What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-12 compared with 2025-11-12 · 88 added, 156 removed, 198 unchanged (55% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,”

“plan,” “anticipate,” “believe,” “estimate,” “seek,” “approximately,”

“intend,” “predict,” “potential,” “projects,” “upcoming”, “opportunity”,

“target” or “continue,” or the negative of such terms and other comparable terminology.

Although we believe that

the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, the

levels of activity, performance or achievements.

These statements involve known and unknown risks and uncertainties that may cause our

or our industry's results, levels of activity, performance or achievements to be materially different from those expressed or implied

by forward-looking statements.

“anticipate,” “believe,”

“estimate,” “seek,” “approximately,” “intend,” “predict,” “potential,”

“projects,” “upcoming”, “opportunity”, “target” or “continue,” or the negative

of such terms and other comparable terminology.

Although we believe that the expectations reflected in the forward-looking statements

contained herein are reasonable, we cannot guarantee future results, the levels of activity, performance or achievements.

These statements

involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance or achievements

to be materially different from those expressed or implied by forward-looking statements.

The Management’s Discussion and Analysis

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cause actual results to differ materially include without limitation:

risks and uncertainties as to the outcome and timing of the strategic review

process being conducted by the Company’s board of directors (the “Board”) and a special independent committee thereof,

including the possibility that the Board may decide not to undertake a strategic alternative following the evaluation process;

the Company’s

inability to consummate any proposed strategic alternative resulting from the review due to, among other things, market, regulatory and

other factors;

risks and uncertainties as to the outcome and timing of the strategic review process being conducted by the Company’s board of directors (the “Board”) and a special independent committee thereof, including the possibility that the Board may decide not to undertake a strategic alternative following the evaluation process;

the Company’s inability to consummate any proposed strategic alternative resulting from the review due to, among other things, market, regulatory and other factors;

the potential for disruption to our business resulting from the review process;

and potential adverse effects on the Company’s

stock price from the announcement, suspension or consummation of the evaluation process and the results thereof, as well as risks and

uncertainties related to the potential impacts of consummation of a strategic transaction on the Company’s current business operations,

anticipated business strategy and product development plans;

and potential adverse effects on the Company’s stock price from the announcement, suspension or consummation of the evaluation process and the results thereof, as well as risks and uncertainties related to the potential impacts of consummation of a strategic transaction on the Company’s current business operations, anticipated business strategy and product development plans;

uncertainty of the expected financial performance of the Company;

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Although we hold a broad patent portfolio, the focus of our internal efforts during

the nine months ended September 30, 2025, was on the advancement of our DNase technology.

the three months ended March 31, 2026, was on the advancement of our DNase technology.

Recent Developments

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a “reverse merger”.

An independent committee of the Board has engaged in preliminary discussions with third parties regarding

An independent committee of the Board has engaged in discussions with third parties regarding

potential transactions.

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of the potential transaction.

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

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

impact of a transaction, if any.

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RESULTS OF OPERATIONS

Comparison of Quarter Ended September 30,

2025 and 2024

Comparison of Quarter Ended March 31, 2026

The comparison of our historical results of operations

for the fiscal quarter ended September 30, 2025 to the fiscal quarter ended September 30, 2024 is as follows:

for the fiscal quarter ended March 31, 2026 to the fiscal quarter ended March 31, 2025 is as follows:

Quarter Ended

September 30, 2025

March 31, 2026

Quarter Ended

September 30, 2024

March 31, 2025

Royalty revenue

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Loss from operations

Other income:

Other (expense) income:

Other (expense) income

Interest income, net

Revenue for the three months ended September 30,

Revenue for the three months ended March 31, 2026

increased by approximately $0.2 million, or 36.0%, to approximately $0.8 million from approximately $0.6 million for the three months

ended September 30, 2024.

ended March 31, 2025.

This increase represented an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals

(“Takeda”) as compared to the same period in 2024 primarily due to royalties recognized from certain countries during

the third quarter of 2025 compared to the same period in 2024.

as compared to the same period in 2025 primarily due to royalties recognized from certain countries during the first quarter

of 2026 compared to the same period in 2025.

Research and Development Expenses

Research & development (“R&D”)

expenses for the three months ended September 30, 2025 increased by approximately $0.4 million, or 105.6%, to approximately $0.8 million

from $0.4 million in the comparable quarter in 2024.

The table below sets forth the R&D costs incurred by the Company by category

of expense for the quarters ended September 30, 2025 and 2024:

expenses for the three months ended March 31, 2026 decreased by approximately $0.2 million, or 24.8%, to approximately $0.7 million from

approximately $0.9 million in the comparable quarter in 2025.

The table below sets forth the R&D costs incurred by the Company by

category of expense for the quarters ended March 31, 2026 and 2025:

Quarter Ended

Category of Expense

September 30,

March 31, 2026

March 31, 2025

Outside services and contract research organizations

Total research and development expense

The increase in

outside services and contract research organizations expense was primarily due to increased manufacturing development efforts and

pre-clinical research as well as increased consulting costs during the three months ended September 30, 2025 compared to the same

period as last year.

General and Administrative Expenses

General and administrative expenses for the three

months ended September 30, 2025 increased by approximately $0.1 million, or 9.3%, to approximately $0.8 million from approximately $0.7

million in the comparable quarter in 2024.

The increase was primarily due to increased legal costs in connection with our strategic review process.

Other income was approximately $4,000 for the

three months ended September 30, 2025 compared to approximately $1,500 of other income for the comparable quarter in 2024.

This increase

in other income was primarily related to favorable changes in foreign currency exchange rates during the three months ended September

30, 2025 as compared to the same period in 2024.

Interest Income, net

Interest income, net decreased to approximately

$31,000 during the three months ended September 30, 2025 as compared to approximately $61,000 for the same period in the prior year.

decrease is primarily due to lower average invested funds during the three months ended September 30, 2025 as compared to the same period

Comparison of Nine Months Ended September

30, 2025 and 2024

The comparison of our historical results of operations

for the nine months ended September 30, 2025 to the nine months ended September 30, 2024 is as follows:

September 30,

Royalty revenue

Operating costs and expenses:

Research and development

General and administrative

Total operating costs and expenses

Loss from operations

Other income:

Interest income, net

$ (2,101,784 )

$ (2,905,754 )

Revenue for the nine months ended September 30,

2025 increased by approximately $0.4 million, or 19.4%, to approximately $2.2 million from approximately $1.9 million for the nine months

ended September 30, 2024.

This increase represented an increase in royalty revenue related to our sublicense agreement with Takeda as

compared to the same period in 2024 primarily due to royalties recognized from certain countries during the nine months ended September

30, 2025 compared to the same period in 2024.

Research and Development Expenses

R&D expenses for the nine months ended September

30, 2025 increased by approximately $46,000, or 2.0%, to approximately $2.3 million from approximately $2.2 million in the comparable

The decrease in outside

services and contract research organizations expense was primarily due to a decrease in pre-clinical and exploratory study costs both

partially offset by an increase in manufacturing development efforts during the three months ended March 31, 2026 compared to the same

period in 2025.

The table below sets forth the R&D costs incurred by the Company by category of expense for the nine months ended

September 30, 2025 and 2024:

Nine Months Ended,

Category of Expense

September 30,

Outside services and contract research organizations

Personnel costs

Share-based expense

Total research and development expense

The increase in outside

services and contract research organizations expense was primarily due to increased consulting and manufacturing development efforts as well as

costs incurred in connection with the commencement of exploratory studies during the nine months ended September 30, 2025.

in personnel costs and share-based expense during the nine months ended September 30, 2025 was related to certain severance and benefits

expensed in connection with a separation agreement entered into during the second quarter of 2024 with our former Chief Scientific Officer.

General and Administrative Expenses

General and administrative expenses for the nine

months ended September 30, 2025 decreased by approximately $0.6 million, or 21.4%, to approximately $2.1 million from approximately $2.7

million in the comparable period in 2024.

The decrease was primarily due to certain severance and benefits expensed in connection with

a separation agreement entered into during the second quarter of 2024 with our former Chief Executive Officer.

This decrease was partially

offset by an increase in legal costs.

Other income was approximately $5,600 for the

nine months ended September 30, 2025 compared to approximately $1,500 for the comparable period in 2024.

This increase in other income

was primarily related to favorable changes in foreign currency exchange rates during the nine months ended September 30, 2025 as compared

General and administrative expenses for the three

months ended March 31, 2026 decreased by approximately $9,000, or 1.4%, to approximately $648,000 from approximately $657,000 in the comparable

quarter in 2025.

The decrease was primarily due to a decrease in personnel costs and share-based expense related to our interim Chief

Executive Officer substantially offset by an increase in legal expense related to our strategic review process during the first quarter

of 2026 compared to the same period in 2025.

Other (Expense) Income

Other expense was approximately $21 for the three

months ended March 31, 2026 compared to approximately $78 of other income for the comparable quarter in 2025.

This increase in other expense

was primarily related to unfavorable changes in foreign currency exchange rates during the three months ended March 31, 2026 as compared

to the same period in 2025.

Interest Income

Interest income, net decreased to approximately

$104,000 during the nine months ended September 30, 2025 as compared to approximately $198,000 for the same period in the prior year.

This decrease is primarily due to lower average invested funds during the nine months ended September 30, 2025 as compared to the same

period in 2024.

Interest Income, net

Interest income, net increased to approximately

$46,000 during the three months ended March 31, 2026 as compared to approximately $39,000 for the same period in the prior year.

increase is primarily due to higher average invested funds during the three months ended March 31, 2026 as compared to the same period

Liquidity and Capital Resources

We incurred a net loss

of approximately $2.1 million for the nine months ended September 30, 2025.

We had an accumulated deficit of approximately $199.3 million

at September 30, 2025, as compared to an accumulated deficit of approximately $197.2 million at December 31, 2024.

Working capital was

approximately $4.0 million at September 30, 2025, and approximately $5.7 million at December 31, 2024.

During the nine months ended September

30, 2025, our working capital decreased by approximately $1.7 million primarily due to our net loss for the nine months ended September

of approximately $456,000 for the three months ended March 31, 2026.

We had an accumulated deficit of approximately $200.3 million at

March 31, 2026, as compared to an accumulated deficit of approximately $199.9 million at December 31, 2025.

Working capital was approximately

$6.6 million at March 31, 2026, and approximately $7.1 million at December 31, 2025, respectively.

During the three months ended March

31, 2026, our working capital decreased by approximately $445,000 primarily due to our net loss for the three months ended March 31, 2026.

Our principal source

of liquidity consists of cash.

At September 30, 2025, we had approximately $4.1 million in cash and approximately $1.1 million in current

At December 31, 2024, we had approximately $6.2 million in cash and $0.9 million in current liabilities.

We have historically

relied upon sales of our equity securities to fund our operations.

At March 31, 2026, we had approximately $7.3 million in cash and $1.0 million in current liabilities.

December 31, 2025, we had approximately $7.9 million in cash and $1.0 million in current liabilities.

We have historically relied upon

sales of our equity securities to fund our operations.

We evaluate whether there

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for a period of at least twelve months from the date of the issuance of these financial statements.

In addition, subsequent to quarter

end, we raised approximately $3.9 million in an underwritten offering of common stock.

However, we anticipate we will need additional

capital in the long-term to pursue our business initiatives.

While we believe we 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 our clinical

development programs, our ability to identify and enter into licensing or other strategic arrangements, our continued listing on the Nasdaq,

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

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 net

proceeds of approximately $4.0 million in an underwritten public offering of common stock in October 2025.

However, we anticipate we will

need additional capital in the long-term to pursue our business initiatives.

While we believe that we 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 our product development programs, our ability to identify and enter into licensing or other strategic

arrangements, our continued listing on Nasdaq, and factors related to financial, economic, geo-political, industry and market conditions,

many of which are beyond our control.

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

and extent of any future financing uncertain.

Cash Flows from Operating Activities

Cash flows used in operating activities for the

nine months ended September 30, 2025 totaled approximately $2.0 million, which was primarily due to our net loss for the period, partially

offset by non-cash charges associated with share-based expense.

The decrease in other assets was due to the reclassification of long-term

assets to prepaid expenses and other current assets as of September 30, 2025.

In addition to the increase of $0.3 million due to the reclassification

from other assets, prepaid expenses and other increased approximately $0.2 million and current liabilities increased approximately $0.2

million during the period.

Cash flows used in operating activities for the nine months ended September 30, 2024 totaled approximately

$2.1 million, which was primarily due to our net loss for the period, partially offset by non-cash charges associated with share-based

expense during the period.

In addition, prepaid expenses and other decreased approximately $0.4 million and current liabilities increased

approximately $0.2 million during the period.

three months ended March 31, 2026 totaled approximately $0.5 million, which was primarily due to our net loss for the period and, to a

lesser extent, a decrease in accounts payable, accrued expenses and other liabilities.

Cash flows used in operating activities

for the three months ended March 31, 2025 totaled approximately $1.0 million, which was primarily due to our net loss for the period and,

to a lesser extent, a decrease in accounts payable, accrued expenses and other liabilities due to payments made in accordance

with severance arrangements.

Cash Flows from Investing Activities

There were no cash flows from investing activities

for the nine months ended September 30, 2025 and 2024.

Cash Flow from Financing Activities

for the three months ended March 31, 2026 and 2025.

Cash Flows from Financing Activities

There were no cash flows from financing activities

for the nine months ended September 30, 2025 and 2024.

for the three months ended March 31, 2026 and 2025.

Contractual Obligations and Commitments

As of September 30, 2025, there were no material

changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December

31, 2024, filed with the SEC on March 18, 2025, as amended on April 29, 2025 and May 13, 2025.

As of March 31, 2026, there were no material changes

in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31,

2025, filed with the SEC on March 12, 2026, as amended on April 24, 2026.

Off Balance Sheet Arrangements

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See Note 3 in our Annual Report on Form 10-K for

the year ended December 31, 2024, filed with the SEC on March 18, 2025, as amended on April 29, 2025 and May 13, 2025, for a discussion

of recent accounting standards.

the year ended December 31, 2025, filed with the SEC on March 12, 2026, as amended on April 24, 2026, for a discussion of recent accounting

Critical Accounting Estimates

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those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026,

as amended on April 29, 2025 and May 13, 2025.

as amended on April 24, 2026.

ITEM 3 – QUANTITATIVE AND QUALITATIVE

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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-Q

Item 2. Management’s Discussion and Analysis