Item 7. Management’s Discussion and Analysis
Item 7. 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 together with our financial statements and the related notes appearing elsewhere in this Annual Report. In addition to the historical financial information, this discussion contains forward-looking statements that involve risks, assumptions, and uncertainties, such as statements of our plans, objectives, expectations, intentions, forecasts, and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under Part I, Item 1A. “Risk Factors,” which you should read carefully to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.
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.
Investment and Joint Venture
In June 2025, the Company (through its recently formed subsidiary – 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 the date of this filing, the Initial Investment has not yet occurred.
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Asset Acquisition
In October 2025, the Company paid $500,000 directly to McMaster University pursuant to a Patent Purchase Agreement, and U.S. Patent No.
11,788,057 B2 (the “Patent”) was formally assigned effective October 8, 2025. The Patent covers proprietary technologies combining 3D bioprinting, artificial intelligence, and quantum modeling that are designed to enable the creation of patient-derived three-dimensional brain tumor models for high-throughput preclinical drug screening.
Liquidity
Since its inception, we have
incurred significant operating losses. Our net loss was $62,146,210 and $11,898,464, for the years ended December 31, 2025 and 2024,
respectively. We had an accumulated deficit of $112,754,655 at December 31, 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.
We believe there is
substantial doubt about our ability to continue as a going concern as of the date of this Annual Report on Form 10-K. The report of
our independent registered public accounting firm on our financial statements as of and for the year ended December 31, 2025
included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern for
the next twelve months from the filing of this Form 10-K. See Note 1 to our financial statements for additional information on our
assessment.
Our major financing transactions over the past few years are summarized as follows:
In December 2022, the Company signed a Letter of Intent (“LOI”) with an investment advisory firm AFH Holdings and Advisory, LLC (“AFH”) to create a newly formed corporation called NeOnc Technologies Holding Company, Inc. (“NTHI”) to facilitate future fundraising transactions. On April 7, 2023, the Company entered into share exchange agreements whereby all of the common stockholders of NTI exchanged all of their stock in NTI for a total of 10,500,000 shares of NTHI Common Stock in the share exchange (“Share Exchange”). At the consummation of the Share Exchange transaction, AFH and its affiliated entities, individuals, or assignees owned an aggregate of 34.4% (5,500,000 shares) of the fully diluted issued and outstanding common shares of the Company. For a period of two years after an initial public offering (“IPO”) or a direct listing, AFH will also act as an investment advisor in future financing transactions.
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On October 11, 2024, the Company entered into an agreement with RBW Capital Partners LLC, a division of Dawson James Securities, Inc. (“Broker”) to serve as placement agent and provide broker services in connection with the possible sale of Common Stock up to $10 million. During the year ended December 31, 2024, we entered into agreements with investors to sell 625,000 shares of Common Stock at the private placement price of $16.00 per share for gross proceeds of approximately $10,000,000 (the “Private Placement”).
On October 11, 2024, the Company entered into a Line of Credit Agreement (“the Agreement”) with HCWG for borrowings of up to $10.0 million. No amounts have been borrowed under the facility through December 31, 2025.
On October 22, 2024, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Mast Hill Fund, LP (“Mast Hill”) pursuant to which the Company may sell and issue to the investor, and the investor may purchase from the Company, up to $50,000,000 of Company’s common shares. In 2025, the Company sold 671,412 shares of Common Stock at $3.73 – $9.53 per share under the Equity Purchase Agreement, resulting in net proceeds of $4,833,410.
In February 2025, our Executive Chairman, Amir F. Heshmatpour, advanced the Company approximately $300,000. The advances carry a 50% (or 1 times amounts borrowed) original issue discount (“OID”) on the principal. In the event of default, interest is payable on any unpaid balance at a rate of 10% per annum. In March 2025, further to the terms of such advance, the Executive Chairman was paid a total of $600,000 upon repayment of such advances, including OID.
In March 2025, prior to our Direct Listing, we issued 625,000 shares of Common Stock to various unaffiliated third parties in a private placement at a price of $16.00 per share for gross proceeds of approximately $10,000,000. In March 2025, we issued to Dawson James 30,000 shares of Common Stock upon the time of our Direct Listing.
On March 25, 2025, the Company’s Common Stock was listed on the Nasdaq Global Market under the stock ticker “NTHI”.
In March 2025, we issued 102,750 shares of Common Stock to various unaffiliated third parties in a private placement at a price of $16.00 per share for gross proceeds of approximately $1,644,000.
On July 16 and July 18, 2025, the Company entered into a series of convertible promissory notes with a group of investors for the aggregate purchase price of $4,000,000 (the “Notes”). The Notes are payable three months from the date of issuance, with an aggregate face value of $5,000,000, reflecting a 20% original issue discount (“OID”). The Company has the option to extend the maturity date for up to three additional one-month periods. In the event of any such extension, the OID shall increase to 25%, 30%, and 35% for the first, second, and third extension periods, respectively. During the year ended December 31, 2025, the Company exercised the first three available extensions, thereby increasing the OID to 35%. Subsequent to December 31, 2025, the Company exercised the final available extension on the convertible promissory notes and then entered into an additional extension of 1 months which increased the OID rate to 40%. In March 2026, the Company repaid the full outstanding balance of $6,666,666.
In August and September 2025, the Company was awarded two grants totaling approximately $1,400,000 in gross proceeds from the National Institutes of Health (NIH). A significant portion of such grants will be paid to the University of Southern California, where our founder and a Board member is a member of their faculty. Due to re-authorization issues with the NIH, we have not yet received any funding under these grants.
On December 1, 2025, the Company entered into a Securities Purchase Agreement with Saad Naja pursuant to which the Company agreed to issue 111,732 shares of its Common Stock, par value $0.0001 per share, at a price of $8.95 per share, representing the closing price of the Company’s Common Stock on the Nasdaq Global Market on November 28, 2025, raising a total of $1.0 million.
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On January 29, 2026, the Company entered into a Securities Purchase Agreement (the “Agreement”) to issue and sell up to 2,222,222 shares (the “Shares”) of common stock, $0.0001 par value per share of the Company (the “Common Stock”) at a per Share purchase price of $7.20 and five-year warrants to purchase up to 2,222,222 shares of Common Stock at a per share exercise price of $9.00 (the “Warrants” and together with the Shares the “Securities”). The initial closing further to the Agreement consisted of the issuance of 1,388,888 Shares and Warrants to purchase 1,388,888 shares of Common Stock to a single institutional investor at a purchase price of $10 million. The subsequent closing further to the Agreement consisted of the issuance of 86,361 Shares and Warrants to purchase 86,361 shares of Common Stock to three investors at an aggregate purchase price of $621,804.11. The offering of Securities further to the Agreement terminated on January 31, 2026.
Additionally, on February 24, 2026, the Company entered into a second Securities Purchase Agreement to issue and sell up to the remaining 746,973 Shares at the same per Share purchase price of $7.20 and Warrants to purchase up to 746,973 shares of Common Stock at the same per share exercise price of $9.00. The initial closing further to this second Securities Purchase Agreement took place on February 25, 2026, and consisted of the issuance of an aggregate of 201,390 Shares and Warrants to purchase 201,390 shares of Common Stock to four investors at a combined purchase price of $1,450,004. The offering of Securities further to the second Securities Purchase Agreement terminated on February 28, 2026.
On March 20, 2026, the Company entered into a third Securities Purchase Agreement to issue and sell up to the remaining 545,583 Shares at the same per Share purchase price of $7.20 and Warrants to purchase up to 545,583 shares of Common Stock at the same per share exercise price of $9.00. The initial closing further to this third Securities Purchase Agreement took place on March 20, 2026, and consisted of the issuance of an aggregate of 138,889 Shares and Warrants to purchase 138,889 shares of Common Stock to one investor at a purchase price of $1,000,000. This third Securities Purchase Agreement contains customary representations, warranties and agreements of the Company, customary conditions to closing and obligations of the parties and the offering of Securities further to the third Securities Purchase Agreement terminates on April 30, 2026.
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.
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;
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●
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.
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.
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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 Company also had interest expense related to the convertible debt entered into in 2025, which contained an OID factor on the original principal amount. The OID to be earned under the loan is recognized ratably over the term of each draw-down under the loan through the maturity date.
Advisory fees
Advisory fees principally represent amounts due AFH Holdings, a related party, for their services in recapitalizing the company.
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.
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Loss on Change in Fair Value of Derivative Liability
Loss on change in fair value of derivative liability relates to the fair value of the discount offered to stockholders who purchased shares under the equity line of credit.
Other Income
Grant income is recognized in other income (expense) in the period in which the reimbursable research and development services are incurred and the right to payment is realized. The revenue from NIH grants are based upon subcontractor costs and internal costs incurred that are specifically covered by the grants, plus a facilities and administrative rate that provides funding for overhead expenses.
Comparison of the years ended December 31, 2025 and 2024:
Results of Operations
The following table summarizes our results of operations for the years presented:
For
the Years Ended
December 31,
2025
2024
Change
Revenues:
Revenue
$ 39,990
$ 83,000
$ (43,010 )
Operating
Expenses:
Research
and development
3,638,257
3,045,239
593,018
Legal
and professional
2,481,413
2,000,623
480,790
General
and administrative
4,817,900
1,679,660
3,138,240
Share
based compensation
35,555,059
-
35,555,059
Advisory
Fee
11,787,806
500,000
11,237,806
Total
Operating Expenses
58,280,435
7,225,522
51,054,913
Loss
From Operations
(58,240,445 )
(7,142,522 )
(51,097,923 )
Other
Income (Expense):
Interest
and other income
327,582
16,133
311,449
Grant
income
71,247
71,247
Amortization
expense
(1,110,484 )
(145,097 )
(965,387 )
Interest
expense related parties
(2,504,567 )
(2,557,055 )
52,488
Loss
on extinguishment of Bridge loan related party
-
(2,069,923 )
2,069,923
Loss
on change in fair value of derivative liability related to sales of common stock through equity line of credit
(689,543 )
-
(689,543 )
Net
Loss
$ (62,146,210 )
$ (11,898,464 )
$ (50,247,746 )
Revenue
Revenue generated for fees for a “right to try” humanitarian program during the years ended December 31, 2025 and 2024 was $39,990 and 83,000, respectively. These are non-recurring in nature.
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Research and Development Expenses
The following table summarizes the components of our research and development expenses for the years presented:
For
the
Years Ended
December 31,
2025
2024
Research
and development costs by project:
NEO100-01
$ 1,179,758
$ 1,146,766
NEO100-02
391,171
320,987
NEO212
979,406
870,614
Pediatric
237,144
191,593
Laboratory
198,177
461,401
Other
652,601
53,878
Total
$ 3,638,257
$ 3,045,239
For
the Years Ended
December 31,
2025
2024
Change
Clinical
trial expense
$ 3,440,080
$ 2,583,838
$ 856,242
Research
and laboratory
198,177
461,401
(263,224 )
Total
research and development expense
$ 3,638,257
$ 3,045,239
$ 593,018
Research
and development expenses were $3,638,257 and $3,045,239 for the years ended December 31, 2025 and 2024, respectively. A portion of these
expenses amounting to approximately $164,449 and $460,559 for the years ended December 31, 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 $593,018 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
NEO100-03 for a Pediatric Indication
●
Increased patient recruitment efforts.
Legal and Professional Expenses
Legal and professional expenses
were $2,481,413 and $2,000,623 for the years ended December 31, 2025 and 2024, respectively. The increase of $480,790 was primarily due
to the expansion of outsourced accounting and SOX compliance professionals, consultants retained for ERP implementation and increased
activity with various attorneys associated with SEC filings, and fundraising efforts.
General and Administrative Expenses
General and administrative
expenses were $4,817,900 and $1,679,660 for the years ended December 31, 2025 and 2024, respectively. The increase of $3,138,240 was
primary due to an investor awareness marketing campaign, increased employee headcount and resultant compensation and benefits, rent and
travel expenses.
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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), as well as amortization of the grant date fair value of RSU’s over the service period during the year ended December 31, 2025.
Advisory Fee
The advisory fee, primarily to a related party, was earned on the Listing Date March 26, 2025.
Interest Expense
Interest expense was $2,504,567
and $2,557,055 for the years ended December 31, 2025 and 2024, respectively. The interest for the year ended December 31, 2025 relates
primarily to the accrued interest for a litigation matter and the accretion of the convertible note payable of approximately $1,900,000
whereas in 2024, the interest expense related primarily to the bridge loan which was converted at June 30, 2024.
Interest and other Income
Interest income and other income was $327,582 and $16,133 for the years ended December 31, 2025 and 2024, respectively. The interest income for the years ended December 31, 2025 and 2024, relates primarily to interest earned on the money market account. For the year ended December 31, 2025, the Company recognized $71,247 of grant income pursuant to the two NIH grants which commenced in late 2025.
Amortization of Debt Issuance Costs
The amortization of debt issuance costs was approximately $1,110,484 and $145,097 for the years ended December 31, 2025 and 2024, respectively. This represents the amortization of the debt issuance costs associated with the warrants issued for the HCWG line of credit, offering costs relating to the Mast Hill agreement and debt issuance cost associated with the convertible promissory notes. These agreements were entered into during 2024, and thus had a partial year of amortization in 2024 as compared to a full year of amortization in 2025.
Loss on Change in Fair Value of Derivative Liability
Loss on change in fair value
of derivative liability was $689,543 and $0 for the years ended December 31, 2025 and 2024, respectively. The derivative liability is
created from the settlement feature embedded in the Company’s equity line of credit agreement with Mast Hill Fund, LP. Under the agreement,
shares of common stock are purchased at a discount due to the five-day settlement period between the commitment date and the issuance
date. This discount feature creates a variable settlement mechanism that is required to be accounted for as a derivative liability. The
loss of $689,543 represents the change in fair value of this derivative liability from the date of the first draw in July 2025 through
the settlement date.
Cash Flows
The following table summarizes our cash flow for the years indicated:
For the Years Ended
December 31,
2025
2024
Change
Net cash provided by (used in):
Operating activities
$
(20,363,948
)
$
(4,213,916
)
$
(16,150,032
)
Investing activities:
(500,000
)
-
(500,000
)
Financing activities
20,857,784
4,246,947
16,610,837
Net (decrease) increase in cash and cash equivalents
$
(6,164
)
$
33,031
$
(39,195
)
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Operating Activities
During the year ended December
31, 2025, net cash used in operating activities was $20,363,948 consisting primarily of our net loss of $62,146,210, offset by share
based compensation of $35,555,059, accretion of original issue discounts of $1,952,066, amortization of assets of $1,110,484, loss on
change in fair value of derivative liability of $689,543, amortization of right of use asset of $36,461, increase in accrued advisory
fee of $1,757,141, and increase in accounts payable and accrued expenses of $1,117,161. These were offset by decreases in accrued compensation
of $479,775, prepaid expenses in the amount of $196,535, security deposit of $47,177, and lease liability of $12,167. Additionally, during the year ended December 31, 2025, the Company recognized a right-of-use asset and corresponding lease liability of
$412,129 upon entering into a new operating lease, which is presented as a non-cash supplemental disclosure.
During the year ended December 31, 2024, net cash used in operating activities was $4,213,916 consisting primarily of our net loss of $11,898,464, offset by the accretion of the original issue discount on the bridge loan of $2,557,055, loss on extinguishment of convertible debt of $2,069,923, write off of deferred issuance costs of $703,796, amortization of right of use asset of $245,945, amortization of debt issuance costs and deferred offering costs of $145,097, increase in bridge loan expenses paid by the bridge loan provider on behalf of the Company of $476,393, increase in accounts payable and accrued expenses of $1,798,583, and increase in accrued compensation of $56,131. These were offset by a decrease in prepaid expenses and other of $123,627 and a decrease in lease liability of $244,748.
Investing Activities
During the year ended December 31, 2025, net cash used in operating activities was $500,000 due to the purchase of patent no. 11,788,057 B2 from McMaster University.
Financing Activities
During the year ended December
31, 2025, cash provided by financing activities was $20,857,784 consisting primarily of the sale of common stock of $12,324,374, proceeds
from the issuance of the convertible note of $4,000,000, proceeds from the sales of common stock under the equity line of credit of $4,833,410,
and proceeds from related party loans of $300,000, offset by repayment of related party loans of $600,000.
During the year ended December
31, 2024, cash provided by financing activities was $4,246,947, consisting primarily of proceeds from the sale of common stock of $4,615,789
and proceeds from related party loans of $892,028, offset by repayment of related party loans of $791,077 and payment of deferred offering
costs of $469,793.
Liquidity and Capital Resources
Sources of Liquidity/Going Concern
Since our inception, we have funded our operations through the sale and issuance of common stock and debt financing rounds from related and third parties.
During the year ended December 31, 2025, the Company sold 727,750 shares of common stock at a price of $16.00 per share for gross proceeds of $11,644,000 pursuant to a private placement of its securities, issued additional 111,732 shares of common stock for private placement resulting in gross proceeds of $1.0 million, and issued 671,412 shares from the sale of shares under the equity line of credit. We also raised $4.0 million through the issuance of convertible promissory note.
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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 year ended
December 31, 2025, the Company incurred a net loss of $62,146,210 and had an accumulated deficit of $112,754,655 at December 31, 2025.
At December 31, 2025, the Company had cash totaling $58,729. These factors raise substantial doubt about our ability to continue as a
going concern in the next twelve months from the filing of this Form 10-K. 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.
In March 2026, the Company completed a Public Investment in Private Equity (“PIPE”) financing, pursuant to which the Company issued 2,222,222 shares of its common stock and accompanying warrants to institutional and accredited investors. Gross proceeds from the PIPE were approximately $16.0 million, before payment of placement agent fees and other offering expenses. The Company used a portion of the proceeds from the PIPE financing to strengthen its balance sheet and settle certain outstanding obligations. Specifically:
●
The Company paid in full the outstanding advisory fee balance owed to AFH Holdings, thereby satisfying all amounts due under the advisory agreement.
●
The Company paid in full the litigation settlement obligation with Fox Infused in the amount of $737,929.77, extinguishing the remaining liability associated with that settlement.
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The Company paid in full the outstanding balance of $6,666,666 related to the Company’s short-term convertible debt, which originated as an Original Issue Discount (“OID”) loan, thereby eliminating the associated debt obligation.
In connection with this financing, the Company agreed to pay Amir Heshmatpour a bonus of $900,000, said amount to be paid in 6 equal installments of $150,000 commencing March 1, 2026.
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. We have the following financing facilities available to us:
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On October 11, 2024, the Company entered into a Line of Credit Agreement (“the Agreement”) with HCWG for borrowings of up to $10.0 million. No amounts have been borrowed under the facility through December 31, 2025.
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On October 22, 2024, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Mast Hill Fund, LP (“Mast Hill”) pursuant to which the Company may sell and issue to the investor, and the investor may purchase from the Company, up to $50,000,000 of Company’s common shares. In 2025, the Company sold 671,412 shares of Common Stock at $3.73 – $9.53 per share under the Equity Purchase Agreement, resulting in net proceeds of $4,833,410.
No assurance can be given that be will be able to draw upon such facilities if needed. Further, 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 stockholders, in the case of equity financing, or grant unfavorable terms in licensing agreements.
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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.
We intend to finance our operations over the next 12 months primarily through existing cash balances and the proceeds from the funds available through our Line of Credit Agreement with HCWG and sales under the Equity Purchase Agreement, each as described above. 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:
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the costs of conducting preclinical studies and clinical trials;
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the costs of manufacturing;
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the scope, progress, results and costs of discovery, preclinical development, laboratory testing, and clinical trials for product candidates we may develop, if any;
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the costs, timing, and outcome of regulatory review of our product candidates;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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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;
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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;
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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims;
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our headcount growth and associated costs as we expand our business operations and research and development activities; and
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the costs of operating as a public company.
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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.
Critical Accounting Estimates
We account for stock-based compensation, including restricted stock units (RSUs), in accordance with ASC 718 (Accounting Standards Codification Topic 718, Compensation—Stock Compensation). 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.
Off-Balance Sheet Arrangements
During the years ended December 31, 2025 and 2024, we did not have, and we do not currently have, any off-balance sheet arrangements (as defined under SEC rules).
Emerging Growth Company and Smaller Reporting Company Status
We are a smaller reporting company and an emerging growth company, each as defined under the Jumpstart Our Business Startups Act (the “JOBS Act”). We are a clinical-stage biopharmaceutical company with no approved products and no product revenue, and we expect to continue to qualify under both classifications for the foreseeable future, subject to the thresholds described below.
Under the JOBS Act, emerging growth companies may take advantage of certain reduced reporting and disclosure requirements. These exemptions include: (i) the ability to delay adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies; (ii) the presentation of only two years of audited financial statements in a registration statement for an initial public offering; (iii) an exemption from the requirement to provide an auditor’s attestation report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); (iv) an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation; and (v) reduced disclosure obligations with respect to executive compensation arrangements.
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We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. We will maintain this election until the earlier of (i) the date we are no longer an emerging growth company or (ii) the date we affirmatively and irrevocably opt out of the extended transition period provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of the public company effective dates. We have taken advantage of certain of these reduced reporting requirements in this Annual Report on Form 10-K and intend to continue to do so for as long as we qualify.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year ending December 31, 2030; (ii) the last day of the first fiscal year in which our total annual gross revenue equals or exceeds $1.235 billion; (iii) the date on which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which requires that the market value of our equity securities held by non-affiliates exceed $700 million as of the last business day of our most recently completed second fiscal quarter; and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Given our current stage of development and financial profile, we do not expect to exceed any of these thresholds in the near term other than the December 31, 2030 date.
Even after we no longer qualify as an emerging growth company, we may continue to qualify as a “smaller reporting company” and/or a “non-accelerated filer” under applicable SEC rules. If we remain a smaller reporting company, we would continue to be permitted to take advantage of many of the same reduced disclosure exemptions, including: (i) presenting only two years of audited financial statements in our Annual Reports on Form 10-K; (ii) not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley for as long as we remain a non-accelerated filer; and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will continue to assess our status under each of these classifications annually and will adjust our disclosure practices accordingly as our status changes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting
company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required by this Item.
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