What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-18 compared with 2024-03-21 · 429 added, 604 removed, 789 unchanged (57% of the section changed)

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Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31, 2024 and 202 3

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023

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Report of Independent Registered Public Accounting

To the Shareholders and Board of Directors

To the Stockholders and Board of Directors of

Xenetic Biosciences, Inc.

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(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements

of comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and

the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally

accepted in the United States of America.

of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related

notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in

all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its

cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted

in the United States of America.

Basis for Opinion

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Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to

the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

Going Concern Assessment

Description of the Matter

We identified the Company’s assessment of

its ability to continue as a going concern and related disclosures as a critical audit matter.

The Company prepared future cash flow forecasts

which involves judgement and estimation of key variables such as future expected revenue royalty proceeds and costs associated with progressing

DNase technology.

Auditing the Company’s going concern assessment described above involves a high degree of auditor judgment to

assess the reasonableness of the cash flow forecasts and other assumptions used in the Company’s going concern analysis.

As described in Note 1 to the consolidated financial

statements, management believes that the Company has sufficient funding available to it at the date of approval of these financial statements

and that it will be able to continue as a going concern for a period of at least twelve months from the date of these financial statements.

In making this assessment, management has considered the Company’s existing resources.

How We Addressed the Matter in Our Audit

We evaluated the assumptions used in the model

to estimate the future cash flows for the next twelve months from the date of our opinion by comparing assumptions used by management

against historical performance, budgets, and the Company’s strategic plans.

We also assessed the key assumptions including those

pertaining to revenue royalty proceeds and the timing of significant payments in the cash flow forecast by comparing them to historical

data and the underlying agreements.

We performed sensitivity analyses on key assumptions such as future expected costs to determine their

impact on the projections of future cash flows.

Further, we assessed the Company’s disclosures with respect to its going concern

Revenue Recognition over Royalty Revenue

Description of the Matter

As described in Note 3 to the consolidated financial

statements, the Company’s sources of revenue include royalty proceeds from a royalty agreement with a third-party based on potential

net sales of approved commercial pharmaceutical products which is based on estimated variable consideration.

The Company must use significant

judgment to determine when the reported sales are reliably measurable, the Company has no remaining performance obligations, and all other

revenue recognition criteria are met.

The Company’s policy is to recognize expected royalties as revenue when they are reliably

measurable, which is upon receipt of reports from the third-party.

The Company typically receives these reports in the quarter subsequent

to the actual sublicensee sales.

The principal consideration for our determination

that performing procedures relating to revenue recognition, specifically related to management’s estimate of the potential net sales

as expected variable consideration, is a critical audit matter that requires significant judgment by management in determining the best

estimate of the amount of expected variable consideration.

This in turn led to a high degree of auditor judgment, subjectivity and effort

in performing procedures and evaluating audit evidence related to management’s identification of expected variable consideration

within the royalty contract with the third-party and the judgments made by management used to estimate the best estimate of variable consideration.

How We Addressed the Matter in Our Audit

Addressing the matter involved performing procedures

and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures

included evaluating management’s best estimate of the potential net sales by the third-party to determine variable consideration.

These procedures also included, among others, (i) evaluating and testing the reasonableness of the significant assumptions used by management,

(ii) consideration of both historical or current trends, noting a relative lack of historical experience available in relation to expected

amounts and (iii) obtaining and vouching evidence including reports received from the third-party.

Critical audit matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

We have served as the Company’s auditor since 2015.

Boston, Massachusetts

March 18, 2025

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1,804,394 shares issued and outstanding as of December 31, 2024 and December 31, 2023

Series A, $ 0.001 par value:

0 and 970,000 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.001 par value;

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XENETIC BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

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Other income (expense):

Other income (expense)

Other (expense) income

Interest income, net

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Preferred Stock

Accumulated Deficit

Comprehensive

Treasury Stock

Stockholders'

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$ ( 5,281,180 )

Issuance of common stock in connection with purchase of in-process research

and development

Exercise of purchase warrants

Issuance of common stock to adjust for reverse split rounding

Conversion of Series A preferred stock to shares of common stock

Share-based expense

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$ ( 5,281,180 )

Issuance of common stock to adjust for reverse split rounding

Conversion of Series A preferred stock to shares of common stock

Issuance of common stock in connection with restricted stock units

Exercise of purchase warrants

Share-based expense

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Adjustments to reconcile net loss to net cash used in operating activities:

Acquired in-process research and development

Amortization of right of use asset

Share-based expense

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( 4,114,219 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash paid to acquire in-process research and development

Net cash used in investing activities

Net change in cash

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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of common stock to acquire in-process research and development

Issuance of common stock from cashless exercise of purchase warrants

Issuance of common stock to adjust for Reverse Stock Split

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or the “Company”), incorporated in the state of Nevada and based in Framingham, Massachusetts, is a biopharmaceutical company

focused on advancing innovative immune-oncology technologies addressing hard to treat cancers.

focused on advancing innovative immune-oncology technologies addressing difficult to treat cancers.

The Company’s proprietary Deoxyribonuclease

(“DNase”) platform is designed to improve outcomes of existing treatments, including immunotherapies, by targeting neutrophil

extracellular traps (“NETs”), which have been implicated in cancer progression and resistance to cancer treatments.

is currently focused on advancing its systemic DNase program into the clinic as an adjunctive therapy for pancreatic carcinoma and locally

advanced or metastatic solid tumors.

Additionally, Xenetic has partnered with biotechnology and pharmaceutical companies to develop its

proprietary drug delivery platform, PolyXen ® , and receives royalty payments under an exclusive license arrangement in the

field of blood coagulation disorders.

(“DNase”) technology is designed to improve outcomes of existing treatments, including immunotherapies, by targeting neutrophil

extracellular traps (“NETs”), which are involved in cancer progression.

Xenetic is currently focused on advancing its systemic

DNase program into the clinic as an adjunctive therapy for pancreatic carcinoma and locally advanced or metastatic solid tumors.

The Company, directly or indirectly, through its

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SymbioTec, GmbH (“SymbioTec”), own various United States (“U.S.”) federal trademark registrations and applications

along with unregistered trademarks and service marks, including but not limited to XCART, OncoHist™, PolyXen, ErepoXen™, and

ImuXen™, which are used throughout this Annual Report.

All other company and product names may be trademarks of the respective companies

with which they are associated.

along with unregistered trademarks and service marks, including but not limited to XCART, OncoHist™, PolyXen ® , ErepoXen™,

and ImuXen™, which are used throughout this Annual Report.

All other company and product names may be trademarks of the respective

companies with which they are associated.

Going Concern and Management’s Plan

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and expects to continue to incur operating losses in the near-term.

These factors raise substantial doubt about its ability to continue

as a going concern.

The Company believes that it has access to capital resources through possible public or private equity offerings,

debt financings, corporate collaborations, related party funding, or other means to continue as a going concern.

The Company believes

that its existing resources will be adequate to fund the Company’s operations for a period of at least twelve months from the date

of the issuance of these financial statements.

However, the Company anticipates it may need additional capital in the long-term to pursue

its business initiatives.

The terms, timing and extent of any future financing will depend upon several factors, including the achievement

of progress in its product development programs, its ability to identify and enter into licensing or other strategic arrangements, its

continued listing on the Nasdaq Stock Market (“Nasdaq”), and factors related to financial, economic, geo-political, industry

and market conditions, many of which are beyond its control.

The capital markets for the biotech industry can be highly volatile, which

make the terms, timing and extent of any future financing uncertain.

On June 3, 2022, the Company received a written

notification (the “Notice”) from the Listing Qualifications Department of Nasdaq notifying the Company that the closing bid

price for its common stock had been below $1.00 for 30 consecutive business days and that the Company therefore was not in compliance

with the minimum bid price requirement for continued inclusion on Nasdaq under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).

The Notice had no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market.

On May 15, 2023, the

Company effected a reduction, on a 1-for-10 basis, in its authorized common stock, par value $ 0.001 , along with a corresponding and proportional

decrease in the number of shares issued and outstanding (the “Reverse Stock Split”).

On May 30, 2023, the Company received

a letter from Nasdaq notifying the Company that it has regained compliance with the Bid Price Requirement as a result of the closing bid

price of the Company’s common stock being at $ 1.00 per share or greater for the 10 consecutive business days from May 15, 2023 through

May 26, 2023 and that this matter is closed.

The Company believes that its existing resources will be adequate

to fund the Company’s operations for a period of at least twelve months from the date of the issuance of these financial statements.

However, the Company anticipates it will need additional capital in the long-term to pursue its business initiatives.

While the Company

believes that it has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations,

related party funding, or other means to continue as a going concern, the terms, timing and extent of any future financing will depend

upon several factors, including the achievement of progress in its product development programs, its ability to identify and enter into

licensing or other strategic arrangements, its continued listing on the Nasdaq Stock Market (“Nasdaq”), and factors related

to financial, economic, geo-political, industry and market conditions, many of which are beyond its control.

The capital markets for the

biotech industry can be highly volatile, which make the terms, timing and extent of any future financing uncertain.

Risks and Uncertainties

Global Conflicts on Operations

Impact of Global

Conflicts on Operations

The short and long-term

implications of Russia’s invasion of Ukraine and conflict in the Middle East are difficult to predict at this time.

The imposition

of current and future sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our

business, financial condition, and results of operations.

implications of the conflicts in the Ukraine and Middle East are difficult to predict at this time.

The imposition of current and future

sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business, financial

condition, and results of operations.

Summary of Significant Accounting Policies

Preparation of Financial Statements

On May 15, 2023, the Company effected the Reverse

On the effective date of the Reverse Stock Split, (i) every 10 shares of common stock were reduced to one share of common

stock, with any fractional amounts rounded up to one share;

(ii) the number of shares of common stock into which each outstanding warrant,

restricted stock unit, or option to purchase common stock was convertible into was proportionately reduced on the same basis as the common

(iii) the exercise price of each outstanding warrant or option to purchase common stock was proportionately increased on a 1-to-10

and (iv) the number of shares of common stock into which each share of preferred stock was convertible into was proportionately

reduced on the same basis as the common stock.

Unless otherwise indicated, all of the share numbers, share prices, and exercise prices

have been adjusted in this Annual Report, on a retroactive basis, to reflect this 1-for-10 Reverse Stock Split.

On May 15, 2023, the Company effected a reduction,

on a 1-for-10 basis , in its authorized common stock, par value $0.001, along with a corresponding and proportional decrease in the number

of shares issued and outstanding (the “Reverse Stock Split”).

On the effective date of the Reverse Stock Split, (i) every

10 shares of common stock were reduced to one share of common stock, with any fractional amounts rounded up to one share;

(ii) the number

of shares of common stock into which each outstanding warrant, restricted stock unit (“RSU”), or option to purchase common

stock was convertible into was proportionately reduced on the same basis as the common stock;

(iii) the exercise price of each outstanding

warrant or option to purchase common stock was proportionately increased on a 1-to-10 basis;

and (iv) the number of shares of common stock

into which each share of preferred stock was convertible into was proportionately reduced on the same basis as the common stock.

otherwise indicated, all of the share numbers, share prices, and exercise prices have been adjusted in this Annual Report, on a retroactive

basis, to reflect this 1-for-10 Reverse Stock Split.

Principles of Consolidation

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and SymbioTec.

All material intercompany balances and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified

in this Annual Report to conform to the presentation for the current period.

Certain of the Company’s subsidiaries require guarantees of support from Xenetic.

While all intercompany balances

and transactions have been eliminated in consolidation, the Company has $0.2 million of cash collateralizing these guarantees.

Use of Estimates

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from foreign currency transactions arising from exchange rate fluctuations on balances denominated in currencies other than the functional

currencies are recognized in “Other income (expense)” in the consolidated statements of comprehensive loss.

Monetary assets

and liabilities that are denominated in a currency other than the functional currency are re-measured to the functional currency using

the exchange rate at the balance sheet date and gains or losses are recorded in the consolidated statements of comprehensive loss.

currencies are recognized in “Other (expense) income” in the consolidated statements of operations.

Monetary assets and liabilities

that are denominated in a currency other than the functional currency are re-measured to the functional currency using the exchange rate

at the balance sheet date and gains or losses are recorded in the consolidated statements of operations.

Fair Value of Financial Instruments

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relationship with one large financial institution and all cash on deposit is covered under federally insured limits.

Property and Equipment

The Company records property and equipment at

cost less accumulated depreciation.

Expenditures for major renewals and improvements which extend the life or usefulness of the asset

are capitalized.

Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred.

calculates depreciation using the straight-line method over the estimated useful lives of the assets:

Schedule of estimated useful life of assets

Asset Classification

Estimated Useful Life

Office and computer equipment

Leasehold improvements

5 years or the remaining term of the lease, if shorter

Furniture and fixtures

The Company eliminates the cost of assets retired

or otherwise disposed of, along with the corresponding accumulated depreciation, from the related accounts, and the resulting gain or

loss is reflected in the results of operations.

Indefinite-Lived Intangible Assets

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the IPR&D assets will be amortized over their estimated useful lives.

IPR&D is not amortized but is reviewed for

impairment at least annually or when events or changes in the business environment indicate that it is more likely than not that the carrying

value may be impaired.

The Company also has the option to first assess qualitative factors to determine whether the existence of events

or circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that the acquired

IPR&D is impaired.

If the Company chooses to first assess the qualitative factors and it is determined that it is not more likely

than not acquired IPR&D is impaired, the Company is not required to take further action to test for impairment.

The Company also has

the option to bypass the qualitative assessment and perform only the quantitative impairment test, which the Company may choose to perform

in some periods but not in others.

The impairment loss, if any, is measured as the excess of the carrying value of the intangible asset

over its fair value.

Indefinite-lived intangible assets are not amortized

but are reviewed for impairment at least annually or when events or changes in the business environment indicate that it is more likely

than not that the carrying value may be impaired.

The Company also has the option to first assess qualitative factors to determine whether

the existence of events or circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more

than 50%) that the acquired indefinite-lived intangible assets are impaired.

If the Company chooses to first assess the qualitative factors

and it is determined that it is not more likely than not acquired indefinite-lived intangible assets are impaired, the Company is not

required to take further action to test for impairment.

The Company also has the option to bypass the qualitative assessment and perform

only the quantitative impairment test, which the Company may choose to perform in some periods but not in others.

The impairment loss,

if any, is measured as the excess of the carrying value of the intangible asset over its fair value.

Intangible assets are highly vulnerable to impairment

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Considering the high risk nature of research and development and the industry’s

success rate of bringing developmental compounds to market, IPR&D impairment charges are likely to occur in future periods.

the fair value of IPR&D for potential impairment is highly sensitive to changes in projections and assumptions and changes to assumptions

could potentially lead to impairment.

The Company believes its estimates and assumptions are reasonable and otherwise consistent with

assumptions market participants would use in their estimates of fair value.

However, if future results are not consistent with the Company’s

estimates and assumptions, then the Company may be exposed to an impairment charge, which could be material.

Use of different estimates

and judgments could yield materially different results in the Company’s analysis and could result in materially different asset

values or expense.

Impairment of Long-Lived Assets

The Company reviews long-lived assets to be held

and used, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount

of the assets or asset group may not be fully recoverable.

Evaluation of recoverability

is based on an estimate of undiscounted future cash flows resulting from the use of the asset or asset group and its eventual disposition.

Impairment, if any, is calculated as the amount by which an asset’s carrying value exceeds its fair value, typically using discounted

cash flows to determine fair value.

No such impairments were recorded during the years ended December 31, 2023 and 2022.

success rate of bringing developmental compounds to market, indefinite-lived intangible asset impairment charges are likely to occur in

future periods.

Estimating the fair value of indefinite-lived intangible assets for potential impairment is highly sensitive to changes

in projections and assumptions and changes to assumptions could potentially lead to impairment.

The Company believes its estimates and

assumptions are reasonable and otherwise consistent with assumptions market participants would use in their estimates of fair value.

if future results are not consistent with the Company’s estimates and assumptions, then the Company may be exposed to an impairment

charge, which could be material.

Use of different estimates and judgments could yield materially different results in the Company’s

analysis and could result in materially different asset values or expense.

Revenue Recognition

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As part of the accounting for these arrangements,

the Company must use significant judgment to determine:

a) the number of performance obligations based on the determination under step

the Company must use judgment to determine:

a) the number of performance obligations based on the determination under step (ii) above;

b) the transaction price under step (iii) above;

and c) the stand-alone selling price for each performance obligation identified

in the contract for the allocation of transaction price in step (iv) above.

The Company uses judgment to determine whether milestones

or other variable consideration should be included in the transaction price as described further below.

The transaction price is allocated

to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the

performance obligations under the contract are satisfied.

In developing the stand-alone price for a performance obligation, the Company

considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the

agreement with the customer and estimated costs.

The Company validates the stand-alone selling price for performance obligations by evaluating

whether changes in the key assumptions used to determine the stand-alone selling prices will have a significant effect on the allocation

of transaction price between multiple performance obligations.

The Company recognizes a contract asset or liability for the difference

between the Company’s performance (i.e., the goods or services transferred to the customer) and the customer’s performance

(i.e., the consideration paid by, and unconditionally due from, the customer).

and c) the stand-alone selling price for each performance obligation identified in the

contract for the allocation of transaction price in step (iv) above.

The Company uses judgment to determine whether milestones or other

variable consideration should be included in the transaction price as described further below.

The transaction price is allocated to each

performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance

obligations under the contract are satisfied.

In developing the stand-alone price for a performance obligation, the Company considers

applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement

with the customer and estimated costs.

The Company validates the stand-alone selling price for performance obligations by evaluating whether

changes in the key assumptions used to determine the stand-alone selling prices will have a significant effect on the allocation of transaction

price between multiple performance obligations.

The Company recognizes a contract asset or liability for the difference between the Company’s

performance (i.e., the goods or services transferred to the customer) and the customer’s performance (i.e., the consideration paid

by, and unconditionally due from, the customer).

The terms of the Company’s license agreements

may include delivery of an IP license to a collaboration partner.

The Company may be compensated under license arrangements through a

combination of non-refundable upfront receipts, development and regulatory objective receipts and royalty receipts on future product sales

The Company anticipates recognizing non-refundable upfront license payments and development and regulatory milestone payments

received by the Company in license and collaboration arrangements that include future obligations, such as supply obligations, ratably

over the Company’s expected performance period under each respective arrangement.

The Company makes its best estimate of the period

over which the Company expects to fulfill the Company’s performance obligations, which may include technology transfer assistance,

research activities, clinical development activities, and manufacturing activities from development through the commercialization of the

Given the uncertainties of these collaboration arrangements, significant judgment is required to determine the duration of the

performance period.

may include delivery of an intellectual property license to a collaboration partner.

The Company may be compensated under license arrangements

through a combination of non-refundable upfront receipts, development and regulatory objective receipts and royalty receipts on future

product sales by partners.

The Company anticipates recognizing non-refundable upfront license payments and development and regulatory

milestone payments received by the Company in license and collaboration arrangements that include future obligations, such as supply obligations,

ratably over the Company’s expected performance period under each respective arrangement.

The Company makes its best estimate of

the period over which the Company expects to fulfill the Company’s performance obligations, which may include technology transfer

assistance, research activities, clinical development activities, and manufacturing activities from development through the commercialization

of the product.

Given the uncertainties of these collaboration arrangements, significant judgment is required to determine the duration

of the performance period.

When the Company enters into an arrangement to

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The Company expenses upfront, non-refundable payments made for research and development services as obligations are

The value ascribed to intangible assets acquired but which have not met capitalization criteria is expensed as research and

development at the time of acquisition.

Upfront payments under license agreements are expensed upon receipt of the license.

payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is

determined to be probable of achievement and the related amount is reasonably estimable.

incurred, except when deposits are made for specifically identified future services.

The value ascribed to intangible assets acquired

but which have not met capitalization criteria is expensed as research and development at the time of acquisition.

Upfront payments under

license agreements are expensed upon receipt of the license.

Milestone payments under license agreements are accrued, with a corresponding

expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably

The Company is required to estimate accrued research

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This process involves reviewing open contracts and purchase orders, communicating with

Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated

cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs.

The majority of the Company’s

service providers invoice in arrears for services performed, on a pre-determined schedule or when contractual milestones are met.

some require advanced payments.

The Company makes estimates of accrued expenses as of each balance sheet date in the financial statements

based on facts and circumstances known at that time.

The Company periodically confirms the accuracy of the estimates with the service

providers and makes adjustments, if necessary.

Examples of estimated accrued research and development expenses include fees paid to:

Company personnel and consultants to identify services that have been performed on its behalf and estimating the level of service performed

and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs.

majority of the Company’s service providers invoice in arrears for services performed, on a pre-determined schedule or when contractual

milestones are met.

However, some require advanced payments.

The Company makes estimates of accrued expenses as of each balance sheet

date in the financial statements based on facts and circumstances known at that time.

The Company periodically confirms the accuracy of

the estimates with the service providers and makes adjustments, if necessary.

Examples of estimated accrued research and development expenses

include fees paid to:

Collaborative partners performing research and development and pre-clinical

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In addition, the Company had recorded accrued program expense of approximately $ 0.2 million

as a component of accrued expenses as of each of December 31, 2023 and 2022.

and $ 0.1 million as a component of accrued expenses as of each of December 31, 2024 and 2023, respectively.

Share-based Expense

The Company grants share-based payments in the

form of options and restricted stock units (“RSUs”) to employees and non-employees to purchase shares of the Company’s

common stock, Joint Share Ownership Plan (“JSOP”) awards to employees and agreements to issue common stock in exchange for

services provided by non-employees.

form of options and RSUs to employees and non-employees to purchase shares of the Company’s common stock.

In addition, prior to

the Company relocating to the U.S.

in 2014, the Company had issued Joint Share Ownership Plan (“JSOP”) awards to employees

and entered into agreements to issue common stock in exchange for services provided by non-employees.

Share-based expense is based on the estimated

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is recognized on a straight-line basis over requisite vesting periods of the awards.

In connection with certain

financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock.

The outstanding

warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards.

The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date.

Warrants issued

to collaboration partners in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional

paid-in capital of the common stock issued.

All other warrants are recorded at fair value as expense on a straight-line basis over the

requisite service period or at the date of issuance if there is not a service period or if service has already been rendered.

granted in connection with ongoing arrangements are more fully described in Note 10, Stockholders’ Equity .

In connection with certain financing, consulting

and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock.

The outstanding warrants are standalone

instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards.

The Company measures the

fair value of the awards using the Black-Scholes option pricing model as of the measurement date.

Warrants issued to collaboration partners

in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of

the common stock issued.

All other warrants are recorded at fair value as expense on a straight-line basis over the requisite service

period or at the date of issuance if there is not a service period or if service has already been rendered.

Warrant arrangements are

more fully described in Note 9, Stockholders’ Equity .

The Company accounts for income taxes using the

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securities have not been included in the calculations of diluted net loss per share, as their inclusion would be anti-dilutive.

December 31, 2023 and 2022, approximately 5,000 potentially dilutive securities were deemed anti-dilutive for each period.

December 31, 2024 and 2023, approximately 3,000 and 5,000 potentially dilutive securities were deemed anti-dilutive for each period.

Segment Information

Operating segments are identified as components

of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker,

who is the Company’s Chief Executive Officer, in making decisions on how to allocate resources and assess performance.

views its operations and manages its business in one operating segment.

In November 2023, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, to improve reportable segment disclosure

requirements, primarily through enhanced disclosures about significant expenses.

Under this ASU, a company is required to enhance its

segment disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM),

a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM

when deciding how to allocate resources.

This ASU was adopted effective for the Company’s fiscal year ending December 31, 2024 and

the adoption did not have a material impact on the Company’s consolidated financial statements.

The Company is principally engaged in

pre-clinical research and development activities to advance its DNase technology.

Operating segments are identified as components of

an enterprise about which separate discrete financial information is available for evaluation by the CODM, who is the

Company’s Chief Executive Officer, in making decisions on how to allocate resources and assess performance.

The Company views

its operations and manages its business as a single operating segment.

The Company’s measure of segment profit or loss is net

The CODM manages and allocates to the operations of the Company on a total company basis.

Managing and allocating resources on

a consolidated basis enables the CODM to assess the overall level of resources available and how best to deploy these resources

across functions, therapeutic areas and research and development projects that are in line with the Company’s long-term

company-wide strategic goals.

Consistent with this decision-making process, the CODM uses consolidated financial information for

purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.

The following table is representative of the significant expense categories regularly provided to the CODM when managing the

Company’s single reporting segment.

A reconciliation to the consolidated net loss for the years ended December 31, 2024 and

2023 is as follows:

Schedule of consolidated net loss

Year Ended December 31,

Program expenses (1)

Non-program expenses (2)

Salaries and wages

Other segment items (3)

$ ( 3,960,275 )

$ ( 4,134,578 )

(1) Includes external research and development.

(2) Includes information technology, legal, intellectual property and other general and administrative expenses.

(3) Includes stock-based compensation expense, interest income and other expense (income).

The Company leases administrative facilities under

operating leases.

Lease agreements may include rent holidays, rent escalation clauses and tenant improvement allowances.

The Company recognizes

a lease liability and a right-of-use asset for all leases, with the exception of short-term leases, at the commencement date.

13, Commitments and Contingencies for further information.

The Company has a history of engaging in acquisition

transactions that require the Company to evaluate whether the transaction meets the criteria of a business combination.

If the transaction

does not meet the business combination requirements, the transaction is accounted for as an asset acquisition or recapitalization and

no goodwill is recognized.

If the acquisition meets the definition of a business combination, the Company allocates the purchase price,

including any contingent consideration, to the assets acquired and the liabilities assumed at their estimated fair values as of the date

of the acquisition with any excess of the purchase price paid over the estimated fair value of net assets acquired recorded as goodwill.

The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or

discounted cash flow valuation methods.

When determining the fair value of tangible assets

acquired, the Company estimates the cost to replace the asset with a new asset, taking into consideration such factors as age, condition

and the economic useful life of the asset.

When determining the fair value of intangible assets acquired, the Company uses judgment to

estimate the applicable discount rate, growth rates and the timing and amount of future cash flows.

The fair value of assets acquired

and liabilities assumed is typically determined using the assistance of an independent third-party specialist.

Business combination related costs are expensed

in the period in which the costs are incurred.

Asset acquisition related costs are generally capitalized as a component of cost of the

assets acquired.

The Company recognizes a lease liability and a right-of-use asset for all leases, with the exception of short-term leases,

at the commencement date.

See Note 12, Commitments and Contingencies for further information.

Recent Accounting Standards

In June 2016, the Financial Accounting Standards

Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326):

of Credit Losses on Financial Instruments .

The guidance modified the measurement and recognition of credit losses for most financial

assets and certain other instruments.

The amendment updated the guidance for measuring and recording credit losses on financial assets

measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model.

This may result

in earlier recognition of allowance for losses.

The Company adopted ASU 2016-13 as of January 1, 2023 and the adoption did not have a

material effect on our consolidated financial statements.

Income Taxes - Improvements to Income Tax Disclosures

(Topic 740) .

In December 2023, the FASB issued ASU No.

2023-09, to improve income tax disclosure requirements, primarily through enhanced

disclosures related to the income tax rate reconciliation and income taxes paid.

This ASU is effective for fiscal 2025, with early adoption

permitted, and may be applied retrospectively.

The Company is currently evaluating the effects that the adoption of this ASU will have

on its consolidated financial statements.

Significant Strategic Collaborations

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Royalty payments

of approximately $ 2.5 million and $ 1.7 million were recorded as revenue by the Company during the years ended December 31, 2023 and 2022,

respectively, and are based on single digit royalties on net sales of certain covered products.

The Company’s policy is to recognize

royalty payments as revenue when they are reliably measurable, which is upon receipt of reports from Takeda.

The Company receives these

reports in the quarter subsequent to the actual sublicensee sales.

At the time the revenue was received, there were no remaining performance

obligations and all other revenue recognition criteria were met.

of approximately $ 2.5 million were recorded as revenue for each year by the Company during the years ended December 31, 2024 and 2023

and are based on single digit royalties on net sales of certain covered products.

The Company’s policy is to recognize royalty payments

as revenue when they are reliably measurable, which is upon receipt of reports from Takeda.

The Company receives these reports in the

quarter subsequent to the actual sublicensee sales.

At the time the revenue was received, there were no remaining performance obligations

and all other revenue recognition criteria were met.

Belgian Volition SARL Limited (“Volition”)

Collaboration

On August 2, 2022, the Company announced a research

and development collaboration with Volition to develop NETs-targeted adoptive cell therapies for the treatment of cancer.

The collaboration

is an early exploratory program to evaluate the potential combination of Volition’s Nu.Q ® Technology Test and the

Company’s DNase-Armored CAR T platform to develop proprietary adoptive cell therapies potentially targeting multiple types of solid

Under the terms of the collaboration agreement, Volition will fund a research program and the two parties will share proceeds

from commercialization or licensing of any products arising from the collaboration.

To date, Volition has funded $ 26,000 under this agreement.

Catalent Pharma Solutions LLC (“Catalent”)

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provide certain services to the Company to perform cGMP manufacturing of the Company’s recombinant protein, Human DNase I.

agreed to enter into a Master Services Agreement (“MSA”) that will contain terms and conditions to govern the project contemplated

by the SOW and that will supersede the addendum to the SOW containing Catalent’s standard terms and conditions.

In addition, in

the event of any conflict between the project-specific terms and conditions set forth in the SOW and the MSA, the MSA terms and conditions

shall govern.

The estimated total cost of the project contemplated by the SOW was expected to be up to approximately $5 million (exclusive

of certain fees and potential alternatives) for the manufacturing services over the course of the term of the project with each phase

of the project invoiced separately in connection with the commencement of such phase.

The Company has paid Catalent approximately $ 2.5

million through December 31, 2023, of which $ 0.1 million has been recognized as an advance payment and is included in prepaid expenses

and other current assets and $ 0.3 million has been recognized within other assets as of December 31, 2023.

As of December 31, 2022, approximately

$ 0.3 million had been recorded as an advance payment and was included in prepaid expenses and other current assets.

agreed to enter into a Master Services Agreement that will contain terms and conditions to govern the project contemplated by the SOW

and that will supersede the addendum to the SOW containing Catalent’s standard terms and conditions.

The Company has paid Catalent approximately $ 2.5 million through December 31, 2024, of which $ 28,000 and $ 0.1 million has been recognized

as an advance payment and is included in prepaid expenses and other current assets as of December 31, 2024 and 2023, respectively, and

approximately $ 0.1 million has been recognized as a liability and is included in accrued expenses and other current liabilities as of

December 31, 2024.

There was no accrual as of December 31, 2023.

In addition, approximately $ 0.3 million has been recognized within other

assets as of both December 31, 2024 and 2023.

Scripps Research

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entered into a Research Funding and Option Agreement (the “Agreement”), pursuant to which the Company has agreed to provide

Scripps Research an aggregate of up to $ 938,000 to fund research relating to advancing the pre-clinical development of the Company’s

DNase oncology platform technology.

The research funding is payable by the Company to Scripps Research on a monthly basis in accordance

with a negotiated budget, which provides for an initial payment of approximately $ 78,000 on the date of the Agreement and subsequent monthly

payments of approximately $ 78,000 over a 12-month period.

Under the Agreement, the Company has the option to acquire a worldwide exclusive

license to Scripps Research’s rights in the Technology or Patent Rights (as defined in the Agreement), as well as a non-exclusive,

royalty-free, non-transferrable license to make and use TSRI Technology (as defined in the Agreement) solely for the Company’s internal

research purposes during the performance of the research program contemplated by the Agreement.

Unless earlier terminated, the term of the Agreement

continues from the date of the Agreement for fifteen (15) months.

The Agreement may be terminated by the Company with 30 days advance

written notice to Scripps Research beginning six (6) months after the Effective Date (as defined in the Agreement) or by Scripps Research

if the Company fails to make timely payments due under the Agreement, subject to 30 days’ written notice to cure such nonpayment.

The Agreement may further be terminated by either party in the event of the other party’s uncured failure to perform any obligations

under the Agreement or the bankruptcy of the other party.

The Company has paid Scripps Research approximately

$ 0.8 million under the Agreement through December 31, 2023, of which approximately $ 0.4 million has been recognized as an advance payment

and is included in prepaid expenses and other current assets as of December 31, 2023.

Scripps Research an aggregate of up to $ 0.9 million to fund research relating to advancing the pre-clinical development of the Company’s

DNase technology.

Under the Agreement, the Company has the option to acquire a worldwide exclusive license to Scripps

Research’s rights in the Technology or Patent Rights (as defined in the Agreement), as well as a non-exclusive, royalty-free, non-transferrable

license to make and use TSRI Technology (as defined in the Agreement) solely for the Company’s internal research purposes during

the performance of the research program contemplated by the Agreement.

During the second quarter of 2024, the Company amended the Agreement

to extend the term to October 31, 2024 with no additional funding required.

On November 1, 2024, the Company and Scripps Research

entered into a Second Amendment to the Agreement (the “Second Amendment”) extending the term of the Agreement for an additional

twelve (12) month period and to provide Scripps Research additional funding in an aggregate amount of up to approximately $400,000 to

fund continuing research.

The research funding is payable by the Company to Scripps Research on a monthly basis in accordance with a negotiated

budget, which provides for an initial payment of approximately $65,000 on the date of the Amendment and subsequent monthly payments of

approximately $65,000 over a 5-month period.

All other terms of the Original Agreement remain unchanged.

The Company paid Scripps Research approximately

$ 0.9 million under the Agreement through December 31, 2024, of which approximately $ 0.4 million had been recognized as an advance payment

and was included in prepaid expenses and other current assets as of December 31, 2023.

There was no amount prepaid as of December 31,

University of Virginia (“UVA”)

3 unchanged sentences

Under the terms of the UVA Agreement, i n

addition to advancing our existing intellectual property, we have an option to acquire an exclusive license to any new intellectual property

arising from the DNase research program.

Allan Tsung, MD, a member of the Company’s Scientific Advisory Board and Chair of

the Department of Surgery at the UVA School of Medicine, will oversee the research conducted under

the UVA Agreement.

As a surgical oncologist and scientist, Dr.

Tsung is internationally recognized for leading substantial research on

the role of NETs in tumor growth, metastasis, and resistance to existing cancer therapies.

addition to advancing our existing intellectual property, the Company has an option to acquire an exclusive license to any new intellectual

property arising from the DNase research program.

Allan Tsung, MD, a member of the Company’s Scientific Advisory Board and Chair

of the Department of Surgery at the UVA School of Medicine, will oversee the research conducted

under the UVA Agreement.

In November 2024, the Company and UVA entered into an amendment to extend the UVA Agreement through December

Pursuant to the UVA agreement, as amended, UVA will build on the preclinical and translational data produced to date and continue

to investigate combinations of DNase I with immunotherapies in models of primary and metastatic colorectal cancer.

paid UVA approximately $ 0.4 million under the UVA Agreement through December 31, 2024, of which $ 0.1 million has been recognized as an

advance payment and is included within prepaid expenses and other current assets as of December 31, 2024.

There were no amounts incurred

as of December 31, 2023.

PJSC Pharmsynthez

7 unchanged sentences

Pharmsynthez directly, and indirectly through

its wholly-owned subsidiary, SynBio, LLC (“SynBio”), had a share ownership in the Company of approximately 3.4 % and 2.9 % of

the total outstanding common stock as of December 31, 2023 and 2022, respectively.

its wholly-owned subsidiary, SynBio, LLC (“SynBio”), had a share ownership in the Company of approximately 3.4 % of the total

outstanding common stock as of both December 31, 2024 and 2023, respectively.

In addition to its common stock ownership, Pharmsynthez

4 unchanged sentences

exclusive license to SynBio to develop, market and commercialize certain drug candidates utilizing molecules based on SynBio’s technology

and the Company’s proprietary technologies (PolyXen, OncoHist and ImuXen) in Russia and CIS, collectively referred to herein as

the SynBio Market.

In return, SynBio granted an exclusive license to the Company to use the preclinical and clinical data generated by

SynBio in certain agreed products and to engage in the development of commercial candidates in any territory outside of the SynBio Market.

and the Company’s proprietary technologies (PolyXen, OncoHist and ImuXen) in Russia and Commonwealth of Independent States, collectively

referred to herein as the SynBio Market.

In return, SynBio granted an exclusive license to the Company to use the preclinical and clinical

data generated by SynBio in certain agreed products and to engage in the development of commercial candidates in any territory outside

of the SynBio Market.

SynBio is solely responsible for funding and conducting

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PolyXen technology.

In February 2021, Pharmsynthez reported in a press release that it had started the registration phase of Epolong by

filing a registration dossier to obtain approval in Russia.

Pharmsynthez had reported in its press release that it expected that the Russian

stage of registration activities would be completed in 2021 and that it would be able to start production of the product as early as the

first quarter of 2022.

Pharmsynthez has informed the Company that it has received a response letter indicating certain deficiencies in

the dossier and continues to develop a gap mitigation strategy with the intent of refiling the registration upon correction.

did not recognize revenue in connection with the Co-Development Agreement during the years ended December 31, 2023 and 2022.

Pharmsynthez filed a registration dossier to obtain approval in Russia and informed the Company that it has received

a response letter indicating certain deficiencies in the dossier.

Pharmsynthez further informed the Company that it developed a gap mitigation

strategy and is currently determining next steps.

The Company did not recognize revenue in connection with the Co-Development Agreement

during the years ended December 31, 2024 and 2023.

Serum Institute of India Limited

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payments due under the collaborative arrangement.

Through December 31, 2023, no commercial products

were developed and no royalty revenue or expense was recognized by the Company related to the arrangement.

Serum Institute had a share

ownership of less than 1% of the total outstanding common stock of the Company as of each of December 31, 2023 and 2022.

Licensing Arrangements

Exclusive Sublicense Agreement

On April 26, 2022, the Company entered into an

Exclusive Sublicense Agreement (the “Sublicense Agreement”) with CLS Therapeutics Ltd.

(“CLS”) pursuant to which

the Company received an exclusive license, under certain patent rights and know-how owned or controlled by CLS, to develop and commercialize

pharmaceutical products and methods incorporating DNase enzyme for use in treatment of cancer (the “Sublicensed Products”).

Under the terms of the Sublicense Agreement, the Company will have sole responsibility for, and shall use commercially reasonable efforts

to, among other things, research, develop and obtain marketing approval for the Sublicensed Products in the U.S.

and certain European

markets, and to commercialize such Sublicensed Products in the relevant market once marketing approval is obtained.

In consideration for the license and other rights

granted to the Company under the Sublicense Agreement, the Company issued to CLS 37,500 shares of the Company’s common stock (the

“Sublicense Agreement Shares”), of which 25,000 Sublicense Agreement Shares were issued directly to OPKO Health, Inc.

in lieu of transfer indirectly from CLS to EirGen Pharma Ltd.

(“EirGen”), a wholly owned subsidiary of OPKO, in satisfaction

of certain third-party contractual obligations between CLS and EirGen.

Additionally, the Company is obligated to pay to CLS up to $13,000,000

in cash in potential milestone payments for the achievement of certain clinical and regulatory milestones, as well as issue an additional

95,000 shares of the Company’s common stock to CLS based on the achievement of certain regulatory milestones.

In addition, the Company

is obligated to pay tiered royalties ranging from the mid-single to low-double digits on net sales of licensed products falling within

the scope of the license during the Royalty Term (as defined in the Sublicense Agreement), as well as pay a percentage share in the low-to-mid

teens of certain consideration received by the Company from any sublicensees.

Exclusive License Agreement

On April 26, 2022, the Company entered into an

Exclusive License Agreement (the “License Agreement”) with CLS, pursuant to which the Company received an exclusive license

under certain patent rights and know-how owned or controlled by CLS to develop and commercialize pharmaceutical products and methods incorporating

DNase in conjunction with CAR T therapies (the “Licensed Products”).

Under the terms of the License Agreement, the Company

will have sole responsibility for, and shall use commercially reasonable efforts to, among other things, research, develop and obtain

marketing approval for the Licensed Products in the U.S.

and certain European markets, and to commercialize such Licensed Products in

the relevant market once marketing approval is obtained.

In consideration for the license and other rights

granted to the Company under the License Agreement, the Company paid CLS a one-time fee of $ 500,000 in cash, issued to CLS 50,000 shares

of the Company’s common stock, and is obligated to pay up to $13,000,000 in cash in potential milestone payments for the achievement

of certain clinical and regulatory milestones for each Licensed Product.

In addition, the Company is obligated to pay tiered royalties

ranging from the mid-single to low-double digits on net sales of licensed products falling within the scope of the license during the

Royalty Term (as defined in the License Agreement), as well as pay a percentage share in the mid-teens to low double digits of certain

consideration received by the Company from any sublicensees.

The total consideration for the Sublicense and

License Agreements was approximately $ 1.3 million , which consisted of a $ 0.5 million cash payment and the fair value of the 87,500 common

shares issued of $ 0.8 million utilizing the closing market price of the Company’s stock price at the closing date.

no future alternative use for the sublicense and license, the Company recorded an expense of $ 1.3 million to research and development

expense during the year ended December 31, 2022.

No milestone or other contingent consideration was recognized in 2023 and 2022 as there

were no development, regulatory or sales milestones that were probable of being achieved as of each of December 31, 2023 and December

Patent Assignment and Volition Collaboration

On August 2, 2022, the Company announced a research

and development collaboration with Volition to develop NETs-targeted adoptive cell therapies for the treatment of cancer.

The collaboration

is an early exploratory program to evaluate the potential combination of Volition’s Nu.Q ® technology Test and the

Company’s DNase-Armored CAR T platform to develop proprietary adoptive cell therapies potentially targeting multiple types of solid

Under the terms of the collaboration agreement, Volition will fund a research program and the two parties will share proceeds

from commercialization or licensing of any products arising from the collaboration.

On July 10, 2023, the Company entered into the first

Collaborator Statement of Work as part of this collaboration with Volition.

Volition has funded approximately $ 0.1 million under this

research program through December 31, 2023.

The Company has recorded this funding as a reduction in research and development costs during

the year ended December 31, 2023.

On October 4, 2022, the Company completed a patent

assignment related to its collaboration with Belgian Volition SARL Limited (“Volition”) and CLS.

In connection with the patent

assignment, the Company entered into a Subscription Agreement with CLS Therapeutics, LLC, a Delaware limited liability company (“CLS

LLC ”) on October 12, 2022, pursuant to which the Company agreed to issue to CLS LLC, and CLS LLC agreed to subscribe for, 85,000

shares of the Company’s common stock (the “Shares”) as consideration for the assignment by CLS and its affiliates to

the Company of certain patent rights owned by CLS and its affiliates.

The total consideration for the patent assignment

was approximately $0.5 million, representing the fair value of the 85,000 common shares issued utilizing the closing market price of

the Company’s stock price at the closing date.

As there was no future alternative use for the patent rights, the Company recorded

an expense of approximately $ 0.5

million to research and development expense for the year ended December 31, 2022.

No milestone or other contingent consideration

was recognized in 2023 and 2022 as there were no development, regulatory or sales milestones that were probable of being achieved as

of each of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, CLS owned approximately

9.6 % of the Company’s common stock.

The Company incurred approximately $ 0.4 million of transaction costs in connection with the

licensing of the DNase technology for the year ended December 31, 2022.

Serum Institute has informed the Company that it is not actively pursuing this program

but may seek to leverage Pharmsynthez’ trial data and potential Russian marketing authorization to request a waiver for a Phase

III clinical trial in India, subject to local regulatory authority approval.

Through December 31, 2024, no commercial products were developed

and no royalty revenue or expense was recognized by the Company related to the arrangement.

Serum Institute had a share ownership of less

than 1% of the total outstanding common stock of the Company as of each of December 31, 2024 and 2023.

In 2016, the Company

entered into an agreement with Serum Institute for the prepayment of clinical PSA supply in exchange for the

Company’s common stock .

As of each of December 31, 2023 and 2022, the Company has classified $ 0.7 million of prepaid clinical

supply as long-term as it does not anticipate utilizing the majority of the PSA supply within the next 12 months.

No clinical supply was

utilized during the years ended December 31, 2023 and 2022.

What changed 10-K

Item 8. Financial Statements and Supplementary Data