Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere in this Form 10-Q as well as our Annual Report on Form 10-K for the year ended December 31, 2024, filed on March 14, 2025.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding our future performance, business prospects, events and product development plans. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. These forward-looking statements include statements about our strategies, objectives and our goals. To the extent statements in this Quarterly Report involve, without limitation, our expectations for growth, estimates of future revenue, our sources and uses of cash, our liquidity needs, our current or planned clinical trials or research and development activities, product development timelines, our future products, regulatory matters, expense, profits, cash flow balance sheet items or any other guidance on future periods, these statements are forward-looking statements.

These statements are often, but not always, made through the use of word or phrases such as "believe," "will," "expect," "anticipate," "estimate," "intend," "plan," and "would. "These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements. Actual events or results may differ materially from those discussed in this Quarterly Report on Form 10-Q. Except as may be required by applicable law, we undertake no obligation to update any forward-looking statements or to reflect events or circumstances arising after the date of this Report.

Important factors that could cause actual results to differ materially from those in these forward-looking statements are in the section entitled "Risk Factors" located in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and the other risks and uncertainties described elsewhere in this report as well as other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and other communications. In addition, the statements contained throughout this Quarterly Report concerning future events or developments or our future activities, including concerning, among other matters, current or planned clinical trials, anticipated research and development activities, anticipated dates for commencement of clinical trials, anticipated completion dates of clinical trials, anticipated meetings with the FDA or other regulatory authorities concerning our product candidates, anticipated dates for submissions to obtain required regulatory marketing approvals, anticipated dates for commercial introduction of products, and other statements concerning our future operations and activities, are forward-looking statements that in each instance assume that we are able to obtain sufficient funding in the near term and thereafter to support such activities and continue our operations and planned activities in a timely manner. There can be no assurance that this will be the case. Also, such statements assume that there are no significant unexpected developments or events that delay or prevent such activities from occurring. Failure to timely obtain sufficient funding, or unexpected developments or events, could delay the occurrence of such events or prevent the events described in any such statements from occurring.

Overview

We are a development-stage biopharmaceutical company dedicated to the research and development of nasal delivery pharmaceutical therapies targeting neurological conditions and infectious diseases. The Company is currently focused on advancing the development and commercialization of its lead product candidate, ONP-002. Our lead product, ONP-002, is a fully synthetic, non-naturally occurring neurosteroid, is lipophilic, and we believe it can cross the blood-brain barrier with the goal of rapidly eliminating swelling, oxidative stress and inflammation while restoring proper blood flow through gene amplification.

Our ONP-002 Neurology Asset for Brain Related Illness and Injury

Our lead product and focus are on the development and commercialization of ONP-002 for the treatment of mild traumatic brain injury ("mTBI" or "Concussion").

ONP-002, together with our other neurology assets, are referred to herein as the Neurology Assets. To date, ONP-002 has been shown to be stable up to 104 degrees for 18 months. The drug candidate is manufactured into a powder and filled into a novel intranasal device. The drug is then administered through the nasal passage from the device. The novel intranasal device is lightweight and easy to use in the field.

We believe the proprietary powder formulation and intranasal administration allows for rapid and direct accessibility to the brain. The device is breath propelled and is designed to allow patients to blow into the device which closes the soft palate in the back of the nasopharynx, preventing the flow of drug to the lungs or esophagus, minimizes system exposure and side effects, and effectively crosses the blood brain barrier. This mechanism is designed to trap ONP-002 in the nasal cavity allowing for more abundant and faster drug availability in the traumatized brain.

Expected ONP-002 Product Development Timeline:

Pre-clinical Animal Studies		Phase 1		Phase 2a		Phase 2b		Phase 3
Complete		Complete		Estimated Q4 2025 start		Estimated Q4 2026 start		Estimated Q4 2027 start

This product development plan is an estimate and is subject to change based on funding, technical risks and regulatory approvals.

Business Development Strategy

Success in the biopharmaceutical and product development industry relies on the continuous development of novel product candidates. Most product candidates do not make it past the clinical development stage, which forces companies to look externally for innovation. Accordingly, we expect, from time to time, to seek strategic opportunities through various forms of business development, which can include strategic alliances, licensing deals, joint ventures, collaborations, equity or debt-based investments, dispositions, mergers, and acquisitions. We view these business development activities as a necessary component of our strategies, and we seek to enhance shareholder value by evaluating business development opportunities both within and complementary to our current business, as well as opportunities that may be new and separate from the development of our existing product candidates.

Recent Funding

Stock Sale

In February 2025, we sold 260,000 shares pursuant to our ATM Agreement with Dawson James for net proceeds of $2.6 million. See Note 7 of Notes to Consolidated Financial Statements.

On July 2, 2025, we completed a public offering of 660,000 shares of Series H Convertible Preferred Stock and 660,000 common stock warrants to purchase additional shares of Series H Convertible Preferred Stock, resulting in net proceeds of approximately $15.2 million. See Note 7 of Notes to Consolidated Financial Statements.

Promissory Note

In March 2025, we issued a $3.0 million promissory note at a 17% original issue discount. After expenses, we received net proceeds of $2.2 million.

On July 2, 2025, the Company repaid in full the $3.0 million promissory note. The repayment was made using a portion of the net proceeds from the Company's July 2, 2025, public offering of Series H Preferred Shares and warrants. See Note 5 of Notes to Consolidated Financial Statements.

Going Concern

See Note 1 of Notes to Consolidated Financial Statements.

Significant Accounting Policies and Use of Estimates

During the three- and nine-months ending September 30, 2025, there were no significant changes to our significant accounting policies and estimates as described in Note 2. Significant Accounting Policies included in Part II, Item 8. of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 14, 2025.

Future Capital Requirements

Our capital requirements for 2025 and beyond will depend on numerous factors, including the success of our research and development efforts, the progress of our ONP-002 program, and our ability to secure strategic partnerships or licensing arrangements to support our pipeline.

We expect to incur substantial expenditures to further develop out neurology assets, including increased cost related to research, nonclinical testing, clinical trials, regulatory submissions, and the ongoing requirements of being a public company. Subject to our ability to raise additional capital, we plan to continue advancing the ONP-002 toward Phase II clinical trials and further IND-enabling work.

To support these activities, we may seek additional equity and debt financings, as well as strategic alliances, joint ventures, licensing agreements, or other business arrangements that could generate sufficient capital to sustain our operations.

As of September 30, 2025, we had $11.4 million in cash and cash equivalents. We believe this capital will allow us to fund our current operating plan through the first half of 2026, depending on the timing and scope of our development activities and other strategic decisions.

Additional capital will still be required to complete planned clinical trials, regulatory filings, and any future commercialization efforts. There can be no assurance that such funding will be available on favorable terms, or at all. If we are unable to secure sufficient capital, we may be forced to delay, scale back, or eliminate certain development programs, which would adversely impact our business and strategic objectives.

The sale of additional equity or convertible securities could result in significant dilution to our existing shareholders. If we raise funds through debt or preferred stock, these instruments may have rights senior to our common stock and could impose restrictive covenants on our operations.

Due to uncertainties associated with clinical development, regulatory approval timelines, and partnership negotiations, we cannot precisely estimate our future capital requirements. However, our needs will depend on many factors, including but not limited to:

	●	Conducting Phase II trials and filing an IND for ONP-002, including potential Phase III Trial planning;
	●	Identification and preparation of clinical sites;
	●	The number and development paths of product candidates we pursue;
	●	The scope, cost, and results of our preclinical and clinical programs;
	●	Timing and cost of obtaining regulatory approvals;
	●	Our ability to secure and maintain strategic partnerships and licensing deals;
	●	Our performance under existing agreements, including potential milestone or royalty payments;
	●	Patent prosecution, enforcement, and potential litigation; and
	●	The timing and revenue, if any, from future product sales and royalties.

We have based these forward-looking statements on assumptions we believe are reasonable; however, actual results and funding needs may differ materially from our current expectations.

New Accounting Pronouncements

See Note 2 of Notes to Consolidated Financial Statements.

Business Segments

We operate in a single reportable segment, which includes all activities related to the development of our lead product candidate, ONP-002, for the treatment of mild traumatic brain injury (concussion). This determination is consistent with how financial information is reviewed and evaluated by our Chief Operation Decision Maker ("CODM") for purposes of performance assessment, resource allocation, and planning.

Our CODM is currently our Chief Executive Officer and Chief Financial Officer, who regularly reviews consolidated net loss and total assets as key measures in operating decision-making. We do not separately evaluate results by geographic region or product line.

For the three and nine months ended September 30, 2025, and 2024, we did not generate any revenue. Our segment asset measure is reported on the consolidated balance sheet and total assets.

Results of Operations

We do not currently sell or market any products and did not generate any revenue for the three and nine months ended September 30, 2025, and 2024.

		Three Months Ended September 30,								Increase (Decrease)				Percentage Change
		2025				2024
Research and development		$	930,894			$	879,041			$	51,853				5.9	%
General and administrative			2,192,879				1,558,239				634,640				40.73	%
Total operating expenses			3,123,773				2,437,280				686,493				28.17	%
Loss from operations			(3,123,773	)			(2,437,280	)			(686,493	)			(28.17	)%
Other income (expense):
Interest income			68,142				9,466				58,676				619.86	%
Interest expense			(7,039	)			(9,971	)			2,932				(29.41	)%
Foreign currency exchange, net			(3,919	)			(25,085	)			21,166				(84.38	)%
Total other income (expense), net			57,184				(25,590	)			82,774				(323.46	)%
Net loss		$	(3,066,589	)		$	(2,462,870	)		$	(603,719	)			24.51	%

		Nine Months Ended September 30,								Increase (Decrease)				Percentage Change
		2025				2024
Research and development		$	1,722,115			$	2,449,234			$	(727,119	)			(29.69	)%
General and administrative			5,142,087				4,754,149				387,938				8.16	%
Total operating expenses			6,864,202				7,203,383				(339,181	)			(4.71	)%
Loss from operations			(6,864,202	)			(7,203,383	)			339,181				4.71	%
Other income (expense):
Interest income			95,138				35,106				60,032				171.00	%
Interest expense			(778,476	)			(18,859	)			(759,617	)			4,027.88	%
Foreign currency exchange, net			(8,077	)			(31,659	)			23,582				(74.49	)%
Total other (expenses) income, net			(691,415	)			(15,412	)			(676,003	)			4,386.21	%
Net loss		$	(7,555,617	)		$	(7,218,795	)		$	(336,822	)			4.67	%

Research and Development

For the three months ended September 30, 2025, research and development ("R&D") expenses were $930,894, compared to $879,041 for the same period in 2024, representing an increase of $51,853, or 5.9%.

The increase was primarily attributable to higher external research and consulting costs related to regulatory documentation, clinical-site preparation, and pre-trial activities associated with the Company's ONP-002 concussion program. These increases were partially offset by lower formulation and laboratory costs compared to the prior-year period, which included wind-down activities for the company's discontinued vaccine and antibiotic programs.

For the nine months ended September 30, 2025, R&D expenses totaled $1.7 million compared to $2.4 million for the same period in 2024, representing a decrease of $727,119, or 29.7%.

The year-to-date decrease was primarily due to the completion of non-core program work in 2024 and a shift in focus toward ONP-002 regulatory submissions and manufacturing readiness, resulting in lower laboratory and preclinical costs. The decrease also reflects lower use of external consultants and reduced contract research activity outside of the ONP-002 program.

We anticipate that research and development expenses will increase in future periods as we initiate the phase IIa clinical trial in Australia, begin IND-enabling work to support a Phase IIb trial in the United States, and commence manufacturing of additional ONP-002 clinical material.

General and Administrative

For the three months ended September 30, 2025, general and administrative ("G&A") expenses were $2.2 million, compared to $1.6 million for the same period in 2024, representing an increase of $634,640, or 40.7%

The increase was primarily driven by higher legal and professional fees, which rose $1.1 million year over year and included a $700,000 accrual related to the Ladenburg Thalmann legal settlement recorded as of September 30, 2025. Excluding this accrual, legal and professional fees increased approximately $375,000, reflecting higher legal, audit, and regulatory compliance costs associated with maintaining public-company status and supporting the Company's Series H Preferred Shares financing.

Investor-relations expense increased by $63,325, due to enhanced shareholder engagement and communication activity surrounding the July 2025 capital raise. Salaries and benefits decreased by $514,594, reflecting lower headcount. Patent-related expenses increased by $44,249 due to continued investment in intellectual property protection following the reclassification of patent costs from R&D to G&A in Q1 2025. Insurance expense was relatively consistent, increasing modestly by $421, while board compensation decreased by $13,126 as a result of changes in board membership. Other variances included a $33,664 decrease in public company expenses, a $12,654 increase in travel, and $3,312 increase in miscellaneous items.

For the nine months ended September 30, 2025, G&A expenses totaled $5.1 million, compared to $4.8 million for the same period in 2024, representing an increase of $387,938, or 8.2%. The year-to-date increase was driven primarily by a $798,760 rise in patent-related legal expenses, a $206,222 increase in investor-relations costs, and a $26,101 increase in insurance expenses. These increases were partially offset by a $897,377 decrease in salaries and benefits, reflecting the full impact of headcount reduction earlier in the year, and a $29,375 reduction in board compensation compared to the same period in 2024.

We expect general and administrative expenses may continue to increase modestly in future periods as we maintain compliance with public-company reporting requirements, continue investor-relations efforts, and support the operational infrastructure needed to advance the ONP-002 program.

Other Income (Expense)

For the three months ended September 30, 2025, total other income was $57,184, compared to an expense of $25,590 in 2024. The change was primarily due to higher interest income from invested cash following the July 2025 financing and lower foreign-exchange losses.

For the nine months ended September 30, 2025, total other expense was $691,415, compared to $15,412 in 2024, primarily reflecting amortization of debt discount and closing costs related to the $3.0 million short-term promissory note issued in March 2025, partially offset by higher interest income on cash balances.

Liquidity and Capital Resources

See "Recent Funding" above for our discussion of our July 2025 public offering of Series H Preferred Stock and warrants.

Since our inception, we have funded our operations primarily through the sale of equity securities in public and private offerings, debt financing, and warrants exercises. As of September 30, 2025, we had an accumulated deficit of $224.3 million and have not yet achieved profitability. We incurred a net loss of $7.6 million for the nine-months ended September 30, 2025, and $10.5 million for the year ended December 31, 2024. We expect to continue incurring significant operating losses as we advance the development of our Neurology Assets, including ONP-002, through regulatory and clinical stages toward potential commercialization.

The following table sets forth our primary sources and uses of cash:

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(6,410,975	)		$	(6,579,029	)
Net cash provided by financing activities			16,949,901				6,239,577
Net increase (decrease) in cash and cash equivalents		$	10,538,926			$	(339,452	)

Operating Activities

Cash used in operating activities for the nine months ended September 30, 2025, and 2024 was $6.4 million and $6.6 million, respectively. In both periods, cash used in operations primarily reflected the Company's net losses adjusted for non-cash charges and changes in working capital accounts.

For the nine months ended September 30, 2025, significant non-cash items affecting operating cash flows included $771,437 of amortization of debt discount and closing costs associated with the March 2025 short-term promissory note, stock-based compensation expense of $30,525, and a stock-based compensation recapture adjustment of $86,617. Changes in operating assets and liabilities also contributed to the net cash outflow, including a $694,108 increase in prepaid expenses and other current assets and a $1.1 million increase in accounts payable and accrued expenses, primarily reflecting timing of vendor payments and ongoing ONP-002 program activities.

For the nine months ended September 30, 2024, non-cash adjustments included $458,366 of stock-based compensation, while working capital changes included a $49,951 increase in prepaid expenses and other current assets and a $131,449 increase in accounts payable and accrued expenses.

The slight reduction in operating cash outflows year-over-year primarily reflects lower R&D expenditures and improved working capital management, partially offset by higher general and administrative expenses associated with maintaining public-company operations, legal settlements, and financing activities in 2025.

Financing Activities

Net cash provided by financing activities was $16.9 million for the nine months ended September 30, 2025, compared to $6.2 million for the same period in 2024.

The increase was primarily attributable to the completion of the July 2025 Series H Preferred Stock and warrant financing, which generated net proceeds of approximately $15.2 million, as well as $2.6 million in net proceeds from sales of common stock during the period. The Company also received $2.2 million in borrowing under short-term notes payable, primarily related to the March 2025 promissory note and new insurance premium financing.

These inflows were partially offset by $3 million in repayments of short-term notes payable. In comparison, financing activities for the nine months ended September 30, 2024, consisted primarily of $6.6 million of common stock, partially offset by $430,283 in repayment of short-term notes payable.

Short-Term Notes Payable

On March 13, 2025, we issued a $3.0 million promissory note (the "Note") to a single investor at an original issue discount of 17%. Net proceeds to us were approximately $2.2 million after placement agent fees of $175,000 and legal expenses of $98,437.

The Note was a non-interesting bearing unless an event of a default occurred, at which time interest would accrue at a rate of 20% per annum. The Note was scheduled to mature on the earlier of July 14, 2025, or the closing of any subsequent offering with net proceeds equal to or exceeding all amounts due under the Note.

In connection with the issuance of the Note, we designated and issued 1,000,000 shares of our authorized but unissued Series G Mirroring Preferred Stock. For a description of the Series G terms, see Note 8. We used the net proceeds for working capital and general corporate purposes. Subsequently, in connection with the Reverse Stock Split the shares of Series G Preferred Stock were cancelled. See Note 8.

On July 2, 2025, the Company repaid in full the $3.0 million promissory note issued on March 13, 2025. The repayment was made using a portion of the net proceeds from the Company's July 2, 2025, public offering of Series H Preferred Stock and warrants to purchase additional shares of Series H Preferred Stock.

Short-term notes payable consisted of the following:

		September 30,				December 31,
		2025				2024
Insurance premium financing of $504,425, due in monthly installments of $58,314, which includes principal and annual interest at 8.75% through April 2026		$	394,836			$	-
Insurance premium financing of $328,528, due in monthly installments of $54,000, which include principal and annual interest at 9.55% through May 2025			--				328,528
Total short-term notes payable		$	394,836			$	328,528

Inflation

Inflation may impact the cost of services and supplies used in our operations, including professional services, insurance premiums, and research-related vendor agreements. Increases in wages, employee benefits, and regulatory compliance costs may continue to exert upward pressure on operating expenses. However, because we are currently in the development stage and do not maintain significant manufacturing operations or large-scale procurement of raw materials, we have not experienced material inflationary effect on our operating results. For the nine-month period ending September 30, 2025, and 2024, inflation has not had a material impact on our results of operations.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.