Kairos Pharma, LTD. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands, except for share amounts and per share data) The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report contain forward-looking statements based upon current beliefs that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations and intentions. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under “Item 1A Risk Factors” and elsewhere in this Annual Report. You should carefully read the “Item 1A Risk Factors” of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see “Disclosure Regarding 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 Annual Report, our product candidates have not been approved as safe or effective by the 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. 103 Since inception, we have incurred significant operating losses. Our net losses were $2,603 and $1,812 for the years ended December 31, 2024 and 2023. As of December 31, 2024, we had an accumulated deficit of $8,815. 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. 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 and 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. 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. Recent Developments Initial Public Offering (IPO) On September 17, 2024, we closed on our IPO of 1,550,000 shares of common stock at $4.00 per share, for gross proceeds of $6,200, following our listing on the NYSE American. Our IPO was underwritten by Boustead Securities, LLC (“Boustead”), acting as lead underwriter, with the underwriters receiving 7% cash compensation and warrants to purchase a total of 108,500 shares of common stock, exercisable at $4.80 per share. Net proceeds relating to the offering, before deducting deferred offering costs, were $5,524. Equity Line of Credit Agreement (ELOC) On November 12, 2024, we entered into an ELOC Agreement with Helena Global Investment Opportunities I LTD (“Helena”), pursuant to which Helena agreed to purchase from the Company up to $30,000 shares of common stock (the “ELOC Shares”). The Company issued 670,641 shares of restricted common stock (the “Commitment Fee Shares”) to Helena as the “Commitment Fee” for the ELOC Agreement. The ELOC Agreement will be available for the Company’s use at such time following the filing and effectiveness of a resale registration statement registering the ELOC Shares for resale. At the time of effectiveness of the resale registration statement (the “Effective Date”), the Commitment Fee Shares will be subject to a “true-up” pursuant to which, in the event the shares are valued at less than $900 on the Effective Date, additional shares will be issued to Helena to bring the ELOC Shares to the full $900 value. The ELOC Agreement will terminate upon the following events: (i) the first day of the month next following the 36-month anniversary of the date of the ELOC Agreement or (ii) the date on which Helena has purchased the full $30,000 of ELOC Shares. 104 The ELOC Agreement may be terminated by the Company after its commencement, at the Company’s discretion, provided that there are no advance notices outstanding for which common stock has yet to be issued, and the Company has paid all amounts owed to Helena under the ELOC Agreement, including the Commitment Fee shares. January 2025 PIPE Offering On January 14, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) and registration rights agreement (the “Registration Rights Agreement”) with the investor name therein (the “Investor”) for the sale and issuance of 2,500,000 units (the “Pre-Funded Units”), with each Pre-Funded Unit consisting of a pre-funded warrant (the “Pre-Funded Warrant”) to purchase one share of common stock, exercisable for $0.001 per share, and a common warrant (the “Common Warrant”) to purchase one and one half shares of common stock, exercisable at $1.40 per share (the “January 2025 PIPE Offering”). On January 16, 2025, the Company closed the January 2025 PIPE Offering for a total purchase price of $3,498 (or $1.399 per Pre-Funded Unit), with an additional $2.50 payable upon the Investor’s exercise of the Pre-Funded Warrants in full. In advance of closing, on January 16, 2025, the Company and the Investor entered into an amendment and restatement to the Purchase Agreement (the “A&R Purchase Agreement”), which amended the terms of the Purchase Agreement to include a requirement that the Company obtain shareholder approval prior to issuing in excess of 19.99% of the Company’s common stock and also amended the Common Warrants to make them immediately exercisable and reduce the exercise period from 5.5 years to five years. Other terms of the Purchase Agreement and Common Warrants remained the same. Boustead and D. Boral Capital LLC (“D. Boral”) acted as co-placement agents for the January 2025 PIPE Offering. In conjunction therewith, on January 16, 2025, the Company entered into a Placement Agent Agreement with Boustead (the “Placement Agent Agreement”). Under the terms of the Placement Agent Agreement, at closing, the Company paid the Placement Agents (i) a cash commission equal to 8% of the gross proceeds (including a 1% non-accountable expense fee) and (ii) warrants to purchase a total of 175,000 shares of common stock, exercisable at $1.40 per share, with the total cash and warrant compensation split equally between Boustead and D. Boral. On January 20, 2025, the Company obtained the approval of 55.4% of the shareholders (the “Majority Shareholders”) for the issuance in excess of 19.99% of the Company’s common stock at a price below market value, in compliance with Rule 713 of the NYSE American LLC Company Guide. On February 10, 2025, the Company filed the definitive Schedule 14C and the shareholder approval became effective on March 1, 2025. Components of Results of Operations Net Sales We have not generated any sales to date. No revenue was recorded from any sources during the years ended December 31, 2024 and 2023, respectively. 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 patented technologies that are subject to the Kairos-Cedars license agreements. 105 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 any pandemic or 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. 106 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands): December 31, 2024 December 31, 2023 Revenues $ - $ - Operating expenses: Research and development 414 82 General and administrative 1,929 1,632 Total operating expenses 2,343 1,714 Loss from operations (2,343 ) (1,714 ) Other expenses: Interest expense (35 ) (42 ) Debt discount amortization (154 ) (56 ) Financing costs (670 ) - Gain on settlement of accounts payable 599 - Total other expenses, net (260 ) (98 ) Net loss $ (2,603 ) $ (1,812 ) Research and Development Expenses The table below summarizes our research and development expenses for the years ended December 31, 2024 and 2023: Research and Development Expenses: December 31, 2024 December 31, 2023 Clinical and related expenses $ 414 $ 82 Total research and development expenses $ 414 $ 82 Research and development expenses were $414 and $82 for the years ended December 31, 2024 and 2023, respectively. The increase in R&D expenses in 2024 primarily related to our Phase 2 trial in prostate cancer beginning in 2024. General and Administrative Expenses The table below summarizes our general and administrative expenses for the years ended December 31, 2024 and 2023: General and Administrative Expenses: December 31, 2024 December 31, 2023 Stock-related expenses $ 219 $ 913 Patent related expenses 134 45 Legal expenses 149 89 Accounting expenses 181 154 Other professional service expenses and fees 242 42 Fees relating to license agreements 138 176 Insurance expenses 151 29 Consulting and contract labor expenses 481 - Amortization expense 160 160 Other expenses 74 24 Total general and administrative expenses $ 1,929 $ 1,632 General and administrative expenses were $1,929 and $1,632 for the years ended December 31, 2024 and 2023, respectively. Significant changes between periods consisted of a $481 increase in consulting and contract labor expenses in 2024, primarily relating to consulting expenses relating to vendor advances; offset by a $694 decrease in stock-related expenses in 2024, primarily relating to the fair value of common shares issued in 2023 to shareholders. 107 Other Expenses Other expenses, net, were $260 and $98 for the years ended December 31, 2024 and 2023, respectively. In fiscal year 2024, other expenses were interest expense of $35, debt discount amortization of $154 and financing costs of $670. In fiscal year 2024, other income consisted of a gain on the settlement of accounts payable of $599. In fiscal year 2023, the other expenses were interest expense of $42 and debt discount amortization of $56. 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. During the year ended December 31, 2024, the Company incurred a net loss of $2,603 and used cash in operations of $3,955. During the year ended December 31, 2024, the Company closed its IPO and received $5,524 of net proceeds, before deducting deferred offering costs. Due to the funds received through the IPO, as well as the conversion of convertible notes payable and certain accounts payable upon the closing of the IPO, at December 31, 2024, the Company had cash totaling $1,272 and shareholders’ equity of $4,776. In January 2025, the Company closed its January 2025 PIPE Offering, in which the Company received net proceeds of $3,145. The Company now expects its cash to last at least 12 months from the date of filing this Annual Report. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future, which will primarily be accomplished by 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 until it is able to generate revenues. 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, such financing 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. Cash Flows The table below summarizes our cash flow activities for the years ended December 31, 2024 and 2023 (in thousands): December 31, December 31, Net cash provided by (used in): 2024 2023 Operating activities $ (3,955 ) $ 81 Investing activities - - Financing activities 5,134 (425 ) Net increase (decrease) in cash $ 1,179 $ (344 ) Operating Activities During the year ended December 31, 2024, we used cash from operating activities of $3,955, compared to $81 provided during the year ended December 31, 2023. During the year ended December 31, 2024, we incurred a net loss of $2,603 and had non-cash expenses of $888, compared to a net loss of $1,812 and non-cash expenses of $1,129 during the year ended December 31, 2023. The primary non-cash expense during both periods was stock-related expenses totalling $917 and $913 during the years ended December 31, 2024 and 2023, respectively. In fiscal year 2024, non-cash expenses also included a gain on the settlement of accounts payable of $599, and amortization expense relating to vendor advances of $256. 108 The net change in operating assets and liabilities during the year ended December 31, 2024 was $2,240, compared to $764 provided during the year ended December 31, 2023. The primary use of cash relating to operating assets and liabilities during the year ended December 31, 2024 was the increase in vendor advances of $2,614. The primary source of cash expenditures during the year ended December 31, 2023 was the increase in accounts payable and accrued expenses of $772. Financing Activities During the year ended December 31, 2024, we received cash from financing activities of $5,134, compared to $425 used during the year ended December 31, 2023. For the year ended December 31, 2024, cash provided by financing activities consisted of proceeds from our IPO of $5,524 and proceeds from notes payable to officers of $142. Net cash used in fiscal year 2024 consisted of the repayment of notes payable to officers of $142 and the payment of deferred offering costs of $390. In fiscal year 2023, net cash used by financing activities consisted of the payment of deferred offering costs of $390. Debt Agreements Conversion of Amounts Due to 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. The advances accrued no interest, were unsecured and were due on demand. During the year ended December 31, 2022, the Company repaid $10 of the advances, and as of December 31, 2023 and September 17, 2024 (the date of the closing of the Company’s IPO), a total of $4 was outstanding. During the three months ended September 30, 2024, the officers agreed to automatically convert the principal into shares of the Company’s common stock upon the closing of the IPO transaction. Upon the closing of the IPO, all of the principal automatically converted into 1,664 shares of the Company’s common stock based on the conversion price of $2.40, which was 60% of the IPO closing price of $4.00. As of December 31, 2024, no principal or interest was due on the advances. Notes Payable to Officers During the year ended December 31, 2024, the Company entered into note payable agreements with three of its officers in the aggregate total of $142. The notes accrued interest at 7.5% per annum, were unsecured and were due one year from the date of issuance. During the year ended December 31, 2024, the principal of $142 and accrued interest of $3 were repaid in the form of stock. In connection with the loans, the Company issued the officers 36,270 shares of the Company’s common stock. No amounts were owed to the officers as of December 31, 2024. Convertible Notes Payable During the year ended December 31, 2022, the Company entered into several convertible note payable agreements with certain investors totalling $675. The 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 of the date of the note, the Company would have the choice of paying off the principal plus all accrued and unpaid interest, or the note’s principal balance would 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 an IPO transaction. The net proceeds to the Company relating to the convertible notes, was $564. As of December 31, 2022, $675 of principal was outstanding on the notes, in addition to $17 of accrued and unpaid interest. 109 During the year ended December 31, 2023, no principal or interest payments were made on the notes and the notes accrued interest of $43. As the Company did not close its IPO transaction within 12 months of the date of the notes, the notes’ principal balance increased to 110% of their original balance, or an increase of $68. As of December 31, 2023, $743 of principal was outstanding on the notes and $60 of accrued and unpaid interest. During the year ended December 31, 2024, as the Company had not closed its IPO transaction within 12 months of the date of issuance of the notes, a portion of the notes’ principal balance increased to 110% of their previous balance, or an increase of $49. As of September 17, 2024, $792 of principal was outstanding on the notes and $92 of accrued and unpaid interest. Upon closing of the Company’s IPO on September 17, 2024, the principal amount of $792, plus the accrued and unpaid interest of $92, totaling $884, automatically converted into 368,371 shares of the Company’s common stock based on the principal and accrued interest due as of September 17, 2024. No principal or interest was owed on the notes as of December 31, 2024. Conversion of Accounts Payable During the year ended December 31, 2024, the Company entered into an agreement with Cedars-Sinai Medical Center (“Cedars”) under which Cedars agreed to convert $750 of the total accounts payable due to them into 312,500 shares of the Company’s common stock, with such conversion to occur upon the closing of the Company’s IPO. The conversion price of the shares was equal to 60% of the per share IPO price, or $2.40 per share. Upon the closing of the IPO, the shares were issued to Cedars and the debt was converted. Also, during the year ended December 31, 2024, the Company entered into another agreement with Cedars under which Cedars agreed to convert $200 of the total accounts payable due to them into 150,830 shares of the Company’s common stock. The conversion price of the shares was equal to 60% of the closing price of the Company’s common stock on the date of the agreement, or $1.33 per share. During the year ended December 31, 2024, the Company entered into an agreement with its Chief Financial Officer, under which the Chief Financial Officer agreed to convert $172 of the total accounts payable due to him into 51,610 shares of the Company’s common stock with such conversion to occur upon the closing of the Company’s IPO. The conversion price of the shares was equal to 83% of the IPO price. Upon the closing of the IPO, the shares were issued to our Chief Financial Officer. No amounts were owed to the Chief Financial Officer as of December 31, 2024. 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 term of the agreement is one year from the effective date. 110 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. 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 $365 fee and will issue BCA 50,000 RSUs, which will vest at the end of six months. 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 will vest at the end of six months after issuance. Should the Shares be valued at less than $500 on the date of vesting, the Shares will be subject to a “true-up” pursuant to which additional shares will be issued to the holder to bring the value of to $500 as of that date (the “True-up Shares”) and the True-up Shares will be deemed fully vested as of the date of 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. 111 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. 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. 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. $50 was owed as of December 31, 2024 and that amount was paid to the former CFO in during the period ended March 31, 2025. 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. 112 We believe that our existing cash, plus the net proceeds from the IPO and the January 2025 PIPE Offering, 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 continue to require additional funding to complete the clinical development and commercialization of 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. 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 Quarterly Report, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments. Vendor Advances We have entered into various contracts with service providers pursuant to which we pay the vendors an advance at the beginning of the contractual period. These vendor advances could be paid by us either in cash or in shares of common stock, depending on the terms of the contract. The advances are reduced by the accumulated value of the services performed by the vendor or are amortized on a straight-line basis over the service period, whichever is shorter. As of December 31, 2024, advances to vendors totalled $ 3,115 , with $ 2,615 being paid in cash and $ 500 being paid in shares of our common stock. Amortization expense relating to the vendor advances during the year ended December 31, 2024 was $256, with an unamortized balance of $2,859 as of December 31, 2024. 113 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, 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 listing of the Company’s common stock on the NYSE American on September 16, 2024 and the subsequent closing of its IPO on September 17, 2024. The Company estimates the fair value of its 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. 114 Commitments and Contingencies From time to time, we may have certain contingent liabilities that arise in the ordinary course of business. We evaluate the likelihood of an unfavorable outcome in legal or regulatory proceedings to which we are a party and record a loss contingency on an undiscounted basis when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective and based on the status of such legal proceedings, the merits of our defenses, and consultation with legal counsel. Actual outcomes of these legal proceedings may differ materially from our estimates. We estimate accruals for legal expenses when incurred as of each balance sheet date based on the facts and circumstances known to us at that time. Off-Balance Sheet Arrangements During the years ended December 31, 2024 and 2023, 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 audited financial statements appearing elsewhere in this Annual 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company,” this item is not required. 115