OS Therapies Inc 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this annual report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a clinical stage biopharmaceutical company focused on the identification, development and commercialization of treatments for Osteosarcoma (OS) and other solid tumors. Our mission is to address the significant need for new treatments in cancers of the bone in children and young adults. Osteosarcoma is an extremely challenging and often aggressive cancer that has particular treatment challenges due to its location, changing genotypes and high metastases rates. We are currently seeking to answer the call for new treatments that will prevent metastasis and the recurrence of metastases with our lead core product candidate OST-HER2 (also known as OST31-164), a cancer immunotherapy product candidate that produces a cellular immune response against the cancer antigen HER2. In 2021, we opened a clinical study to produce data for the U.S. Food and Drug Administration (FDA) to evaluate the safety and efficacy of OST-HER2 in patients after resection of recurrent Osteosarcoma, which achieved full enrollment of 41 patients in October 2023. We expect topline results from all 41 patients enrolled by the fourth quarter of 2024 and, if successful, intend to seek regulatory approval for OST-HER2 for the prevention of metastases in Osteosarcoma in 2025. Upon success in gaining regulatory approval from the FDA with OST-HER2 in Osteosarcoma, we intend to evaluate OST-HER2’s potential use, both alone and in combination with HER2 targeting antibodies such as Herceptin ® , in other solid tumors including breast, esophageal and lung cancers. OST-HER2 has potential uses in both the prevention of metastases in solid tumors, and therapeutically against HER2-expressing solid tumors treated with HER targeting antibodies. We also own rights to OST-Tunable Drug Conjugate (OST-tADC) platform, a next generation antibody-drug conjugate (ADC) silicone dioxide linker technology. “Tunable” is a term used in drug development that refers to the properties that can be influenced by chemical modifications, and “antibody-drug conjugate” or ADC is a term used to describe a drug made up of a monoclonal antibody attached to a cytotoxic payload, or a highly active and toxic pharmaceutical molecule, through chemical linkers. The ADC links an antibody that can home in on a targeted tumor to deploy the cytotoxic payload or toxic agent against the tumor. Furthering our founding mission, we intend to investigate clinical indications for OST-tADC in Osteosarcoma and other solid tumors. 58 No new treatments have been approved by the FDA for human Osteosarcoma for more than 40 years. In humans, Osteosarcoma is an extremely rare cancer that primarily affects children, teenagers and young adults generally under 40 years of age. We are not aware of any competing adjuvant therapy for Osteosarcoma to be tested in children that is further along in the development process than OST-HER2. This disease is difficult to diagnose. The standard of care following first line therapies is simply to screen and wait for possible recurrence/metastasis, or the development of secondary malignant growths at a distance from a primary site of cancer. Studies published in the Journal of Clinical Oncology, “Osteosarcoma Relapse After Combined Modality Therapy: An Analysis of Unselected Patients in the Cooperative Osteosarcoma Study Group (COSS),” by Kempf-Bielack B., et al. (January 2005), and “Second and Subsequent Recurrences of Osteosarcoma: Presentation, Treatment, and Outcomes of 249 Consecutive Cooperative Osteosarcoma Study Group Patients,” by Bielack S., et al. (February 2009), reported that recurrence/metastasis happens in approximately half of all patients within 12 to 18 months following initial remittance. For those patients that experience recurrence, metastasis is typically to the lungs and brain, with survival rates of approximately 13% over the next year, according to these studies. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are those that, in management’s view, are most important to the portrayal of a company’s financial condition and results of operations and most demanding on their calls on judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. While our significant accounting policies are described in more detail in Note 2 to our financial statements appearing elsewhere in this annual report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Warrant Liability We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. 59 The Series A Warrants issued in connection with the Purchase Agreement are recognized as a derivative liability in accordance with ASC 815. We recognize the warrant instruments as a liability at fair value and adjust the instruments to fair value at each reporting period. The liability is subject to re-measurement at each balance sheet date until exercised or reclassified, and any change in fair value is recognized in our consolidated statements of operations. The fair value of the Series A Warrants was measured using a Binomial simulation model. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available, and, accordingly, the actual results could differ significantly. As the fair value of the warrant liability is based on a Binomial simulation model, we determined the fair value of the warrant liability was a critical accounting estimate. Components of Our Results of Operations Revenue. We did not recognize revenues for the years ended December 31, 2024 and 2023. Operating Expenses. Our operating expenses are comprised primarily of research and development expenses, general and administrative expenses and licensing costs. Research and Development Expenses. Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: ● personnel-related costs, including salaries, benefits and stock-based compensation expense, for employees engaged in research and development functions; ● expenses incurred in connection with our research programs, including under agreements with third parties, such as consultants and contractors and CROs; ● the cost of developing and scaling our manufacturing process and manufacturing drug substance and drug product for use in our research and preclinical and clinical studies, including under agreements with third parties, such as consultants and contractors and contract development and manufacturing organizations (CDMOs); and ● the cost of laboratory supplies and research materials. We track our direct external research and development expenses on a program-by-program basis. These consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, CDMOs, and CROs in connection with our preclinical, clinical and manufacturing activities. We do not allocate employee costs, costs associated with our discovery efforts, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and, as such, are not separately classified. We expect that our research and development expenses will increase substantially as we advance OST-HER2 and OST-tADC into clinical development and expand our discovery, research and preclinical activities. General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, investor and public relations and accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company. Licensing Costs. Costs incurred in obtaining technology licenses and asset purchases are charged to licensing costs if the technology licensed has not reached technological feasibility which includes manufacturing, clinical, intellectual property and/or regulatory success which has no alternative future use. The licenses purchased by us require substantial completion of research and development and regulatory and marketing approval efforts in order to reach technological feasibility. 60 Interest Expense. We evaluated the convertible notes issued by us from July 2018 to April 2024 in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and determined the convertible notes are considered share-settled debt and should be recorded as a liability. This conclusion was determined based on the debt providing the holder with a variable number of shares at settlement with an aggregate fair value equal to the debt instrument’s outstanding principal. The general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement (e.g., share-settled debt) to be carried at fair value unless other accounting guidance specifies another measurement attribute. It has been determined that the appropriate guidance for share-settled debt is ASC 835. As a result, the convertible notes were recorded at the amortized cost. Cumulative Series A Preferred Stock Dividend. The Series A preferred stock dividend requirement represents the coupon dividends on our preferred stock that has since been converted and is identified as a separate component of our statement of operations to compute net income (loss) available to common stockholders. The coupon dividends are computed at 5% of the principal per annum and are recorded monthly. The cumulative accrued dividend at December 31, 2024 and 2023 was $375,000 and $343,750, respectively. The Series A preferred stock was converted into common stock on a 1:1 basis in February 2024, and the last coupon dividend was issued in the quarter ended March 31, 2024. Income Taxes. Since our inception, we have not recorded income tax benefits for the net operating losses incurred or the research and development tax credits generated in each year, due to the uncertainty of realizing a benefit from those items. As of December 31, 2024, we had U.S. federal net operating loss carry forwards of approximately $22,236,580, which may be available to offset future taxable income. The federal net operating loss carry forward indefinitely but may only be used to offset 80% of annual taxable income. As of December 31, 2024, we also had federal and state general business tax credit carry forwards of $1,672,876 available to offset future tax liabilities and expire at various dates beginning in January 1, 2040. We have R&D credits that we opted to convert and use toward payroll taxes in amounts equal to $268,568 as of December 31, 2024. As of December 31, 2024, we also had federal and state research and development tax credit carry forwards of approximately $1,672,876, which may be available to offset future tax liabilities and expire at various dates beginning January 1, 2043 and January 1, 2042, respectively. Deferred Offering Costs. Deferred offering costs consisted of legal, accounting, printing and filing fees that we capitalized, which will be offset against the gross proceeds from our initial public offering. Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023: December 31, (In thousands) 2024 2023 Expenses: Research and development expenses $ 2,839 $ 3,217 General and administrative 3,975 1,121 Licensing - 5 Total operating expenses 6,814 4,343 Loss from operations (6,814 ) (4,343 ) Other income (expenses): Non-operating income 34 Non-operating expenses (51 ) Interest (expense) (2,052 ) (3,449 ) Total other income (expense) (2,069 ) (3,449 ) Net loss (8,883 ) (7,792 ) Cumulative Series A preferred stock dividend requirement (31 ) (125 ) Deemed dividend or Series A convertible preferred stock (1,972 ) - Net loss available to common shareholders $ 10,886 $ (7,917 ) 61 Research and Development Expenses. Research and development expenses were approximately $2.8 million for the year ended December 31, 2024 compared to approximately $3.2 million for the year ended December 31, 2023. This decrease was primarily due to a decrease in vendor expenses associated with our OST-tADC product. The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023: As of December 31, (In thousands) 2024 2023 Direct research and development expenses by program: OST-HER2 $ 2,206 $ 2,598 OST-tADC 51 214 Unallocated research and development expenses: Personnel-related 582 405 Total research and development expenses $ 2,839 $ 3,217 In 2024, the direct research and development expenses related to OST-HER2 were $2.2 million. In 2023, such expenses were primarily lab fees, vendor expenses and payroll. Additionally, in 2024 and 2023, we incurred expenses for our Phase IIb clinical trial. OST-tADC related direct research and development expenses were approximately $0.05 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively. General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2024 were approximately $4.0 million compared to $1.1 million for the year ended December 31, 2023. This increase was primarily attributed to increased payments to consultants, along with staff related payroll and legal fees. Interest Expense. Interest expense for the year ended December 31, 2024 was approximately $2.1 million compared to $3.5 million for the year ended December 31, 2023. The Series A preferred stock coupon dividend requirement of $31,250 for the year ended December 31, 2024 represents an expense that terminated during the period ended March 31, 2024 upon the conversion of our old Series A preferred shares into shares of our common stock. The Series A preferred stock coupon dividend requirement of $125,000 for the year ended December 31, 2023 represents a 12-month expense. We issued Series A convertible preferred stock with a deemed dividend of $1.97 million as of December 31, 2024. 62 Liquidity and Capital Resources Operating Losses Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates. For the years ended December 31, 2024 and 2023, we reported a net loss of approximately $8.9 million and $7.8 million, respectively, and had an accumulated deficit of approximately $41 million and $29.5 million, respectively. We expect to incur significant expenses at an increasing rate and increasing operating losses for the foreseeable future. As of December 31, 2024 and 2023, we had cash of approximately $5.5 million and $0.04 million, respectively. We have funded our operations to date primarily from the sale of our convertible notes and Series A securities in our private placements, as well as the sale of our common stock in our initial public offering, which have provided total gross proceeds of $34.6 million as of March 28, 2025. We believe that the net proceeds from our private placements and initial public offering, together with our existing cash, will enable us to fund our operating expenses and capital expenditure requirements for the next nine to 12 months. Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: December 31, (In thousands) 2024 2023 Cash used in operating activities $ (7,282,295 ) $ (3,006,967 ) Cash provided by investing activities - 1,145 Cash provided by financing activities 12,776,840 2,873,324 Net increase (decrease) in cash $ 5,494,545 $ (132,498 ) Operating Activities During the years ended December 31, 2024 and 2023, operating activities used approximately $7.3 million and $3.0 million of cash, respectively, resulting from our net loss of approximately $8.9 million and $7.8 million, respectively, offset by net non-cash charges of approximately $1.7 million and $2.8 million, respectively, partially offset by net cash provided by changes in our operating assets and liabilities of approximately $0 million and $2.0 million, respectively. Net cash provided by changes in our operating assets and liabilities for the years ended December 31, 2024 and 2023 consisted primarily of an increase (decrease) in accounts payable of approximately $ (1.1) million and $1.3 million, respectively, an increase (decrease) in accrued interest of approximately $0.6 million and $0.8 million, respectively, and a change in accrued payroll of approximately $0 million and $(0.3) million, respectively. Non-cash charges for the years ended December 31, 2024 and 2023 were primarily the result of the amortization of debt discount on our convertible debt of approximately $1.4 million and $2.6 million, respectively. Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to growth in our business, the advancement of our research programs and the timing of vendor invoicing and payments. Investing Activities During the years ended December 31, 2024 and 2023, net cash provided by investing activities was approximately $0 and $1,145, respectively. 63 Financing Activities For the years ended December 31, 2024 and 2023, net cash provided by financing activities was approximately $12.8 million and $2.9 million, respectively. Convertible Notes. We completed seven separate private financing transactions from July 2018 to April 2024 in which we issued convertible notes and raised total gross proceeds of $19,426,449 from accredited investors. All of the convertible notes were automatically converted into shares of our common stock at the closing of our initial public offering. Demand Notes. On March 6, 2024 and June 28, 2024, we issued demand promissory notes to a lender who was an investor in one of our prior convertible notes rounds in a principal amount of $100,000 and $150,000, respectively. The demand notes bear interest at a rate of 8% per annum and the principal plus all accrued interest is payable upon demand by such lender. If such notes are not paid on demand by us, interest will accrue at a rate of the lesser of 16% per annum and the highest rate of interest allowable under Maryland law. As of August 14, 2024, we repaid the demand notes in full. BlinkBio. On August 19, 2020, we issued a convertible note with a principal amount of $2,400,000 (the “BlinkBio Convertible Note”) to BlinkBio, Inc., which was a related party because our former Chairman, Colin Goddard, Ph.D., is the Chairman and Chief Executive Officer of BlinkBio, in exchange for the entry into the license agreement. On March 15, 2021, the principal and unpaid accrued interest of $100,000 of the BlinkBio Convertible Note converted into 1,302,082 shares of our Series A preferred stock and then distributed to BlinkBio stockholders. The BlinkBio Convertible Note had a conversion capitalization ceiling of $19.2 million, which limited the price a noteholder must pay in a convertible note-to-common stock conversion occurrence. On February 9, 2024, the 1,302,082 shares of our Series A preferred stock were converted into 651,041 shares of common stock (on a post-split basis). TEDCO Grant. In May 2021, we received the first of two tranches from TEDCO’s Rural & Underserved Business Recovery from Impact of Covid-19 (RUBRIC) Grant in the amount of $50,000. In October 2021, we received the second tranche of $50,000, which brought the total reimbursable grant amount to $100,000. We are obligated to report on and pay to TEDCO 3% of their quarterly revenues for a five-year period following the reward date. Income from grants and investments are not considered revenues. Royalties due to TEDCO are capped at 150% of the amount of the award, or $150,000. We have the option to eliminate the quarterly royalty obligation by making an advance payment prior to the end of the five-year period, in which case, we will receive a 10% reduction of the royalty cap percentage for each year prior to the expiration of the five-year reimbursement period that the grant is repaid in full. If we cease to meet eligibility requirements at any time, the reimbursement obligation will become due to TEDCO immediately; however, the discount for meeting the obligation will still apply. Private Placement On December 24, 2024, we entered into the Purchase Agreement with the selling stockholders, substantially all of whom were existing stockholders of the Company, pursuant to which we agreed to issue and sell to the selling stockholders the Units for aggregate gross proceeds of not less than $6 million and not more than $10 million. At two closings occurring on December 31, 2024 and January 14, 2025, we issued to the selling stockholders an aggregate of (i) 1,775,750 shares of Series A Preferred Stock and (ii) Series A Warrants initially exercisable into 1,775,750 shares of common stock. The gross proceeds from the closing of the Private Placement, before deducting transaction fees and other estimated Private Placement expenses, were approximately $7,103,000. The Purchase Agreement requires us to seek stockholder approval for any transactions contemplated by the Purchase Agreement and the related documents for which the rules of the NYSE American require stockholder approval (“Stockholder Approval”) and to hold a special meeting of stockholders for the purpose of obtaining Stockholder Approval not later than April 10, 2025. In the event Stockholder Approval is not obtained at the first meeting, we are required to call a meeting every four months seeking Stockholder Approval until Stockholder Approval is obtained. Brookline acted as exclusive placement agent for the issuance and sale of the securities in the Private Placement. Pursuant to the terms of the Placement Agency Agreement, we agreed to pay Brookline an aggregate cash fee (the “Cash Fee”) equal to (i) 7% of the gross proceeds received by the Company from the sale of the securities in the Private Placement to selling stockholders other than certain selling stockholders identified on a schedule thereto (“Reduced Fee Purchasers”) plus (ii) 3% of the gross proceeds received by the Company from the sale of the securities in the Private Placement to Reduced Fee Purchasers, plus expenses; provided that Ceros is entitled to 33.3% of the Cash Fee. 64 In addition, we agreed to pay Brookline or its designees a fee in the form of the Agent Warrants. The Agent Warrants are initially exercisable into a number of shares of common stock equal to (i) 7% of the number of shares of common stock initially issuable pursuant to the shares of Series A Preferred Stock issued to selling stockholders other than Reduced Fee Purchasers in the Private Placement plus (ii) 3% of the number of shares of common stock initially issuable pursuant to the shares of Series A Preferred Stock issued Reduced Fee Purchasers in the Private Placement; provided that Ceros is entitled to 33.3% of the Agent Warrants. The terms of the Agent Warrants are substantially similar to the terms of the Series A Warrants, except the Agent Warrants are not exercisable until Stockholder Approval is obtained. At two closings occurring on December 31, 2024 and January 14, 2025, (i) Brookline received an aggregate cash fee of $159,685 and 39,918 Agent Warrants, and (ii) Ceros received an aggregate cash fee of $79,723 and 19,930 Agent Warrants. Contractual Obligations and Other Commitments We enter into contracts in the normal course of business with our CDMOs, CROs and other third parties to support preclinical research studies and testing and other development activities. These contracts are generally cancellable by us. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. License Obligations and Research Services Advaxis. In November 2020, we entered into an amended and restated development, license and supply agreement with Advaxis, Inc. (now Ayala Pharmaceuticals, Inc.) (“Advaxis”), a clinical-stage biotechnology company focused on the development and commercialization of proprietary Lm ( Listeria monocytogenes )-LLO (Listeriolysin O) cancer immunotherapies. Pursuant to this agreement, Advaxis granted a license to us that allows us to utilize Advaxis’ ADXS-HER2 construct patents to develop and commercialize ADXS-HER2, our lead product candidate (OST-HER2). The agreement was subsequently amended in April 2021 to modify the payment amounts for Milestones 2 and 3 listed in the table below. Under the terms of the amended agreement, we are required to pay to Advaxis (i) a one-time, non-refundable payment of $1,550,000 (the “License Commencement Payment”) and (ii) certain amounts based on the achievement of the milestones described in the payment schedule below. As of December 31, 2024, we paid to Advaxis a total of $2,925,000, consisting of (i) the License Commencement Payment for Milestone 1 and (ii) $1,375,000 for Milestone 2. Payments towards the License Commencement Payment have been recorded as licensing expenses in our Statement of Operations and Comprehensive Loss for the year ended December 31, 2022. We expect to achieve Milestone 3 in 2025. The payment schedule for milestones and corresponding payment amounts is set forth below. Milestone Milestone Payment 1. OST has secured funding of at least $2,337,500, in the aggregate (paid) License commencement payment: $ 1,550,000 2. The earlier to occur of: (A) OST having secured at least $8,000,000, in the aggregate, or (B) completion of the first Clinical Trial (paid) $ 1,375,000 3. The earlier to occur of: (A) receipt of Regulatory Approval from the FDA for the First Indication of the first Licensed Product or (B) initiation of the first Registrational Trial of the first Licensed Product in the Field $ 5,000,000 4. Cumulative Net Sales of all Licensed Products in excess of $20,000,000 $ 1,500,000 5. Cumulative Net Sales of all Licensed Products in excess of $50,000,000 Cumulative Net Sales of all Licensed Products in ex $ 5,000,000 6. Cumulative Net Sales of all Licensed Products in excess of $100,000,000 $ 10,000,000 65 All milestone payments are non-creditable and non-refundable and are due and payable upon the achievement of the milestone, regardless of any failure by us to provide notice to Advaxis of such achievement. In addition to the payments upon achievement of the milestones listed in the above payment schedule, we are required to pay to Advaxis (i) a percentage in the high single digits to low double digits of (a) upfront sublicense fees or (b) clinical or regulatory milestone payment amounts, paid by a sublicensee to us in consideration of a sublicense grant to such sublicensee, and (ii) a quarterly royalty of a percentage in the high single digits to low double digits of net sales of our products containing the ADXS-HER2 constructs. On January 28, 2025, we entered into the HER2 Purchase Agreement with Ayala, pursuant to which we agreed, subject to the terms and conditions set forth therein, to acquire from Ayala the HER2 Assets. Pursuant to the terms of the HER2 Purchase Agreement, the change in milestone payments and royalty consideration owed as it relates to the OST-HER2 program will be follows: 1. Elimination of $3,500,000 payment owed to Ayala upon the first filing of a BLA approval for OST-HER2 with the FDA. 2. Elimination of a total of $16,500,000 in OST-HER2 related sales milestone payments owed to Ayala made up of the following payments: ● $1,500,000 owed upon reaching cumulative sales of $20,000,000; ● $5,000,000 owed upon reaching cumulative sales of $50,000,000; and ● $10,000,000 owed upon reaching cumulative sales of $100,000,000. 3. The reduction in total royalty consideration owed on OST-HER2 related sales from 10% of net sales owed to Ayala to 1.5% of net sales owed under the Penn License. The royalty consideration of 1.5% of net sales owed to the University of Pennsylvania going forward will apply to sales related to: ● OST-HER2 related sales; ● ADXS-503 related sales; ● ADXS-504 related sales; and ● Sales related to any new immunotherapy drug candidates created from the Lm platform during the term of the Penn License. BlinkBio. In August 2020, we entered into a licensing agreement with BlinkBio, Inc., a privately held developer of drug conjugate therapies designed to facilitate the treatment of cancer. Pursuant to this agreement, BlinkBio granted a license to us that allows us to utilize BlinkBio’s proprietary technology to develop, manufacture and commercialize certain of our products. BlinkBio granted us an exclusive license for tunable drug conjugates that are directed towards, binds to or modifies the folate receptor alpha and a co-exclusive license for tunable drug conjugates that are directed towards, binds to or modifies any target other than the folate receptor alpha, such as HER2. 66 Under the terms of the agreement, we are required to pay to BlinkBio (i) an upfront, non-refundable, non-creditable license fee of $300,000 (the “Up-Front Fee”), (ii) a royalty of 6% of net sales of our products that were made using BlinkBio’s proprietary technology, subject to potential reductions on such royalty, and (iii) certain amounts based on the achievement of the milestones described in the payment schedule below. As of December 31, 2024, we had paid the Up-Front Fee. The payment schedule for milestones and corresponding payment amounts is set forth below. Milestone Bearing Event Milestone Payment 1. License Fee to utilize proprietary technology (paid) Up-front fee + $2.4 million Convertible Note 2. Commencement of a toxicology study commented pursuant to Good Laboratory Practices (under 21 CFR Part 58), such that any resulting positive data would be admissible to applicable Regulatory Authorities to support an IND (commonly referred to as “GLP-Tox”) $ 375,000 3. Completion of a Phase I Clinical Trial $ 1,500,000 4. Completion of a Phase IIb Clinical Trial $ 2,500,000 5. Filing of an NDA, BLA or MAA registration (or the equivalent in any other territory around the world) $ 6,000,000 6. Regulatory Approval in the first of the United States, within the European Union or within the United Kingdom $ 12,000,000 We are required to make the above cash payments to BlinkBio within 30 days of the achievement of each milestone with respect to the first product to attain each such milestone, except that the first milestone only applies to our first product candidate. The aggregate amount of payments relating to milestones 2 through 6 payable thereunder cannot exceed $22,375,000. In connection with the license agreement, we also agreed to issue the BlinkBio Convertible Note. See “— Convertible Notes ” above for more information on the BlinkBio Convertible Note. George Clinical. In June 2020, we entered into a services agreement, as amended, with George Clinical, Inc., a clinical contract research organization. Pursuant to this agreement, we engaged George Clinical to use its clinical research services for our study entitled “An Open Label, Phase 2 Study of Maintenance Therapy with OST-HER2 after Resection of Recurrent Osteosarcoma.” Under the terms of the agreement, we are required to pay to George Clinical certain fees described in the fee schedule below. The total new budget under the agreement is approximately $2,423,928. For the years ended December 31, 2024 and 2023, we paid $714,943 and $444,421, respectively, to George Clinical. These payments have been recorded as research and development expenses in our Statement of Operations and Comprehensive Loss. The fee schedule for certain fees and corresponding payment amounts is set forth below. George Clinical Payment Schedule Payment Amount 1. Service Fee Advance (paid) $ 49,989 2. Service Fee Advance of $212,335 minus the amount already paid, plus PTC Fee Advance of $31,325 (paid) $ 193,671 3. Statistics Fees – 35% on Electronic Data Capture (EDC) Go Live Date $ 47,740 4. Statistics Fees – 35% on Development of SAP tables $ 47,740 5. Statistics Fees – 30% on Final Analysis $ 40,920 6. Service Fees – Remainder Due Split monthly over course of study 67 George Clinical tracks and invoices us for the number of task units completed and pass-through costs are invoiced each month in arrears based on actual costs without mark-up. The PTC Fee Advance will be used to offset the first few months of invoices payable. As of December 31, 2024, the balance due to George Clinical was $359,617. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Recent Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to Notes to the Financial Statements appearing elsewhere in this annual report. The JOBS Act The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards. We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering. Item 7A. Quantitative and Qualitative Disclosures about Market Risks. Not applicable. 68