor targeting platform which allows us to leverage and exploit key tumor targets and novel emerging pathways such as IMCD to facilitate

the delivery of potent drugs directly to the TME while sparing healthy tissue.

By efficiently extending the circulation half-life, as

well as targeting delivery to the tumor site, Quatramer preferentially traps drugs in the TME.

This emerging orthogonal anti-cancer approach

leverages a fundamental recognized mechanism of iron mediated tumor growth and metabolism.

We are building a portfolio of long-acting,

potent anti-cancer drug candidates using our Quatramer platform.

Quatrabody™ provides an entry into development of next generation IO biologics including, bispecific and trispecific antibodies,

ADCs, CAR-T, CAR-NKs among others.

Quatrabodies capitalize on the long half-life of tumor targeting Quatramers combined with Picobodies™,

bovine-derived antibody “knob” domains which have potential to access and bind more tightly to “undruggable”

epitopes better than full sized antibodies.

HSB-1940 is a combination of PD-1 targeting Picobodies bound to the surface of Quatramers.

Quatrabodies have the potential for delivering an increased drug payload to the tumor with a longer half-life while targeting novel “undruggable”

epitopes of well-established and validated IO targets such as PD-1.

critical components of our business strategy to achieve our goals include:

drug candidate, HSB-1216, in solid tumors.

from a clinical pilot study conducted at the University of Heidelberg, Germany, led us to progress HSB-1216 into IND-enabling studies

with the goal of submitting an IND to the FDA in 2023.

drug candidate, HSB-3215

ErbB family of cell surface proteins are some of the most well-known and validated oncology drug targets including ErbB2 or HER2 (human

epidermal growth factor receptor) and Erb3 or HER3.

drug candidate, HSB-1940

Quatrabody™ provides an entry into next generation of IO biologics including, bispecific and trispecific antibodies, ADCs, CAR-T,

CAR-NKs and others.

Quatrabodies capitalize on the long half-life of tumor targeting Quatramers, combined with Picobodies™, bovine-derived

antibody “knob” domains which have potential to access and bind more tightly to “undruggable” epitopes better

than full sized antibodies.

our novel platform to develop a pipeline of high value Quatramer leads.

tunability of our technology allows us to efficiently expand our pipeline of Quatramer, both on our own and in collaboration with others,

through various combinations of targeted DNA encoded for anti-tumor cytokines and therapeutic payloads, which enables us to move into

other areas of oncology, including IO whereby we could potentially increase the effectiveness of ICIs.

and commercializing Quatramer in collaboration with leading pharmaceutical companies.

addition to our internal development programs, we actively seek opportunities to collaborate with recognized biopharmaceutical companies

to develop Quatramer incorporating therapeutic payloads from their proprietary product portfolios.

We intend to establish collaborations

with industry leaders and strategic pharmaceutical organizations.

Commercializing

proprietary Quatramer based products, including HSB-1216, directly in the United States and with collaborators outside the United

own HSB-1216 and our other proprietary pipeline and expect to maintain similar rights with respect to other proprietary Quatramer we

Following FDA approval in the United States, we may partner with a larger biopharmaceutical company as well as potentially build

a focused oncology sales organization to market Quatramer-based therapeutics.

Outside of the United States, we intend to rely on collaborators

to commercialize proprietary approved Quatramer.

to extend and protect our product technology and Quatramer through our intellectual property portfolio.

seek to protect our novel platform through U.S.

and international patents as well as know-how and trade secrets relating to the design

and manufacturing of our technology.

We expect to continue to file patent applications as we apply our technology to new targets and

therapeutic payloads.

In addition, we believe the heightened regulatory requirements for generics of this technology may strengthen the

protection afforded by our intellectual property portfolio.

Minotaur Research and Collaboration Agreement and

Taurus License Agreement

Hillstream has entered into a research collaboration and product license

agreement with Minotaur and a commercial license agreement with Taurus for use of certain technology, including OmniAb antibodies, to

advance Picobodies against novel, unreachable and undruggable epitopes in high-value validated targets starting with PD-1.

and collaboration agreement and product license agreement is for the development of proprietary targeted biologics, Knob Quatrabodies™

(HSB-1940), against PD-1.

technologies of Hillstream and Minotaur will be combined under the license

from Taurus to discover, develop and advance biotherapeutics against high-value validated IO targets.

Picobodies are bovine-derived antibody

“knob” domains comprised of cysteine-rich ultralong CDR H3 sequences of 30-40 amino acids weighing ~3-4KDa, which have the

potential to access challenging epitopes better than full size antibodies can.

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

We further believe that the development of HSB-1940 is a step toward enabling us to enter the rapidly growing IO market with

additional targets thereafter.

Biomedical Research Institute Option Agreement

ABSI has developed technology to target unique functional epitopes of the

cancer targets HER2 and HER3.

Monoclonal antibodies being developed at ABSI are unique from the currently approved anti-HER2 antibodies.

ABSI has granted us an exclusive option to license technology to develop HER2 and HER3 antibodies, including multi-specific and Quatramer-based

therapeutics incorporating portions of the antibodies.

These antibodies could be incorporated into proprietary multi-format biologics

(bi- and tri-specific antibodies, ADCs (antibody drug conjugates), CAR-T and CAR-NKs, in Quatramers and Quatrabodies) against drug resistant

cancers including HER2-positive metastatic breast cancer, gastric cancer, lung cancer and ovarian cancer.

The ABSI option terminates on March 24, 2023, unless extended by the parties.

and Uncertainties-COVID-19

global COVID-19 pandemic continues to evolve.

The extent of the impact of the COVID-19 on our business, operations, pre-clinical and

clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread

of the outbreak, COVID-19 variants, and the future impact of COVID-19 on our clinical trial enrollment, clinical trial sites, CROs, third-party

manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific

and management personnel.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and

with many of our employees and consultants working remotely.

We will continue to actively monitor the evolving situation related to COVID-19

and may take further actions that alter our operations, including those that may be required by federal, state or local authorities,

or that we determine are in the best interests of our employees and other third parties with whom we do business.

At this point, the

extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the

resulting impact on our expenditures and capital needs, remains uncertain.

is a clinical-stage biotechnology company developing therapeutic candidates in rare, inflammatory and oncologic conditions with high

On November 3, 2023, we entered into a patent license agreement (the “Avior License Agreement”) with Avior Inc.

d/b/a Avior Bio, LLC (“Avior”) pursuant to which we received an exclusive sublicensable right and license to Licensed Patent

Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize

TH104 and TH103 and to practice the Licensed Technology in connection with the foregoing, throughout the world, each as defined in the

Avior License Agreement.

See “Recent Developments” below for additional information.

In February 2023, the U.S.

Drug Administration (“FDA”) approved an investigational new drug (“IND”) application for TH104.

TH104 has a dual

mechanism of action by affecting multiple receptors, known to suppress chronic, debilitating pruritis or “uncontrollable itching.”

With respect to TH104, we intend to first seek approval for the treatment of moderate to severe chronic pruritis in patients with primary

biliary cholangitis (“PBC”), an orphan rare form of liver disease with no known cure in which more than 70% of patients suffer

from debilitating chronic pruritis, and with respect to TH103, we intend to develop the product candidate and potentially file an IND.

are also developing an early-stage pipeline of novel therapeutic candidates targeting validated high value immuno-oncology (“IO”)

targets including human epidermal growth factor (“EGF”) receptor 2 (“HER2”), human

EGF receptor 3 (“ HER3”) and programmed cell death protein 1 (“PD-1”).

We are developing antibodies including

bispecific antibodies, antibody drug conjugates (“ADCs”) and small molecular weight bovine-derived Picobodies™ or antibody

“knob” domains which have the potential to target and bind more tightly to “undruggable” epitopes better than

full sized antibodies.

We are advancing TH3215, a bispecific against both HER2 and HER3 antibody which targets a novel “bridging

epitope” encompassing multiple domains of the HER2 extracellular domain (“ECD”) as well as ligand-dependent and independent

blocking of the ECD of HER3 into IND-enabling studies in 2024.

In addition, we anticipate that TH0059, a HER2/HER3 bispecific ADC (“bsADC”),

and TH1940, a PD-1 Picobody, will progress to enter IND-enabling studies in 2024.

have deprioritized our previous preclinical candidate, HSB-1216, due to a strategic reprioritization of our vision to focus on therapeutics

in high unmet need cancers focused on novel epitopes of certain antitumor drug targets.

critical components of our business strategy include:

Develop TH14 as a transmucosal

buccal film product for the treatment of chronic pruritis in PBC and other inflammatory diseases;

Continue to advance TH3215

as an anti-HER2/HER3 BspAb for multiple tumor types including high unmet need cancers;

Effectively create a strategy

to develop TH0059 as a bispecific monoclonal ADC specifically targeted to both HER2 and HER3 receptors in high unmet need standard-of-care

resistant tumors with a high capacity to metastasize;

Create a preclinical and

clinical path forward for our third product candidate, TH1940, a unique PD-1 Picobody with unique binding differentiation compared

to full length antibodies for IO vulernable tumors;

Hasten the discovery of next

generation multi-specific (bi- and tri) antibodies with binding capabilities to novel epitopes of combinations of HER2, HER3, PD-1,

PD-L1, TROP2 and other validated targets with and without toxin delivery capacity to multiple high unmet need rare cancers;

Pursue strategic collaboration

opportunities to maximize the value of our pipeline to bring novel therapies to patients suffering from high unmet need conditions.

Biomedical Research Institute Research and Development Collaboration and License Agreement

July 5, 2023 (the “ABSI Effective Date”), we entered into a Research and Development Collaboration and License Agreement

(the “ABSI Agreement”) with Applied Biomedical Science Institute (“ABSI”) pursuant to which ABSI granted us an

exclusive royalty-bearing, sublicensable license to the ABSI Patents and a non-exclusive, royalty-bearing, sublicensable license to the

ABSI Know-How to Exploit the ABSI Products for the treatment, diagnosis, prediction, detection or prevention of disease in humans and

animals worldwide (the “Territory”).

Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical,

IND- enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product.

parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target with a view

to identifying or generating suitable Products for our Company to Exploit.

“Target” means ErB2 (Her2) and ErbB3.

Upon completion

of the Discovery Timeline for a Target, subject to the terms and conditions of ABSI Agreement, we shall exclusively own any ABSI Products

against such Target.

In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, we

may propose an additional target, which, upon approval by ABSI, shall replace a failed Target, each capitalized term as defined in the

ABSI Agreement.

part of the ABSI Agreement, on July 26, 2023, we issued 25,107 shares of our common stock with a per share value of $9.95, representing

total compensation expense of $250,000.

November 3, 2023 (the “Avior Effective Date”), we entered into the Avior Patent License Agreement with Avior pursuant to

which we received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things,

Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the Licensed Technology

in connection with the foregoing, throughout the world.

Pursuant to the Avior Patent License Agreement, we paid Avior a mid-six digit

up front license fee within ten days of the Avior Effective Date and an additional mid-six digit license fee which shall be paid in four

equal installments within ten days of the end of each fiscal quarter following the Avior Effective Date.

In addition, we shall pay Avior

a high single digit percentage of any upfront payments received by us as a result of the grant of any sublicenses with respect to TH104.

We shall also pay Avior milestone payments in the aggregate amount of $24.25 million upon the occurrence of various development milestones

(the “Development Milestone Payments”).

Furthermore, we shall pay Avior certain fees based upon sales milestones.

for such sales milestones range from the low seven digits to the low eight digits with higher sales being subject to higher fees.

we shall pay Avior royalties based on net sales.

Such royalties range from low single digit percentages to mid-single digit percentages

with higher sales being subject to lower percentages.

The Avior Patent License Agreement shall expire upon the expiration of the final

payment obligation due to Avior as set forth in such agreement.

Upon the expiration of the Avior Patent License Agreement, we shall have

a fully paid-up, irrevocable, freely transferable and sublicensable worldwide license to the Licensed Patent Rights and Licensed Technology

to Develop, have Developed, make, have made, use, have used sell, offer for sale, have sold, import, have imported, export, have exported,

commercialize or have commercialized any and all Licensed Products and to practice the Licensed Technology worldwide.

Pursuant to the

Avior Patent License Agreement, we may terminate the agreement at any time without cause, upon 30 days’ prior written notice to

Avior along with payment of the next unpaid Development Milestone Payment, if any.

Furthermore, either we or Avior may terminate the

Avior Patent License Agreement (i) on written notice to the other party if the other party materially breaches any provision of the Avior

Patent License Agreement and fails to cure such breach within 30 days after the breaching party receives written notice thereof or (ii)

on written notice in the event that either party (A) becomes insolvent or admits its inability to pay its debts generally as they become

(B) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law,

which is not fully dismissed or vacated within 60 days;

(D) makes a general assignment for the benefit of creditors;

or (E) has a receiver, trustee, custodian or similar agent appointed by

order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.

Upon termination

of the Avior Patent License Agreement, the license granted pursuant to such agreement shall terminate and all rights in the Licensed

Patent Rights and Licensed Products shall revert back to Avior.

of Results of Operations

did not recognize revenues for years ended December 31, 2022 and 2021.

did not recognize any revenue for the years ended December 31, 2023 and 2022.

and Development Expenses

and development expenses include personnel costs associated with research and development activities, including third-party contractors

to perform research, conduct clinical trials, stock-based compensation and manufacture drug supplies and materials.

Research and development

expenses are charged to operations as incurred.

to perform research, conduct clinical trials, and manufacture drug supplies and materials as well as stock-based compensation for our

research and development personnel.

Research and development expenses are charged to operations as incurred.

accrue costs incurred by external service providers, including contract research organizations and clinical investigators, based on estimates

5 unchanged sentences

as expense in future periods as the related services are rendered.

have incurred research and development expenses related to the development of HSB-1216.

We expect that our research and development expenses

will increase as we plan for and commence our clinical trials of HSB-1216, HSB-3215 and HSB-1940.

cannot determine with certainty the duration and costs of future clinical trials of our product candidates, HSB-1216, HSB-3215 and HSB-1940,

or any other product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and

sale of any of our product candidates for which we obtain marketing approval.

We may never succeed in obtaining marketing approval for

any of our product candidates.

have incurred research and development expenses related to the development of HSB-1216, which has been deprioritized.

We expect that

our research and development expenses will increase as we plan for and commence our clinical trials of TH3215 and TH1940.

cannot determine with certainty the duration and costs of future clinical trials of our product candidates, TH3215 and TH1940, or any

other product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of

any of our product candidates for which we obtain marketing approval.

We may never succeed in obtaining marketing approval for any of

our product candidates.

The duration, costs and timing of clinical trials and development of our current and future product candidates

15 unchanged sentences

and Administrative Expenses

and administrative expenses consist primarily of compensation and consulting related expenses, including

stock-based compensation .

General and administrative expenses also include professional fees and other corporate expenses, including

legal fees relating to corporate matters;

and administrative expenses consist primarily of compensation and consulting related expenses, including stock-based compensation for

our general and administrative personnel.

General and administrative expenses also include professional fees and other corporate expenses,

including legal fees relating to corporate matters;

professional fees for accounting, auditing, tax, and consulting services;

insurance costs;

expenses and other operating costs that are not specifically attributable to research activities.

travel expenses and other operating costs that are not specifically attributable to research activities.

expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our

1 unchanged sentence

We also incur expenses associated with being a public company,

including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, director and officer insurance expenses,

including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, directors and officers insurance expenses,

corporate governance expenses, investor relations activities and other administrative and professional services.

in Redemption Value

account for derivative instruments in accordance with Accounting Standards Codification (“ASC”) 815, Derivatives 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.

Our derivative

financial instrument consists of an embedded feature contained in our convertible debt that we call the “redemption liability.”

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

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

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 our initial public offering

(“IPO”), the unamortized debt discount was charged to interest expense.

In accordance with Accounting Standards Update (“ASU”)

2015-03, Interest — Imputation of Interest , the unamortized debt discount is presented in the accompanying consolidated

balance sheets as a direct deduction from the carrying amount of the related debt.

redemption liability includes a provision that provides the noteholder with certain conversion and put rights at various conversion or

redemption values as well as certain call options for us.

The fair value of the redemption liability is calculated under Level 3 of the

fair value hierarchy, determined based upon a Probability-Weighted Expected Returns Method (“PWERM”).

This PWERM was determined

to be the most appropriate method of estimating the value of possible redemption or conversion outcomes over time, since we did not enter

into a priced equity round through December 31, 2021.

The significant assumptions utilized in these calculations are the possible exit

scenarios (either a conversion of the principal and accrued interest of the Notes (as defined herein) in the event of a Next Equity Financing

(as defined herein), 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 our common stock, the probabilities of such

exit events occurring and discounts/premiums available to the noteholders at such measurement dates.

The calculation of the redemption

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

income consists of interest income from funds held in our cash accounts.

Offering Costs

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

from its initial public offering.

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

common stock offerings during the year.

of Operations

1 unchanged sentence

following table sets forth key components of our results of operations for the years ended December 31, 2023 and 2022.

Statements of Operations Data:

and development

Consolidated Statements

of Operations Data:

Operating expenses:

and administrative

operating expenses

income (expense)

in redemption value

other income (expense), net

$ (8,473,182 )

Other expense:

Interest expense

other income (expense)

$ (9,319,094 )

1 unchanged sentence

and Development Expenses

and development expenses increased by $435,621, or 23.6%, to $2,278,424 for the year ended December 31, 2022 from $1,842,803 for the

year ended December 31, 2021.

The increase was primarily the result of an increase in expenses for pre-clinical activities of $494,017

and consulting expenses of $130,771.

These increases were offset by decreases of $189,167 in stock based compensation expense related

to research and development team members because of the limited number of stock options issued during the year.

and development expenses increased by $1.3 million, or 56.2%, to $3.6 million for the year ended December 31, 2023 from $2.3 million

for the year ended December 31, 2022.

The increase was the result of an increase in expenses for pre-clinical activities of approximately

$0.3 million, an increase in licensing fees of approximately $1.0 million, an increase of approximately $0.1 million in stock-based compensation

expense related to research and development team members because of an increased number of stock options vested during the year.

increases were offset by a decrease in research and development consulting expenses of approximately $0.1 million.

The increase for the

year ended December 31, 2023 was primarily the result of increased focus on newer product candidates as we placed our now deprioritized

product candidate, HSB-1216, on hold during the 3 rd quarter.

and Administrative Expenses

and administrative expenses increased by $3,238,300 or 237.2%, to $4,603,514 for the year ended December 31, 2022 from $1,365,214 for

the year ended December 31, 2021.

The increase in general and administrative expenses was primarily due to an increase of $1,219,401

in insurance expenses, $693,632 in consulting expenses, $499,951 in payroll expenses, $236,265 in accounting expenses;

$224,864 in legal

$220,380 in remuneration paid to our directors;

$205,743 in investor relations expenses;

$67,578 in filing fees, and $119,892

in various other expenses.

The increases were offset by a decrease of $249,406 in stock-based compensation expense.

expense increased by $759,967, or 91.4%, to $1,591,244 for the year ended December 31, 2022 from $831,277 for the year ended December

The increase in interest expense was primarily related to the unamortized debt discount charged to interest expense on the

date of our IPO.

See Note 3 of our consolidated financial statements.

in Redemption Value

change in redemption value decreased by $1,832,651, or 100.0%, to $0 for the year ended December 31, 2022 from $1,832,651 for the year

ended December 31, 2021 as the redemption liability was re-evaluated in light of the actual fair value increment provided to the debt

holders upon completion of our IPO in January 2022.

and administrative expenses increased by approximately $1.3 million, or 28.1%, to $5.9 million for the year ended December 31, 2023 from

$4.6 million for the year ended December 31, 2022.

The change in general and administrative expenses was primarily due to an increase

of approximately $0.9 million in investor relations expenses, approximately $0.6 million in general and administrative personnel expenses,

$0.2 million in legal expenses, and other general corporate increases of approximately $0.1 million.

These increases were offset by a

decrease of $0.3 million in financial consulting expenses and a decrease in insurance expense of approximately $0.2 million.

expense decreased by $1.6 million, or 99%, to $16,505 for the year ended December 31, 2023 from $1.6 million for the year ended December

The decrease in interest expense was primarily related to the unamortized debt discount charged to interest expense on the

date of our IPO during 2022 further described in Note 3 of the accompanying consolidated financial statements.

income increased by $0.2 million, or 100.0%, to $0.2 million for the year ended December 31, 2023 from $0 for the year ended December

The increase in interest income was primarily from the funds held in our cash accounts.

loss increased by $0.8 million, or 10.0%, to $9.3 million for the year ended December 31, 2023 from $8.5 million for the year ended December

The change in net loss was primarily related to the increase in research and development and general and administrative expenses

described above offset by the decrease in interest expense.

and Capital Resources

2 unchanged sentences

For the year ended December

31, 2022, we 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.

We financed our working

capital requirements through December 31, 2022 primarily through the issuance of common stock through our IPO.

Net proceeds to us from

the IPO were approximately $13.0 million.

See Note 5 to the consolidated financial statements for details regarding the IPO.

stock began trading on The Nasdaq Capital Market on January 12, 2022 under the ticker symbol “HILS.”

31, 2023, we incurred operating losses of approximately $9.5 million, expended approximately $7.3 million in cash in operating activities,

and had an accumulated deficit of approximately $24.7 million as of December 31, 2023.

We financed our working capital requirements through

December 31, 2023 primarily through the issuance of common stock in various offerings.

We received gross proceeds of approximately $13.6

million through public offerings of our common stock on May 2, 2023 and November 30, 2023 which generated net proceeds to us of approximately

$2.1 million and $9.7 million, respectively.

on our limited operating history, recurring negative cash flows from operations, current plans and available resources, we will need

1 unchanged sentence

We have concluded that the prevailing conditions and ongoing liquidity

risks faced by us raise substantial doubt about our 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 we be unable to continue as a going concern.

risks faced by us raise substantial doubt about our ability to continue as a going concern for at least one year following the date these

consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued.

The accompanying consolidated financial

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

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 we will be able

to obtain additional capital on terms acceptable to us, on a timely basis or at all.

The failure to obtain sufficient additional funding

could adversely affect our ability to achieve its business objectives and product development timelines and could have a material adverse

effect on our results of operations.

Flow Activities for the Years Ended December 31, 2022 and 2021

or other arrangements or a combination of the foregoing to support our future operations;

however, there can be no assurance that we

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

The failure to obtain sufficient additional

funding could adversely affect our ability to achieve our business objectives and product development timelines and may result in delaying

or terminating clinical trial activities which could have a material adverse effect on our results of operations.

Flow Activities for the Year Ended December 31, 2023 and 2022

following table sets forth a summary of our cash flows for the periods presented.

Ended December 31,

cash used in operating activities

Net cash used in operating activities

$ (7,300,106 )

$ (6,557,950 )

cash provided by financing activities

increase (decrease) in cash

Net cash provided by financing activities

Net increase in cash

Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2022

was $6,557,950 which consisted of net loss of $8,473,182, partially offset by $2,484,344 in non-cash charges and other adjustments to

reconcile net loss to net cash used in operating activities and $569,112 in net decrease in operating accounts.

The non-cash charges consist

of amortization of debt discount of $1,569,003, stock compensation expenses of $800,696, stock issuance pursuant to service agreement

of $100,000 and interest and original issuance discount on promissory notes of $14,645.

The net decrease in operating activities was primarily

due to a decrease of $200,000 due to founder, a decrease in accounts payable of $141,170, a decrease in accrued expenses of $127,755,

a decrease of $107,424 in prepaid expenses and other current assets offset by an increase of $7,237 in accrued interest.

used in operating activities for the year ended December 31, 2021 was $1,086,244 which consisted of net loss of $2,206,643, partially

offset by $73,184 in non-cash charges and other adjustments to reconcile net loss to net cash used in operating activities and $1,047,215

in net increase in operating accounts.

The non-cash charges consist of stock compensation expenses of $1,239,269, amortization of debt

discount of $666,566 offset by decrease in fair value of redemption liability of $1,832,651.

The net increase in operating activities

was primarily due to an increase of $850,293 in accounts payable and accrued expenses, an increase in accrued interest of $164,646 and

a decrease of $32,276 in prepaid expenses and other current assets.

used in operating activities for the year ended December 31, 2023 was $7.3 million which consisted of net loss of $9.3 million, partially

offset by non-cash stock-based compensation of approximately $0.8 million, non-cash stock issuance pursuant to a services agreement of

approximately $0.4 million, and net changes in operating assets and liabilities of approximately $0.8 million.

used in operating activities for the year ended December 31, 2022 was $6.6 million which consisted of net loss of $8.5 million and net

decrease in operating assets and liabilities of $0.6 million, partially offset by $2.5 million in non-cash charges and other adjustments

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

The non-cash charges consist of amortization of debt discount of $1.6

million, stock compensation expenses of $0.8 million, stock issuance pursuant to service agreement of $0.1 million, and interest expense

and original issuance discount on promissory notes of $14,645.

The net decrease in operating activities was primarily due to a decrease

of $0.2 million due to founder, a decrease in accounts payable of $0.1 million, a decrease in accrued expenses of $0.1 million, and a

decrease of $0.1 million in prepaid expenses and other current assets.

Flows from Financing Activities

provided by financing activities for the year ended December 31, 2022 was $13,064,128.

The net increase in financing activities was from

net cash proceeds of $13,645,643 from the issuance of our common stock in connection with our IPO, $125,000 from the issuance of promissory notes and $24,389 from exercise of stock

options offset by deferred offering costs of $521,294, repayment of promissory notes of $139,645 and purchase of treasury stock, at cost of $69,965.

provided by financing activities for the year ended December 31, 2021 was $898,748.

The net increase in financing activities was from

net cash proceeds of $1,078,015 from the issuance of convertible promissory notes offset by deferred offering costs of $179,267.

Promissory Notes

in May 2017, we issued convertible promissory notes (the “Notes”) to certain investors to help finance our operations.

principal amount of such notes ranged from $1,000 to $300,000.

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 our common

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

by us on demand by the holders at any time after the earlier of (i) the maturity date of each Note and (ii) the closing of the Next Equity

“Next Equity Financing” means the next sale or series of related sales of our Equity Securities pursuant to which

we receive 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

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 Equity Security by the investors in

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

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 Company’s initial public offering qualified as a Next Equity Financing.

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 31, 2021.

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.

provided by financing activities for the year ended December 31, 2023 was $11.7 million.

The net increase in financing activities was

from net cash proceeds of $12.2 million from the issuance of our common stock in connection with public offerings and $0.7 million in

proceeds received from insurance premium financing liability offset by deferred offering costs of $0.5 million and $0.7 million in repayments

of insurance premium financing liability.

provided by financing activities for the year ended December 31, 2022 was $13.1 million.

The net increase in financing activities was

from net cash proceeds of $13.6 million from the issuance of our common stock in connection with our IPO, $0.9 million from insurance

premium financing liability, $0.1 million from the issuance of promissory notes, offset by repayment of insurance premium financing liability

of $0.9 million, payment of deferred offering costs of $0.5 million, repayment of promissory notes of $0.1 million, and purchase of treasury

stock at cost of $0.1 million.

See Note 2 of our consolidated financial statements.

Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with generally accepted

accounting principles in the United States of America (“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.

Estimates are used in the following areas, among others:

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.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the 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, and cash flow assumptions regarding going concern considerations.

Although management

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

Concentration

18 unchanged sentences

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

based compensation

based compensation represents the cost related to stock based awards granted to our employees, directors and consultants and our affiliates.

We measure stock based compensation costs at the grant date, based on the estimated fair value of the award and recognize the cost over

the requisite service period.

compensation represents the cost related to stock-based awards granted to our employees, directors, consultants, and affiliates.

stock-based compensation costs at the grant date, based on the estimated fair value of the award and recognize the cost over the requisite

service period.

recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense

7 unchanged sentences

12, 2022, we were a private company and our common stock has only been publicly traded since that date.

As a result, we lacked company-specific

As a result, we lack company-specific

historical and implied volatility information.

Therefore, we have estimated our 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

Therefore, we have estimated our expected stock price 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.

1 unchanged sentence

of the award for time periods approximately equal to the expected term of the award.

value measurements

apply 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 our 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.

The calculation of the redemption liability at December

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

discount and derivative instruments

initial fair value of the redemption value relating to the convertible debt instruments is treated as a debt discount and 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 ASU 2015-03, Interest - Imputation of Interest , the unamortized debt discount is presented

in the accompanying consolidated balance sheet as a direct deduction from the carrying amount of the related debt.

account 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.

Our derivative financial instrument consists of an embedded feature

contained in our convertible debt that is bifurcated and accounted for separately.

See Note 3 of our audited consolidated financial statements.

Issued and Adopted Accounting Standards

Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

are an “emerging growth company,” as defined in the JOBS Act.

Emerging growth companies can take advantage of the extended

transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards.

words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise

apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies

under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies

provided under the JOBS Act.

As a result, our consolidated financial statements may not be comparable to those of companies that comply

with public company effective dates for complying with new or revised accounting standards.

For as long as we continue to be an emerging

growth company, we also intend to take advantage of certain other exemptions from various reporting requirements that are applicable

to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic

reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory stockholder vote on executive compensation

and any golden parachute payments not previously approved, exemption from the requirement of auditor attestation in the assessment of

our internal control over financial reporting and exemption from any requirement that may be adopted by the Public Company Accounting

Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information

about the audit and the financial statements (auditor discussion and analysis).

We will remain an emerging growth company until the earliest

of (i) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, (ii) the end of the fiscal year in

which we have total annual gross revenues of $1.235 billion or more during such fiscal year, (iii) the date on which we issue more than

$1 billion in non-convertible debt in a three-year period or (iv) the end of the fiscal year following the fifth anniversary of the date

of the completion of our IPO.

Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was enacted.

Section 107 of the JOBS Act provides

that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of

the Securities Act for complying with new or revised accounting standards.

In other words, an “emerging growth company” can

delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying

with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act.

As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for

complying with new or revised accounting standards.

to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions,

including, without limitation, (i) providing an auditor’s attestation report on our internal controls over financial reporting

pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with the requirement adopted by the Public

Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements.

We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total

annual gross revenues of $1.235 billion or more;

(ii) the last day of our fiscal year following the fifth anniversary of the date of

the completion of our IPO;

(iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three

or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

a smaller reporting company, we are not required to provide the information required by this item.

Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined

in Rule 12b-2 of the Exchange Act.

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 7. Management’s Discussion and Analysis