Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate
depends on a variety of factors that may affect our business and operations. Certain of these factors are discussed in “Item 1A.
Risk Factors.”
The
following discussion of our financial condition and results of operations should be read in conjunction with our financial statements
and the related notes thereto and other financial information appearing elsewhere in this report.
Overview
We
are a development stage company and reported net income (losses) of approximately $2,380,000 and $(3,233,000) for the years ended December
31, 2025 and 2024, respectively. We had current assets of approximately $16,000 and current liabilities of approximately $2,157,000 as
of December 31, 2025. As of December 31, 2024, our current assets and current liabilities were approximately $32,000 and $5,304,000,
respectively. We have prepared our financial statements for the years ended December 31, 2025 and 2024 assuming that we will continue
as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support
from our shareholders as well as Yissum’s ability to successfully commercialize the License. Our sources of capital in the past
have included the sale of equity securities, which include common stock sold in private transactions, and short-term debt. During the
current year, we entered into a bridge loan agreement with our Executive Chairman to obtain funding for current operating expenses.
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Critical
Accounting Policies
The
SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective
or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and
my change in subsequent periods.
The
following discussion of critical accounting policies represents our attempt to report on these accounting policies which we believe are
critical to our financial statements and other financial disclosures. It is not intended to be a comprehensive list of all of our significant
accounting policies, which are more fully described in Note 2 of the Notes to the Financial Statements included in this Annual Report.
We
have identified our accounting policies for stock-based compensation and accounting for derivative liabilities as critical accounting
policies.
We
recognize stock-based compensation expense based on the fair value recognition provision of applicable accounting principles, using the
Black-Scholes option valuation method. Accordingly, we are required to measure the cost of services received in exchange for an award
of equity instruments based on the grant-date fair value of the award and to recognize that cost over the period during which services
are provided in exchange for the award. Under the Black-Scholes method, we make assumptions with respect to the expected lives of the
options that have been granted and are outstanding, the expected volatility, the dividend yield percentage of our common stock and the
risk-free interest rate at the respective dates of grant.
The
Company did not grant any options during the year ended December 31, 2025. The expected volatility factor used to value stock options
granted in 2024 was based on the historical volatility of the market price of our common stock over the period from our change to a biotechnology
company, September 2018, through December 2024. For the expected term of the option, we used an estimate of the expected option life
based on historical experience. The risk-free interest rate used is based upon U.S. Treasury yields for a period consistent with the
expected term of the options. We assumed no quarterly dividend rate. Due to the numerous assumptions involved in calculating stock-based
compensation expense, the expense recognized in our financial statements may differ significantly from the value realized by option holders
on exercise of the share-based instruments. In accordance with the prescribed methodology, we do not adjust our recognized compensation
expense to reflect these differences.
For
the years ended December 31, 2025 and 2024, we incurred stock compensation expense with respect to options of approximately $8,800 and
$40,000, respectively.
See
Note 5 to the financial statements for the assumptions used to calculate the fair value of stock-based compensation.
In
accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, we identify and, if applicable, bifurcate
embedded derivatives in financial instruments. Those embedded features that are identified, bifurcated and accounted for separately
are measured at fair value continuously at each financial statement reporting date. If the fair value of a financial liability (the derivative)
exceeds the proceeds received for the issuance of a hybrid instrument in an arm’s length transaction with no rights or privileges
that require separate accounting recognition as an asset identified, then we record the embedded derivative at fair value with the excess
of fair value over proceeds recognized as a loss in earnings. Our only identified derivative was terminated as part of the amendment of a note payable to a shareholder during
the year ended December 31, 2025.
Results
of Operations
The
selected statement of operations data for the years ended December 31, 2025 and 2024 and balance sheet data as of December 31, 2025 and
2024 have been derived from our audited financial statements included in this Annual Report.
This
data should be read in conjunction with our financial statements and related notes included herein.
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Selected
Statement of Operations Data:
Years Ended December 31,
2025
2024
Change
Administrative fee income
$ -
$ 12,000
$ (12,000 )
Operating expenses:
G&A expenses
$ 238,755
$ 880,947
$ (642,192 )
Litigation expenses (contra expenses)
-
58,975
(58,975 )
Total operating expenses
238,755
939,922
(701,167 )
Loss from operations
(238,755 )
(927,922 )
689,167
Other (income) expenses:
Loss on derivative instrument
-
90,000
(90,000 )
Gain on disposal of equity method investment
(1,171,760 )
-
(1,171,760 )
Relief of indebtedness income
(1,697,024 )
-
(1,697,024 )
Interest expense
256,219
425,417
(169,198 )
Total other (income) expenses
(2,612,565 )
515,417
(3,127,982 )
Net income (loss) before equity in net income (loss) of equity method
investees
2,373,810
(1,443,339 )
3,817,149
Equity in net income (loss) of equity method investees
640
(161,046 )
161,686
Impairment loss on equity method investee
5,432
(1,628,657
)
1,634,089
Net income (loss)
$ 2,379,882
$ (3,233,042 )
$ 5,612,924
2025
Compared to 2024
We
are a holding company whose primary asset currently is our right to the monetization of the former NewStem license now held by Yissum.
We currently conduct no other business and as a result, we have no operating revenue or cost of revenue. We did charge annual administrative
fees to an affiliated entity through the year ended December 31, 2024.
The
Company incurs general and administrative (“G&A”) expenses primarily related to professional fees, insurance and stock-based compensation. We incurred G&A expenses of approximately $239,000 and $881,000 for the years ended December 31, 2025 and 2024,
respectively. Our decrease in G&A expenses relates primarily to decreases in bad debt expense, stock-based compensation and professional
fees incurred in the audit of our financial statements for the years ended December 31, 2025 and 2024, preparation of our quarterly reports
for 2025 and 2024, and for documents and advice related to our attempt to purchase the remaining shares of NewStem in 2024.
Specifically,
we wrote off as bad debt uncollected management fees of $9,500 during the year ended December 31, 2025 as compared to the net balance
due from NewStem of $458,000 in the year ended December 31, 2024, and professional fees decreased by approximately $145,000 in the year
ended December 31, 2025 as compared to the year ended December 31, 2024. Insurance costs decreased by approximately $17,000 in the year
ended December 31, 2025 as compared to the year ended December 31, 2024.
Total
stock compensation expense, included in G&A expenses, decreased by approximately $31,000 in the year ended December 31, 2025 as compared
to the year ended December 31, 2024 due to the fact that no options were awarded during the current fiscal year.
The
remaining decrease in G&A expenses of approximately $700 during the year ended December 31, 2025 consists primarily of decreases
in expenses related to investor relations and information technology.
We
incurred costs related to litigation and the related litigation funding agreement involving our former settled arbitration with our NetCo
joint venture partner of approximately $59,000 during the year ended December 31, 2024.
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The
Company has recorded a loss on derivative instruments of $90,000, for the year ended December 31, 2024 related to a guarantee previously
included in the note payable shareholder entered into in May 2023. The guarantee was removed in an amendment to the note payable during
the year ended December 31, 2024, terminating the derivative.
The
Company reported a gain on disposal of equity method investment of approximately $1,172,000 during the year ended December 31, 2025 related
to the sale of our investment in NetCo. We also reported relief of indebtedness income of approximately $1,697,000 related to the cancellation
of the remaining balance on the litigation funding agreement from the same transaction.
The
Company recorded an impairment loss of approximately $1,629,000 during the year ended December 31, 2024 related to its investment in
NewStem. This loss reduced our investment in NewStem to zero ($0.00) as of December 31, 2024. This adjustment was made in response to
the fact that NewStem ceased operations and was in the process of liquidation. The technology and license held by NewStem reverted to
the original licensee, Yissum, and the Company retains a right to a share of future licensing or monetization of the technology and license.
The Company does expect to recover some value from the license, up to a total of $3,750,000, however, as of December 31, 2025 and 2024,
the realization of this value is not certain, therefore has not been recorded by the Company. During the year ended December 31, 2025,
the Company received approximately $5,000 from the liquidation of the remaining assets of NewStem which was reported as a partial recovery
of the impairment loss.
Interest
expense decreased by approximately $169,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024. The
decrease in interest expense is primarily related to the reduction of interest from the settlement of the litigation funding agreement
offset by increased debt incurred for operations.
The
Company has recorded no income tax expense as we have incurred operating losses and all deferred tax assets are fully offset by an income
tax valuation allowance.
We
reported net income and losses from equity method investees during the years ended December 31, 2025 and 2024. The net income reported
for the year ended December 31, 2025 included net income of $640 from NetCo. Net losses reported for the year ended December 31, 2024
included net loss of approximately $5,000 from NetCo combined with net loss of approximately $156,000 from NewStem.
Liquidity
and Capital Resources
We
have not paid dividends on our common stock since our name change and business focus shift in 2018. Our present policy is to apply cash
to investments in product development at NewStem, acquisitions or expansion; consequently, we do not expect to pay dividends on common
stock in the foreseeable future.
The
Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include
fundraising until our interest in NewStem’s technology via monetization of the License is profitable. Although management continues
to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient cash from financing on terms
acceptable to the Company, or that NewStem’s technology will be monetized and become profitable.
During
the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a
member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended in March 2024
to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August 2024 providing
for total borrowings of $750,000 and extending the maturity date to December 31, 2025. The agreements provide for interest at a rate
of 10% per annum. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026.
During
the year ended December 31, 2023, the Company entered into a note agreement with a shareholder to borrow $300,000 for continued working
capital. This note bore interest at zero percent (0%) and matured on May 5, 2025. The note included a guarantee which has been identified
as an embedded derivative with a fair value of a liability of $650,000 at December 31, 2024. This note was amended in May 2025 to provide
for fixed interest, remove the guarantee and extend the maturity date to September 30, 2025. This note was amended for a second time
in October 2025 to extend the maturity date to December 31, 2026.
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In
December 2023, the Company entered into two short term notes payable with unrelated parties for a total of $250,000 in borrowings utilized
for the funding of NewStem. The notes bear interest at 12% per annum and matured December 21, 2025, at which time all principal and accrued
interest were due and payable. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026.
The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be
entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the
transaction.
In
April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These
agreements bear interest at 10% per annum and matured December 30, 2025. Prior to the filing of this Annual Report, the maturity dates
have been extended to June 30, 2026.
During
the year ended December 31, 2025, the Company borrowed $161,867 from the Executive Chairman in the form of an interim bridge loan until
alternate funding sources can be found. The Company is accruing interest at 10% per annum for these advances. The agreement matured December
31, 2025. Prior to the filing of this Annual Report, the maturity date has been extended to June 30, 2026.
On
May 9, 2025 the Company sold its interest in NetCo to its JV partner for $1,300,000 which was paid directly to Omni Bridgeway in full
settlement of all liabilities related to the litigation funding agreement totaling $2,959,625.
Net
Cash Used In Operating Activities.
For
the year ended December 31, 2025, net cash used in operating activities was approximately $168,000, which consisted primarily of a net
income of approximately $2,380,000 reduced by noncash gain of approximately $1,172,000 from the sale of our interest in NetCo and the
related noncash relief of indebtedness income from the settlement of the litigation funding agreement with Omni Bridgeway of $1,697,000,
stock-based compensation of approximately $9,000. Further offset by accretion of discount on notes payable of $60,000 and interest added
to notes payable and convertible debt of approximately $194,000. Additionally, cash was used in operations related to an increase in
current assets of approximately $10,000 and an increase in accrued liabilities and other payables of approximately $48,000.
For
the year ended December 31, 2024, net cash used in operating activities was approximately $272,000, which consisted primarily of a net
loss of approximately $3,233,000, offset by noncash equity in loss of equity method investees of approximately $161,000, impairment of
equity method investees of approximately $1,629,000, bad debt expense of $500,000, and stock-based compensation of approximately $40,000.
Further offset by loss on derivative instrument of $90,000, accretion of discount on notes payable of $178,000 and interest added to
notes payable and convertible debt of approximately $215,000. Additionally, cash was used in operations related to an increase in current
assets of approximately $8,000 and an increase in accrued liabilities and other payables of approximately $140,000.
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Net
Cash Used In Investing Activities.
During
the year ended December 31, 2024, the Company loaned $250,000 to NewStem in anticipation of a purchase transaction. This transaction
was not consummated and NewStem ceased operations and began liquidation proceedings in October 2024, resulting in the loan becoming uncollectible.
As such, the Company determined the note was uncollectible and wrote the balance, including $250,000 loaned in 2023, off as a bad debt
during the year ended December 31, 2024.
Net
Cash Provided By Financing Activities.
For
the year ended December 31, 2025, net cash provided by financing activities was $161,867, consisting of advances on the bridge loan payable
to our Executive Chairman.
For
the year ended December 31, 2024, net cash provided by financing activities was $475,000, consisting of long-term borrowings from two
directors and a stockholder totaling $375,000 and borrowings from convertible debt with unrelated parties of $100,000.
Off-Balance
Sheet Arrangements
We
are not party to any off-balance sheet transactions.
Contractual
Obligations and Commercial Commitments
As
of December 31, 2025, we had a contractual obligation related to our directors’ and officers’ insurance providing for 10
monthly installments of $5,109 payable through June 2026.
As
of December 31, 2024, we had a contractual obligation related to our directors’ and officers’ insurance providing for 10
monthly installments of $5,127 payable through June 2025.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
This
section is not applicable.
Item
8. Financial Statements and Supplementary Data.
Furnished
at the end of this Annual Report, commencing on page F-1.
Item
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
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