NEONC TECHNOLOGIES HOLDINGS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from these forward-looking statements as a result of certain factors. For a complete discussion of such risk factors, see the section entitled “Risk Factors”. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the “Part I - Financial Information,” including the related notes to the consolidated financial statements contained therein. Overview Our company (f/k/a NAS-ONC, Inc.) was formed in 2008, devoted to developing new drugs with new delivery modes. As a clinical-stage biopharmaceutical company, we have focused on establishing superior treatments for intracranial malignancies, i.e., aggressive cancers located in the brain. These cancer types include primary brain cancers, such as glioblastoma, and secondary brain cancers, that have arrived through metastatic spread from other cancers throughout the body, such as melanoma or breast and lung cancer. Brain-localized malignancies are particularly difficult to treat because the blood-brain barrier prevents efficient entry of most pharmacotherapeutic agents into the brain. As a result, these patients are faced with poor prognoses and shortened average life expectancy. NeOnc is developing novel drug delivery methods to be used in combination with novel drug candidates. NeOnc’s lead product candidate is NEO100. NEO100 is administered to patients via intranasal delivery. We have completed human safety testing in a Phase 1 clinical trial and are currently conducting preliminary efficacy testing in a Phase 2a trial with recurrent malignant glioma (Grade IV IDH1 mutant and Grade III Astrocytoma IDH1 mutant) patients. NeOnc is also developing a second product candidate, NEO212, which has completed preclinical testing, and an investigational new drug (IND) application has been filed and accepted with the United States Food and Drug Administration (FDA). The company has started Phase 1 clinical trials with patients harbouring primary and secondary malignant brain cancer types. Several additional drug candidates are in the pipeline and are undergoing preclinical development. 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 other than for humanitarian usage. On October 11, 2024, the Company entered into an agreement with a broker dealer to serve as placement agent and provide broker services in connection with the proposed sale of common stock up to $10,000,000. Under this agreement, through December 31, 2024, the Company closed on commitments from investors to purchase 625,000 shares of common stock of the Company at $16 per share for total commitments of $10,000,000, which were to be held in escrow until the Company’s registration statement was declared effective. During the three months ended March 31, 2025, prior to the Company having an effective registration statement, the Company closed on an additional commitment to purchase 102,750 shares of common stock of the Company at $16 per share, for total commitments of $1,644,000, On March 10, 2025, the Company’s registration statement was declared effective at which time the $11,644,000 in escrow was released to the Company. On March 26, the Company was listed (“Listing”) on the NASDAQ global markets. The Company has restated the previously issued unaudited consolidated financial statements as of and for the quarter ended March 31, 2025 (the “Restatement”). The Restatement corrects an overstatement of share based compensation due to an incorrect vesting period. The correction reduced the share based compensation expense from $23,073,745 to $17,397,774 and the corresponding net loss from $38,002,012 to $32,326,016 for the quarter ended March 31, 2025. 21 Investment and Joint Venture In June 2025, the Company (through a soon to be formed entity – Nuromena Holdings Ltd. “NuroMena”) entered into a letter of intent to form an investment and joint venture agreement with a Middle-East investor (“Investor”), Quazar Investments. At the formation date, the Company would own 10 million shares of NuroMena and contribute a license to its technology to NuroMena, and the Investor will purchase 2.5 million shares of NuroMena for a subscription price of $400,000 (“Initial Investment”). Following the formation of the entity and closing of the Initial Investment, the Investor shall source one or more future investors to purchase up to $50.0 million at $25/share in common stock of the Company, of which 70% of the proceeds will be maintained by the Company and 30% will be transferred to an operating entity to be formed under NuroMena, to conduct clinical trials in the middle-east markets. As of August 13, 2025, the entity has not yet been formed, and therefore the Initial Investment has not yet occurred. Since its inception, we have incurred significant operating losses. Our net loss was $5,680,170 and $4,522,006, for the three months ended June 30, 2025 and 2024, respectively, and $38,006,186 and $7,460,982 for the six months ended June 30, 2025 and 2024, respectively. We had an accumulated deficit of $88,614,631 at June 30, 2025. 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 a third-party commercialization partnership, we expect to 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 as of and for the year ended December 31, 2024 included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern. See Note 1 to our financial statements for additional information on our assessment. Components of Results of Operations Revenue We occasionally receive a fee from a patient for a “right to try” humanitarian program. Such revenues are not part of our core business. Operating Expenses Our operating expenses consist of (i) research and development expenses and (ii) legal and professional expenses and (iii) general and administrative expenses. 22 Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research and development activities, including our product candidate discovery efforts and preclinical and clinical studies under our research programs, which include: ● employee-related expenses, including salaries, benefits and stock-based compensation expense for our research and development personnel; ● costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf; ● costs of manufacturing drug products and drug supply related to our current or future product candidates; ● costs of conducting preclinical studies and clinical trials of our product candidates; ● consulting and professional fees related to research and development activities, including equity-based compensation to non-employees; ● costs of maintaining our laboratory, including purchasing laboratory supplies and non-capital equipment used in our preclinical studies; ● costs related to compliance with clinical regulatory requirements; and ● facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies. Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our preclinical and clinical studies or other services performed. The successful development of our product candidates is highly uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if they are approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of: ● the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies and clinical trials and other research and development activities; ● establishing an appropriate safety profile; ● successful enrollment in and completion of clinical trials; ● whether our product candidates show safety and efficacy in our clinical trials; ● receipt of marketing approvals from applicable regulatory authorities; ● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; ● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; ● commercializing product candidates, if and when approved, whether alone or in collaboration with others; and ● continued acceptable safety of the products following any regulatory approval. 23 A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as we commence clinical trials and continue the development of our current and future product candidates. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans. Legal and Professional Expenses Legal and professional expenses consist of costs related to corporate and intellectual property legal costs and accounting and auditing fees. We also anticipate increased expenses associated with being a public company, including costs for audit, legal, regulatory and tax-related services related to compliance with the rules and regulations of the Securities and Exchange Commission, or the SEC, and listing standards applicable to companies listed on a national securities exchange, director and officer insurance premiums, and investor relations costs. General and Administrative Expenses General and administrative expenses include salaries and other compensation-related costs, including stock-based compensation, for personnel in executive, finance and accounting, business development, operations and administrative roles. Other significant costs include insurance costs, travel costs, facility and office-related costs not included in research and development expenses. We anticipate that our general and administrative expenses will increase in the future as our business expands to support expected growth in research and development activities, including our future clinical programs. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside service providers, among other expenses. In addition, if we obtain regulatory approval for any of our product candidates and do not enter a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities. Share Based Compensation Share based compensation expense result from the recognition of the fair value of restricted stock units (RSU) recorded on a straight-line basis from the date of grant to the date the RSU becomes fully vested. Interest Expense Interest expense primarily results from the bridge loan and a short-term loan both from related parties. Borrowings under these loans carry a 50% (or 1 times amounts borrowed) original issue discount (“OID”) on principal. The OID to be earned under the bridge loan is recognized ratably over the term of each draw-down under the loan through the maturity date. Amortization Amortization on debt issuance costs resulted from the grant of warrants for a line of credit commitment. The fair value of the warrants was determined using the Black Scholes valuation method and the fair value is being amortized over the term of the line of credit commitment. Amortization on deferred offering costs resulted from the issuance of common stock in connection with a private equity agreement 24 Comparison of the three and six months ended June 30, 2025 and 2024: Results of Operations The following table summarizes our results of operations for the periods presented: For the Three Months Ended June 30, 2025 2024 Change Revenues: Revenue $ - $ 20,000 $ (20,000 ) Cost of Revenues - Operating Expenses: Research and development 677,332 394,484 282,848 Legal and professional 520,364 590,984 (70,620 ) General and administrative 984,262 289,652 694,610 Share based compensation 3,526,076 - 3,526,076 License expense - 25,000 (25,000 ) Total Operating Expenses 5,708,034 1,300,120 4,407,914 Loss From Operations (5,708,034 ) (1,280,120 ) (4,427,914 ) Other Income (Expense): Interest income 28,725 28,725 Amortization on debt issuance and deferred offering costs (192,249 ) - (192,249 ) Other income, net 240,138 - 240,138 Interest expense - related parties (48,750 ) (1,171,963 ) 1,123,213 Loss on extinguishment of Bridge loan - related party - (2,069,923 ) 2,069,923 Net Loss $ (5,680,170 ) $ (4,522,006 ) $ 1,158,164 Revenue Revenue was generated for fees for a “right to try” humanitarian program during 2025 and 2024. Research and Development Expenses The following table summarizes the components of our research and development expenses for the periods presented: For the Three Months Ended June 30, 2025 2024 Research and development costs by project: NEO100-01 $ 109,166 $ 98,399 NEO100-02 93,326 96,367 NEO212 279,074 197,962 Pediatric 50,178 1,591 Laboratory 107,465 - Other 38,123 165 Total $ 677,332 $ 394,484 For the Three Months Ended June 30, 2025 2024 Change Clinical trial expense $ 531,744 $ 394,319 $ 137,425 Research and laboratory 145,588 165 145,423 Total research and development expense $ 677,332 $ 394,484 $ 282,848 25 Research and development expenses were $677,332 and $394,484 for the three months ended June 30, 2025 and 2024, respectively. A portion of these expenses amounting to approximately $145,588 and $165 for the three months ended June 30, 2025 and 2024, respectively, are from the University of Southern California (USC), where Dr. Chen is a member of the faculty. The total increase of $282,848 was primarily due to: ● The addition of clinical trial sites for NEO100’s clinical trial. ● The recruitment for NEO212. ● The start of the clinical trial for NEO100-03for a Pediatric Indication. ● Increased patient recruitment efforts. Legal and Professional Expenses Legal and professional expenses were $520,364 and $590,984 for the three months ended June 30, 2025 and 2024, respectively. The decrease of $70,820 was primarily due to the completion of the direct listing process which occurred in the first quarter of 2025. General and Administrative Expenses General and administrative expenses were $984,262 and $289,652 for the three months ended June 30, 2025 and 2024, respectively. The increase of $694,610 was primary due to a marketing campaign, rent and travel expenses and expense incurred in pursuit of the Middle East deal for which a letter of intent was executed subsequent to June 30, 2025. Share Based Compensation Share based compensation resulted from the granting of RSUs and is the recognition of the expense from the grant date (which included a catch up period from the original date of issuance of the RSU’s through the Listing Date, due to the removal of the contingency which occurred on the Listing Date) during the three months June 30, 2025. Interest Expense Interest expense was $48,750 and $1,171,963 for the three months ended June 30, 2025 and 2024, respectively. The interest for the three months ended June 30, 2025 relates primarily to the accrued interest for a litigation matter. The OID interest for the three months ended June 30, 2024 relates to the OID for the related party bridge loan that was converted into common stock in June of 2024. Interest Income Interest income was $28,725 and $0 for the three months ended June 30, 2025 and 2024, respectively. The interest income for the three months ended June 30, 2025, relates primarily interest earned on the money market account. Loss on Extinguishment of Bridge Loan – related part Loss on Extinguishment of Bridge Loan – related party was $0 and $2,069,923 for the three months ended June 30, 2025 and 2024, respectively. The loss is related to the loan being converted into common stock in June 2024. 26 Amortization of Debt Issuance and Deferred Offering Costs The amortization of debt issuance costs was approximately $192,000 and $0 for the three months ended June 30, 2025 and 2024, respectively. This represents the amortization of the debt issuance costs associated with the warrants issued for the HCWG line of credit, and offering costs relating to the Mast Hill agreement. The following table summarizes our results of operations for the periods presented: For the Six Months Ended June 30, 2025 2024 Change Revenues: Revenue $ 39,990 $ 63,000 $ (23,010 ) Cost of Revenues Operating Expenses: Research and development 1,675,554 1,009,001 666,553 Legal and professional 1,477,909 1,155,338 322,571 General and administrative 1,833,747 705,264 1,128,483 Share based compensation 20,923,850 - 20,923,850 License expense - 25,000 (25,000 ) Advisory fees 11,737,806 - 11,737,806 Total Operating Expenses 37,648,886 2,894,603 34,754,263 Loss From Operations (37,608,876 ) (2,831,603 ) (34,777,273 ) Other Income (Expense): Interest income 80,424 - 80,424 Amortization on debt issuance and deferred offering costs (360,200 ) - (360,200 ) Other income, net 240,138 - 240,138 Interest expense (357,672 ) (2,559,456 ) 2,201,784 Loss on extinguishment of Bridge loan - related party - (2,069,923 ) 2,069,923 Net Loss $ (38,006,186 ) $ (7,460,982 ) $ (30,545,204 ) Revenue Revenue was generated for fees for a “right to try” humanitarian program during 2025 and 2024. Research and Development Expenses The following table summarizes the components of our research and development expenses for the periods presented: For the Six Months Ended June 30, 2025 2024 Research and development costs by project: NEO100-01 $ 688,628 $ 456,721 NEO100-02 201,787 123,431 NEO212 455,629 359,696 Pediatric 99,010 68,988 Laboratory 192,377 - Other 38,123 165 Total $ 1,675,554 $ 1,009,001 27 For the Six Months Ended June 30, 2025 2024 Change Clinical trial expense $ 1,445,054 $ 1,008,836 $ 436,218 Research and laboratory 230,500 165 230,335 Total research and development expense $ 1,675,554 $ 1,009,001 $ 666,553 Research and development expenses were $1,675,554 and $1,009,000 for the six months ended June 30, 2025 and 2024, respectively. A portion of these expenses amounting to approximately $230,500 and $165 for the six months ended June 30, 2025 and 2024, respectively, are from the University of Southern California (USC), where Dr. Chen is a member of the faculty. The total increase of $666,553 was primarily due to: ● The addition of clinical trial sites for NEO100’s clinical trial. ● The recruitment for NEO212. ● The start of the clinical trial for NEO100-03for a Pediatric Indication. ● Increased patient recruitment efforts. Legal and Professional Expenses Legal and professional expenses were $1,477,909 and $1,155,338 for the six months ended June 30, 2025 and 2024, respectively. The increase of 322,571 was primarily due to completion of the direct listing process. General and Administrative Expenses General and administrative expenses were $1,833,747 and $705,264 for the six months ended June 30, 2025 and 2024, respectively. The increase of $1,128,483 was primary due to a marketing campaign, rent and travel expenses. Share Based Compensation Share based compensation resulted from the granting of RSUs and is the recognition of the expense from the grant date (which included a catch up period from the original date of issuance of the RSU’s through the Listing Date, due to the removal of the contingency which occurred on the Listing Date) through June 30, 2025. Advisory Fee The advisory fee was earned on the Listing Date March 26, 2025. 28 Interest Expense Interest expense was $357,672 and $2,559,456 for the six months ended June 30, 2025 and 2024, respectively. The interest for the six months ended June 30, 2025 relates to the short-term loan in March from a related party in the amount of $300,000 and $56,250 interest for a litigation matter. The OID interest for the six months ended June 30, 2024 relates to the OID for the related party bridge loan that was converted into common stock in June of 2024. Amortization of Debt Issuance and Deferred Offering Costs The amortization of debt issuance costs were $360,200 and $0 for the six months ended June 30, 2025 and 2024, respectively. This represents the amortization of the warrants issued for the HCWG line of credit and deferred offering costs relating to the Mast Hill agreement. Cash Flows The following table summarizes our cash flow for the periods indicated: For the Six Months Ended June 30, 2025 2024 Change Net cash provided by (used in): Operating activities $ (10,964,226 ) $ (172,456 ) $ (10,791,770 ) Financing activities 11,024,372 1,673,128 9,351,244 Net increase (decrease) in cash $ 60,146 $ 1,500,672 $ (1,440,526 ) Operating Activities During the six months ended June 30, 2025, net cash used in operating activities was $10,964,226 consisting primarily of our net loss of $38,006,186, offset by share based compensation of $20,923,850, accretion of original issue discount of $300,000, amortization of costs of $769,441 and the accrued advisory fee of $5,882,710. These were offset by decreases in accrued compensation in the amount of $479,775, and prepaid expenses in the amount of $350,134. During the six months ended June 30, 2024, net cash used in operating activities was $172,456 consisting primarily of our net loss of $7,460,982 less the non-cash charge of the accretion of the original issue discount on the bridge loan in the amount $2,558,241, less the non-cash charge for the loss on extinguishment of convertible debt of $2,069,923 and an increase in accounts payable of $1,551,272. Financing Activities During the six months ended June 30, 2025, cash provided by financing activities was $11,024,372 consisting primarily of the sale of common stock of $11,324,372, receipt of $300,000 from a related party loan and the repayment of related party loan of $600,000. During the six months ended June 30, 2024, cash used in financing activities was $1,673,148, consisting primarily of proceeds from the sale of common stock of $1,702,658. 29 Liquidity and Capital Resources Sources of Liquidity/Going Concern Since our inception, we have funded our operations through the sale and issuance of preferred and common stock and debt financing rounds from related and third parties. In March 2025 prior to our direct listing we issued 625,000 shares of common stock in a private placement at a price of $16.00 per share for gross proceeds of approximately $10,000,000. In March 2025 after our direct listing we issued 102,750 shares of common stock in a private placement at a price of $16.00 per share for gross proceeds of approximately $1,644,000. No shares of common stock were issued in the quarter ending June 30, 2025. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Since our inception, we have not generated any revenue from product sales or any other sources, except humanitarian use, and we have incurred significant operating losses. We have not yet commercialized any products, and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever. As reflected in the accompanying consolidated financial statements, we have incurred recurring net losses since our inception. For the three and six months ended June 30, 2025, the Company incurred a net loss of $5,680,170 and $38,006,186, respectively, and had an accumulated deficit of $88,614,631 at June 30, 2025. At June 30, 2025, the Company had cash totaling $125,039. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our strategies, such as executing additional licensing contracts. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. The ability to continue as a going concern is dependent on us raising additional capital and attaining and maintaining profitable operations in the future to meet our obligations and repay our liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings and licensing income and we expect 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 us. Even if we are 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 shareholders, in the case of equity financing, or grant unfavorable terms in licensing agreements. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, initiate and conduct preclinical studies and clinical trials, and seek marketing approval for our current and any of our future product candidates. In addition, if we obtain marketing approval for any of our current or our future product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution, which costs we may seek to offset through entry into collaboration agreements with third parties. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. 30 We expect to finance our operations over the next 12 months primarily through existing cash balances and the proceeds from the aforementioned private placements and supplemented as necessary by funds available through our Line of Credit Agreement with HCWG and sales under the Equity Purchase Agreement, each as described below. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on a number of factors, including: ● the costs of conducting preclinical studies and clinical trials; ● the costs of manufacturing; ● the scope, progress, results and costs of discovery, preclinical development, laboratory testing, and clinical trials for product candidates we may develop, if any; ● the costs, timing, and outcome of regulatory review of our product candidates; ● our ability to establish and maintain collaborations on favorable terms, if at all; ● the achievement of milestones or the occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time; ● the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; ● the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; ● the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims; ● our headcount growth and associated costs as we expand our business operations and research and development activities; and ● the costs of operating as a public company. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise funds through potential collaborations, strategic alliances 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 to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate 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. 31 Critical Accounting Estimates We account for stock-based compensation, including restricted stock units (RSUs), in accordance with ASC 718. RSUs are measured at fair value on the grant date based on our common stock price and expense over the vesting period. For awards with performance or market conditions, expense is recognized based on the probability of achievement and may be accelerated. We estimate forfeitures based on historical data and adjust these estimates periodically. Changes in forfeiture rates, stock price, or performance assumptions can materially affect stock-based compensation expenses. Management reviews these assumptions quarterly and updates estimates as necessary. We consider the accounting for RSUs a critical estimate due to the judgment involved and its material impact on our financial results.