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Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-31 · 212 added, 221 removed, 217 unchanged (67% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 plan of operations together with our accompanying financial statements and the related notes appearing

elsewhere in this Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis contains forward-looking

statements that involve risks, uncertainties, and assumptions.

Our actual results may differ materially from those discussed below.

that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the

section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

All amounts in this report are in U.S.

analysis of our financial condition and plan of operations together with our accompanying financial statements and the related notes

appearing elsewhere in this Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis contains

forward-looking statements that involve risks, uncertainties, and assumptions.

Our actual results may differ materially from those discussed

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those

discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

All amounts in this

report are in U.S.

dollars, unless otherwise noted.

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focus on kidney disease.

Founded in 2016, Unicycive was established to create a streamlined and efficient drug development platform capable

Founded in 2016, we were established to create a streamlined and efficient drug development platform capable

of accelerating the advancement of promising therapies from discovery to commercialization.

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and build our team, we intend to focus on identifying medical conditions within and outside of kidney disease.

Our business model is to

license technologies and drugs in order to pursue development, regulatory approval, and commercialization of those products in global

Our business model is

to license technologies and drugs in order to pursue development, regulatory approval, and commercialization of those products in global

Many biotechnology companies utilize similar strategies of in-licensing and then developing and commercializing drugs.

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us an advantage in identifying and bringing these assets into our company.

Our current development programs are focused on

two novel therapies:

Oxylanthanum Carbonate, a next-generation phosphate binder for the treatment of hyperphosphatemia in chronic kidney

disease patients on dialysis, and UNI-494, a novel drug candidate in development for the treatment of acute kidney injury.

Our current development programs are focused

on two novel therapies:

oxylanthanum carbonate, a next-generation phosphate binder for the treatment of hyperphosphatemia in chronic

kidney disease patients on dialysis, and UNI-494, a novel drug candidate in development for the treatment of acute kidney injury.

carbonate and UNI-494 were initially developed by and licensed to us from Spectrum Pharmaceuticals (“Spectrum”) and Sphaera

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With OLC, if approved, people on dialysis and their physicians may have a better option to control hyperphosphatemia.

AKI is a sudden episode of kidney failure or kidney

damage (within the first 90 days of injury).

AKI is a sudden episode of kidney failure or

kidney damage (within the first 90 days of injury).

After 90 days, the patient is considered to have progressed into CKD.

AKI affects more than

2 million U.S.

more than 2 million U.S.

patients and costs the healthcare system in excess of $9 billion per year.

More than 300,000 patients per year in the U.S.

More than 300,000 patients per year

die due to AKI.

Currently there are no FDA approved medicines to treat DGF and/or AKI.

Treatment options for AKI include continuous renal

replacement therapy, renal transplant, and dialysis.

In most cases the damage to the kidney is irreversible, and the patient needs to

have a renal transplant or be on dialysis for life.

Treatment options for AKI include

continuous renal replacement therapy, renal transplant, and dialysis.

In most cases the damage to the kidney is irreversible, and the

patient needs to have a renal transplant or be on dialysis for life.

Therefore, there is a high unmet medical need.

If approved, UNI-494 has the potential

to be a first-in-class drug for the treatment of AKI.

If approved, UNI-494

has the potential to be a first-in-class drug for the treatment of AKI.

Our business model is to license technologies

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$36.7 million and $26.6 million for the years ended December 31, 2024 and 2025 respectively.

As of December 31, 2024, we had an accumulated

deficit of $101.3 million.

We expect that our operating expenses will increase significantly as we advance our product candidates through

pre-clinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization;

discover, validate, and develop additional product candidates;

obtain, maintain, protect and enforce our intellectual property portfolio;

As of December 31, 2025, we had an

accumulated deficit of $127.8 million.

We expect that our operating expenses will increase significantly as we advance our product candidates

through pre-clinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization;

acquire, discover, validate, and develop additional product candidates;

obtain, maintain, protect and enforce our intellectual property

and hire additional personnel.

We have funded our operations primarily from the

sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief Executive

Officer and principal stockholder.

Our ability to generate

product revenue will depend on the successful development, regulatory approval and eventual commercialization of our current product candidates

and future product candidates.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance

our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through

other sources of financing.

We have funded our operations primarily from

the sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief

Executive Officer and principal stockholder.

Our ability to generate product revenue will

depend on the successful development, regulatory approval and eventual commercialization of our current product candidates and future

product candidates.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations

through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources

of financing.

Adequate funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or

enter into agreements to raise capital as and when needed, we may have to significantly delay, scale back or discontinue the development

and commercialization of our current product candidates and future product candidates.

If we fail to raise capital or enter into agreements

to raise capital as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization

of our current product candidates and future product candidates.

We plan to continue to use third-party service

providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development and to manufacture and

supply the materials to be used during the development and commercialization of our product candidates.

providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development and to manufacture

and supply the materials to be used during the development and commercialization of our product candidates.

Recent Developments

Extension of Nasdaq Compliance Period

On July 9, 2024, the Company received written

notice (the “ Notice ”) from the Nasdaq Stock Market, LLC (“ Nasdaq ”) indicating that the bid price

its common stock, for the last 30 consecutive business days, had closed below the minimum $1.00 per share and, as a result, the Company

was not in compliance with the $1.00 minimum bid price requirement for the continued listing on the Nasdaq Capital Market, as set forth

in Nasdaq Listing Rule 5550(a)(2).

In accordance with the Nasdaq Listing Rule 5810(c)(3)(A),

the Company had a period of 180 calendar days, or until January 6, 2025, to regain compliance with the minimum bid price requirement.

As of January 6, 2025, the Company has not regained

compliance with the minimum bid price requirement.

On January 7, 2025, Nasdaq notified the Company that it would have an additional 180

calendar days, or until July 7, 2025, to regain compliance.

Issuance of Common Stock Upon Conversion of

Series A-2 Prime Preferred

On February 18, 2025, the Company issued 1,400,000

shares (the “Shares”) of common stock, upon conversion of 686.00 shares of the Company’s Series A-2 Prime Preferred.

On October 28, 2025,we announced an update from our meeting with the

Food and Drug Administration (FDA) and timing of the resubmission of our New Drug Application (NDA) for oxylanthanum carbonate (OLC)

following receipt of a CRL on June 30, 2025.

The Type A FDA meeting was held to discuss the resolution of the single deficiency identified

in the CRL related to the compliance status of a third-party manufacturing vendor.

No other concerns have been identified to us, including

pre-clinical, clinical, or safety data submitted as part of the NDA.

Following receipt of the official meeting minutes from the Type A

meeting and engaging in discussions with our third-party manufacturing vendor, we resubmitted our NDA to the FDA in December 2025.

January 2026, the FDA accepted the resubmission of the NDA for OLC, deeming the resubmission to be a Class II complete response which

has a six-month review period from the date of resubmission, and set a PDUFA target action date of June 29, 2026

Subsequent to December 31, 2025, pursuant to a sales agreement dated November 13, 2024 between the Company and Guggenheim

Securities, LLC, as amended by Amendment No.

1 thereto dated November 14, 2025, the Company sold 3,123,537 shares of common stock at

an average price of $6.51 per share, resulting in net proceeds to the Company of approximately $19.6 million.

Components of Results of Operations

We recognize revenue from product sales or services

rendered when control of the promised goods is transferred to a counterparty in an amount that reflects the consideration to which we

expect to be entitled in exchange for those goods and services.

To achieve this core principle, we apply the following five steps:

the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction

price to performance obligations in the contract and recognize revenues when or as we satisfy a performance obligation.

We may earn licensing

revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

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expenses consist of expenses incurred in connection with the development of our product candidates.

These expenses include fees paid to

third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product

acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs

and stock-based compensation expenses for our research and product development employees and allocated overheads, including information

These expenses include fees paid

to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies,

product acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit

costs and stock-based compensation expenses for our research and product development employees and allocated overheads, including information

technology costs and utilities and expenses for the issuance of shares pursuant to the anti-dilution clause in the purchase of in process

research and development technology.

We expense both internal and external research and development expenses as they are incurred.

We expense both internal and external research and development expenses as are incurred.

We do not allocate our costs by product candidate,

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General and Administrative Expenses

General and administrative expenses consist principally

of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for

legal, consulting, accounting and tax services, including information technology costs and utilities, and other general operating expenses

not otherwise classified as research and development expenses.

General and administrative

expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation

expenses, professional fees for legal (including patent costs), consulting, accounting and tax services, including information technology

costs and utilities, and other general corporate overhead expenses.

We anticipate that our general and administrative

expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services

costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director and

officer insurance premiums associated with being a public company.

expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting

services costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director

and officer insurance premiums associated with being a public company.

Other Expenses

Other expenses consist of the change in fair value

of our warrant liability, interest income and interest expense.

Other expenses consist of the change in fair

value of our warrant liability, interest income and interest expense.

Results of Operations

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2024 and 2025 (in thousands)

Licensing revenues:

Operating expenses:

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Total other income (expenses)

Licensing Revenues

Licensing revenues decreased approximately $0.7

million, or 100%, from the year December 30, 2023 due to an upfront payment of approximately $0.7 million associated with a licensing

agreement entered into with Lotus International Pte Ltd.

in February 2023.

There was no comparable revenue earned in the current period.

We may earn additional licensing revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

Research and development expenses increased by

approximately $7.1 million, or 55% from $12.9 million for the year ended December 31, 2023 to $20.0 million for the year ended December

The increase in research and development expenses was primarily due to an increase in drug development costs of $6.1 million.

There was $750,000 increase in labor costs.

Non-cash stock compensation increased $211,000.

Research and development

expenses decreased by approximately $10.9 million, or 54%, from approximately $20.0 million for the year ended December 31, 2024 to approximately

$9.1 million for the year ended December 31, 2025.

This decrease was primarily driven by a reduction in drug development costs of $8.0

million and a decline in clinical costs of $3.4 million.

These decreases were partially offset by increased costs, including $0.2 million

in consulting and professional services and $0.2 million in labor.

Additionally, stock-based compensation rose by $0.1 million.

General and Administrative Expenses

General and administrative expenses increased

by approximately $3.5 million, or 42%, from $8.5 million for the year ended December 31, 2023 to $12.1 million for the year ended December 31,

2024 primarily due to an increase of $1.5 million in consulting and professional services costs.

Labor costs increased $319,000 due to

hiring of new employees, and rent, travel, supplies and other costs increased $2.7 million.

Non-cash stock compensation costs increased

The increases were partially offset by a decrease in insurance expense for directors and officers of $168,000.

by $8.3 million, or 69%, from approximately $12.1 million for the year ended December 31, 2024 to approximately $20.4 million for the

year ended December 31, 2025.

This increase was primarily driven by a $2.4 million rise in marketing expenses associated with the commercial

launch, $3.5 million in higher consulting and professional service costs, and $1.8 million in labor and related expenses.

Additionally,

rent, travel, supplies, and other costs increased by $0.5 million, while stock-based compensation grew by $0.1 million.

Other Income (Expenses)

Other income (expenses) decreased by approximately

$5.2 million, or 53% from $9.8 million for the year ended December 31, 2023 to approximately $4.6 million for the year ended December

The increase was due primarily to the change in fair value of our warrant liability.

We earned interest income of $1.3 million

on our cash balance during the year that was partially offset by $71,000 in interest expense.

Other income (expenses)

improved by $7.6 million, or 164%, from an expense of $4.6 million for the year ended December 31, 2024, to income of $3.0 million for

the year ended December 31, 2025.

This was primarily driven by a favorable change in the fair value of our warrant liability, partially

offset by a decrease of earned interest income during the year as a result of lower average cash balances available for interest-bearing

Liquidity and Capital Resources

Sources of Liquidity

Since our formation through June 2021, we have

funded our operations with the sale of common stock, convertible notes and from a loan from our Chief Executive Officer and principal

In connection with our initial public offering

(“IPO”), on July 13, 2021, we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July

15, 2021 we received approximately $22.3 million in net proceeds after deducting the underwriting discounts, commissions and offering

We have used the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the

FDA, and for general and corporate purposes, including hiring additional employees and conducting market research and other commercial

Since our formation through December 31,

2020, we have funded our operations with the sale of common and preferred stock, convertible notes and from a loan from our Chief Executive

Officer and principal stockholder.

As a result of our initial public offering (“IPO”),

on July 13, 2021 we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021 we received

approximately $22.3 million in net proceeds after deducting the underwriting discounts, commissions and offering expenses.

the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA, and for general and

corporate purposes, including hiring additional management and conducting market research and other commercial planning.

Future revenue streams may consist of collaboration

or licensing revenue as well as product sales.

We have generated approximately $1.6 million in licensing revenue to date.

On March 3, 2023, we entered into a securities

purchase agreement with certain healthcare-focused institutional investors that may provide up to $130.0 million in gross proceeds through

a private placement and that includes initial upfront funding of $30.0 million.

Proceeds from the offering will be used to support our

NDA submission with the FDA for approval of Oxylanthanum Carbonate for the treatment of hyperphosphatemia in the U.S.

and, if approved,

for the commercial launch of Oxylanthanum Carbonate in the U.S.

On March 13, 2024, the Company entered into a

securities purchase agreement with certain accredited investors pursuant to which we agreed to issue and sell, in a private placement,

50,000 shares of our Series B Convertible Preferred Stock, par value $0.001 per share at a purchase price of $1,000 per share with an

initial conversion price of $1.00 per share, subject to adjustment for an aggregate purchase price of $50 million.

In addition, on November 13, 2024, we entered

into a Sales Agreement, with Guggenheim Securities, LLC pursuant to which, we may offer and sell shares of our common stock having an

aggregate offering price of up to $50 million, subject to certain limitations and in accordance with the terms of the Sales Agreement,

from time to time through or to Guggenheim Securities, acting as sales agent or principal.

From November 13, 2024 through December 31,

2024 we have sold 977,407 shares of common stock at an average price of $0.72 per share resulting in aggregate gross proceeds of approximately

$0.7 million, for which it paid Guggenheim approximately $21,000 in commissions, resulting in net proceeds to the Company of approximately

$0.7 million.

a private placement and that included initial upfront funding of $30.0 million.

On March 13, 2024, we entered into a securities

purchase agreement with certain accredited investors to provide $50 million in gross proceeds through a private placement.

the securities purchase agreement, we issued institutional purchasers $50.0 million in shares of Series B Convertible Preferred Stock.

We received $46.2 million in net proceeds.

On November 13, 2024, we entered into a sales agreement, with Guggenheim

Securities, LLC pursuant to which, we may offer and sell shares of common stock having an aggregate offering price of up to $50.0 million,

subject to certain limitations and in accordance with the terms of the sales agreement, from time to time through or to Guggenheim Securities,

LLC acting as sales agent or principal.

On November 14, 2025, the Company entered into an Amendment No.

1 to sales agreement with Guggenheim

Securities LLC to increase the number of shares that may be sold under the sales agreement to $100,000,000 (collectively with the November

13, 2024 sales agreement, the “Sales Agreement”).

During the period from October 1, 2025 through December 31, 2025, the Company

sold 1,263,882 shares of common stock pursuant to the Sales Agreement, at an average price of $5.77 per share and paid $0.2 million in

commissions, resulting in net proceeds to the Company of approximately $6.6 million.

During the year ended December 31, 2025, the Company

sold 9,310,618 shares of common stock pursuant to the Sales Agreement, at an average price of $5.40 per share and paid $1.4 million in

commissions, resulting in net proceeds to the Company of approximately $45.2 million.

Future Funding Requirements

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As of December 31, 2025, we had an accumulated deficit of $127.8 million.

We anticipate that our current cash will be sufficient to fund our

operations for more than 12 months from the date of this report.

We expect to continue incurring losses in the

future and will be required to raise additional capital in the future to complete planned clinical trials, pursue product development

initiatives and penetrate markets for the sale of our products.

Management believes that we will continue to have access to capital resources

through possible equity offerings, debt financing, corporate collaborations, or other means.

There can be no assurance that we will be

able to obtain additional financing on terms acceptable to us, on a timely basis or at all.

If we are unable to secure additional capital,

it may be required to curtail any clinical trials and development of new or existing products and take additional measures to reduce

expenses in order to conserve cash in amounts sufficient to sustain operations and meet our obligations.

Based on our currently anticipated

level of expenditures, and after receiving the proceeds from the private placement in March 2024 and at-the-market public offering in

November 2024, we believe that we have sufficient resources such that there is not substantial doubt about the ability to continue operations

for at least one year after the date that these financial statements are available to be issued.

future and will be required to raise additional capital in the future to complete our clinical trials, pursue product development initiatives

and penetrate markets for the sale of our products.

We believe that we will continue to have access to capital resources through possible

equity offerings, debt financings, corporate collaborations or other means.

There can be no assurance that we will be able to obtain

additional financing on terms acceptable to us, on a timely basis or at all.

If we are unable to secure additional capital, we may be

required to curtail any clinical trials and development of new or existing products and take additional measures to reduce expenses in

order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.

Based on our current level of expenditures,

we believe that we have sufficient resources such that there is not substantial doubt about our ability to continue operations for at

least one year after the date that these financial statements are available to be issued.

We anticipate that we will need to raise substantial

additional capital, the requirements for which will depend on many factors, including:

the scope, timing, rate of progress and costs of our drug discovery efforts, pre-clinical

development activities, laboratory testing and clinical trials for our current product candidates and future product candidates;

the number and scope of clinical programs we decide to pursue;

the cost, timing, and outcome of preparing for and undergoing regulatory review of our current product

candidates and future product candidates;

the scope and costs of development and commercial manufacturing activities;

the cost and timing associated with commercializing our current product candidates and future product

candidates, if they receive marketing approval;

the extent to which we acquire or in-license other product candidates and technologies;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our

intellectual property rights and defending intellectual property-related claims;

our ability to establish and maintain collaborations on favorable terms, if at all;

our efforts to enhance operational systems and our ability to attract, hire and retain qualified

personnel, including personnel to support the development of our current product candidates and future product candidates and, ultimately,

the sale of our products, following FDA approval;

the impact, if any, of the coronavirus pandemic on our business operations;

the scope, timing, rate

of progress and costs of our drug discovery efforts, pre-clinical development activities, laboratory testing and clinical trials

for our current product candidates and future product candidates;

the number and scope of

clinical programs we decide to pursue;

the cost, timing and outcome

of preparing for and undergoing regulatory review of our current product candidates and future product candidates;

the scope and costs of

development and commercial manufacturing activities;

the cost and timing associated

with commercializing our current product candidates and future product candidates, if they receive marketing approval;

the extent to which we

acquire or in-license other product candidates and technologies;

the costs of preparing,

filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual

property-related claims;

our ability to establish

and maintain collaborations on favorable terms, if at all;

our efforts to enhance

operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development

of our current product candidates and future product candidates and, ultimately, the sale of our products, following FDA approval;

the impact, if any, of

the coronavirus pandemic on our business operations;

our ability to access capital;

our implementation of operational, financial and management systems;

the costs associated with being a public company.

our implementation of operational,

financial and management systems;

the costs associated with

being a public company.

A change in the outcome of any of these or other

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If we are unable to raise additional funds when needed, we may be required to delay, reduce,

or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others’

rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that

limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders,

or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others rights

to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit

our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders,

which could materially affect our business and financial condition.

Related Party Payable

The Company received advances from the stockholder

of $210,000 during February 2023.

The Company repaid amounts owed to the stockholder of $210,000 plus accrued interest during March 2023.

Summary of Cash Flows

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Financing activities

Net (decrease) increase in cash

Net increase in cash and cash equivalents

Cash Flows from Operating Activities

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Net cash used in investing activities was $12.1

for the year ended December 31, 2024 and was due to the purchase of furniture and fixtures for our corporate office.

million for the year ended December 31, 2025 and was due primarily to the purchase of marketable securities.

Net cash used in investing activities was $72,000

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Cash Flows from Financing Activities

Net cash provided by financing activities was

$45.1 million for the year ended December 31, 2024 and was due primarily to the private placement financing agreement we closed on March

13, 2024 and the public offering sales agreement we closed on November 13, 2024 , partially offset by dividends paid to preferred stockholders.

Net cash provided by financing activities was

$27.5 million for the year ended December 31, 2023 and was primarily due to the private placement financing agreement we closed

on March 3, 2023.

Critical Accounting Policies, Significant

Judgments and Use of Estimates

Net cash provided by

financing activities was $46.5 million during the year ended December 31, 2025, due primarily to sales made under the sales

agreement with Guggenheim Securities LLC dated November 13, 2024 as amended by Amendment No.

1 thereto dated November 14, 2025.

Net cash provided by

financing activities was $45.1 million during the year ended December 31, 2024 due primarily to the private placement financing

agreement we signed on March 13, 2024 and sales made under the sales agreement with Guggenheim Securities LLC dated November 13, 2024,

partially offset by dividends paid to preferred stockholders.

Off-Balance Sheet Arrangements

As of December 31, 2025 and through the

filing date of this Annual Report on Form 10-K, we do not have any off-balance sheet arrangements, as defined in the rules and regulations

Critical Accounting Policies, Significant Judgments and Use of

Our financial statements have been prepared in

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We consider our critical accounting

policies and estimates to be related to revenue, research and development, stock-based compensation, and warrant liabilities.

value of warrants contingently issued as part of our March 2023 private placement financing represents a material addition to our critical

accounting policies and estimates.

There have been no other material changes to our critical accounting policies and estimates during

the year ended December 31, 2024 from those used for the year ended December 31, 2023.

policies and estimates to be related to debt and equity classification, warrant liabilities, research and development,

and stock-based compensation.

There have been no other material changes to our critical accounting policies and estimates during the

year ended December 31, 2025 from those used for the year ended December 31, 2024.

The below policies represent our critical accounting

Revenue Recognition

We apply ASC 606, Revenue from Contracts with

Customers, for our revenue recognition guidance.

This includes the development of new policies based on the five-step model provided

in the revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures.

We recognize revenue

from product sales or services rendered when control of the promised goods is transferred to a counterparty in an amount that reflects

the consideration to which we expect to be entitled in exchange for those goods and services.

To achieve this core principle, we apply

the following five steps:

identify the contract with the client, identify the performance obligations in the contract, determine the

transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as we satisfy

a performance obligation.

Debt and Equity Classification

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We account for these warrants as liabilities

(in accordance with ASC 480) on the balance sheets as a result of certain redemption clauses that are not within the control of the Company.

The warrant liabilities are initially measured at fair value and are remeasured at fair value each reporting period.

Changes in the fair

value of the warrant liabilities are recognized in earnings during each period.

The warrant liabilities are measured using Level 3 fair

value inputs.

See Note 11 for a description of warrant liabilities and the related valuations.

(in accordance with ASC 480, Distinguishing Liabilities from Equity ) on the balance sheets as a result of certain redemption clauses

that are not within the control of the Company.

The warrant liabilities are initially measured at fair value, resulting in an implied

discount on the related preferred stock financing arrangement (recognized as a partial offset to the carrying value of the Series A-1

Preferred Stock), and are remeasured at fair value each reporting period.

Changes in the fair value of the warrant liabilities are recognized

in earnings during each period.

The warrant liabilities are measured using Level 3 fair value inputs.

S ee Note 10 to our audited financial

statements included elsewhere in this Annual Report on Form 10-K for a description of warrant liabilities and the related valuations

Research and Development

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and product development employees.

We expense both internal and external research and development expenses as they are incurred.

We expense both internal and external research and

development expenses as they are incurred.

Stock-Based Compensation

We account for stock-based compensation for all

share-based payments made to employees and non-employees by estimating the fair value on the date of grant and recognizing compensation

expense over the requisite service period on a straight-line basis.

We recognize forfeitures related to stock-based compensation as they

We account for stock-based

compensation for all share-based payments made to employees and non-employees by estimating the fair value on the date of grant and recognizing

compensation expense over the requisite service period on a straight-line basis.

We recognize forfeitures related to stock-based compensation

as they occur.

We estimate the fair value of stock options using the Black-Scholes option-pricing model.

The Black-Scholes model requires the

input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term, and the risk-free

interest rate.

The Black-Scholes model requires

the input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term, risk-free interest

rate, and the public market closing price of the Company’s underlying common stock on the date of grant .

JOBS Act Accounting Election

On April 5, 2012, the JOBS Act was enacted.

107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided

in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period

provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an “emerging

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Recent Accounting Pronouncements

See Note 2 to our audited financial statements

found elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our financial

See the section titled “Summary

of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our audited financial statements included

elsewhere in this Annual Report on Form 10-K for additional information.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis