Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a clinical-stage biopharmaceutical company focused on developing new generation therapies for unmet medical needs. We are focused on developing (i) a topical formulation for treating side effects from drugs used for the treatment of cancer (HT-001); (ii) a treatment for mast-cell derived cancers and anaphylaxis (HT-KIT); and (iii) a treatment and/or prevention for Alzheimer's or other neuroinflammatory diseases (HT-ALZ). We also have assets being developed for (i) atopic dermatitis (also known as eczema) (BioLexa); (ii) a treatment for asthma and allergies using inhalational administration (HT-004); and (iii) a treatment for obesity, and obesity-related diseases and conditions (HT-VA).

Results of Operations

Comparison of Our Results of Operations for the Years Ended December 31, 2025 and 2024

Operating Costs and Expenses

Research and Development Expenses

For the year ended December 31, 2025, research and development expenses were approximately $5.9 million. Specifically, during the year ended December 31, 2025, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) HT-001, approximately $3,646,000 related to manufacturing and clinical activities; (ii) HT-KIT, approximately $753,000 related to manufacturing and preclinical activities; (iii) HT-VA, approximately $137,000, and (iv) HT-ALZ, approximately $12,000 related to preclinical studies. In addition to the foregoing, we also incurred fees of approximately $131,000 payable to members of our scientific advisory board for services and recorded approximately $1,268,000 of in-process research and development expenses in connection with the acquisition of patent applications.

For the year ended December 31, 2024, research and development expenses were approximately $3.2 million. Specifically, during the year ended December 31, 2024, our research and development costs consisted primarily of the following costs for each of our key research and development projects: (i) HT-001, approximately $2.1 million related to manufacturing and clinical activities; (ii) HT-KIT, approximately $0.6 million related to manufacturing and preclinical activities; (iii) HT-ALZ, approximately $0.2 million related to preclinical studies; and (iv) HT-004, approximately $0.1 million related to sponsored research. In addition to the foregoing, we also incurred fees of approximately $0.2 million payable to members of our scientific advisory board for services.

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

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employee-related expenses, which include salaries and benefits, and rent expenses;

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fees related to in-licensed products and technology;

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expenses incurred under agreements with CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our pre-clinical activities;

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the cost of acquiring and manufacturing clinical trial materials; and

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costs associated with non-clinical activities and regulatory approvals.

General and Administrative Expenses

For the year ended December 31, 2025, general and administrative expenses amounted to approximately $6.4 million as compared to $5.0 million for the year ended December 31, 2024, an increase of $1.4 million, or 29.2%. For the years ended December 31, 2025 and 2024, general and administrative expenses consisted of the following (rounded to the nearest $1,000):

		Year Ended December 31,
		2025				2024
Compensation and related expenses		$	2,841,000			$	2,251,000
Professional and consulting expenses			2,794,000				1,902,000
Rent expense			54,000				53,000
Other general and administrative expenses			726,000				760,000
Total		$	6,415,000			$	4,966,000

During the year ended December 31, 2025, the increase in general and administrative expenses of approximately $1,449,000 was primarily attributed to an increase in compensation and related expenses of $590,000, primarily attributable to the issuance of 800,000 shares of common stock to our Chief Executive Officer valued at $968,000 and an increase in other compensation and related expenses of $196,000, which were offset by a decrease in stock-based compensation of approximately $574,000 in connection with the issuance of stock options during the year ended December 31, 2025 as compared to the year ended December 31, 2024. Additionally, during the year December 31, 2025, professional and consulting expenses increased by approximately $892,000 which was primarily attributable to an increase in legal and consulting fees of approximately $538,000, an increase in stock-based professional fees of $333,000 an increase in directors' fees of approximately $21,000, and an increase in rent expense of $1,000. These increases were offset by a decrease in other general and administrative expenses of approximately $34,000.

We anticipate that our general and administrative expenses will increase in future periods, reflecting continued and increasing costs associated with:

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support of our research and development activities;

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stock compensation granted to key employees and non-employees;

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support of business development activities; and

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increased professional fees and other costs associated with regulatory requirements that we are subject to.

Other Income (Expenses), net

For the year ended December 31, 2025, other expense, net was approximately $108,000, which resulted from the recording of an unrealized loss of crypto assets of $109,000.

For the year ended December 31, 2024, other income, net was approximately $27,000, which primarily resulted from $27,000 of dividend and interest income.

Net Loss

For the years ended December 31, 2025 and 2024, we incurred a net loss of approximately $12.5 million, or $0.90 per common share (basic and diluted), and $8.2 million, or $1.28 per common share (basic and diluted), respectively.

Liquidity and Capital Resources

To date we have funded our operations primarily through the sale of equity and debt securities. As of December 31, 2025, we had approximately $6.2 million in cash and cash equivalents, working capital of approximately $5.2 million and an accumulated deficit of approximately $72.9 million. Net cash used in operating activities was $9.8 million and $7.0 million for the years ended December 31, 2025 and 2024, respectively. We incurred net losses of approximately $12.5 million and $8.2 million for the years ended December 31, 2025 and 2024, respectively. We have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the foreseeable future as we continue our pre-clinical and clinical development of our product candidates. We have not yet commercialized any products and have never generated any revenue from product sales. We do not believe that our existing cash as of December 31, 2025 will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the date that our consolidated financial statements are available to be issued.

On November 8, 2024, we entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC ("Wainwright") under which we could offer and sell shares of our common stock having an aggregate sales price of up to $2,700,000 through Wainwright as the sales manager pursuant to our effective shelf registration statement on Form S-3 (File No. 333-272620), including an accompanying base prospectus and a prospectus supplement dated November 8, 2024. Sales of shares of the Company's common stock through Wainwright, if any, will be made by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act. Wainwright will use commercially reasonable efforts to sell shares of the Company's common stock from time to time, based on instructions from us (including any price, time or size limits or other parameters or conditions we may impose). We will pay Wainwright a commission equal to 3.0% of the aggregate gross proceeds from the sales of shares of the Company's common stock sold through Wainwright under the ATM Agreement and will also reimburse Wainwright for certain specified expenses in connection with the ATM Agreement. On February 7, 2025, the amount that the Company could offer and sell pursuant to the ATM Agreement was increased by $5,000,000 pursuant to a prospectus supplement dated February 7, 2025. On November 13, 2025, the amount that the Company could offer and sell pursuant to the ATM Agreement was increased by $2,439,256 pursuant to a prospectus supplement dated November 13, 2025 for a current offering up to $4,821,200. The offering of shares pursuant to the ATM Agreement will terminate on the earlier of (1) the sale, pursuant to the ATM Agreement, of shares having an aggregate offering price of $10,139,256 and (2) the termination of the ATM Agreement by either us or Wainwright, as set forth therein. During the year ended December 31, 2025 we issued an aggregate of 2,782,309 shares of our common stock for net proceeds of approximately $4.1 million, after deducting approximately $142,000 in sales agent commissions and other offering expenses payable by us pursuant to the ATM Agreement.

We have entered into certain license, sublicense, sponsored research and option agreements with third parties. Pursuant to such agreements, we may be required to make certain: (i) license maintenance fee payments; (ii) out-of-pocket expense payments, including, but not limited to, payments related to intellectual property and research related expenses; (iii) development and commercialization expense payments; (iv) annual and quarterly minimum payments; (v) diligence expense payments; and (vi) revenue interest payments. In addition, subject to the achievement of certain development and/or commercialization events, we may also be required to make certain: (i) minimum royalty payments, ranging from middle to high five figures, (ii) sales-based royalties and running royalties, ranging from low single digits to low double digits; and (iii) milestone payments, of up to approximately $25 million (if all milestones in all of our current agreements are achieved).

Additional funding will be necessary to fund our future clinical and pre-clinical activities. We may obtain additional financing through sales of our equity and debt securities or entering into strategic partnership arrangements, or a combination of the foregoing. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of the economic downturn. If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Cash Flows from Operating Activities

For the year ended December 31, 2025, net cash used in operating activities was approximately $9.8 million, which primarily resulted from a net loss of approximately $12.5 million and an increase in prepaid expenses and other current assets of approximately $460,000 and an increase in accounts payable and accrued expenses of approximately $644,000, offset by approximately $850,000 of non-cash research and development-acquired patent, $1.5 million in stock-based compensation and professional fees, and unrealized loss on crypto assets of $109,000.

For the year ended December 31, 2024, net cash used in operating activities was approximately $7.0 million, which primarily resulted from a net loss of approximately $8.2 million, offset by $0.8 million in stock-based compensation, a decrease in prepaid expense of $0.2 million and an increase in accounts payable and accrued expenses of $0.2 million.

Cash Flows from Investing Activities

During the year ended December 31, 2025, the Company purchased $300,000 in crypto assets.

The Company did not have any cash flows from investing activities for the year ended December 31, 2024.

Cash Flows from Financing Activities

For the year ended December 31, 2025, net cash provided by financing activities was approximately $9.3 million, which primarily resulted from net proceeds from the issuance of common stock of approximately $4.1 million and proceeds from the exercise of warrants of approximately $5.6 million, offset by the payment of taxes related to the net share settlement of an equity award of $376,000.

For the year ended December 31, 2024, net cash provided by financing activities was approximately $4.7 million, which primarily resulted from net proceeds from the issuance of common stock, common stock warrants, and prefunded warrants of $1.0 million and proceeds from the exercise of warrants of approximately $3.7 million.

Our ultimate success is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet our obligations on a timely basis. We will require significant amounts of capital to sustain operations, and we will need to make the investments we need to execute our longer-term business plan to support new technologies and help advance innovation. Absent generation of sufficient revenue from the execution of our long-term business plan, we will need to obtain debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly traded company or from operations. Such additional debt or equity financing may not be available to us on favorable terms, if at all.

We plan to pursue our plans with respect to the research and development of our pre-clinical products which will require resources beyond those that we currently have, ultimately requiring additional capital from third-party sources. We currently do not expect to generate any revenue.

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

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it requires assumptions to be made that were uncertain at the time the estimate was made; and

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changes in the estimate or different estimates that could have been selected could have a material impact in our results of operations or financial condition.

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material.

See Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for an additional discussion of our significant accounting policies.

Stock-based compensation

The Company accounts for stock-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company's long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company's stock at the date of grant and expire up to ten years from the date of grant. Options are generally issued fully vested. The Company accounts for forfeited awards as they occur.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment.

Expected Term - The expected term of options represents the period that the Company's stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

The Company grants restricted stock awards under its equity incentive plan. Restricted stock awards are granted to employees and non-employees. The restricted stock awards are measured based on the grant-date fair value. In general, the restricted stock awards vest over a service period of zero to three years. Stock-based compensation expense is generally recognized based on the straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

The Company has issued warrants to non-employees. The warrants are measured based on the grant-date fair value. In general, the warrants vest over a term of zero to ten years. Stock-based compensation expense is generally recognized based on the straight-line basis over the vesting term.

Income taxes

Income taxes are recorded in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes ("ASC 740") which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between our financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit would more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Recently Issued Accounting Standards Not Yet Effective or Adopted

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on its consolidated financial statements.