Kairos Pharma, LTD. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (in thousands, except for share amounts and per share data) You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q (the “Quarterly Report”), and with our audited financial statements and notes thereto for the year ended December 31, 2023, included in our prospectus dated September 16, 2024 (File Number: 333-274805)(the “Prospectus”). Special Note Regarding Forward-Looking Statements In addition to historical information, some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and any projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report, along with the risks identified in the Prospectus under the title “Risk Factors” and in our other filings with the Securities Exchange Commission (the “SEC”). We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Overview We are a clinical-stage biopharmaceutical company advancing therapeutics for cancer patients that are designed to overcome key hurdles in immune suppression and drug resistance. Our mission is to advance our portfolio of innovative therapeutics to reverse key mechanisms of therapeutic resistance and immune suppression and transform the way cancer is treated. We have leveraged molecular insights of the mechanisms of therapeutic resistance and immune suppression to develop a new class of novel drugs that we expect will target drug resistance and checkpoints of immune suppression. As of the date of this Quarterly Report, our product candidates have not been approved as safe or effective by the Food and Drug Administration (“FDA”) or any other comparable foreign regulator. Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, establishing our intellectual property portfolio, identifying potential product candidates and undertaking preclinical and clinical studies and manufacturing. We do not have any products approved for sale and have not generated any revenue from product sales. Since inception, we have incurred significant operating losses. Our net losses were $1,623 and $1,812 for the nine months ended September 30, 2024 and for the year ended December 31, 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $7,835. We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company. 19 We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we will likely incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when needed, could have a material adverse effect on our business, results of operations and financial condition. The report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2022 and 2023 included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern. See Note 1 to our annual financial statements appearing at the Prospectus for additional information on our assessment. At September 30, 2024, the Company had cash on hand in the amount of $3,217. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings and it expects to continue to rely on these sources of capital in the future. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing. Critical Accounting Policies and Significant Judgments and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate. We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. While our significant accounting policies are more fully described in Note 2 to our unaudited financial statements appearing elsewhere in this Quartey Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments. 20 Research and Development Expenses Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. At the end of each reporting period, we compare payments made to third-party service providers to the estimated progress toward completion of the applicable research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that we estimate has been made as a result of the service provided, we may record net prepaid or accrued expenses relating to these costs. As of December 31, 2023, and September 30, 2024, we have not made any material adjustments to our prior estimates of accrued research and development expenses. Stock-Based Compensation The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is recognized in the period of the forfeiture. Generally, the Company issues stock options with only service-based vesting conditions and records the expense for these awards using the straight-line method over the requisite service period. The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified. The Company was a private company until the completion of its IPO on September 17, 2024. The Company estimates the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options or warrants at each valuation date, as applicable. The fair value of each stock option or warrant grant is estimated using the Black-Scholes option-pricing model. 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 volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is 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. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Off-Balance Sheet Arrangements During the years ended December 31, 2022 and 2023, and the nine months ended September 30, 2024, we did not have, and we do not currently have, any off-balance sheet arrangements (as defined under SEC rules). Recent Accounting Pronouncements For a description of recently issued accounting standards that may have a material impact on our financial statements or will otherwise apply to our operations, please see Note 2 to our unaudited financial statements appearing elsewhere in this Quartey Report. Emerging Growth Company Status As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012 permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies. Components of Results of Operations Net Sales We have not generated any sales to date. There was no revenue recorded from any sources during the year ended December 31, 2023, and the nine months ended September 30, 2024. Operating Expenses Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses. Research and Development Expenses Dr. Ramachandran Murali is our Vice President of Research and Development. Dr. Murali is a doctor and scientist at Cedars-Sinai Medical Center, and is the inventor, with others, of three of the patent technologies that are subject to the Kairos-Cedars license agreements. 21 We are engaged in rolling out Phase 1 and Phase 2 clinical trials for ENV-105 and a Phase 1 trial for KROS-201. In addition, we are continuously performing preclinical research including animal models of disease, medicinal chemistry laboratory studies, formulation, and toxicology and biodistribution studies. Our clinical development costs may vary significantly based on factors such as: per patient trial costs; the number of trials required for approval; the number of sites included in the trials; the location where the trials are conducted; the length of time required to enroll eligible patients; the number of patients that participate in the trials; the number of doses that patients receive; the drop-out or discontinuation rates of patients; potential additional safety monitoring requested by regulatory agencies; the duration of patient participation in the trials and follow-up; the cost and timing of manufacturing our product candidates; the phase of development of our product candidates; and the efficacy and safety profile of our product candidates. The successful development and commercialization of product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following: the timing and progress of nonclinical and clinical development activities; the number and scope of nonclinical and clinical programs we decide to pursue; raising necessary additional funds; the progress of the development efforts of parties with whom we may enter into collaboration arrangements; our ability to maintain our current development program and to establish new ones; our ability to establish new licensing or collaboration arrangements; the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; the receipt and related terms of regulatory approvals from applicable regulatory authorities; the availability of drug substance and drug product for use in production of our product candidate; establishing and maintaining agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved; our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally; our ability to protect our rights in our intellectual property portfolio; the commercialization of our product candidates, if and when approved; obtaining and maintaining third-party insurance coverage and adequate reimbursement; the acceptance of our product candidate, if approved, by patients, the medical community and third-party payors; competition with other products; the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from the COVID-19 pandemic or similar public health crisis; and a continued acceptable safety profile of our therapies following approval. A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. General and administrative expenses General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, as well as administrative functions. General and administrative expenses also include legal fees relating to patent, corporate, IPO-related matters, and reporting matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; marketing expenses and other operating costs. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our business operations. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs, as well as investor and public relations expenses associated with being a public company. 22 Results of Operations Comparison of the Three Months Ended September 30, 2024 and 2023 The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands), respectively: Operating Expenses: September 30, 2024 September 30, 2023 Research and development $ 14 $ 33 General and administrative 369 254 Total operating expenses 383 287 Loss from operations (383 ) (287 ) Other expenses: Interest expense (12 ) (15 ) Financing costs (537 ) - Debt discount amortization (115 ) (10 ) Total other expenses (664 ) (25 ) Net loss $ (1,047 ) $ (312 ) Research and Development Expenses The table below summarizes our research and development expenses for the three months ended September 30, 2024 and 2023 (in thousands), respectively: Research and Development Expenses: September 30, 2024 September 30, 2023 Clinical and related expenses $ 14 $ 33 Total research and development expenses $ 14 $ 33 Research and development expenses were $14 and $33 for the three months ended September 30, 2024 and 2023, respectively. There were no significant changes between periods. General and Administrative Expenses The table below summarizes our general and administrative expenses for the three months ended September 30, 2024 and 2023 (in thousands), respectively: General and Administrative Expenses: September 30, 2024 September 30, 2023 Patent related expenses $ 114 $ 109 Stock compensation 34 - Accounting fees 30 47 Other professional fees 93 11 Fees relating to license agreements 29 30 Insurance expense 12 5 Amortization expense 40 40 Other expenses 17 12 Total general and administrative expenses $ 369 $ 254 General and administrative expenses were $369 and $254 for the three months ended September 30, 2024 and 2023, respectively. There were no significant changes between periods. 23 Other Expenses Other expenses were $664 and $25 for the three months ended September 30, 2024 and 2023, respectively. The increase in 2024 was due to financing costs recorded during 2024 of $537 and the increase in debt discount amortization in 2024. Comparison of the Nine Months Ended September 30, 2024 and 2023 The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands), respectively: Operating Expenses: September 30, 2024 September 30, 2023 Research and development $ 242 $ 75 General and administrative 655 550 Total operating expenses 897 625 Loss from operations (897 ) (625 ) Other expenses: Interest expense (35 ) (39 ) Financing costs (537 ) - Debt discount amortization (154 ) (30 ) Total other expenses (726 ) (69 ) Net loss $ (1,623 ) $ (694 ) Research and Development Expenses The table below summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023 (in thousands), respectively: Research and Development Expenses: September 30, 2024 September 30, 2023 Clinical and related expenses $ 242 $ 75 Total research and development expenses $ 242 $ 75 Research and development expenses were $242 and $75 for the nine months ended September 30, 2024 and 2023, respectively. The increase in 2024 primarily resulted from expenses relating to the beginning of our Phase 2 clinical trial for our lead product candidate ENV 105 . 24 General and Administrative Expenses The table below summarizes our general and administrative expenses for the nine months ended September 30, 2024 and 2023 (in thousands), respectively: General and Administrative Expenses: September 30, 2024 September 30, 2023 Patent related expenses $ 123 $ 130 Legal fees 2 - Stock compensation 34 - Accounting fees 102 145 Other professional fees 125 33 Fees relating to license agreements 93 88 Insurance expense 33 11 Amortization expense 120 120 Other expenses 23 23 Total general and administrative expenses $ 655 $ 550 General and administrative expenses were $655 and $550 for the nine months ended September 30, 2024 and 2023, respectively. There were no significant changes between periods. Other Expenses Other expenses were $726 and $69 for the nine months ended September 30, 2024 and 2023, respectively. The increase in 2024 was due to financing costs recorded during 2024 of $537 and the increase in debt discount amortization in 2024. Liquidity and Capital Resources During the year ended December 31, 2023, the Company incurred a net loss of $1,812 and had a shareholders’ deficit of $2,078 as of December 31, 2023. As reflected in the accompanying condensed consolidated financial statements, during the nine months ended September 30, 2024, the Company incurred a net loss of $1,623 and used cash in operations of $2,152. During the nine months ended September 30, 2024, the Company closed its initial public offering (“IPO”) and received $5,524 of net proceeds from this offering, before deducting deferred offering costs. Due to the funds received through this offering, and the conversion of convertible notes payable and certain accounts payable upon the closing of the IPO, the Company had shareholders’ equity of $3,332 at September 30, 2024. The Company now expects its cash, totaling $3,217 at September 30, 2024, to last into the fourth quarter of 2025. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings and it expects to continue to rely on these sources of capital in the future. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. 25 Cash Flows for the Nine Months Ended September 30, 2024 and 2023 The table below summarizes our cash flow activities for the nine months ended September 30, 2024 and 2023 (in thousands), respectively: Nine months Ended September 30, Net cash provided by (used in): 2024 2023 Operating activities $ (2,152 ) $ 15 Investing activities - - Financing activities 5,276 (353 ) Net increase (decrease) in cash $ 3,124 $ (338 ) Operating Activities During the nine months ended September 30, 2023, we provided cash from operating activities of $15, compared to $2,152 used during the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we incurred a net loss of $1,623 and had non-cash expenses of $845, compared to a net loss of $694 and non-cash expenses of $150 during the nine months ended September 30, 2023. The primary non-cash expense incurred during both periods was amortization expense, totaling $120 during the nine months ended September 30, 2024 and 2023, respectively. The net change in assets and liabilities during the nine months ended September 30, 2023 provided cash of $559, compared to $1,374 used during the nine months ended September 30, 2024. The primary source of cash relating to the change in assets and liabilities for the nine months ended September 30, 2024 and 2023 was the increase in accounts payable and accrued expenses. The primary use of cash was the increase in vendor advances. Investing Activities There was no cash used in investing activities for the nine months ended September 30, 2024 and 2023. Financing Activities Net cash (used in) provided by financing activities for the nine months ended September 30, 2024 and 2023 was 5,276 and $(353), respectively. For the nine months ended September 30, 2024 and 2023, cash used in financing activities consisted of payments of deferred offering costs of $390 and $353, respectively. For the nine months ended September 30, 2024, cash provided by financing activities consisted of $5,524 of proceeds from common stock issued in connection with the IPO and $142 from notes payable – officers. Debt Agreements Advances from Related Parties During the year ended December 31, 2021, shareholders of the Company, and a company whose principal stockholder is also a stockholder of the Company, advanced the Company $14, all of which was outstanding at December 31, 2021. The advances accrue no interest, are unsecured and are due on demand. As of December 31, 2021, $14 was owed on the advances. During the year ended December 31, 2022, the Company repaid $10 of the advances, and as of December 31, 2022 and 2023, and September 30, 2024, a total of $4 remained outstanding. Convertible Notes Payable During the year ended December 31, 2022, the Company entered into several convertible note payable agreements with certain investors. The convertible notes accrue interest at 6% per annum, are unsecured and are due by April 2025. If the Company does not close an IPO transaction within 12 months following the date of issuance of the notes, the Company will have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance will increase to 110% of its original balance. The notes are convertible at the option of the noteholders into shares of the Company’s common stock at a price per share as defined in the agreement or will automatically be converted into shares of the Company’s common stock at 60% of the IPO price per share upon the closing of the IPO. The convertible note offerings were completed pursuant to an exemption from registration under Rule 506(b) of the Securities Act. Boustead Securities, LLC acted as placement agent in each of the June and September 2022 private placements and received five-year warrants to purchase shares of common stock equal to 7.0% of the number of the conversion shares at an exercise price equal to the conversion price. 26 As of September 30, 2024, $792 of principal was outstanding on the notes and $92 of accrued and unpaid interest, which automatically converted into 368,371 shares of the Company’s common stock upon the closing of the Company’s IPO. Notes Payable - Officers During the nine months ended September 30, 2024, the Company borrowed $142 from three of its officers. The loans accrue interest at 7.5% per annum, are unsecured and are due one year from the issuance date, with the due dates ranging from April 2025 to August 2025. Subsequent to September 30, 2024, the loans were repaid and the officers were granted 36,269 shares of the Company’s common stock. Conversion of Accounts Payable Subsequent to December 31, 2023, we entered into agreements with Cedars-Sinai Medical Center (“Cedars”) under which Cedars agreed to convert $750 of the $988 total accounts payable due to them into 312,500 shares of our common stock, with such conversion to occur upon the closing of the Company’s IPO. The conversion price of the shares will be equal to 60% of the per share IPO price. Upon the closing of the Company’s IPO, the 312,500 shares were issued to Cedars and the $750 of debt was forgiven. Conversion of Amounts Due to Related Parties Subsequent to December 31, 2023, two officers and shareholders agreed to convert the $4 due to them into 1,664 shares of the Company’s common stock, effective upon the closing of the Company’s IPO. The conversion price of the shares was equal to 60% of the per share IPO purchase price. During the three months ended September 30, 2024, the debt converted, and the 1,664 shares were issued. As of September 30, 2024, an officer converted $172 of accounts payable owed primarily for past services into 51,610 shares of the Company’s common stock, effective upon the closing of the Company’s IPO. The conversion price of the shares was equal to the IPO per share purchase price times a multiple of 1.2, as per the officer’s employment agreement. Funding Requirements We expect our expenses to increase substantially in connection with our ongoing research activities, particularly as we pursue the advancement of our product candidates through clinical trials. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend on numerous variables, including: the initiation, progress, timing, costs and results of the clinical trials for our product candidates or any future product candidates we may develop; the initiation, progress, timing, costs and results of nonclinical studies for our product candidates or any future product candidates we may develop; our ability to maintain our relationships with key collaborators; the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more nonclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to; the cost to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights; the effect of competing technological and market developments; the costs of continuing to grow our business, including hiring key personnel and maintain or acquiring operating space; market acceptance of any approved product candidates, including product pricing, as well as product coverage and the adequacy of reimbursement by third-party payors; the cost of acquiring, licensing or investing in additional businesses, products, product candidates and technologies; the cost and timing of selecting, auditing and potentially validating a manufacturing site for commercial-scale manufacturing; the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval and that we determine to commercialize; and our need to implement additional internal systems and infrastructure, including financial and reporting systems. 27 We believe that our existing cash, plus the net proceeds from the IPO, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We expect that we will require additional funding to complete the clinical development and commercialize our product candidates, if we receive regulatory approval, and pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize ourselves. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our current common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations and Commitments Kairos Agreement with Prevail Infoworks, Inc. In August 2024, the Company entered into a master service and technology agreement with Prevail Infoworks, Inc. (“Prevail”), pursuant to which Prevail agreed to provide certain clinical research services to the Company. As part of the agreement, the Company must make an advance payment of $900 to Prevail before they begin their services and, at such time as we notify Prevail to engage their services related to the relevant clinical trial, or six months from the date of the agreement, pay approximately $80 per month during the time Prevail performs clinical research services for the Company’s Phase 2 ENV 105 prostate and Phase 1 ENV 105 lung clinical trials. The agreement with Prevail is subject to cancellation at any time upon 30 days’ written notice to the other party. The Company made the advance payment to Prevail in October 2024. Kairos Agreement with PreCheck Health Services, Inc. On September 20, 2024, the Company entered into a bioassay services agreement (the “Bioassay Services Agreement”) with PreCheck Health Services, Inc., a Florida-based corporation (“PreCheck”). Pursuant to the Bioassay Services Agreement, PreCheck will provide certain biomarker screening services for the Company’s ongoing carotuximab (ENV105) clinical trials in order to assist the Company in identifying lung and prostate cancer patients suitable to the Company’s ongoing Phase 1 clinical trials for lung cancer patients and Phase 2 trials for patients with castrate resistant prostate cancer. In order to identify biomarkers for patient screening and therapy monitoring using carotuximab (ENV105), PreCheck will utilize its SolidTumorCheck+ platform for the somatic gene expression analysis of biopsy tissue samples derived from patients with lung and prostate cancer, as part of the Company’s ongoing clinical trials. In furtherance of these efforts, PreCheck will develop a companion diagnostic to support its identification of such patients with a three gene PCR analysis or other genetic analysis, which diagnostic test will then be developed and submitted to the FDA for castrate-resistant prostate cancer patients and for lung cancer patients on Tagrisso. In exchange for PreCheck’s services, and according to the terms of the Bioassay Services Agreement, the Company paid $900 to PreCheck as an advance for the future laboratory services to be performed. The payment of $900 is included in vendor advances on the accompanying balance sheet as of September 30, 2024. The term of the agreement is one year from the effective date. Kairos Agreement with CEO.CA Technologies Ltd. On September 23, 2024, the Company entered into an advisory and consulting services agreement (the “CEO.CA Agreement”) with CEO.CA Technologies Ltd., a Canadian company (“CEO.CA”), pursuant to which CEO.CA will provide certain internet-based financial information and communications services for a period of one year for a services fee of $250. The service fee is an advance on future services to be performed. The CEO.CA Agreement includes such services as strategic news placement, news releases, interviews, monthly analytics and a video launch. The CEO.CA Agreement contains other customary clauses, including representations and warranties, indemnification clauses and governing law clauses. The payment of $250 is included in vendor advances on the accompanying balance sheet as of September 30, 2024. Kairos Agreement with Belair Capital Advisors Inc. On September 23, 2024, the Company entered into a strategic advisory agreement (the “Strategic Advisory Agreement”) with Belair Capital Advisors Inc. (“BCA”). BCA, a venture capital and corporate finance advisory firm, has been a long-term investor and advisor to the Company and frequently works with early-stage pharmaceutical companies. The strategic advisory services consist of corporate strategy, market positioning and long-term growth plans within the pharmaceutical sector, digital marketing and engagement, market research analysis and business development assistance, among other things. During the one-year term of the Strategic Advisory Agreement, in exchange for its services, the Company will pay BCA a $365 fee and will issue BCA 50,000 RSUs, which will vest at the end of six months. The payment of $365 is included in vendor advances on the accompanying balance sheet as of September 30, 2024. The Company valued the 50,000 shares of common stock at $100 based on the Company’s closing stock price on the effective date of the agreement. The fair value will be amortized over the one-year term of the agreement. Kairos Agreement with Cross Current Capital LLC On October 1, 2024, the Company entered into a consulting agreement (the “Consulting Agreement”) with Cross Current Capital LLC, a limited liability company organized under the laws of Puerto Rico (“Cross Current”), and Alan Masley (the “Advisor”), pursuant to which Cross Current agreed to provide certain financial and business consulting services to the Company including, but not limited, to (a) help drafting a public company competitive overview, (b) help preparing and/or reviewing a valuation analysis, (c) help in drafting marketing materials and presentations, (d) reviewing the Company’s business requirements and discuss financing and businesses opportunities, (e) investor marketing, (f) investor relations introductions, (g) legal counsel introductions, (h) auditor introductions, (i) investment banking and research introductions, (j) M&A canvassing and ways to grow the business organically, and (k) stand by capital markets advisory services. For the services rendered thereunder, the Company agreed to pay Cross Current $200,000 in cash and agreed to issue to the Advisor restricted shares of the Company’s common stock, issuable under the Company’s 2023 Equity Inventive Plan, in an amount equal to $500,000 (the “Shares”), which Shares shall vest at the end of six months after issuance. The term of the Consulting Agreement is 24 months and can be extended for another 12 months upon the written consent of both parties. The Company made the $200 payment in October 2024. Exclusive License Agreements with Cedars We have entered into four Exclusive License Agreements with Cedars which grants us licensing rights with respect to certain patent rights owned by Cedars as follows: 1. Methods of use of compounds that bind to RelA of NFkB; 2. Composition and methods for treating fibrosis; 3. Compositions and methods for treating cancer and autoimmune diseases; and 4. Method of generating activated T cells for cancer therapy. 28 On June 2, 2021, our wholly owned subsidiary, Enviro, entered into two Exclusive License Agreements with Cedars, which granted Enviro exclusive licensing rights (which include the right to sublicense) with respect to certain patent rights owned by Cedars, as follows: ● an Exclusive License Agreement (the “Enviro-Cedars License Agreement (Mitochondrial DNA)”) for Enviro to develop, manufacture, use and sell products utilized or derived from patent rights worldwide related to the “Compositions and Methods for Treating Diseases and Conditions by Depletion of Mitochondrial DNA from Circulation and for Detection of Mitochondrial DNA” invented by Dr. Neil Bhowmick and others; and ● an Exclusive License Agreement, (the “Enviro-Cedars License Agreement (Endoglin Antagonism)” and, collectively with the Enviro-Cedars License Agreement (Mitochondrial DNA), the “Enviro-Cedars License Agreements”) for Enviro to develop, manufacture, use and sell products utilized or derived from the patent rights and technical information worldwide related to the “Sensitization of Tumors to Therapies Through Endoglin Antagonism” invented by Dr. Neil Bhowmick and others. Agreement with former Chief Financial Officer We have an agreement with our former Chief Financial Officer that requires us to pay $50 upon the completion of raising more than $900 in a debt or an equity financing. No amount was owed at December 31, 2022 or 2023, but $50 was owed as of September 30, 2024. In addition, on September 27, 2023, we entered into an employment agreement with our current Chief Financial Officer, which became effective upon completion of the Company’s IPO. Item 3. Quantitative and Qualitative Disclosures about Market Risks. As a “smaller reporting company,” we are not required to provide the information required by this Item.