Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes thereto and the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Form 10-K") filed with the Securities and Exchange Commission on March 31, 2026. In addition to historical financial information, this discussion and analysis contains forward-looking statements that involve risks, assumptions, and uncertainties, including statements of our plans, objectives, expectations, intentions, forecasts, and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under Part I, Item 1A "Risk Factors" of the Form 10-K, which you should read carefully to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the "Part I - Financial Information," including the related notes to the condensed consolidated financial statements contained therein.

Overview

Our Company (f/k/a NAS-ONC, Inc.) was formed in 2008, devoted to developing new drugs with new delivery modes. As a clinical-stage biopharmaceutical company, we have focused on establishing superior treatments for intracranial malignancies, i.e., aggressive cancers located in the brain. These cancer types include primary brain cancers, such as glioblastoma, and secondary brain cancers, that have arrived through metastatic spread from other cancers throughout the body, such as melanoma or breast and lung cancer. Brain-localized malignancies are particularly difficult to treat because the blood-brain barrier prevents efficient entry of most pharmacotherapeutic agents into the brain. As a result, these patients are faced with poor prognoses and shortened average life expectancy. NeOnc is developing novel drug delivery methods to be used in combination with novel drug candidates.

NeOnc's lead product candidate is NEO100. NEO100 is administered to patients via intranasal delivery. We have completed human safety testing in a Phase 1 clinical trial and are currently conducting preliminary efficacy testing in a Phase 2a trial with recurrent malignant glioma (Grade IV IDH1 mutant and Grade III Astrocytoma IDH1 mutant) patients. NeOnc is also developing a second product candidate, NEO212, which has completed preclinical testing, and an investigational new drug (IND) application has been filed and accepted with the United States Food and Drug Administration (FDA). The Company has started Phase 1 clinical trials with patients harbouring primary and secondary malignant brain cancer types. Several additional drug candidates are in the pipeline and are undergoing preclinical development.

Since inception, our operations have focused on organizing and staffing our Company, business planning, raising capital, acquiring and developing our technology, establishing our intellectual property portfolio, identifying potential product candidates and undertaking preclinical and clinical studies and manufacturing. We do not have any products approved for sale and have not generated any revenue from product sales other than for humanitarian usage.

Investment and Joint Venture

In June 2025, the Company (through its recently formed subsidiary - Nuromena Holdings Ltd. "NuroMena") entered into a letter of intent to form an investment and joint venture agreement with a Middle-East investor ("Investor"), Quazar Investments. At the formation date, the Company would own 10 million shares of NuroMena and contribute a license to its technology to NuroMena, and the Investor will purchase 2.5 million shares of NuroMena for a subscription price of $400,000 ("Initial Investment"). Following the formation of the entity and closing of the Initial Investment, the Investor shall source one or more future investors to purchase up to $50.0 million at $25/share in common stock of the Company, of which 70% of the proceeds will be maintained by the Company and 30% will be transferred to an operating entity to be formed under NuroMena, to conduct clinical trials in the middle-east markets. As of the date of this filing, the Initial Investment has not yet occurred.

Asset Acquisition

In October 2025, the Company paid $500,000 to McMaster University pursuant to a Patent Purchase Agreement, and U.S. Patent No. 11,788,057 B2 (the "Patent") was formally assigned effective October 8, 2025. The Patent covers proprietary technologies combining 3D bioprinting, artificial intelligence, and quantum modeling that are designed to enable the creation of patient-derived three-dimensional brain tumor models for high-throughput preclinical drug screening.

Liquidity

Since our inception, we have incurred significant operating losses. Our net loss was $8,819,932 and $32,326,016 for the three months ended March 31, 2026 and 2025, respectively. We had an accumulated deficit of $121,574,587 as of March 31, 2026, compared to $112,754,655 as of December 31, 2025. We expect to continue to incur operating losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.

We have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We occasionally receive a fee from a patient for a "right to try" humanitarian program. Such revenues are not part of our core business.

Operating Expenses

Our operating expenses consist of (i) research and development expenses and (ii) legal and professional expenses and (iii) general and administrative expenses.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research and development activities, including our product candidate discovery efforts and preclinical and clinical studies under our research programs, which include:

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employee-related expenses, including salaries, benefits and stock-based compensation expense for our research and development personnel;

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costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf;

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costs of manufacturing drug products and drug supply related to our current or future product candidates;

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costs of conducting preclinical studies and clinical trials of our product candidates;

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consulting and professional fees related to research and development activities, including equity-based compensation to non-employees;

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costs of maintaining our laboratory, including purchasing laboratory supplies and non-capital equipment used in our preclinical studies;

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costs related to compliance with clinical regulatory requirements; and

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facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies.

Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our preclinical and clinical studies or other services performed.

The successful development of our product candidates is highly uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if they are approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

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the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies and clinical trials and other research and development activities;

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establishing an appropriate safety profile;

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successful enrollment in and completion of clinical trials;

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whether our product candidates show safety and efficacy in our clinical trials;

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receipt of marketing approvals from applicable regulatory authorities;

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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

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commercializing product candidates, if and when approved, whether alone or in collaboration with others; and

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continued acceptable safety of the products following any regulatory approval.

A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as we commence clinical trials and continue the development of our current and future product candidates. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

Legal and Professional Expenses

Legal and professional expenses consist of costs related to corporate and intellectual property legal costs and accounting and auditing fees. We also anticipate increased expenses associated with being a public company, including costs for audit, legal, regulatory and tax-related services related to compliance with the rules and regulations of the Securities and Exchange Commission, or the SEC, and listing standards applicable to companies listed on a national securities exchange, director and officer insurance premiums, and investor relations costs.

General and Administrative Expenses

General and administrative expenses include salaries and other compensation-related costs, including stock-based compensation, for personnel in executive, finance and accounting, business development, operations and administrative roles. Other significant costs include insurance costs, travel costs, facility and office-related costs not included in research and development expenses.

We anticipate that our general and administrative expenses will increase in the future as our business expands to support expected growth in research and development activities, including our future clinical programs. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside service providers, among other expenses. In addition, if we obtain regulatory approval for any of our product candidates and do not enter a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities.

Stock Based Compensation

Stock based compensation expense result from the recognition of the fair value of restricted stock recorded on a straight-line basis from the date of grant to the date the restricted stock becomes fully vested.

Interest Expense

Interest expense primarily results from the bridge loan and a short-term loan both from related parties. Borrowings under these loans carry a 50% (or 1 times amounts borrowed) original issue discount ("OID") on principal. The Company also had interest expense related to the convertible debt entered into in 2025, which contained an OID factor on the original principal amount. The OID to be earned under the loan is recognized ratably over the term of each draw-down under the loan through the maturity date.

Interest expense primarily relates to the convertible debt entered into in 2025, which contained an original issue discount ("OID") factor on the original principal amount, which was repaid in January 2026. The Company also had interest expense related to the outstanding litigation settlements.

Advisory fees

Advisory fees principally represent amounts due AFH Holdings, a related party, for their services in recapitalizing the Company.

Amortization

Amortization on debt issuance costs resulted from the grant of warrants for a line of credit commitment. The fair value of the warrants was determined using the Black Scholes valuation method and the fair value is being amortized over the term of the line of credit commitment.

Amortization on deferred offering costs resulted from the issuance of common stock in connection with a private equity agreement.

Gain (Loss) on Change in Fair Value of Derivative Liability

Gain (loss) on change in fair value of derivative liability relates to the fair value of the discount offered to stockholders who purchased shares under the equity line of credit.

Comparison of the three months ended March 31, 2026 and 2025:

Results of Operations

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

		For the Three Months Ended March 31,
		2026				2025				Change
Revenues:
Revenue		$	-			$	39,990			$	(39,990	)
Operating Expenses:
Research and development			1,286,336				998,222				288,114
Legal and professional			1,188,220				957,545				230,675
General and administrative			488,709				849,485				(360,776	)
Stock based compensation			2,732,397				17,397,774				(14,665,377	)
Advisory Fee			1,360,000				11,737,806				(10,377,806	)
Total Operating Expenses			7,055,662				31,940,832				(24,885,170	)
Loss From Operations			(7,055,662	)			(31,900,842	)			24,845,180
Other Income (Expense):
Interest and other income			5,196				51,699				(46,503	)
Grant income			47,123				-				47,123
Amortization expense			(192,165	)			(167,951	)			(24,214	)
Interest expense - related parties			(982,624	)			(308,922	)			(673,702	)
Other income (expense)			(644,601	)			-				(644,601	)
Gain on change in fair value of derivative liability			2,801				-				2,801
Net Loss		$	(8,819,932	)		$	(32,326,016	)		$	23,506,084

Revenue

No revenue was generated for fees for a "right to try" humanitarian program during the three months ended March 31, 2026. Revenue of $39,990 was generated during the three months ended March 31, 2025 from fees related to a "right to try" humanitarian program.

Research and Development Expenses

The following table summarizes the components of our research and development expenses for the periods presented:

		For the Three Months Ended March 31,
		2026				2025
Research and development costs by project:
NEO100-01		$	882,654			$	579,462
NEO100-02			105,094				108,461
NEO212			268,577				176,555
Pediatric			19,736				48,832
Laboratory			10,275				84,912
Total		$	1,286,336			$	998,222

		For the Three Months Ended March 31,
		2026				2025				Change
Clinical trial expense		$	1,276,061			$	913,310			$	362,751
Research and laboratory			10,275				84,912				(74,637	)
Total research and development expense		$	1,286,336			$	998,222			$	288,114

Research and development expenses were $1,286,336 and $998,222 for the three months ended March 31, 2026 and 2025, respectively. A portion of these expenses amounting to approximately $38,409 and $103,224 for the three months ended March 31, 2026 and 2025, respectively are from the University of Southern California (USC), where Dr. Chen is a member of the faculty. The total increase of $288,114 was primarily due to:

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The addition of clinical trial sites for NEO100's clinical trial.

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The recruitment for NEO212.

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The start of the clinical trial for NEO100-03 for a Pediatric Indication.

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Increased patient recruitment efforts.

Legal and Professional Expenses

Legal and professional expenses were $1,188,220 and $957,545 for the three months ended March 31, 2026 and 2025, respectively. The increase of $230,675 was primarily attributable to investment banking fees and incremental legal and audit fees incurred in connection with the preparation and filing of our Annual Report on Form 10-K for the year ended December 31, 2025, our Registration Statement on Form S-3, and related prospectus supplement.

General and Administrative Expenses

General and administrative expenses were $488,709 and $849,485 for the three months ended March 31, 2026 and 2025, respectively. The decrease of $360,776 was primarily driven by a reduction in marketing and advertising expense in connection with the direct public listing, as well as a reduction of rent, travel, and other costs incurred in Q1 2025 in pursuit of the Middle East deal.

Stock Based Compensation

Stock-based compensation expense, which is a non-cash expense, for the three months ended March 31, 2026 resulted from the ongoing recognition of the grant date fair value of restricted stock over the applicable service periods. Stock-based compensation expense for the three months ended March 31, 2025 included the recognition of expense from the original grant dates of certain restricted stock through the Listing Date that occurred on March 26, 2025, reflecting a cumulative catch-up upon removal of the listing contingency, in addition to amortization of the grant date fair value of those shares of restricted stock over their respective service periods following the Listing Date. Since stock-based compensation is a non-cash item, it does not affect our cash position or our cash used in operating activities.

Advisory Fee

Advisory fee expense, primarily to a related party, was $1,360,000 and $11,737,806 for the three months ended March 31, 2026 and 2025, respectively. Advisory fee expense for the three months ended March 31, 2026 consisted of fees incurred for advisory services related to our capital financing arrangements pursuant to a letter of intent with AFH (see Note 4). Advisory fee expense for the three months ended March 31, 2025 was substantially comprised of the $11,328,565 fee earned upon the Listing Date on March 26, 2025 in accordance with the AFH advisory agreement.

Interest Expense

Interest expense was $982,624 and $308,922 for the three months ended March 31, 2026 and 2025, respectively. Interest expense for the three months ended March 31, 2026 related to the short-term loan and accrued interest for a litigation matter.

Interest and other Grant Income

Interest and grant income was $52,319 and $51,699 for the three months ended March 31, 2026 and 2025, respectively. Interest and other grant income for the three months ended March 31, 2026 related primarily to interest earned on our money market account and grant income pursuant to the two NIH grants which commenced in late 2025. Interest and other income for the three months ended March 31, 2025 related primarily to interest earned on our money market account.

Amortization of Debt Issuance Costs

Amortization of debt issuance costs was $192,165 and $167,951 for the three months ended March 31, 2026 and 2025, respectively. Amortization of debt issuance costs in both periods primarily reflected the ongoing amortization of debt issuance costs associated with (i) the warrants issued in connection with the line of credit with HCWG and (ii) the offering costs related to the equity purchase agreement with Mast Hill Fund, LP.

Gain on Change in Fair Value of Derivative Liability

Gain on change in fair value of derivative liability was $2,801 and $0 for the three months ended March 31, 2026 and 2025, respectively. The derivative liability is created from the settlement feature embedded in the Company's equity line of credit agreement with Mast Hill Fund, LP. Under the agreement, shares of common stock are purchased at a discount due to the five-day settlement period between the commitment date and the issuance date. This discount feature creates a variable settlement mechanism that is required to be accounted for as a derivative liability. The gain represents the change in fair value of this derivative liability from each draw under the agreement through the corresponding settlement date. There were no draws under the equity purchase agreement during the three months ended March 31, 2025, and no related loss was recognized in that period.

Other Income (Expense)

Other expense was $644,601 and $0 for the three months ended March 31, 2026 and 2025, respectively. Other expense for the three months ended March 31, 2026 consisted of penalties and interest accrued in connection with the unremitted income tax withholdings on shares of common stock that were withheld from recipients upon the vesting of shares of restricted stock to satisfy the recipients' tax obligations. As of March 31, 2026, the Company had not remitted such withholding taxes to the applicable taxing authorities, and accordingly the Company has accrued penalties and interest, which is included within accrued expenses in the condensed consolidated balance sheets.

Cash Flows

The following table summarizes our cash flow for the periods indicated:

		For the Three Months Ended March 31,
		2026				2025				Change
Net cash provided by (used in):
Operating activities		$	(6,991,773	)		$	(5,650,055	)		$	(1,341,718	)
Financing activities			7,071,645				11,024,372				(3,952,727	)
Net increase in cash		$	79,872			$	5,374,317			$	(5,294,445	)

Operating Activities

During the three months ended March 31, 2026, net cash used in operating activities was $6,991,773 consisting primarily of our net loss of $8,819,932, offset by stock based compensation of $2,732,397, accretion of original issue discount on the convertible promissory notes of $714,600, amortization of debt issuance of $192,165, amortization of right of use asset of $20,406, amortization of intangible asset of $11,574, and increase in accrued expense of $1,437,582. These were offset by decreases in accrued advisory fee of $1,757,141, accounts payable of $390,550, accounts payable and accrued expenses - related parties of $463,513, and lease liability of $15,760, an increase in prepaid expenses of $650,800, and a gain on change in fair value of derivative liability of $2,801.

During the three months ended March 31, 2025, net cash used in operating activities was $5,650,055 consisting primarily of our net loss of $32,326,016, offset by stock based compensation of $17,397,774, accretion of original issue discount on related-party advances of $300,000, amortization of debt issuance costs of $577,192, increase in accrued advisory fee of $8,828,565, and increase in accounts payable - related parties of $628,276. These were offset by an increase in prepaid expenses of $765,738 and a decrease in accrued compensation of $290,108.

Financing Activities

During the three months ended March 31, 2026, cash provided by financing activities was $7,071,645 consisting primarily of proceeds from the issuance of common stock and warrants in connection with our PIPE financing of $13,071,783 and proceeds from the sales of common stock under the equity line of credit of $666,528, offset by the repayment of the OID convertible promissory notes of $6,666,667.

During the three months ended March 31, 2025, cash provided by financing activities was $11,024,372 consisting primarily of proceeds from the sale of common stock of $11,324,372 and proceeds from related party loans of $300,000, offset by repayment of related party loans of $600,000.

Liquidity and Capital Resources

Sources of Liquidity/Going Concern

Since our inception, we have funded our operations through the sale and issuance of common stock and debt financings from related and third parties. Our historical sources of liquidity, including the issuances of common stock under our private placements, sales under the Equity Purchase Agreement with Mast Hill Fund, LP, the line of credit with HCWG, and our convertible debt financings, are described in the "Liquidity and Capital Resources" section of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to these arrangements during the three months ended March 31, 2026 except as described below.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Since our inception, we have not generated any revenue from product sales or any other sources, except humanitarian use, and we have incurred significant operating losses. We have not yet commercialized any products, and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever. As reflected in the accompanying condensed consolidated financial statements, we have incurred recurring net losses since our inception. For the three months ended March 31, 2026, we incurred a net loss of $8,819,932, and we had an accumulated deficit of $121,574,587 at March 31, 2026. At March 31, 2026, we had cash totaling $138,601. These factors raise substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our strategies, such as executing additional licensing contracts. The condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

In January 2026, the Company entered into the first of a series of related Securities Purchase Agreements providing for the issuance, in one or more closings, of up to an aggregate of 2,222,222 shares of common stock and warrants to purchase up to 2,222,222 shares of common stock at an exercise price of $9.00 per share, for aggregate gross proceeds of up to approximately $16,000,000. During the three months ended March 31, 2026, we completed closings under three Securities Purchase Agreements for an aggregate of 1,815,528 shares of common stock and warrants to purchase 1,815,528 shares of common stock, resulting in gross proceeds of $13,071,808. Subsequent to March 31, 2026, on April 20, 2026, we entered into a fourth Securities Purchase Agreement and completed an additional closing thereunder for an aggregate of 277,777 shares of common stock and warrants to purchase 277,777 shares of common stock, resulting in gross proceeds of approximately $2,000,000. The offering of securities under the PIPE Financing terminated on April 30, 2026.

The ability to continue as a going concern is dependent on us raising additional capital and attaining and maintaining profitable operations in the future to meet our obligations and repay our liabilities arising from normal business operations when they come due. Since inception, we have funded our operations primarily through equity and debt financings and licensing income and we expect to continue to rely on these sources of capital in the future. We have the following financing facilities available to us:

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On October 11, 2024, the Company entered into a Line of Credit Agreement ("the Agreement") with HCWG for borrowings of up to $10.0 million. No amounts have been borrowed under the facility through December 31, 2025.

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On October 22, 2024, we entered into an equity purchase agreement (the "Equity Purchase Agreement") with Mast Hill Fund, LP ("Mast Hill") pursuant to which the Company may sell and issue to the investor, and the investor may purchase from the Company, up to $50,000,000 of Company's common shares. During the three months ended March 31, 2026, the Company sold 76,648 shares of common stock at prices ranging from $8.40 to $8.97 per share under the Equity Purchase Agreement, resulting in net proceeds of $663,727.

No assurance can be given that we will be able to draw upon such facilities if needed. Further, no assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing, or grant unfavorable terms in licensing agreements.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, initiate and conduct preclinical studies and clinical trials, and seek marketing approval for our current and any of our future product candidates. In addition, if we obtain marketing approval for any of our current or our future product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution, which costs we may seek to offset through entry into collaboration agreements with third parties. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We intend to finance our operations over the next 12 months primarily through existing cash balances and the proceeds from the funds available through our Line of Credit Agreement with HCWG and sales under the Equity Purchase Agreement, each as described above. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on a number of factors, including:

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the costs of conducting preclinical studies and clinical trials;

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the costs of manufacturing;

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the scope, progress, results and costs of discovery, preclinical development, laboratory testing, and clinical trials for product candidates we may develop, if any;

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the costs, timing, and outcome of regulatory review of our product candidates;

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our ability to establish and maintain collaborations on favorable terms, if at all;

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the achievement of milestones or the occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time;

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the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims;

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our headcount growth and associated costs as we expand our business operations and research and development activities; and

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the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

If we raise funds through potential collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds 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 product candidates that we would otherwise prefer to develop and market ourselves.

Critical Accounting Estimates

Stock-Based Compensation

We account for stock-based compensation, including restricted stock, in accordance with ASC 718 (Accounting Standards Codification Topic 718, Compensation-Stock Compensation). Shares of restricted stock are measured at fair value on the grant date based on our common stock price and expense over the vesting period. For awards with performance or market conditions, expense is recognized based on the probability of achievement and may be accelerated. We estimate forfeitures based on historical data and adjust these estimates periodically. Changes in forfeiture rates, stock price, or performance assumptions can materially affect stock-based compensation expenses. Management reviews these assumptions quarterly and updates estimates as necessary. We consider the accounting for restricted stock a critical estimate due to the judgment involved and its material impact on our financial results.

Common Stock Purchase Warrants

We consider the valuation of our common stock purchase warrants a critical accounting estimate. The fair value of our warrants is determined using a Monte Carlo Simulation model. The Monte Carlo Simulation model requires significant judgment in the selection of key inputs, including expected volatility, expected term, risk-free interest rate, and the fair value of our common stock. Expected volatility is estimated based on the historical volatility of a peer group of guideline public companies, given our limited trading history as a public company. The expected term reflects, among other factors, our assumptions regarding the likelihood and timing of liquidity events. For warrants with down-round protective provisions, additional judgment is required in modeling the timing, probability, and pricing of assumed future financing events that could trigger an adjustment to the warrant exercise price. Changes in these assumptions, particularly expected volatility, expected term, and stock price, can materially affect the estimated fair value of our warrants and, for liability-classified warrants, our reported results of operations in any given period.