What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-12 compared with 2025-03-18 · 548 added, 503 removed, 715 unchanged (60% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID 199 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 688 )

Consolidated Balance Sheets as of December 31, 2025 and 2024

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We have audited the accompanying consolidated

balance sheets of Xenetic Biosciences, Inc.

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

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.

balance sheet of Xenetic Biosciences, Inc.

(the “Company”) as of December 31, 2025, the related consolidated statements of

operations, stockholders’ equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the

year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Retrospective Application of a Change in Accounting Principle

We also have audited the adjustments to the 2024

financial statements to retrospectively apply the change in accounting due to the adoption of ASU 2023-09 – Income Taxes (Topic

Improvements to Income Tax Disclosures, as described in Note 3.

In our opinion, such adjustments are appropriate and have been properly

We were not engaged to audit, review, or apply any procedures to the 2024 financial statements of the Company other than with

respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2024 financial statements

taken as a whole.

Basis for Opinion

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of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are

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regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

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to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

As part of our audit we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

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Accordingly, we express no such opinion.

Our audits included performing procedures to assess

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

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Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

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We determined that there are no critical audit matters.

/s/ CBIZ CPAs P.C.

We have served as the Company’s auditor since 2015 (such date

takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C.

effective November 1, 2024).

March 12, 2026

Report of Independent Registered Public Accounting

To the Stockholders and Board of Directors of

Xenetic Biosciences, Inc.

Opinion on the Financial Statements

We have audited, before the effects of the adjustments

to retrospectively apply the change in accounting described in Note 3, the accompanying consolidated balance sheet of Xenetic Biosciences,

(the “Company”) as of December 31, 2024, the related consolidated statements of operations, stockholders’ equity

and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”)

and the 2024 financial statements before the effects of the adjustments discussed in Note 3 are not presented herein).

In our opinion,

based on our audit, the 2024 financial statements, before the effects of the adjustments to retrospectively apply the change in accounting

described in Note 3, present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the

results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally

accepted in the United States of America.

We were not engaged to audit, review, or apply

any procedures to the adjustments to retrospectively apply the change in accounting described in Note 3 and, accordingly, we do not express

an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments

were audited by CBIZ CPAs.

Basis for Opinion

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

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.

We have served as the Company’s auditor from 2015 through 2025.

March 18, 2025

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Series B, $ 0.001 par value:

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

1,454,545 and 1,804,394 shares issued and outstanding as of December 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value;

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Total liabilities and stockholders' equity

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these

consolidated financial statements.

XENETIC BIOSCIENCES, INC.

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Other income (expense):

Other (expense) income

Other income (expense)

Interest income, net

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Weighted-average shares of common stock outstanding, basic and diluted

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these

consolidated financial statements.

XENETIC BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Preferred Stock

Accumulated Deficit

Comprehensive

Treasury Stock

Stockholders'

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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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$ ( 5,281,180 )

Issuance of common stock in connection with restricted stock units

Exercise of purchase warrants

Issuance of common stock in October 2025 underwritten public offering,

net of issuance costs

Conversion of Series B preferred stock to shares of common stock

Share-based expense

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$ ( 5,281,180 )

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these

consolidated financial statements.

XENETIC BIOSCIENCES, INC.

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Other long-term assets

Accounts payable, accrued expenses and other liabilities

Accounts payable, accrued expenses and other current liabilities

Net cash used in operating activities

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( 2,817,478 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from issuance of common stock in October 2025 underwritten public offering

Net cash provided by financing activities

Net change in cash

( 2,817,478 )

( 4,114,219 )

Cash at beginning of period

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Issuance of common stock from cashless exercise of purchase warrants

Issuance of common stock to adjust for Reverse Stock Split

Conversion of Series A preferred stock to common stock

The accompanying notes are an integral part of

these consolidated financial statements.

Conversion of Series B preferred stock to common stock

The accompanying notes are an integral part of these

consolidated financial statements.

XENETIC BIOSCIENCES, INC.

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Xenetic Biosciences, Inc.

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

(“Xenetic” 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 difficult to treat cancers.

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(“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

wholly-owned subsidiaries, Hesperix S.A.

(“Hesperix”) and Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and

the wholly-owned subsidiaries of Xenetic UK, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and

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.

extracellular traps or 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 wholly-owned

subsidiaries, Hesperix S.A.

(“Hesperix”) and Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and the wholly-owned

subsidiaries of Xenetic UK, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and 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 may be used throughout this Annual Report.

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

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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.

In addition, the Company raised $4.0 million in an underwritten offering of common stock as more fully described in Note 8, Stockholders’

Equity , to the consolidated financial statements.

However, the Company anticipates it will need additional capital in the long-term

to pursue its business initiatives.

While the Company believes it will continue to have 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.

Recent Developments

The Company and its board of directors (the “Board”)

have initiated a formal strategic review process with the assistance of outside financial and legal advisors.

The Company is considering

a wide range of alternatives to maximize shareholder value, including, but not limited to, the sale of all or part of the Company or its

assets or a business combination, including a “reverse merger”, share exchange or similarly structured transaction.

An independent

committee of the Board has engaged in preliminary discussions with third parties regarding potential transactions.

Any such completed

transaction could have a significant impact on the Company’s stockholders, including if the transaction would result in the current

investors of the counterparty holding a substantial majority of the Company’s outstanding common stock following consummation of

the potential transaction.

Given the preliminary stage of such discussions, at this time there is no way to quantify the potential impact

of a transaction, if any.

There is no deadline or definitive timetable set for the completion of the strategic alternatives process, and

there can be no assurance any proposal will be made or accepted, any agreement will be executed, or any transaction will be consummated

in connection with this review.

In addition, if the Company does enter into definitive agreements with respect to a potential transaction,

the Company expects that consummation of the potential transaction would be subject to a number of conditions, including approval by the

Company’s stockholders and Nasdaq, and other customary conditions, which would be out of the Company’s control and may never

be satisfied.

The Company remains committed to advancing its DNase technology and does not intend to make further announcements regarding

the review process unless and until the Board approves a specific transaction or otherwise determines that further disclosure is appropriate.

Risks and Uncertainties

Impact of Global

Conflicts on Operations

The short and long-term

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.

Impact of Global Conflicts

on Operations

The short and long-term implications

of geopolitical events and global conflicts, including those in Ukraine and the Middle East are difficult to predict at this time.

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

impact the Company’s business, financial condition, and results of operations.

Summary of Significant Accounting Policies

Preparation of Financial Statements

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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Functional Currency Change

The functional currency for the Company’s

foreign subsidiaries is the U.S.

The functional currency of the Company’s UK-based subsidiaries changed from the British

Pound Sterling to the U.S.

The functional currency for the Company’s foreign

subsidiaries is the U.S.

The functional currency of the Company’s UK-based subsidiaries changed from the British Pound Sterling

dollar when the Company relocated to the U.S.

The change in functional currency was applied on a prospective

The change in functional currency was applied on a prospective basis.

Therefore, any gains and losses that were previously recorded in accumulated other comprehensive income remain unchanged.

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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 (expense) income” in the consolidated statements of operations.

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

Monetary assets and liabilities

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nature of these instruments.

Financial instruments that potentially subject

the Company to credit risk consist primarily of cash on deposit with financial institutions, the balances of which may exceed federally

insured limits.

The Company has not experienced any losses on such accounts, and does not believe it is exposed to any unusual credit

risk beyond the normal credit risk currently associated with commercial banking relationships.

The Company maintains its primary banking

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

Financial instruments that potentially subject the

Company to credit risk consist primarily of cash on deposit with financial institutions, the balances of which may exceed federally insured

The Company has not experienced any losses on such accounts, and does not believe it is exposed to any unusual credit risk beyond

the normal credit risk currently associated with commercial banking relationships.

The Company maintains banking relationships with two

large financial institutions and all cash on deposit is covered under federally insured limits.

Indefinite-Lived Intangible Assets

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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 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.

During the year

ended December 31, 2024, the Company recorded an asset impairment charge of $ 0.7 million, which is presented within research and development

expenses in the consolidated statements of operations, representing the excess of the long-lived asset’s carrying value over its

estimated fair value.

Revenue Recognition

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of the performance period.

When the Company enters into an arrangement to

sublicense some of its patents, it will consider the performance obligations to determine if there is a single element or multiple elements

to the arrangement as it determines the proper method and timing of revenue recognition.

The Company considers the terms of the license

or sublicense for such elements as price adjustments or refund clauses in addition to any performance obligations for it to provide such

as services, patent defense costs, technology support, marketing or sales assistance or any other elements to the arrangement that could

constitute an additional deliverable to it that could change the timing of the revenue recognition.

Non-refundable upfront license and

sublicense fees received, whereby continued performance or future obligations are considered inconsequential or perfunctory to the relevant

licensed technology, are recognized as revenue upon delivery of the technology.

The Company expects to recognize royalty revenue

in the period of sale, based on the underlying contract terms, provided that the reported sales are reliably measurable, the Company has

When the Company enters into an arrangement to sublicense

some of its patents, it will consider the performance obligations to determine if there is a single element or multiple elements to the

arrangement as it determines the proper method and timing of revenue recognition.

The Company considers the terms of the license or sublicense

for such elements as price adjustments or refund clauses in addition to any performance obligations for it to provide such as services,

patent defense costs, technology support, marketing or sales assistance or any other elements to the arrangement that could constitute

an additional deliverable to it that could change the timing of the revenue recognition.

Non-refundable upfront license and sublicense

fees received, whereby continued performance or future obligations are considered inconsequential or perfunctory to the relevant licensed

technology, are recognized as revenue upon delivery of the technology.

The Company expects to recognize royalty revenue in

the period of sale, based on the underlying contract terms, provided that the reported sales are reliably measurable, the Company has

no remaining performance obligations, and all other revenue recognition criteria are met.

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Collaborative partners performing research and development and pre-clinical

Program managers in connection with overall program management of clinical

Program managers in connection with overall program management of exploratory

studies and clinical trials;

CMOs in connection with cGMP manufacturing;

CROs in connection with clinical trials;

Investigative sites in connection with clinical trials.

CROs in connection with exploratory studies and clinical trials;

Investigative sites in connection with exploratory studies and clinical trials.

The Company bases its expenses related to research

and development, pre-clinical activities, manufacturing and clinical trials on its estimates of the services received and efforts expended

pursuant to quotes and contracts with multiple research institutions, CMOs and CROs that conduct and manage clinical trials on the Company’s

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment

There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment

of the expense.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of

effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from the estimate,

the Company adjusts the accrual or prepaid accordingly.

Although it does not expect its estimates to be materially different from amounts

actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and

timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

there have not been any material adjustments to the Company’s prior estimates of accrued research and development expenses.

Company has recorded approximately $ 0.3 million and $ 0.5 million of prepayments as a component of prepaid expenses and other current assets

as of December 31, 2024 and 2023, respectively.

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

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

pursuant to quotes and contracts with multiple research institutions, CMOs and CROs that conduct and manage exploratory studies and clinical

trials on the Company’s behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract

and may result in uneven payment flows.

There may be instances in which payments made to vendors will exceed the level of services provided

and result in a prepayment of the expense.

In accruing service fees, the Company estimates the time period over which services will be

performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort

varies from the estimate, the Company adjusts the accrual or prepaid accordingly.

Although it does not expect its estimates to be materially

different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to

the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular

To date, there have not been any material adjustments to the Company’s prior estimates of accrued research and development

The Company has recorded approximately $ 0.1 million and $ 0.3 million of prepayments as a component of prepaid expenses and other

current assets as of December 31, 2025 and 2024, respectively.

In addition, the Company had recorded accrued research costs of approximately

$ 0.4 million and $ 0.2 million as a component of accrued expenses and other current liabilities as of each of December 31, 2025 and 2024,

respectively.

Share-based Expense

The Company grants share-based payments in the

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

fair value of the option or calculated using the Black-Scholes option pricing model.

Determining the appropriate fair value model and

related assumptions requires judgment, including estimating share price volatility and expected terms of the awards.

The expected volatility

rates are estimated based on the historical volatility of the Company.

To the extent Company data is not available for the full expected

term of the awards the Company uses a weighted-average of the historical volatility of the Company and of a peer group of comparable publicly

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

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 fair

value of the option or calculated using the Black-Scholes option pricing model.

Determining the appropriate fair value model and related

assumptions requires judgment, including estimating share price volatility and expected terms of the awards.

The expected volatility rates

are estimated based on the historical volatility of the Company.

To the extent Company data is not available for the full expected term

of the awards the Company uses a weighted-average of the historical volatility of the Company and of a peer group of comparable publicly

traded companies over the expected term of the option.

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and settlement provisions of the grant are met.

For employee options that vest based solely on

service conditions, the fair value measurement date is generally on the date of grant and the related compensation expense is recognized

on a straight-line basis over the requisite vesting period of the awards.

For employee options that vest based solely on service

conditions, the fair value measurement date is generally on the date of grant and the related compensation expense is recognized on a

straight-line basis over the requisite vesting period of the awards.

For non-employee options issued in exchange for goods or services

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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.

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

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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

asset and liability method.

Under this method, deferred tax assets and liabilities are determined based on temporary differences resulting

from the different treatment of items for tax and financial reporting purposes.

Deferred tax assets and liabilities are measured using

enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

Warrant arrangements are more

fully described in Note 8, Stockholders’ Equity .

The Company accounts for income taxes using the asset

and liability method.

Under this method, deferred tax assets and liabilities are determined based on temporary differences resulting from

the different treatment of items for tax and financial reporting purposes.

Deferred tax assets and liabilities are measured using enacted

tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

Additionally,

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Basic and Diluted Net Loss per Share

The Company computes basic net loss per share

by dividing net loss applicable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding

during the period.

The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options

that are outstanding during the period, except where such non-participating securities would be anti-dilutive.

The Company’s JSOP

awards, prior to exercise, are considered treasury shares by the Company and thus do not impact the Company’s net loss per share

For the years ended December 31, 2024 and 2023,

basic and diluted net loss per share are the same for each year due to the Company’s net loss position.

The Company computes basic net loss per share by dividing

net loss applicable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding during

The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options that are

outstanding during the period, except where such non-participating securities would be anti-dilutive.

The Company’s JSOP awards,

prior to exercise, are considered treasury shares by the Company and thus do not impact the Company’s net loss per share calculation.

For the years ended December 31, 2025 and 2024, basic

and diluted net loss per share are the same for each year due to the Company’s net loss position.

Potentially dilutive, non-participating

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

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

December 31, 2025 and 2024, approximately 29,000 and 3,000 potentially dilutive securities were deemed anti-dilutive due to the Company’s

net loss position for each period.

Segment Information

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 Company is required to disclose 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.

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.

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

The Company’s measure of segment profit or loss is

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:

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

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, 2025 and 2024 is as follows:

Schedule of consolidated net loss

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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.

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.

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

The Company accounts for leases in accordance with

ASU 2016-02, Leases (Topic 842) and recognizes a lease liability and a right-of-use asset for all leases, with the exception of

short-term leases, at the commencement date.

The Company leases administrative facilities under operating leases.

Lease agreements may

include rent holidays, rent escalation clauses and tenant improvement allowances.

See Note 11, Commitments and Contingencies for

further information.

Recent Accounting Standards

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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.

The Company adopted this ASU on a retrospective basis and such adoption did not have a

material impact on its consolidated financial statements.

Significant Strategic Collaborations

Takeda Pharmaceutical Co.

with its wholly-owned subsidiaries, “Takeda”)

In October 2017, the Company granted to Takeda

the right to grant a non-exclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously

exclusively licensed to Takeda in connection with products related to the treatment of blood and bleeding disorders.

Royalty payments

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

( together with

its wholly-owned subsidiaries, “Takeda”)

In October 2017, the Company granted to Takeda the

right to grant a non-exclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously exclusively

licensed to Takeda in connection with products related to the treatment of blood and bleeding disorders.

Royalty payments of approximately

$ 3 .0 million and $ 2.5 million were recorded as revenue by the Company during the years ended December 31, 2025 and 2024, respectively,

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

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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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of Work (the “SOW”) with Catalent to outline the general scope of work, timeline, and pricing pursuant to which Catalent will

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 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.

provide certain services to the Company to perform current Good Manufacturing Practices of the Company’s recombinant protein, Human

The parties 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 $ 2.9 million through December 31, 2025, of which approximately $ 53,000 and $ 28,000 has been recognized as an advance payment

and is included in prepaid expenses and other current assets as of December 31, 2025 and 2024, respectively, and approximately $ 0.1 million

has been recognized as a liability and is included in accrued expenses and other current liabilities as of both December 31, 2025 and

In addition, approximately $ 0.3 million has been recognized as long-term within other assets as of both December 31, 2025 and 2024.

Scripps Research

On March 17, 2023, the Company and Scripps Research

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 $ 0.9 million to fund research relating to advancing the pre-clinical development of the Company’s

DNase technology.

entered into a Research Funding and Option Agreement (as amended to date, the “Agreement”), pursuant to which the Company

had agreed to provide 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

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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,

twelve (12) month period and to provide Scripps Research additional funding in an aggregate amount of up to approximately $ 0.4 million

to fund continuing research.

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

a negotiated budget, which provided for an initial payment of approximately $65,000 on the date of the Second Amendment and subsequent

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

All other terms of the Agreement remained unchanged.

Effective May 1, 2025, the Company and Scripps Research

entered into a Third Amendment to the Agreement (the “Third Amendment”), pursuant to which the Company expanded the services

to be performed under the Agreement and provided Scripps Research additional funding in an aggregate amount of up to approximately $ 0.4

million to fund continuing research.

The research funding was 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 $70,000 on the date of the Third Amendment and subsequent

monthly payments of approximately $70,000 over a 5-month period.

All other terms of the Agreement remained unchanged.

Effective November 1, 2025, the Company and Scripps

Research entered into a Fourth Amendment to the Agreement (the “Fourth Amendment”), pursuant to which the Company extended

and expanded the services to be performed under the Agreement and provided Scripps Research with additional funding in an aggregate

amount of up to approximately $ 0.3 million.

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 $85,000 on the effective date of the Fourth Amendment

and subsequent monthly payments of approximately $85,000 over a 3-month period.

All other terms of the Agreement remained unchanged.

Effective March 1, 2026, the Company and Scripps Research

entered into a Fifth Amendment to the Agreement (the “Fifth Amendment”), pursuant to which the Company extended and expanded

the services to be performed under the Agreement and agreed to provide Scripps Research additional funding in an aggregate amount of up

to approximately $ 0.5 million.

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 $80,000 on the effective date of the Fifth Amendment and subsequent

monthly payments of approximately $80,000 over a 5-month period.

All other terms of the Agreement remain unchanged.

The Company has incurred approximately $ 1.8 million

under the Agreement through December 31, 2025, of which approximately $ 0.2 million was included in accrued expenses and other current

There were no amounts accrued as of December 31, 2024.

University of Virginia (“UVA”)

On December 21, 2023, the Company entered into

a Research Funding and Material Transfer Agreement with UVA (the “UVA Agreement”) to advance the development of our systemic

DNase program.

Under the terms of the UVA Agreement, i n

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.

On December 21, 2023, the Company entered into a Research

Funding and Material Transfer Agreement with UVA (the “UVA Agreement”) to advance the development of our systemic DNase program.

Under the terms of the UVA Agreement, i n 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, oversees 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 2025.

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.

produced preclinical and translational data under the UVA Agreement and has investigated combinations of DNase I with immunotherapies

in models of primary and metastatic colorectal cancer.

The Company is currently in discussions with UVA concerning completion of current

activities and potential expansion of the scope of work under the UVA Agreement.

The Company paid UVA approximately $ 0.5 million

under the UVA Agreement through December 31, 2025, of which approximately $ 31,000 was recorded within accrued expenses and other current

liabilities as of December 31, 2025 and $ 0.1 million had been recognized as an advance payment and was included within prepaid expenses

and other current assets as of December 31, 2024.

PJSC Pharmsynthez

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development and commercialization of drug candidates outside of certain territories at the Company’s own expense.

Pharmsynthez directly, and indirectly through

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.

Pharmsynthez directly, and indirectly through its

wholly-owned subsidiary, SynBio, LLC (“SynBio”), had a share ownership in the Company of approximately 2.3 % and 3.4 % of the

total outstanding common stock as of December 31, 2025 and 2024, respectively.

In addition to its common stock ownership, Pharmsynthez

owns approximately 1.5 million shares of our outstanding Series B Preferred Stock (as defined in Note 9, Stockholders’ Equity.

In August 2011, SynBio and the Company entered

into a stock subscription and collaborative development agreement (the “Co-Development Agreement”).

The Company granted an

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

owns all of our outstanding Series B Preferred Stock (as defined in Note 8, Stockholders’ Equity.

In August 2011, SynBio and the Company entered into

a stock subscription and collaborative development agreement (the “Co-Development Agreement”).

The Company granted an 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 Commonwealth of Independent States, collectively

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to engage in research and development activities with no resultant commercial products.

In December 2020, Pharmsynthez reported positive

data from its Phase 3 clinical study of Epolong, a treatment for anemia in patients with chronic kidney disease leveraging the Company’s

PolyXen technology.

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.

Pharmsynthez received regulatory approval to commence

a Phase II(b)/III human clinical trial of ErepoXen (also known as Epolong) in Russia with patient recruitment completed in 2020.

2020, Pharmsynthez reported positive data from this trial of Epolong, a treatment for anemia in patients with chronic kidney disease leveraging

the Company’s PolyXen technology.

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 awaiting further feedback from regulatory authorities..

The Company did not recognize revenue

in connection with the Co-Development Agreement during the years ended December 31, 2025 and 2024.

Serum Institute of India Limited

In August 2011, the Company entered into a collaborative

research and development agreement with Serum Institute of India Limited (“Serum Institute”) providing Serum Institute an

exclusive license to use the Company’s PolyXen technology to research and develop one potential commercial product, Polysialylated

Erythropoietin.

Serum Institute is responsible for conducting all preclinical and clinical trials required to achieve regulatory approvals

within the certain predetermined territories at Serum Institute’s own expense.

Royalty payments are payable by Serum Institute to

the Company for net sales to certain customers in the Serum Institute sales territory.

There are no milestone or other research-related

payments due under the collaborative arrangement.

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 polysialic acid (“PSA’) supply in exchange for

the Company’s common stock .

As of December 31, 2023 the Company had classified $ 0.7

million of prepaid clinical supply as long-term as it did 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, 2024 and 2023.

Long-lived assets to be held and used are tested for

impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

While the prepayment remains

a valid claim for future PSA supply, the Company concluded that the following factors indicated that the long-lived asset was impaired:

the failure to identify potential third-party partners to develop, sell or license the PSA technology;

a change in both the Company’s

management and the Board of Directors (the “Board”);

and a decision by the Company and the Board to no longer pursue development

of the PSA supply and allow current patent protection for the PSA technology to lapse.

During the year ended December 31, 2024, the Company

recorded an asset impairment charge of $ 0.7 million, which is presented within research and development expenses in the consolidated statements

of operations, representing the excess of the long-lived asset’s carrying value over its estimated fair value.

As a result, there

was no clinical supply recorded as of December 31, 2024.

No long-lived asset impairment was recorded during the year ended December 31,

Accrued Expenses and other current liabilities

The Company entered into a collaborative research

and development agreement with Serum Institute of India Limited (“Serum Institute”) in 2011 providing Serum Institute an exclusive

license to use the Company’s PolyXen technology to research and develop one potential commercial product, Polysialylated Erythropoietin.

Serum Institute is responsible for conducting all preclinical and clinical trials required to achieve regulatory approvals within the

certain predetermined territories at Serum Institute’s own expense.

Royalty payments are payable by Serum Institute to the Company

for net sales to certain customers in the Serum Institute sales territory.

There are no milestone or other research-related payments due

under the collaborative arrangement.

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, 2025, 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, 2025 and 2024.

Accrued Expenses and other current liabilities

consist of the following:

Accrued expenses and other current liabilities consist

of the following:

Schedule of accrued expenses

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Total accrued expenses

On June 19, 2024, the Company entered into a confidential separation

agreement and general release with each of Jeffrey F.

On June 19, 2024, the Company entered into a confidential

separation agreement and general release with each of Jeffrey F.

Eisenberg, the Company’s former Chief Executive Officer (the “Eisenberg

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Eisenberg and Lockshin were each eligible for certain severance payments and benefits consistent

with the terms of their existing employment agreements as described under “Employment Agreements with our Named Executive Officers”

in our Proxy Statement on Schedule 14A filed by the Company with the SEC on October 31, 2024.

In addition, the Eisenberg Separation Agreement

provided for accelerated vesting of all of the unvested stock options held by Mr.

with the terms of their then current employment agreements.

In addition, the Eisenberg Separation Agreement provided for accelerated vesting

of all of the unvested stock options held by Mr.

Eisenberg as of May 16, 2024.

During the year ended

December 31, 2024, the Company expensed approximately $ 0.8 million of accrued payroll and benefits related to the Separation Agreements.

In addition, the Company recorded approximately $ 13,000 of share-based expense for the accelerated vesting of unvested stock options.

As of December 31, 2024, approximately $ 0.2 million was accrued within accrued expenses and other current liabilities related to these

During the year ended December 31, 2024, the Company expensed

approximately $ 0.8 million of accrued payroll and benefits related to the Separation Agreements.

In addition, the Company recorded approximately

$ 13,000 of share-based expense for the accelerated vesting of unvested stock options.

As of December 31, 2024, approximately $ 0.2 million

was accrued within accrued expenses and other current liabilities related to these obligations.

There was no expense recorded during the

year ended December 31, 2025 and there was no accrual as of December 31, 2025 as all obligations were settled during 2025.

Fair Value Measurements

ASC Topic 820, Fair Value Measurement,

defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between

market participants at the measurement date.

The Company applies the following fair value hierarchy, which prioritizes the inputs used

to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available

and significant to the fair value measurement.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities

that the reporting entity has the ability to access at the measurement date.

Level 2 utilizes quoted market prices in markets that are

not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Level 3 inputs are

unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement

As of December 31, 2024 and December 31, 2023, the carrying amounts of the Company’s financial instruments approximate fair

value due to their short maturities.

There were no financial instruments classified as Level 3 in the fair value hierarchy during the

years ended December 31, 2024 and 2023.

ASC Topic 820, Fair Value Measurement, defines

fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market

participants at the measurement date.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure

fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant

to the fair value measurement.

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that

the reporting entity has the ability to access at the measurement date.

Level 2 utilizes quoted market prices in markets that are not

active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Level 3 inputs are unobservable

inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

As of December 31, 2025 and December 31, 2024, the carrying amounts of the Company’s financial instruments approximate fair value

due to their short maturities.

There were no financial instruments classified as Level 3 in the fair value hierarchy during the years

ended December 31, 2025 and 2024.

Deferred tax assets and liabilities are determined

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2024, as the Company has incurred losses to date.

The components of loss before income taxes are

The components of loss before income taxes are as

Schedule of components of loss before income taxes

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$ ( 3,960,275 )

The reconciliation of

income tax benefit at the U.S.

corporation tax rate, being the rate applicable to the country of domicile of the Company to net income

tax benefit, is as follows:

Schedule of reconciliation of income tax provision

The reconciliation of income

tax benefit at the U.S.

corporation tax rate, being the rate applicable to the country of domicile of the Company to net income tax benefit,

is as follows:

Schedule of components of loss before income taxes

Year ended December 31,

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$ ( 831,658 )

Domestic Federal

Effect of cross-border tax laws

Change in valuation allowance

Permanent differences, net

Foreign rate differential

Share-based expense, net

Enhanced research and development tax credits

United Kingdom

Rate differential

Valuation allowance

Attribute adjustments

Net benefit for income taxes

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tax legislation.

These regulations may limit the future use of operating loss carryforwards (i) if there is a change in ownership and a change in the nature

or conduct of the business carried on by the Company, and (ii) in certain circumstances where there is a change in the nature or conduct

of the business only.

These regulations may limit the future use of operating loss carryforwards (i) if there is a change in ownership and a change in the

nature or conduct of the business carried on by the Company, and (ii) in certain circumstances where there is a change in the nature

or conduct of the business only.

In such cases the carryforwards would cease to be available to set against future income.

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The Company files income tax returns in the U.S.

federal tax jurisdiction, Massachusetts state tax jurisdiction, and certain foreign tax jurisdictions.

The Company is subject to examination

tax jurisdiction, Massachusetts state tax jurisdiction, and certain foreign tax jurisdictions.

The Company is subject to examination by

federal, state, foreign, and local income tax authorities for calendar tax years through 2025 due to available net operating

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Potential 382 Limitation

The Company’s net operating loss and tax

credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service.

The Company’s ability to utilize

its net operating loss (“NOL”) and research and development credit (“R&D”) carryforwards may be substantially

The Company’s net operating loss and tax credit

carryforwards are subject to review and possible adjustment by the Internal Revenue Service.

The Company’s ability to utilize its

net operating loss (“NOL”) and research and development credit (“R&D”) carryforwards may be substantially

limited due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Code, as

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outstanding stock of a company by certain stockholders or public groups.

The Company has not completed a study to assess

whether one or more ownership changes have occurred since it became a loss corporation as defined in Section 382 of the Code, but the

Company believes that it is likely that an ownership change has occurred.

If the Company has experienced an ownership change, utilization

of the NOL and R&D credit carryforwards would be subject to an annual limitation, which is determined by first multiplying the value

of the Company’s common stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be

subject to additional adjustments, as required.

Any such limitation may result in the expiration of a portion of the NOL or R&D credit

carryforwards before utilization.

Until a study is completed, and any limitation known, no amounts are being considered as an uncertain

tax position or disclosed as an unrecognized tax benefit.

Any carryforwards that expire prior to utilization as a result of such limitations

will be removed from deferred tax assets with a corresponding adjustment to the valuation allowance.

Due to the existence of the valuation

allowance, it is not expected that any potential limitation will have a material impact on the Company’s operating results.

From time to time the Company may be assessed

interest or penalties by major tax jurisdictions, namely the Commonwealth of Massachusetts.

As of December 31, 2024, the Company had no

material unrecognized tax benefits and no adjustments to liabilities or operations were required.

No interest and penalties have been

recognized by the Company to date.

The Company has not completed a study to assess whether

one or more ownership changes have occurred since it became a loss corporation as defined in Section 382 of the Code, but the Company

believes that it is likely that an ownership change has occurred.

If the Company has experienced an ownership change, utilization of the

NOL and R&D credit carryforwards would be subject to an annual limitation, which is determined by first multiplying the value of the

Company’s common stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject

to additional adjustments, as required.

Any such limitation may result in the expiration of a portion of the NOL or R&D credit carryforwards

before utilization.

Until a study is completed, and any limitation known, no amounts are being considered as an uncertain tax position

or disclosed as an unrecognized tax benefit.

Any carryforwards that expire prior to utilization as a result of such limitations will be

removed from deferred tax assets with a corresponding adjustment to the valuation allowance.

Due to the existence of the valuation allowance,

it is not expected that any potential limitation will have a material impact on the Company’s operating results.

From time to time the Company may be assessed interest

or penalties by major tax jurisdictions, namely the Commonwealth of Massachusetts.

As of December 31, 2025, the Company had no material

unrecognized tax benefits and no adjustments to liabilities or operations were required.

No interest and penalties have been recognized

by the Company to date.

Stockholders’ Equity

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or winding-up of the Company, the holders of common stock are entitled to share ratably in the assets of the Company available for distribution.

On May 11, 2023, the Company filed a Certificate

of Change to the Company’s Articles of Incorporation with the Secretary of State of Nevada to effect the Reverse Stock Split.

Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 15, 2023.

No fractional shares were issued as a result of the Reverse

Stock Split and any remaining share fractions were rounded up to the nearest whole share, resulting in 15,941 new shares of common stock

being issued to existing holders of the Company’s common stock.

At the Market (“ATM”) Offering

On November 19, 2021, the Company entered into

an ATM Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC, as the exclusive sales agent (“Wainwright”),

pursuant to which the Company may offer and sell, from time to time through Wainwright, shares of its common stock, par value $ 0.001 per

The offer and sale of the shares will be made pursuant to a shelf registration statement on Form S-3 and the related prospectus,

and is limited to a number of securities the Company can sell pursuant to General Instruction I.B.6 of Form S-3.

In October 2024, the

Company filed a new shelf registration statement on Form S-3 (the “2024 Shelf Registration”) replacing the previously filed

shelf registration statement.

The ATM Offering was not updated in connection the 2024 Shelf Registration and, as a result, is not currently

No shares were sold under the ATM Agreement during

the years ended December 31, 2024 and 2023.

The Company incurred approximately $ 0.2 million of costs associated with the ATM offering

which were expensed during the year ended December 31, 2023.

Series A Preferred Stock

The Company has designated

1,000,000 shares as Series A preferred stock with each share having a par value of $0.001 and stated value of $ 4.80 (the “Series

A Preferred Stock”).

During 2023, the holder of the Series A Preferred Stock converted all of their shares into 8,084 shares of

Company common stock.

As a result, there was no Series A Preferred Stock outstanding as of both December 31, 2024 and 2023.

Underwritten Public Offering

On October 10, 2025, the Company entered into an underwriting agreement

with Canaccord Genuity LLC as representative of the underwriters named therein, relating to an underwritten public offering (the “Offering”)

of 735,000 shares of the Company’s common stock, par value $0.001 per share, at a public offering price of $ 6.12 per share.

proceeds from the Offering were approximately $ 4.0 million after deducting underwriting discounts and commissions and other offering expenses

of approximately $ 0.5 million paid by the Company.

The shares were offered by the Company pursuant to a prospectus supplement to the Company’s

effective shelf registration statement on Form S-3 (Registration No.

333-282756), which was initially filed with the SEC on October 21,

2024, and was declared effective on November 1, 2024.

The Offering closed on October 14, 2025.

Series B Preferred Stock

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share to approximately 0.033 common share basis, subject to an issuable maximum and the adjustments described below.

There were no Series

B Preferred Stock conversions during the years ended December 31, 2024 and 2023.

Subsequent Equity

The Series B Preferred Stock has ratchet price based anti-dilution protection, subject to customary

carve outs, in the event of a down-round financing at a price per share below the stated value of the Series B Preferred Stock.

is no bifurcation of the embedded conversion option being clearly and closely related to the host instrument.

The Series B Preferred

Stock has additional terms covering stock dividends and splits, voting rights, fractional shares and fundamental transactions.

of December 31, 2024 and 2023, there were approximately 1.8 million shares of Series B Preferred Stock issued and outstanding which are

convertible into approximately 60,000 shares of common stock in each year, which represents the issuable maximum that can be issued upon

the conversion of the currently outstanding Series B Preferred Stock.

Warrants Related to Financing Arrangements

has warrants to purchase approximately 462,963 shares of the Company’s common stock (the “Series A Warrants”) outstanding

as of both December 31, 2024 and December 31, 2023.

The Series A Warrants are immediately exercisable at a price of $ 33.00 per share of

common stock and expire on February 23, 2025 .

No Series A Warrants were exercised or forfeited during the year ended December 31, 2024

Subsequent Equity Sales .

Series B Preferred Stock has ratchet price based anti-dilution protection, subject to customary carve outs, in the event of a down-round

financing at a price per share below the stated value of the Series B Preferred Stock.

There is no bifurcation of the embedded conversion

option being clearly and closely related to the host instrument.

The Series B Preferred Stock has additional

terms covering stock dividends and splits, voting rights, fractional shares and fundamental transactions.

As of December 31, 2025 and

2024, there were approximately 1.5

million and 1.8

million shares of Series B Preferred Stock issued and outstanding, respectively, which are convertible into approximately 45,000

shares of common stock in each year, respectively, which represents the issuable maximum that can be issued upon the conversion of the

currently outstanding Series B Preferred Stock.

During the year ended December 31, 2025, approximately 350,000

shares of Series B Preferred Stock were converted into approximately 14,000

shares of common stock.

There were no

conversions during the year ended December 31, 2024.

had warrants to purchase approximately 462,963 shares of the Company’s common stock (the “Series A Warrants”) outstanding

as of December 31, 2024.

These warrants expired in February 2025 and, as a result, no Series A Warrants were outstanding as of December

No Series A Warrants were exercised or forfeited during the years ended December 31, 2025 and 2024.

The Company also has warrants to purchase approximately

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issuance is lower than the then-applicable exercise price per share, each warrant may be exercised, at the option of the holder, on a

cashless basis for one share of common stock, as adjusted for the Reverse Stock Split.

Warrants to purchase approximately 1,038 shares

of common stock were exercised on a cashless, one-for-one basis during the year ended December 31, 2024.

None of these warrants were exercised

or forfeited during the year ended December 31, 2023.

All of the remaining public warrants outstanding as of July 19, 2024 expired, and

no public warrants were outstanding at December 31, 2024.

cashless basis for one share of common stock, as adjusted for stock splits.

Warrants to purchase approximately 1,038 shares of common

stock were exercised on a cashless, one-for-one basis during the year ended December 31, 2024.

All of the remaining public warrants outstanding

as of July 19, 2024 expired, and no public warrants were outstanding at each of December 31, 2025 and 2024.

Share-Based Expense

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Stock Options

The Company grants stock option awards and RSUs

to employees and non-employees with varying vesting terms under the Xenetic Biosciences, Inc.

The Company grants stock option awards and RSUs to

employees and non-employees with varying vesting terms under the Xenetic Biosciences, Inc.

Amended and Restated Equity Incentive Plan.

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31, 2025 and 2024.

During the year ended December 31, 2024, 32,535 shares having a weighted average grant date fair value of $ 40.07 per

option were forfeited.

No employee stock options were forfeited or expired during the year ended December 31, 2023.

During the years ended December 31, 2025 and 2024, 93,231 and 32,535 shares having a weighted average grant date fair

value of $ 57.11 and $ 40.07 per option, respectively, were forfeited.

During the years ended December 31, 2025 and 2024,

53,750 and 33,333 total stock options vested, respectively, with total fair values of approximately $ 0.3 million in both periods.

December 31, 2024, there was approximately $ 0.1 million of unrecognized share-based payments related to employee stock options that are

expected to vest.

The Company expects to recognize this expense over a weighted-average period of approximately 2.1 years.

Key assumptions used in the Black-Scholes option

pricing model for options granted to employees during the years ending December 31, 2024 and 2023 are as follows:

18,749 and 53,750 total stock options vested, respectively, with total fair values of approximately $ 0.1 million and $ 0.3 million in December

31, 2025 and 2024, respectively.

As of December 31, 2025, there was approximately $ 0.1 million of unrecognized share-based payments related

to employee stock options that are expected to vest.

The Company expects to recognize this expense over a weighted-average period of approximately

Key assumptions used in the Black-Scholes option pricing

model for options granted to employees during the years ending December 31, 2025 and 2024 are as follows:

Schedule of assumptions used

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Weighted-average exercise price ($)

The following is a summary of employee stock option activity for the

years ended December 31, 2024 and 2023:

The following is a summary of employee stock option activity for the years

ended December 31, 2025 and 2024:

of option activity

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Exercisable as of December 31, 2025

A summary of the status

of the Company’s non-vested employee stock option shares as of December 31, 2024, and the changes during the year ended December

31, 2024, is as follows:

A summary of the status of the Company’s non-vested employee stock

option shares as of December 31, 2025, and the changes during the year ended December 31, 2025, is as follows:

Schedule of non-vested options

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Balance as of December 31, 2025

Restricted Stock

There were 417 RSUs outstanding

as of December 31, 2023.

The RSUs were fully vested and had a grant date fair value of $ 253.70 per share.

No RSUs were granted or expired

during the years ended December 31, 2024 and 2023.

During the year ended December 31, 2024, the Company issued 417 shares of common stock

representing the exercise of all outstanding RSUs.

As a result, no RSUs were outstanding at December 31, 2024.

Restricted Stock Units

There were 417 fully vested

RSUs with a grant date fair value of $ 253.70 per share outstanding as of December 31, 2023.

No RSUs were granted or expired during the

years ended December 31, 2025 and 2024.

During the year ended December 31, 2024, the Company issued 417 shares of common stock representing

the exercise of all outstanding RSUs.

As a result, no RSUs were outstanding at both December 31, 2025 and 2024.

Non-Employee Stock

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of common stock were granted or exercised during the years ended December 31, 2025 and 2024.

No compensation expense related to non-employee

options during the years ended December 31, 2024 and December 31, 2023 as all non-employee stock options were fully vested as of December

The following is a summary of non-employee stock

option activity for the years ended December 31, 2024 and 2023:

stock option grants to purchase 253 shares of common stock expired during the year ended December 31, 2025, representing all remaining

outstanding option grants.

As a result, no non-employee stock option grants were outstanding as of December 31, 2025.

compensation expense related to non-employee options during the years ended December 31, 2025 and December 31, 2024 as all non-employee

stock options became were fully vested.

The following is a summary of non-employee stock option

activity for the years ended December 31, 2025 and 2024:

Schedule of option activity

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Exercisable as of December 31, 2025

Common Stock Awards

The Company has granted common stock awards to

non-employees in exchange for services provided.

The Company measures the fair value of these awards using the fair value of the services

provided or the fair value of the awards granted, whichever is more reliably measurable.

The fair value measurement date of these awards

is generally the date the performance of services is complete.

The fair value of the awards is recognized as services are rendered on

a straight-line basis.

No common stock awards were granted or issued during the years ended December 31, 2024 and 2023.

Joint Share Ownership Plan

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Commitments and Contingencies

The Company determines whether an arrangement

is a lease at inception.

The Company determines whether an arrangement is a

lease at inception.

The Company leases office space in a shared office location in Framingham, Massachusetts.

As this lease had a

term of 6 months at inception, the Company did not apply the provisions of ASU 2016-02 and will account for it as an operating lease.

As of December 31, 2024, total minimum lease payments on this lease were approximately $ 3,000 .

The Company did not apply the provisions of ASU

2016-02 to the lease of its office space in Miami, Florida as this lease had a term of 12 months at inception.

As a result, the Company

accounts for it as an operating lease.

This lease was terminated in November 2024 and no further minimum lease payments are due.

As this lease had a term

of 6 months at inception, the Company did not apply the provisions of ASU 2016-02 and will account for it as an operating lease.

December 31, 2025, total minimum lease payments on this lease were approximately $ 7,000 , representing a 6 month extension effective from

January 1, 2026 through June 30, 2026.

Letter of Credit

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Related Party Transactions

The Company has entered into various research,

development, license and supply agreements with Serum Institute and Pharmsynthez, each a related party whose relationship, ownership,

and nature of transactions is disclosed within other sections of these footnotes.

Please refer to Note 4, Significant Strategic Collaborations,

and Note 5, Other Assets , for details on arrangements with collaboration partners that are also related parties.

During the fourth quarter

of 2019, the Company entered into a loan agreement with Pharmsynthez (the “Pharmsynthez Loan”), pursuant to which the Company

advanced Pharmsynthez an aggregate principal amount of up to $ 500,000 to be used for the development of a specific product under the Company’s

Co-Development Agreement with Pharmsynthez.

The Pharmsynthez Loan had an initial term of 15-months and accrued interest at a rate of 10 %

The Pharmsynthez Loan was guaranteed by all of the operating subsidiaries of Pharmsynthez, including SynBio and AS Kevelt,

and was secured by all of the common and preferred stock of the Company owned by Pharmsynthez and SynBio.

Pharmsynthez paid all

obligations due under the Pharmsynthez Loan in May 2023, and no further amounts are due under the Pharmsynthez Loan.

As a result, no amounts

were outstanding as of December 31, 2024 and December 31, 2023.

The Company did not recognize any interest income related to the Pharmsynthez

Loan during the year ended December 31, 2024.

The Company recognized approximately $ 65,000 of income related to interest and fees associated

with the Pharmsynthez Loan including approximately $ 40,000 related to interest income during the twelve months ended December 31, 2023.

During the fourth quarter of 2024, the Company

entered into a clinical trial services agreement with PeriNess Ltd.

(“PeriNess”) to advance the Company’s development

program for its systemic DNase I technology in Israeli medical centers.

The Company has entered into various research, development,

license and supply agreements with Pharmsynthez, a related party whose relationship, ownership, and nature of transactions is disclosed

within other sections of these footnotes.

Please refer to Note 4, Significant Strategic Collaborations for details on these arrangements.

During the fourth quarter of 2024, the Company entered

into a clinical trial services agreement with PeriNess Ltd.

(“PeriNess”) to advance the Company’s development program

for its systemic DNase I technology in Israeli medical centers.

One of our directors, Dr.

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The Company expensed

approximately $ 50,000 related to this agreement during the year ended December 31, 2024.

As of December 31, 2024, approximately $ 45,000

was recorded as an advanced payment and included in Prepaid expenses and other on the December 31, 2024 consolidated balance sheet.

approximately $ 123,000 and $ 50,000 under this agreement during the years ended December 31, 2025 and December 31, 2024, respectively.

As of December 31, 2025 and 2024, approximately $ 50,000 was recorded as an advanced payment and included in prepaid expenses and other

current assets within the consolidated balance sheet in both years.

In addition, and approximately $ 28,000 and $ 8,000 was reflected in

accounts payable on the December 31, 2025 and 2024 consolidated balance sheet, respectively.

During the first quarter of 2025, the Company entered

into a Consulting Agreement with Dr.

Dmitry Genkin, Chairman of our Board, to provide consulting services related to the Company’s

DNase-based oncology program.

This agreement was effective January 1, 2025 and the Company paid Dr.

Genkin approximately $ 0.4

million during the year ended December 31, 2025, of which approximately $ 30,000

was reflected within accounts payable as of December 31, 2025.

Genkin does not receive any fees for his service as a member of the

Subsequent Events

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to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring

recognition or disclosure in the financial statements.

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

recognition or disclosure in the financial statements except as described in Note 4, Significant Strategic Collaborations .

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

Not applicable.

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 8. Financial Statements and Supplementary Data