Item 7. Management’s Discussion and Analysis
ITEM
7.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The
following discussion is intended to assist in the understanding and assessment of significant changes and trends related to our results
of operations and our financial condition together with our consolidated subsidiaries. This discussion and analysis should be read in
conjunction with the accompanying consolidated financial statements and notes thereto included in the Annual Report on Form 10-K. Historical
results and percentage relationships set forth in the statements of operations, including trends which might appear, are not necessarily
indicative of future operations.
Business
Strategy
The
Company is selectively continuing ongoing and planning to initiate new monotherapy and/or combination therapy ITU PV-10 clinical trials
of solid tumor cancer indications to generate more and/or new clinical data and appropriately utilizing clinical data from historical
ITU PV-10 trials, EAPs, and/or QOL study of these oncology indications. Our goals are to pursue drug approval pathways and/or co-development
relationships with commercial pharmaceutical companies for ITU PV-10 based on these indications and data.
The
Company is developing a systemically administered formulation of pharmaceutical-grade RBS for the treatment of cancer. Our goals, when
this work is complete, are to file an investigational new drug application (“IND”) with the U.S. Food and Drug Administration
(“FDA”), take an initial systemic drug candidate into an early-stage clinic trial for an initial oncology or hematology indication,
and/or pursue a co-development collaboration or out-license arrangement for this route of administration and disease area.
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The
Company is developing different formulations of pharmaceutical-grade RBS using different concentrations and different routes of administration
for other disease areas by endeavoring to show non-clinical activity and lack of toxicity. Our goals, when each task of this work is
completed, are to file an IND with the FDA, take an initial drug candidate into an early-stage clinic trial for an initial indication,
and/or pursue a co-development collaboration or out-license arrangement for the respective disease area and route of administration.
The
Company is endeavoring to fully elucidate the traits and characteristics of the RBS molecule using different academic medical centers
under sponsored research and testing agreements. Our goal is to gain and communicate additional knowledge of the RBS molecule’s
targeting, mechanism, signaling, immune response, and other features that are common to and/or different from each disease area and indication
under research.
The
Company is doing rigorous chemical analytical comparisons of non-pharmaceutical grades of rose bengal from specialty chemical suppliers
against the Company’s pharmaceutical-grade RBS. Our goal is to demonstrate the proprietary nature of the Company’s pharmaceutical-grade
RBS and that our pharmaceutical-grade RBS meets the necessary uniformity and purity requirements for commercial pharmaceutical use.
RBS
API and Drug Candidate Manufacturing
Our
pharmaceutical-grade RBS resulted from the Company’s innovation of a proprietary, patented, commercial-scale process to synthesize
and utilize the RBS molecule into a viable active pharmaceutical ingredient (“API”) for commercial pharmaceutical use; the
development of unique chemistry, manufacturing, and control (“CMC”) specifications for API and drug candidate manufacturing
processes; the production and multi-year stability testing of multiple API and drug candidate lots; the comprehensive documentation of
lot composition and reproducibility; and the review and acceptance of CMC data from these lots by seven different national drug regulatory
agencies for use in a prior, multi-country, multi-center Phase 3 randomized control trial of the Company.
The
Company’s API and drug candidate manufacturing processes employ Quality-by-Design principles, current good manufacturing practice
(“cGMP”) regulations, and the guidelines of The International Council for Harmonization (ICH) of Technical Requirements for
Pharmaceuticals for Human Use. These processes utilize controls that eliminate the formation of historical impurities and avoid the introduction
of potentially hazardous impurities that the Company believes may have been and could be present in uncontrolled and unreported amounts
in non-pharmaceutical grades of rose bengal.
The
Company’s processes of synthesizing the RBS molecule into pharmaceutical-grade RBS and manufacturing RBS API and ITU PV-10 drug
candidate, the processes’ CMC specifications, and the CMC data from the production of stability lots of API and drug candidate
have been reviewed by multiple national drug regulatory agencies prior to granting clinical trial authorizations for the Company to commence
a historical Phase 3 study of ITU PV-10 for the treatment of the Company’s former lead indication of locally advanced cutaneous
melanoma, including the U.S. FDA, Germany’s Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM), Australia’s
Therapeutic Goods Administration (TGA) under a clinical trial notification, France’s Agence Nationale de Sécurité
du Médicament et des Produits de Santé (ANSM), Italy’s Agenzia Italiana del Farmaco (AIFA), Mexico’s Comisión
Federal para la Protección contra Riesgos Sanitarios (COFEPRIS), and Argentina’s Administración Nacional de Medicamentos,
Alimentos y Tecnología Médica (ANMAT).
RBS
Non-proprietary Name
The
RBS name for the Company’s pharmaceutical-grade API was selected by and passed the review of the World Health Organization (“WHO”)
Expert Advisory Panel on the International Pharmacopoeia and Pharmaceutical Preparations after the Company applied for a non-proprietary
name in the third quarter of 2020 and reached the status of recommended International Non-proprietary Names (“INN”). INN
Recommended List 88, which includes the RBS name, was published with the No. 3 issue of the WHO Drug Information, Volume 36 in the fourth
quarter of 2022.
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Non-Pharmaceutical
Grades of Rose Bengal
Commercial
Grade
Commercial
grade rose bengal can be purchased from specialty chemical suppliers in the U.S. and in other parts of the world that manufacture it
under non-cGMP conditions. Commercial grade rose bengal appears to have reported purities that may vary between 80% and 95% and may contain
substantial amounts of unreported impurities and/or gross contaminants. Commercial grade rose bengal is typically used by researchers
unaffiliated with the Company for non-clinical study of the rose bengal molecule for potential biomedical therapeutic applications.
We
believe that commercial grade rose bengal is still manufactured using the original historical process, or a variant thereof, developed
by the molecule’s original Swiss creator Rudolph Gnehm in 1881. Some chemical manufacturers may, however, apply purification techniques
that the Company believes still result in commercial grade rose bengal possessing questionable purity and contaminants and substantial
lot-to-lot manufacturing variability.
Diagnostic
Grade
Diagnostic
grade rose bengal describes non-approved rose bengal that is used as an ingredient in historical or current ophthalmic solutions, strips,
and devices, has been historically or is presently compounded by pharmacists for ophthalmic use, and has been or is in other non-ophthalmic
diagnostic tests such as the rose bengal test for human brucellosis.
We
presume, but have not yet confirmed, that diagnostic grade rose bengal is derived from commercial grade rose bengal that may have undergone
a form of purification under cGMP regulations and/or may have been compounded by a pharmacist, academic medical researcher, or commercial
entity under cGMP regulations. Here too, the Company believes that purification may not sufficiently improve the amounts and accuracy
of diagnostic grade rose bengal purity and lot contents and may not adequately reduce or eliminate lot-to-lot manufacturing variability.
Chemical
Analytical Comparison
In
the first quarter of 2022, the Company began work with a U.S. contract development and manufacturing organization to assess rigorously
and methodically three lots of commercial grade rose bengal, one each from three different specialty chemical suppliers, and compare
these non-pharmaceutical grade materials with the Company’s pharmaceutical-grade RBS. This chemical analytical work was substantially
completed by the end of the third quarter of 2022. The Company believes that the preliminary results of these analyses indicate that
all three lots of commercial grade rose bengal had rose bengal purity that was drastically different from what was represented on their
respective certificates of analysis (“CofAs”), and that one of the three lots contained gross contaminants that were not
represented on its CofA.
Potential
Barriers to Entry
The
Company believes that the Company’s proprietary, patented, pharmaceutical-grade RBS possesses several competitive advantages over
non-pharmaceutical-grade rose bengal (i.e., commercial and diagnostic grades) that researchers, clinicians, and academic, business, and/or
governmental competitors have used, are using, and/or may attempt to use for potential biomedical applications. The Company believes
that non-pharmaceutical-grade rose bengal may suffer from the uncontrolled presence of substance-related impurities and/or gross contaminants,
substantial lot-to-lot manufacturing variability, inaccurately reported and/or misrepresented purity and contents, and the lack of reproducible,
consistent, and fulsome CMC specifications and documentation. The Company believes that historical and potentially hazardous impurities
and other manufacturing and handling issues facing non-pharmaceutical grade rose bengal may pose significant scientific, technological,
and economic challenges to overcome and validate for compliance with modern drug regulatory standards.
Components
of Operating Results
Grant
Revenue
Grant
revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been
met. Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as grant
revenue when qualifying costs are incurred.
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Research
and Development Expenses
Research and development expenses include costs incurred in connection with research activities and the clinical
development of our product candidates. These expenses consist primarily of:
●
costs
of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations, and consultants, among
others;
●
salaries
and related expenses for personnel, including stock-based compensation expense;
●
other
outside service costs including cost of contract manufacturing;
●
the
costs of supplies and reagents; and
●
occupancy
and depreciation charges.
We
expense research and development costs as incurred.
Research
and development activities are central to our business model. We expect our research and development expenses to increase in the future
as we advance our existing product candidates through clinical trials and pursue their regulatory approval. Undertaking clinical development
and pursuing regulatory approval are both costly and time-consuming activities. As a result of known and unknown uncertainties, we are
unable to determine the duration and completion costs of our research and development activities, or if, when, and to what extent we
will generate revenue from any subsequent commercialization and sale of our drug product candidates.
General
and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, and
stock-based compensation, for employees engaged in executive and finance functions. General and administrative expenses also include facility-related
costs not otherwise included in research and development expenses, director fees, insurance costs, and professional fees for legal, patent,
accounting, information technology, corporate communications, and other consulting services provided by third-party firms.
Comparison
of the Years Ended December 31, 2025 and 2024
Overview
Refer
to tables below for year-over-year comparison of revenues and expenses.
For the Years Ended
December 31,
2025
2024
Increase/(Decrease)
% Change
Grant Revenue
$ 336,108
$ 617,140
$ (281,032 )
-45.5 %
Operating Expenses:
Research and development
1,897,276
2,050,663
(153,387 )
-7.5 %
General and administrative
3,733,597
3,098,861
634,736
20.5 %
Total Operating Expenses
5,630,873
5,149,524
481,349
9.3 %
Total Operating Loss
(5,294,765 )
(4,532,384 )
(762,381 )
-16.8 %
Other Income/(Expense):
Research and development tax credit
-
9,320
(9,320 )
-100.0 %
Interest expense
(210,359 )
(239,073 )
28,714
12.0 %
Total Other Income (Expense), Net
(210,359 )
(229,753 )
19,394
8.4 %
Net Loss
(5,505,124 )
(4,762,137 )
(742,987 )
-15.6 %
Net loss attributable to noncontrolling interest
(74,273 )
(29,585 )
44,688
151.0 %
Net loss attributable to common stockholders
$ (5,430,851 )
$ (4,732,552 )
$ (698,299 )
-14.8 %
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Grant
Revenue
For
the years ended December 31, 2025 and 2024, there was $336,108 and $617,140 respectively, of grant revenue recognized related to qualifying
expenses that were incurred and included within research and development on the consolidated statements of operations. The decrease of
$281,032 or 45.5% was primarily attributable to the completion and full recognition of grant revenue under the awarded program in 2025.
Research
and Development
Research
and development expenses decreased by $153,387, or 7.5%, to $1,897,276 for the year ended December 31, 2025, from $2,050,663 for the
year ended December 31, 2024. The decrease was primarily attributable to lower clinical trial and research-related costs following
the closure of certain studies. The decrease was also driven by reduced depreciation expense as certain assets became fully
depreciated during the period. In addition, insurance expense declined as a result of a change in insurance carriers, and
facility-related costs, including rent and utilities, were lower compared to the prior year and write-off of old accounts payable.
These decreases were partially offset by higher stock-based compensation expense and increased payroll-related costs.
The
following table summarizes our research and development expenses incurred during the years ended December 31, 2025 and 2024:
For the Years Ended
December 31,
2025
2024
Increase/(Decrease)
% Change
Operating Expenses:
Research and development:
Clinical trial and research expenses
$ 1,318,339
$ 1,463,422
$ (145,083 )
-9.9 %
Depreciation/amortization
-
5,294
(5,294 )
-100.0 %
Insurance
179,358
225,754
(46,396 )
-20.6 %
Payroll and taxes
314,014
270,360
43,654
16.1 %
Stock-based compensation
54,108
51,536
2,572
5.0 %
Rent and utilities
31,457
34,297
(2,840 )
-8.3 %
Total research and development
$ 1,897,276
$ 2,050,663
$ (153,387 )
-7.5 %
General
and Administrative
General
and administrative expenses increased by $634,736, or 20.5%, to $3,733,597 for the year ended December 31, 2025, from $3,098,861 for
the year ended December 31, 2024. The increase in general and administrative expenses was primarily attributable to higher directors’
fees resulting from the reversal of previously waived director fees for Mr. Horowitz following his resignation on March 25, 2024, as
well as increased payroll-related expenses associated with the appointment of new officers in April 2024. General and administrative
expenses also increased due to a donation made to the University of Miami, higher professional fees primarily related to audit services,
increased travel and entertainment expenses associated with investor meetings, and additional costs related to the implementation of
NetSuite during 2025. These increases were partially offset by lower insurance costs resulting from a change in insurance carriers, reduced
legal fees related to patent matters, and lower stock-based compensation expense primarily due to equity awards granted to two independent
directors in 2024 that did not recur in 2025, with equity awards in 2025 limited to executives and employees.
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The
following table summarizes our general and administrative expenses incurred during the years ended December 31, 2025 and 2024:
For the Years Ended
December 31,
2025
2024
Increase/(Decrease)
% Change
Operating Expenses:
General and administrative:
Depreciation
$ 1,863
$ 1,863
$ 0
0.0 %
Directors’ fees
310,000
(121,250 )
431,250
355.7 %
Donations
50,000
-
50,000
100.0 %
Insurance
122,089
168,644
(46,555 )
-27.6 %
Legal and litigation
450,496
576,908
(126,412 )
-21.9 %
Other general and administrative cost
140,240
66,372
73,868
111.3 %
Payroll and taxes
870,187
644,479
225,708
35.0 %
Professional fees
570,600
512,500
58,100
11.3 %
Rent and utilities
18,455
19,314
(859 )
-4.4 %
Stock based compensation
1,183,438
1,229,250
(45,812 )
-3.7 %
Travel and entertainment
16,229
-
16,229
100.0 %
Foreign currency translation
-
791
(791 )
-100.0 %
Total general and administrative
$ 3,733,597
$ 3,098,861
$ 634,736
20.5 %
Other
Income/(Expense)
Research
and development tax credits in Australia were $0 for the year ended December 31, 2025, compared to $9,320 for the year ended December
31, 2024. The decrease was attributable to the absence of active clinical trials in Australia during the current period.
Interest
expense decreased by $28,714, or 12.0%, to $210,359 for the year ended December 31, 2025, from $239,073 for the year ended December 31,
2024. The decrease was primarily attributable to the conversion of the 2022 and 2024 Notes into shares of Series D-1 Preferred Stock
resulting in lower debt balances during the 2025 period.
The
following table summarizes our Other Income/(Expenses) incurred during the years ended December 31, 2025 and 2024:
For the Years Ended
December 31,
Increase/
2025
2024
(Decrease)
% Change
Other Income/Expense):
Research and development tax credit
$ -
$ 9,320
$ (9,320 )
-100.0 %
Interest expense
(210,359 )
(239,073 )
28,714
12.0 %
Total Other Income/(Expense), Net
$ (210,359 )
$ (229,753 )
$ 19,394
8.4 %
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Liquidity
and Going Concern
Our
cash was $251,291 at December 31, 2025, compared to $489,726 at December 31, 2024. Cash balances as of December 31, 2024 included
$182,284 of restricted cash associated with a grant received from the State of Tennessee. There was no restricted cash associated
with the grant received from the State of Tennessee as of December 31, 2025 due to the completion of the grant award program during
2025.
The
consolidated financial statements and notes thereto included in this Annual Report on Form 10-K have been prepared on a basis that contemplates
the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have continuing net
losses and negative cash flows from operating activities. In addition, we have an accumulated deficit of $262,853,811 as of December
31, 2025. These conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year
from the date that the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued. Our consolidated
financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary
should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to obtain additional
financing as may be required to fund current operations.
Management’s
plans include selling our equity securities and obtaining other financing to fund our capital requirements and on-going operations, including
the 2025 Financing discussed above; however, there can be no assurance we will be successful in these efforts. Significant funds will
be needed to continue and complete our ongoing and planned clinical trials.
As
of December 31, 2025, cash requirements for our current liabilities include approximately $3,925,681 for accounts payable and other
accrued expenses (including lease liabilities) and a $217,772 note payable related to our financing of our commercial insurance
policies and purchased software. Also, a related party convertible note payable in the amount of $100,000 plus approximately $59,444
of related interest is past due. Additional related and non-related convertible debt in the amount of $2,510,000 plus $107,824 of
accrued interest will mature one year from the date of the notes if not converted prior to maturity.
Access
to Capital
Management
plans to access capital resources through possible public or private equity offerings, including the 2025 Financing, exchange offers,
debt financings, corporate collaborations, or other means. If we are unable to raise sufficient capital through the 2025 Financing or
otherwise, we will not be able to pay our obligations as they become due.
The
primary business objective of management is to build the Company into a commercial-stage biotechnology company; however, we cannot assure
you that management will be successful in implementing the Company’s business plan of developing, licensing, and/or commercializing
our prescription drug candidates. Moreover, even if we are successful in improving our current cash flow position, we nonetheless plan
to seek additional funds to meet our current and long-term requirements in 2026 and beyond. We anticipate that these funds will otherwise
come from the proceeds of private placement transactions, including the 2025 Financing, exercise of outstanding stock options, or public
offerings of debt or equity securities. While we believe that we have a reasonable basis for our expectation that we will be able to
raise additional funds, we cannot assure you that we will be able to complete additional financing in a timely manner. In addition, any
such financing may result in significant dilution to stockholders.
During
the years ended December 31, 2025 and 2024, our sources and uses of cash were as follows:
Net
Cash Used in Operating Activities
We
experienced negative cash flows from operating activities for the years ended December 31, 2025 and 2024 in the amounts of
$3,325,991 and $3,284,091, respectively. The net cash used in operating activities for the year ended December 31, 2025 was
primarily due to cash used to fund a net loss of $5,505,123, adjusted for non-cash items in the aggregate amount of $1,287,537 mainly driven by stock-based compensation,
plus $891,595 of cash generated from changes in the levels of operating assets and liabilities. The net cash used in operating
activities for the year ended December 31, 2024 was primarily due to cash used to fund a net loss of $4,762,137, adjusted for
non-cash expenses in the aggregate amount of $1,335,335 mainly driven by stock-based compensation, plus $142,711 of cash generated from changes in the levels of operating
assets and liabilities.
Net
Cash Provided by Financing Activities
Net
cash provided by financing activities during the years ended December 31, 2025 and 2024 was $3,087,006 and $2,747,865, respectively.
During the year ended December 31, 2025, we received $2,510,000 proceeds from the issuance of convertible notes payable, $850,000 from
the issuance of common stock of our majority-owned subsidiary, VisiRose, and offset by $272,994 for the repayment of the short-term note payable.
During the year ended December 31, 2024, we received $2,853,000 proceeds from the issuance of convertible notes payable and received
$300,000 from the issuance of common stock of our majority-owned subsidiary, VisiRose. These cash proceeds were offset by the $305,135
repayment of a short-term note payable, and the $100,000 repayment of a 2021 convertible note payable.
Critical
Accounting Estimates
We
prepare our consolidated financial statements in accordance with U.S. GAAP, which require our management to make estimates that affect
the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well
as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between
these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our
own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations
for the future based on available information. We evaluate these estimates on an ongoing basis.
We
consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were
highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from
period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact
on our financial condition or results of operations. There are items within our consolidated financial statements that require estimation
but are not deemed critical, as defined above.
ITEM
7A.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
applicable.
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