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 discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited consolidated condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and the other information set forth in certain of our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2024filed with the SEC on March 27, 2025. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.

Overview

We are a specialty pharmaceutical company with a goal of using cutting-edge biological science and applied research to further develop and commercialize new therapies for the prevention and treatment of infectious diseases. We have successfully achieved regulatory approval of Arakoda® ("Arakoda"), a malaria preventative treatment that has been on the market since late 2019. Currently, 60P's pipeline under development covers development programs for vector-borne, fungal, and viral diseases utilizing three of the Company's future products: (i) new products that contain the Arakoda regimen of Tafenoquine; (ii) new products that contain Tafenoquine; and (iii) Celgosivir and/or botanical extracts from Australian Chestnut Trees.

Business Developments

The following highlights significant business developments in our business during the quarter ended September 30, 2025.

July 2025 Offering

On July 15, 2025, we entered into a securities purchase agreement with certain institutional investors pursuant to which we sold, in a registered direct offering (the "July 2025 Offering"), 1,753,314units at an offering price of $1.90per unit and 878,264pre-funded units at an offering price of $1.899per pre-funded unit. Each unit consisted of (i) one share of common stock, (ii) one series A-1 warrant exercisable for one share of common stock (the "July 2025 A-1 Warrants"), and (iii) one series A-2 warrant exercisable for one share of common stock (the "July 2025 A-2 Warrants" and together with the July 2025 A-1 Warrants, the "July 2025 Warrants"). Each pre-funded unit consists of one pre-funded warrant exercisable for one share of common stock (the "July 2025 Pre-Funded Warrants") and warrants identical to the July 2025 Warrants included in the units. The July 2025 Pre-Funded Warrants have an exercise price of $0.001per share, and were immediately exercisable beginning on July 16, 2025until exercised in full. The July 2025 A-1 Warrants have an exercise price of $1.90per share and are exercisable beginning on July 16, 2025 until July 15, 2030. The July 2025 A-2 Warrants have an exercise price of $1.90per share and are exercisable beginning on July 16, 2025 until January 15, 2027.

As compensation for acting as the placement agent for the July 2025 Offering, we also issued to H.C. Wainwright & Co., LLC warrants (the "July 2025 Placement Agent Warrants") to purchase up to 197,368shares of common stock. The July 2025 Placement Agent Warrants have an exercise price equal to $2.375per share and are exercisable upon issuance, or July 16, 2025, and expire five years from the date of issuance, or July 15, 2030.

The July 2025 Offering was made pursuant to our registration statement on Form S-1 (File No. 333-288550), which was declared effective by the Securities and Exchange Commission (the "SEC") on July 15, 2025, and the final prospectus, which we filed with the SEC on July 16, 2025. The Offering closed on July 16, 2025, resulting in net proceeds of approximately $4,281,300, after deducting placement agent fees and other offering expenses paid by us.

2025 ATM Agreement

On September 5, 2025, we entered into an At-The-Market Sales Agreement (the "2025 ATM Agreement") with H.C. Wainwright & Co., LLC ("Wainwright") pursuant to which we may, from time to time, offer and sell shares of our common stock, having aggregate gross sales proceeds of up to $1,397,532 (the "2025 ATM Offering"). As compensation for acting as the sales agent for the 2025 ATM Offering, Wainwright will be entitled to a commission of 3.0% of the gross proceeds from sales of shares in the 2025 ATM Offering. The common stock to be sold under the 2025 ATM Agreement, if any, will be issued and sold pursuant to our shelf registration statement on Form S-3 and accompanying base prospectus (Registration Statement No. 333-280796), which was declared effective by the SEC on July 18, 2024, and our prospectus supplement dated September 5, 2025 relating to the offer and sale of the shares pursuant to the 2025 ATM Agreement. Between October 16, 2025and November 13, 2025, we sold an aggregate of 125,979shares at a weighted average price per share of $1.62, generating net proceeds of $196,356, after deducting commissions and certain other offering expenses.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of $4,115,779($1,659,353as of December 31, 2024). For the nine months ended September 30, 2025and 2024, our net cash used in operating activities was $5,156,566and $4,009,871, respectively. To date, we have financed our operations primarily through the issuance of common stock, warrants to purchase common stock, and proceeds from the issuance of convertible debt and promissory notes. Based on current internal projections, taking into consideration the net proceeds of approximately $4.3million received from the July 2025 public offering and an additional $196thousand received through the 2025 ATM Agreement, we estimate that we will have sufficient funds to remain viable through March 31, 2026, assuming no additional capital raises. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot assure you that we will be able to raise additional capital on acceptable terms, or at all.

Going Concern

In their audit report for the fiscal year ended December 31, 2024, our auditors have expressed their concern as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain financing. The audited consolidated financial statements for the year ended December 31, 2024included an explanatory note referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.

Our future results are subject to substantial risks and uncertainties. Since our inception, we have not demonstrated the ability to generate enough revenues to date to cover operating expenses and we have accumulated losses to date. To date, we have funded our operations primarily with proceeds from sales of common stock and warrants for the purchase of common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and securityagreements.

Continuation as a going concern is dependent upon our ability to meet our financial requirements, raise additional capital, and achieve gross profitability from our single marketed product. To achieve profitability, we expect we will need to raise additional capital to fund our activities relating to commercial support for our existing product and any future clinical research trials and operating activities. However, there can be no assurance that we will ever achieve or maintain profitability. These conditions, among others, raise substantial doubt about our ability to continue as a going concern for one year from the date these financial statements are issued.

We plan to fund our operations through third party and related party debt/advances, private placement of restricted securities and the issuance of stock in a subsequent offering until such a time as the business achieves profitability or a business combination may be achieved. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are favorable to us. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

As such, we have concluded that such plans do not alleviate the substantial doubt about our ability to continue as a going concern for one year from the date the accompanying financial statements are issued.

The accompanying consolidated condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business, and do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2025:

Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the achievement of certain milestones. These contingent milestones may or may not be achieved. We have not included any of these amounts in the table above as we cannot estimate or predict when, or if, these amounts will become due.

Components of Results of Operations

Product Revenues - net of Discounts and Rebates

We receive the majority of our product revenues from sales of our Arakoda product to resellers in the U.S. and abroad. Foreign sales to both Australia and Europe are further subject to profit sharing agreements for boxes sold to customers. Sales to resellers in the US are subject to considerable discounts and rebates for services provided by our third-party logistics ("3PL") partner and wholesalers and pharmacy benefit managers ("PBMs").

Cost of Revenues, Gross Profit, and Gross Margin

Cost of revenues associated with our products is primarily comprised of direct materials, shipping, manufacturing-related costs incurred in the production process, serialization costs, and inventory write-downs due to expiration.

Other Operating Revenues

Other operating revenues for the periods presented include research revenue earned from the Australian Tax Authority for research activities conducted in Australia. Beginning in the third quarter of 2024, we began to recognize research revenues associated with our new contract with the United States Army Medical Material Development Activity (USAMMDA) for Arakoda supply chain upgrade support. Research revenue under this contract is recognized when we incur the direct costs eligible for reimbursement, up to the maximum allowable amount.

Operating Expenses

Research and Development

Research and development costs for the periods presented primarily consist of contracted research and development services and costs associated with preparation for and conducting our Babesiosis trial. We expense all research and development costs in the period in which they are incurred. Payments made prior to the receipt of goods or services to be used in research and development are recognized as prepaid assets and expensed over the service period as the services are provided. We have also issued shares of our common stock to vendors in exchange for research and development services.

General and Administrative Expenses

Our general and administrative expenses primarily consist of salaries, advertising and promotion expenses, professional services fees, such as consulting, audit, accounting and legal fees, general corporate costs and allocated costs, including facilities, information technology and amortization of intangibles.

Interest and Other Income (Expense), Net

We earn interest income from cash invested in interest-bearing accounts, as well as cash equivalents and short-term investments consisting of certificates of deposits with original maturities ranging from three to six months. Interest expense for the periods presented is limited to a single $150,000 SBA loan that bears interest at 3.75%. Other components of other income (expense)include changes in the fair value of derivative liabilities and other miscellaneous income or expenses.

Results of Operations

The following table sets forth our results of operations for the periods presented:

The following table sets forth our results of operations as a percentage of revenue:

Comparison of the Three Months Ended September 30, 2025and 2024

Product Revenues - net of Discounts and Rebates, Cost of Revenues, Gross (Loss) Profit, and Gross Margin

Product Revenues - net of Discounts and Rebates

Our product revenues - net of discounts and rebates were $437,602for the three months ended September 30, 2025, as compared to $135,293for the three months ended September 30, 2024. For the three months ended September 30, 2025, our U.S. pharmaceutical distributor and Infuserve America accounted for 80% and 8% of our total net product sales of Arakoda, respectively, and Kodatef sales to our Australian distributor accounted for 7% of total net product sales (92%, 0% and 8% for the three months ended September 30, 2024, respectively). Domestic, commercial product sales increased substantially in the period due to refilling the supply chain after stocking out in Q2 2025.

We offer discounts and rebates to the civilian U.S. supply chain distribution channel. We record sales when our 3PL partner transfers boxes into their title model. Discounts and rebates offered to our 3PL partner amount to 12% (lower rates available upon reaching larger revenue tiers) along with a $5,500 fixed monthly fee. The product is then transferred usually to one of the three large U.S. pharmaceutical distributors where rebates are 10%. Lastly, we have relationships with several large pharmacy benefit managers ("PBMs") that allow patients to purchase Arakoda at a discount. The rebate associated with PBMs ranges from 30% to 41.25% depending on the amount of coverage provided. For the three months ended September 30, 2025, discounts and rebates were $150,532compared to $122,862for the three months ended September 30, 2024. The rebate on Kodatef sales was only 10% and there were no PBM-related discounts on sales of Kodatef.

Arakoda entered the U.S. civilian supply chain in the third quarter of 2019. Since the introduction of the new 8-ct bottle in June 2025, we will be reporting Arakoda unit sales in terms of 16-ct box equivalents. For the three months ended September 30, 2025, the equivalent of 1,50516-ct boxes were sold to pharmacies and dispensaries. Sales volume increasedby 14% from 1,31916-ct box equivalents sold to pharmacies and dispensaries for the three months ended September 30, 2024.

Kodatef sales to our distributor Biocelect in Australia for the three months ended September 30, 2025were $29,490($10,691for the three months ended September 30, 2024). A historical portion of sales to Biocelect remained subject to a profit share distribution once the original transfer price has been recouped. Biocelect, which acts as a distributor in the Australian and New Zealand markets, reported a 33% quarter-over-quarter increase, with 552boxes sold for the three months ended September 30, 2025, compared to 414boxes for the three months ended September 30, 2024. As of September 30, 2025, Biocelect has no inventory left that remains subject to profit share. Additionally, under a new agreement executed during the second quarter, Biocelect began to purchase from the latest manufactured lot of Kodatef at $49.50 AUD per box which are not subject to historical profit share. For the quarter ended September 30, 2025, 900boxes of Kodatef were sold to Biocelect (none for the quarter ended September 30, 2024). As of September 30, 2025, $16,331of receivables were due to us ($9,444as of December 31, 2024).

Arakoda sales volume in Europe continues to grow. We first shipped Arakoda to our distributor Scandinavian Biopharma ("SB") in September 2022. SB reported 66boxes sold during the three months ended September 30, 2025, representing a 22% increase fromthe 54boxes sold during the three months ended September 30, 2024. According to our distributor, the stock out experienced in the US during the second quarter of 2025 also negatively impacted sales for the quarter in Europe. This only became rectified in late August when we sent 1,000 bottles of Arakoda to Europe.

Cost of Revenues, Gross (Loss) Profit, and Gross Margin

Cost of revenues was $537,690for the three months ended September 30, 2025, as compared to $111,687for the three months ended September 30, 2024. The significant increase in cost of goods sold was primarily due to higher write-offs of inventory not expected to be sold prior to its expiration date. Write-offs of expiring inventory were $436,561for the three months ended September 30, 2025, as compared to $1,165for the three months ended September 30, 2024. The excess inventory resulted from our strategic decision to validate a new, larger-scale production method with then soon to be expiring raw materials (API), with the offsetting assistance from our USAMMDA grant. The development proved successful but the dating on the produced inventory is already considered in the industry to be short-dated and will have to be replaced by the beginning of the second quarter of 2026. The temporary increase in inventory write-offs was a necessary step in scaling our operations and is not expected to be recurring. Our new larger-scale production processes are expected to help keep inventory costs lower than otherwise. As a result of these factors, the Gross Margin % decreased from 17.45% for the three months ended September 30, 2024to a Gross Loss % of 22.87% for the three months ended September 30, 2025.

Other Operating Revenues

The research revenues earned by us were $90,960for the three months ended September 30, 2025, as compared to $12,818for the three months ended September 30, 2024. The increase in research revenues is due to the new USAMMDA contract we were awarded in July 2024 to facilitate commercial validation of a new bottle and replacement blister packaging of Arakoda. We recognized research revenues of $90,960related to the USAMMDA grant for the three months ended September 30, 2025($12,994for the three months ended September 30, 2024).

Operating Expenses

Research and Development

Research and development costs decreasedby $130,286for the three months ended September 30, 2025when compared to the three months ended September 30, 2024. The decline is partially attributable to a non-cash charge of $600,000recognized during the three months ended September 30, 2024upon the delivery from Trevally of 8.8 kilograms of castanospermine, for which we had previously issued fully vested shares as advance consideration for the research materials. Otherwise, research and development costs incurred for the three months ended September 30, 2025and 2024primarily consisted of costs related to our babesiosis trials for tafenoquine. Direct trial-related costs represent 81% of the total research and development costs at $656,754for the three months ended September 30, 2025, compared to 29% of the costs at $270,497for the three months ended September 30, 2024.

General and Administrative Expenses

For the three months ended September 30, 2025, our general and administrative expenses increasedby approximately 24.00% or $291,567from the three months ended September 30, 2024. For the three months ended September 30, 2025, we incurred higher sales, advertising and promotion expenses at $414,718, up from $47,645for the three months ended September 30, 2024. Additionally, for the three months ended September 30, 2025, we incurred higher legal and professional fees at $177,401($86,335for the three months ended September 30, 2024).

Interest and Other Income, net

Interest Expense

For the three months ended September 30, 2025, we recognized $1,708of interest expense ($1,467for the three months ended September 30, 2024). Our interest expense for the periods presented primarily relates to our single outstanding loan from the SBA. Cash paid for interest expense was $2,193and $2,193for the three months ended September 30, 2025and September 30, 2024, respectively.

Change in Fair Value of Derivative Liabilities

For the three months ended September 30, 2025, we recognized a loss on the change in fair value of derivative liabilities of $21,103compared to the loss of $56,712for the three months ended September 30, 2024. During the periods presented, derivative liabilities include the contingent milestone payment due to Knight upon a future sale of Arakoda or a Change of Control. We use a probability-weighted expected return method to estimate the fair value of this derivative liability. Generally in the valuation model as we get closer to potential milestones the value of the derivative increases.

Other Income, net

For the three months ended September 30, 2025, we recognized $31,550in other income compared to $16,623for the three months ended September 30, 2024. For the three months ended September 30, 2025, we recognized interest income from cash invested in interest-bearing accounts and investments in certificates of deposit of $32,566($16,635for the three months ended September 30, 2024).

Comparison of the Nine Months Ended September 30, 2025, and 2024

Product Revenues - net of Discounts and Rebates, Cost of Revenues, Gross Profit, and Gross Margin

Product Revenues - net of Discounts and Rebates

Our product revenues - net of discounts and rebates were $702,086for the nine months ended September 30, 2025, as compared to $365,939for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, our U.S. pharmaceutical distributor and Infuserve America accounted for 73% and 18% of our total net product sales of Arakoda, respectively, and Kodatef sales to our Australian distributor accounted for 6% of total net product sales (94%, 0%, and 6% for the nine months ended September 30, 2024, respectively). Despite a shortage of Arakoda 16-ct boxes starting in April 2025, which resulted from a delay in completing commercial validation of a new packaging format, domestic, commercial product sales increased during the period, primarily due to the combination of rising sales, price increases and fewer returns.

We offer discounts and rebates to the civilian U.S. supply chain distribution channel. We record sales when our 3PL partner transfers boxes into their title model. Discounts and rebates offered to our 3PL partner amount to 12% (lower rates available upon reaching larger revenue tiers) along with a $5,500 fixed monthly fee. The product is then transferred usually to one of the three large U.S. pharmaceutical distributors where rebates are 10%. Lastly, we have relationships with several large pharmacy benefit managers ("PBMs") that allow patients to purchase Arakoda at a discount. The rebate associated with PBMs ranges from 30% to 41.25% depending on the amount of coverage provided. For the nine months ended September 30, 2025, discounts and rebates were $324,948compared to $324,486for the nine months ended September 30, 2024.

Arakoda entered the U.S. civilian supply chain in the third quarter of 2019. Since the introduction of the new 8-ct bottle in June 2025, we will be reporting Arakoda unit sales in terms of 16-ct box equivalents. For the nine months ended September 30, 2024, 3,64216-ct box equivalents were sold to pharmacies and dispensaries. Sales volume increasedby 14% to 4,16616-ct box equivalents sold to pharmacies and dispensaries for the nine months ended September 30, 2025.

Kodatef sales to our distributor Biocelect in Australia for the nine months ended September 30, 2025were $42,775($20,697for the nine months ended September 30, 2024). A historical portion of sales to Biocelect remained subject to a profit share distribution once the original transfer price has been recouped. Biocelect, which acts as a distributor in the Australian and New Zealand market, reported 10% year-over-year decline, the equivalent of 1,334boxes sold for the nine months ended September 30, 2025, compared to 1,489boxes for the nine months ended September 30, 2024. As of September 30, 2025, Biocelect has no inventory left that remains subject to profit share. Additionally, under a new agreement executed during the period, Biocelect began to purchase from the latest manufactured lot of Kodatef at $49.50 AUD per box which are not subject to historical profit share. For the nine months ended September 30, 2025, 1,100boxes of Kodatef were sold to Biocelect (Nonefor the nine months ended September 30, 2024). As of September 30, 2025, $16,331of receivables was due to us ($9,444as of December 31, 2024).

Arakoda sales volume in Europe continues to grow. We first shipped Arakoda to our distributor Scandinavian Biopharma ("SB") in September 2022. For the nine months ended September 30, 2025, SB reported 249boxes sold (109boxes sold for the nine months ended September 30, 2024). According to our distributor, this is due to greater interest in treating babesiosis. Additionally, we received another purchase order of product from Europe and shipped 1,000 bottles towards the end of August 2025.

Cost of Revenues, Gross Profit, and Gross Margin

Cost of revenues was $661,013for the nine months ended September 30, 2025, as compared to $266,688for the nine months ended September 30, 2024. The significant increase in cost of goods sold was primarily due to higher write-offs of inventory not expected to be sold prior to its expiration date. Write-offs of expiring inventory were $436,596for the nine months ended September 30, 2025, as compared to $18,490for the nine months ended September 30, 2024. The excess inventory resulted from our strategic decision to validate a new, larger-scale production method with then soon to be expiring raw materials (API), with the offsetting assistance from our USAMMDA grant. The development proved successful but the dating on the produced inventory is already considered in the industry to be short-dated and will have to be replaced by the beginning of the second quarter 2026. The temporary increase in inventory writeoffs was a necessary step in scaling our operations and is not expected to be recurring. Our new larger-scale production processes are expected to help keep inventory costs lower than otherwise. Due to these factors, the Gross Margin % decreased from 27.12% for the nine months ended September 30, 2024to 5.85% for the nine months ended September 30, 2025.

Other Operating Revenues

The research revenues earned by us were $390,630for the nine months ended September 30, 2025, as compared to $43,177for the nine months ended September 30, 2024. The increase in research revenues is primarily due to the new USAMMDA contract we were awarded in July 2024 to facilitate commercial validation of a new bottle and replacement blister packaging of Arakoda and the contract we signed with the University of Kentucky for tafenoquine clinical trial supply. We recognized research revenues of $285,874related to the USAMMDA grant for the nine months ended September 30, 2025($12,994for the nine months ended September 30, 2024). We recognized research revenues of $89,302from the University of Kentucky for the nine months ended September 30, 2025($0for the nine months ended September 30, 2024). Other research revenues were $15,454for the nine months ended September 30, 2025($30,183for the nine months ended September 30, 2024).

Operating Expenses

Research and Development

Research and development costs decreasedby $2,905,288for the nine months ended September 30, 2025when compared to the nine months ended September 30, 2024. The decline is primarily attributable to a non-cash charge of $3,225,000 recognized during the nine months ended September 30, 2024related to share-based payments issued to vendors in January 2023 as advance consideration, which payments were initially deferred and capitalized. Kentucky Technology, Inc. delivered us a report on the potential development of SJ733 + tafenoquine in the second quarter of 2024 and Trevally completed the synthesis of 8.8 kilograms of castanospermine in the third quarter of 2024, resulting in $2,625,000 and $600,000, respectively, of research and development expense recognized for the nine months ended September 30, 2024. Otherwise, research and development costs incurred for the nine months ended September 30, 2025and 2024primarily consisted of costs related to our babesiosis trial for tafenoquine. Direct trial-related costs represent 76% of the total research and development costs at $1,109,279for the nine months ended September 30, 2025, compared to 19% of the costs at $846,323for the nine months ended September 30, 2024. We also recorded $204,112in research and development expenses related to commercial validation and packaging of Arakoda, for which a majority qualifies for reimbursement under the USAMMDA grant discussed above.

General and Administrative Expenses

For the nine months ended September 30, 2025, our general and administrative expenses increasedby approximately 40.53% or $1,385,901from the nine months ended September 30, 2024. For the nine months ended September 30, 2025, we incurred significantly higher sales, advertising and promotion expenses and investor outreach expenses at $1,095,102and $992,044, up from $226,024and $684,808for the nine months ended September 30, 2024, respectively. Additionally, for the nine months ended September 30, 2025, we recognized $212,030in stock-based compensation expense ($15,246for the nine months ended September 30, 2024). This increase was in part due to new partially vested option grants awarded to two executives in January 2025, as well as the ongoing quarterly expense recognized for additional stock options granted in the third quarter of 2024.

Interest and Other (Expense) Income, net

Interest Expense

For the nine months ended September 30, 2025, we recognized $4,719of interest expense ($6,490for the nine months ended September 30, 2024). Our interest expense for the periods presented relates primarily to our single outstanding loan from the SBA. Cash paid for interest expense was $6,579and $6,579for the nine months ended September 30, 2025and 2024, respectively.

Change in Fair Value of Derivative Liabilities

For the nine months ended September 30, 2025, we recognized a loss on the change in fair value of derivative liabilities of $156,445compared to the gain of $1,683,034for the nine months ended September 30, 2024. During the periods presented, derivative liabilities include the contingent milestone payment due to Knight upon a future sale of Arakoda or a Change of Control. We use a probability-weighted expected return method to estimate the fair value of this derivative liability.

Other Income, net

For the nine months ended September 30, 2025, we recognized $74,938in other income compared to $67,358for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, we recognized interest income from cash invested in interest-bearing accounts and investments in certificates of deposit of $80,150($59,192for the nine months ended September 30, 2024). Other income for the nine months ended September 30, 2024also included $10,789of storage revenue recognized in association with final payment under the legacy contract with the USAMMDA for storing Arakoda purchases. We did not recognize storage revenue for the nine months ended September 30, 2025.

Cash Flows

Cash Used in Operating Activities

Net cash used in operating activities was $5,156,566for the nine months ended September 30, 2025, as compared to $4,009,871for the nine months ended September 30, 2024. Our net cash used in operating activities increased primarily due to highergeneral and administrative expenses at $4,805,648for the nine months ended September 30, 2025($3,419,747for the nine months ended September 30, 2024), as a result of higher sales, advertising and promotion costs and investor outreach expenses, as discussed above, and higher research and development costs for our babesiosis trial at $1,109,279for the nine months ended September 30, 2025($846,323for the nine months ended September 30, 2024).

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $1,625,347for the nine months ended September 30, 2025, as compared to net cash used in investing activities of $1,887,016for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, we received proceeds of $1,708,000from maturities of certain short-term investments in certificates of deposit ($0for the nine months ended September 30, 2024). The cash proceeds are partially offset by capitalized patent costs of $20,868and fixed asset purchases of $60,000for the nine months ended September 30, 2025($49,869and $103,773for the nine months ended September 30, 2024, respectively). Additionally, we capitalized less website development costs for the nine months ended September 30, 2025at $1,785($25,374capitalized for the nine months ended September 30, 2024) associated with enhancements to the functionality of our corporate website.

Cash Provided by Financing Activities

Net cash provided by financing activities was $5,979,077for the nine months ended September 30, 2025, as compared to $7,052,598for the nine months ended September 30, 2024. The decreasein net cash provided by financing activities is mainly attributable to net proceeds aggregating to $7,042,608received in connection with (i) our common stock and warrant offering in January 2024, (ii) the sale of common stock pursuant to the At-the-Market Sales Agreement in July and August 2024, and (iii) the sale of warrants in our Private Placement offering that closed in September 2024, which exceeded the aggregate net proceeds of $5,994,273received in connection with our common stock and warrant offerings completed in January, February, and July 2025.

We also received lower proceeds from the exercise of warrants at $2,804for the nine months ended September 30, 2025, compared to $9,990for the nine months ended September 30, 2024. Additionally, for the nine months ended September 30, 2025, we withheld shares valued at $18,000to cover tax withholdings for net share settlement of certain 2024 performance bonuses awarded to our executives ($0 for the nine months ended September 30, 2024).

Effect of Foreign Currency Translation on Cash

Our foreign operations were small relative to U.S. operations for the nine months ended September 30, 2025and September 30, 2024, thus effects of foreign currency translation have been minor.

Critical Accounting Policies, Significant Judgments, and Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

We recognize revenue in accordance with FASB ASC Topic No. 606, Revenue from Contracts with Customers("ASC 606"). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. As part of the accounting for these arrangements, we may be required to make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Revenues from product sales are recorded at the net sales price, or "transaction price," which may include estimates of variable consideration that result from product returns. We determine the amount of variable consideration by using either the expected value method or the most-likely-amount method. We include the unconstrained amount of estimated variable consideration in the transaction price, which reflects the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. Reserves are established for the estimates of variable consideration based on the amounts we expect to be earned or to be claimed on the related sales.

We record U.S. commercial revenues as a receivable when our American distributor transfers shipped product to their title model for 60P. Foreign sales to both Australia and Europe are recognized as a receivable at the point product is shipped to distributor. The shipments to Australia and Europe are further subject to profit sharing agreements for boxes sold to customers.

Share-Based Payments

We account for share-based payments in accordance with ASC Subtopic 718, Compensation - Stock Compensation("ASC 718"). We measure compensation for all share-based payment awards granted to employees, directors, and nonemployees, based on the estimated fair value of the awards on the date of grant. For awards that vest based on continued service, the service-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards. For service vesting awards with compensation expense recognized on a straight-line basis, at no point in time does the cumulative grant date value of vested awards exceed the cumulative amount of compensation expense recognized. The grant date is determined based on the date when a mutual understanding of the key terms of the share-based awards is established. We account for forfeitures as they occur.

We estimate the fair value of all stock option awards as of the grant date by applying the Black-Scholes option pricing model. The application of this valuation model involves assumptions, including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends and the expected term of the option. Due to the lack of a public market for our common stock prior to the IPO and lack of company-specific historical implied volatility data, we base our computations of expected volatility on the historical volatility of a representative group of public companies with similar characteristics of the Company, including stage of development and industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. We generally use the simplified method as prescribed by the SEC Staff Accounting Bulletin Topic 14, Share-Based Payment, to estimate the expected term for stock options, whereby, the expected term equals the midpoint of the weighted average remaining time to vest, vesting period and the contractual term of the options due to our lack of historical exercise data. For certain options granted out-of-the-money, our best estimate of the expected term is the contractual term of the award. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock. The assumptions used in calculating the fair value of share-based awards represent our best estimates and involve inherent uncertainties and the application of significant judgment.

We recognize compensation expense for restricted stock units ("RSUs") with only service-based vesting conditions on a straight-line basis over the vesting period. Compensation cost for service-based RSUs is based on the grant date fair value of the award, which is the closing market price of our common stock on the grant date multiplied by the number of shares awarded.

For awards that vest upon a liquidity event or a change in control, the performance condition is not probable of being achieved until the event occurs. As a result, no compensation expense is recognized until the performance-based vesting condition is achieved, at which time the cumulative compensation expense is recognized. Compensation cost related to any remaining time-based service for share-based awards after the liquidity-based event is recognized on a straight-line basis over the remaining service period.

For fully vested, nonforfeitable equity instruments that are granted at the date we enter into an agreement for goods or services with a nonemployee, we recognize the fair value of the equity instruments on the grant date. The corresponding cost is recognized as an immediate expense or a prepaid asset and expensed over the service period depending on the specific facts and circumstances of the agreement with the nonemployee.

Derivative Liabilities

We analyze all financial instruments with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity("ASC 480") and ASC Topic 815, Derivatives and Hedging("ASC 815"). The classification of derivative financial instruments is reassessed each reporting period. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. As of September 30, 2025, derivative liabilities consist of contingent payment arrangements. We use a probability-weighted expected return method to determine the fair value of these instruments.

Upon conversion or repayment of a debt or equity instrument in exchange for equity shares, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), we record the equity shares at fair value on the date of conversion, relieve all related debt, derivative liabilities, and unamortized debt discounts, and recognize a net gain or loss on debt extinguishment, if any.

Equity or liability instruments that become subject to reclassification under ASC Topic 815 are reclassified at the fair value of the instrument on the reclassification date.

Off-Balance Sheet Arrangements

During 2025 and 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

JOBS Act Accounting Election

In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Recent Accounting Pronouncements

From time to time, the FASB issues Accounting Standards Updates ("ASU") to amend the authoritative literature in the ASC. The Company regularly evaluates new ASUs to determine the impact that these pronouncements may have on the consolidated condensed financial statements. Other than the pronouncements listed below, management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, or (iii) are not applicable to the Company's consolidated condensed financial statements or related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures("ASU 2023-07") which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses and segment profit or loss. ASU 2023-07 also requires entities with a single reportable segment to provide all segment disclosures under ASC 280, including the new required disclosures under the ASU. We adopted ASU 2023-07 on a retrospective basis for the 2024 annual period, and for interim periods beginning in 2025. The impact is limited to our financial statement disclosures, which are presented in Note 2 to the accompanying consolidated condensed financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures("ASU 2023-09") which requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We will adopt this standard for the annual period ending December 31, 2025. The impact of ASU 2023-09 will be limited to our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses("ASU 2024-03"), which applies to all public business entities that file financial statements with the SEC. The amendments in this ASU require public business entities to disclose on an annual and interim basis, disaggregated information about certain income statement expense line items. The new standard is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We are currently evaluating the impact that ASU 2024-03 will have on our financial statement disclosures.