Quarterly Report for Quarter Ending June 30, 2026 (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, 2025 filed with the SEC on March 30, 2026. 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 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) Australian Chestnut Extract and/or Celgosivir.

Business Developments

The following highlights significant business developments in our business during the quarter ended June 30, 2026:

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On April 15, 2026, we commenced our partnership with Runway Health, a direct-to-patient telehealth platform, to expand pre-departure access to Arakoda for prevention of malaria among international travelers through the Runway Health travel medicine platform.

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On May 19, 2026, we received a letter from U.S. Food and Drug Administration (FDA) regarding Australian Chestnut Extract and their objection to us marketing it as a dietary supplement.

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On June 11, 2026, we announced the signing of a patent license with Florida State University ("FSU") for the non-prescription use of Australian Chestnut extract as a botanical supplement.

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 were permitted to offer and sell shares of our common stock from time to time for aggregate 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 was entitled to a commission of 3.0% of the gross proceeds from sales of shares in the 2025 ATM Offering.

The common stock sold under the 2025 ATM Agreement was 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 a prospectus supplement dated September 5, 2025, relating to the offer and sale of the shares pursuant to the 2025 ATM Agreement.

Pursuant to the 2025 ATM Agreement, between January 1, 2026 and January 22, 2026, we sold an aggregate of 418,602 shares at a weighted average price per share of $2.07, generating net proceeds of $834,705, after deducting commissions and certain other offering expenses. We intend to use the net proceeds from the 2025 ATM Offering for general corporate purposes, including working capital, commercialization support for Arakoda, and funding our babesiosis clinical development programs.

2026 ATM Prospectus Supplement

On March 2, 2026, we filed a prospectus supplement pursuant to Rule 424(b)(5), updating the amount we were permitted to offer and sell under the 2025 ATM Agreement to allow for additional gross sales proceeds of $1,308,000 (the "2026 ATM Prospectus Supplement"). The 2026 ATM Prospectus Supplement was subsequently amended on March 11, 2026 and March 13, 2026, to increase the maximum aggregate offering price by $981,000 and $565,000, respectively (the "2026 ATM Prospectus Supplement Amendment," and together with the 2026 ATM Prospectus Supplement the "2026 ATM Offering").

As compensation for acting as the sales agent for the 2026 ATM Offering, Wainwright was entitled to a commission of 3.0% of the gross proceeds from the sales of shares in the 2026 ATM Offering.

The common stock sold pursuant to the 2026 ATM Prospectus Supplement was 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, the prospectus supplement dated September 5, 2025, and the 2026 ATM Prospectus Supplement relating to the offer and sale of the shares pursuant to the 2025 ATM Agreement.

Between March 2, 2026 and March 25, 2026, we sold an aggregate of 1,055,106 shares at a weighted average price per share of $2.49 generating net proceeds of $2,535,047, after deducting commissions and certain other offering expenses. We currently expect to use the net proceeds from the 2026 ATM Offering for similar general corporate purposes, including supporting our sales and marketing initiatives and ongoing clinical and preclinical research.

Due to the decline in our stock price, as of June 30, 2026, we did not have available capacity to sell additional shares under the 2025 ATM Agreement and related prospectus supplements based on the limitations of General Instruction I.B.6 of Form S-3, which restricts the aggregate market value of securities we may sell during any 12-month period to one-third of our public float. Our ability to resume sales under the 2025 ATM Agreement and related prospectus supplements will depend on future increases in our stock price or the passage of time such that prior sales are no longer counted within the trailing 12-month measurement period.

Reverse Stock Split and Nasdaq Delisting Notice

On January 20, 2026, we received a notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC ("Nasdaq") indicating that Nasdaq staff had determined to delist our common stock and warrants from The Nasdaq Capital Market because our common stock failed to maintain a minimum bid price of $1.00 per share for 30 consecutive business days, in violation of Nasdaq Listing Rule 5550(a)(2). Upon receipt of the notice, we paid $20,000 for the hearing fee and requested an appeal with Nasdaq, pursuant to the notice, which stayed the suspension of trading and the filing of the Form 25-NSE pending the Panel's decision.

At the 2025 Annual Stockholders Meeting in October 2025, our stockholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our common stock at a range of ratios between 1:3 to 1:10, and on December 17, 2025, our Board of Directors approved the implementation of the reverse stock split at a ratio of 1:4 (the "1:4 Reverse Stock Split"). Beginning January 20, 2026, our common stock traded on The Nasdaq Capital Market on a split adjusted basis.

Following the implementation of the 1:4 Reverse Stock Split, on February 11, 2026, we were notified by Nasdaq that we regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) and were therefore in compliance with the Nasdaq Capital Market's listing requirements. As a result, the hearing before the Nasdaq Hearings Panel scheduled for February 19, 2026 was cancelled and the matter was closed. Our common stock and warrants will continue to be listed and traded on The Nasdaq Capital Market.

The 1:4 Reverse Stock Split did not change the authorized number of shares of common stock or preferred stock. Proportional adjustments were made to the number of shares of common stock issuable upon exercise or conversion of our equity awards, warrants, and other equity instruments convertible into common stock, as well as the respective exercise prices, if applicable in accordance with the terms of the instruments. No fractional shares of common stock were issued in connection with the 1:4 Reverse Stock Split and all fractional shares were rounded up to the nearest whole share with respect to outstanding shares of common stock.

Unless otherwise noted, all references to numbers of shares of our common stock and per share information presented in this Quarterly Report on Form 10-Q have been retroactively restated, as appropriate, to reflect the effects of the 1:4 Reverse Stock Split.

Liquidity and Capital Resources

As of June 30, 2026, we had cash and cash equivalents of $1,022,606 ($1,510,065 as of December 31, 2025). For the six months ended June 30, 2026 and 2025, our net cash used in operating activities was $4,973,280 and $3,047,494, 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 $0.7 million received from the July 2026 PIPE public offering following approximately $3.8 million in net proceeds received through the 2025 ATM Agreement and related prospectus supplements between October 2025 and March 2026, we estimate that we will have sufficient funds to remain viable through early-October 2026. However, based on our cash forecasts and planned operating expenditures, we do not currently have sufficient cash and cash equivalents to fund our operating plan for at least the next 12 months from the date of issuance of these financial statements, which raises substantial doubt about our ability to continue as a going concern. Our plans to address these conditions, which include additional equity financings and potential business development transactions, are not currently sufficient to alleviate this substantial doubt. 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 near 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, 2025, 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, 2025 included 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 security agreements.

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. Accordingly, there is no assurance that we will be able to obtain the additional capital necessary to fund our operations during the look-forward period. 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.

We have evaluated these conditions and our plans to mitigate them and concluded that, collectively, such plans do not alleviate the substantial doubt about our ability to continue as a going concern for at least one year after the date these consolidated condensed 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 June 30, 2026:

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.

In addition, the Company has non-cancelable purchase obligations totaling $468,960, payable to its manufacturer Piramal, contingent upon the vendor meeting certain manufacturing milestones. $228,960 is expected to be payable around December 2026, with the remaining $240,000 is expected in March 2027. These amounts are not recognized on the consolidated balance sheet, as payment is contingent upon achievement of future events.

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 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"). We recognize revenue when control of Arakoda transfers to our 3PL partner, which generally occurs upon shipment. We record product revenue net of estimated discounts, rebates, chargebacks and product returns in accordance with ASC 606. We estimate these forms of variable consideration using the expected value method and constrain estimates to amounts for which it is probable that a significant reversal of cumulative revenue will not occur when the related uncertainties are resolved.

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. In 2025, other operating revenues also included research revenues associated with our contract with the United States Army Medical Material Development Activity (USAMMDA) for Arakoda supply chain upgrade support. We recognized research revenue related to the USAMMDA contract over time as qualifying costs were incurred, up to the maximum contractual funding amount. All funded activities under this contract were completed and fully reimbursed by December 31, 2025, and no additional amounts are expected to be earned under the arrangement. Currently, we are not engaging in research activity that would lead directly and immediately to research revenue.

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.

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, 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 $150,030 SBA loan that bears interest at 3.75%. Other components of other income (loss) 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 June 30, 2026 and 2025

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

Product Revenues - net of Discounts and Rebates

For the three months ended June 30, 2026, product revenues - net of discounts and rebates were $207,898, compared to $100,932 for the same period in 2025, an increase of $106,966, or 105.98%. The increase was attributable to two factors. First, the prior-year period was affected by a shortage of Arakoda 16-ct boxes, as previously disclosed, while new product lots underwent commercial validation at our secondary packager. Second, during the current period our third-party logistics partner ("3PL") agreed to carry higher inventory levels on a continuing basis, after deliveries to wholesalers and pharmacies were delayed at prior inventory levels. As a result, shipments to our 3PL in the current period exceeded sell-through to pharmacies by approximately $200,000. We do not expect this increase in channel inventory to recur, and revenue for the current period is not indicative of future quarterly revenue.

For the three months ended June 30, 2026, our 3PL, which purchases product from us and resells it to three large U.S. pharmaceutical wholesalers and to a compounding pharmacy, Infuserve America ("IA"), accounted for 92% of total net product sales of Arakoda (compared to 21% in the prior-year period), IA accounted for 0% (compared to 78%), and Kodatef sales to our Australian distributor accounted for 8% (compared to 1% in the prior-year period). During the shortage described above, we imported Kodatef from Australia under a temporary FDA authorization that facilitated patient access, and sold it directly to IA, which dispensed it to patients. That authorization has expired, and IA has since resumed purchasing through our 3PL.

We recognize revenue on transfer of control of product to our 3PL, which generally occurs upon shipment. Unit volumes described below as sold to pharmacies and dispensaries, and volumes reported by our distributors in Australia and Europe, represent sell-through to their respective customers and are not directly correlated to the revenue we recognize in any period.

We offer discounts and rebates to the civilian U.S. supply chain distribution channel. Our 3PL partner receives a distribution rebate of 10% of amounts invoiced and a 2% discount conditional on prompt payment, and we pay our 3PL partner a fixed fee of $5,500 per month together with data fees incurred in connection with serialization and distribution requirements. The product is then transferred usually to one of the three large U.S. pharmaceutical wholesalers or to IA, where rebates are 10% of their purchases from 3PL. Under our partnership with GoodRx, which commenced on February 2, 2026, eligible patients may obtain savings of up to 30% on Arakoda; amounts recorded under that program, including associated program fees, were $13,294 for the three months ended June 30, 2026. 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. Because rebates payable to wholesalers and PBMs are paid to parties that are not our customers, we account for them as variable consideration rather than as trade discounts. We estimate these forms of variable consideration using the expected value method and constrain estimates to amounts for which it is probable that a significant reversal of cumulative revenue will not occur when the related uncertainties are resolved. Total discounts and rebates for the three months ended June 30, 2026 were $162,350, an increase of $79,546, or 96%, from $82,804 in the prior-year period. As a percentage of gross product sales, discounts and rebates were 29.6% and 45.4% in the current and prior-year periods, respectively. The decrease reflects the conclusion of the temporary IA arrangement, under which a substantially higher proportion of sales were subject to PBM rebates.

Product returns for the three months ended June 30, 2026 were $178,659, compared to a net credit of $1,232 in the prior-year period. Returns consist of authorized returns of expired product from our 3PL and returns from wholesalers and pharmacies processed through a third-party administrator for destruction. The increase was primarily attributable to the expiration of product lots held in the distribution channel. As a percentage of gross product sales, returns were 32.6% in the current period.

For the three months ended June 30, 2026, the equivalent of 1,287 16-ct boxes were sold to U.S. pharmacies and dispensaries. Sales volume sold through increased by 19% from 1,082 16-ct box equivalents sold to U.S. pharmacies and dispensaries for the three months ended June 30, 2025. As previously disclosed, we report Arakoda unit sales in 16-ct box equivalents following the introduction of the 8-ct bottle in June 2025.

Kodatef sales to our distributor Biocelect in Australia for the three months ended June 30, 2026 were $15,808 ($1,219 for the three months ended June 30, 2025). Biocelect, which acts as a distributor in the Australian and New Zealand markets, reported a 26% year-over-year increase in sell-through, with 497 boxes sold to its customers for the three months ended June 30, 2026, compared to 396 boxes for the three months ended June 30, 2025. As of June 30, 2026, no receivables were due from Biocelet (none as of December 31, 2025).

We ship Arakoda to our European distributor, Scandinavian Biopharma ("SB"), periodically rather than each quarter, and did not recognize revenue on shipments to SB during either period presented. SB reported 103 boxes sold during the three months ended June 30, 2026, representing a 6% decrease from the 110 boxes sold during the three months ended June 30, 2025.

Cost of Revenues, Gross Profit, and Gross Margin

Cost of revenues was $151,100 for the three months ended June 30, 2026, as compared to $50,051 for the three months ended June 30, 2025. In 2025, total cost of revenues was uniquely low as the FDA allowed us to import and sell lower cost per unit Kodatef on a temporary basis due to stock out of Arakoda. As a result of no longer selling Kodatef in the US in 2026, gross margin % decreased to 27.32% for the three months ended June 30, 2026, from 50.41% in the prior-year period. Still, our gross profit increased by $5,917 to $56,798 for the three months ended June 30, 2026, from $50,881 in the prior-year period.

Other Operating Revenues

The research revenues earned by us were none for the three months ended June 30, 2026, as compared to $206,939 for the three months ended June 30, 2025. The decrease in research revenues is primarily due to the USAMMDA contract we were awarded in July 2024 to facilitate commercial validation of a new bottle and replacement blister packaging of Arakoda, which was fully utilized by the end of 2025. We recognized research revenues of $116,948 related to the USAMMDA grant for the three months ended June 30, 2025, compared to none for the three months ended June 30, 2026. Research revenues for the three months ended June 30, 2025 also included $954 earned from the Australian Tax Authority for qualifying research activities conducted in Australia. We recognized research revenue related to the USAMMDA contract over time as qualifying costs were incurred, up to the maximum contractual funding amount. All funded activities under this contract were completed and fully reimbursed by December 31, 2025, and no additional amounts are expected to be earned under the arrangement.

Operating Expenses

Research and Development

Research and development costs increased by $366,741 for the three months ended June 30, 2026 when compared to the three months ended June 30, 2025. The increase was primarily driven by an earlier start to the tick season which increased costs for our hospitalization study. Otherwise, research and development costs incurred for the three months ended June 30, 2026 and 2025 primarily consisted of costs related to our babesiosis trials for tafenoquine. Direct trial-related costs represent 69% of the total research and development costs at $413,424 for the three months ended June 30, 2026, compared to 76% of the costs at $176,892 for the three months ended June 30, 2025.

General and Administrative Expenses

For the three months ended June 30, 2026, our general and administrative expenses increased by approximately 5.94% or $97,011 from the three months ended June 30, 2025. The increase was driven by higher sales, advertising, and promotion expenses ($571,231 vs. $395,097) and partially offset by lower investor outreach expenses ($226,702 vs. $365,523).

Interest and Other Income, net

Interest Expense

For the three months ended June 30, 2026, we recognized $1,403 of interest expense ($1,221 for the three months ended June 30, 2025). Our interest expense for the periods presented primarily relates to our single outstanding loan from the SBA. Cash paid for interest expense was $2,197 and $2,193 for the three months ended June 30, 2026 and June 30, 2025, respectively.

Change in Fair Value of Derivative Liabilities

For the three months ended June 30, 2026, we recognized a net loss on the change in fair value of derivative liabilities of $5,665 compared to $140,447 for the three months ended June 30, 2025. 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. This method requires significant judgment and is sensitive to changes in assumptions related to the expected timing of payment, the likelihood of potential exit scenarios, and the selected discount rate. The losses recognized during the periods presented are non-cash in nature and do not impact our liquidity or cash flows.

Other Income, net

For the three months ended June 30, 2026, we recognized $12,584 in other income compared to $13,066 for the three months ended June 30, 2025. For the three months ended June 30, 2026, we recognized interest income from cash invested in interest-bearing accounts and investments in certificates of deposit of $12,584 ($15,687 for the three months ended June 30, 2025).

Comparison of the Six Months Ended June 30, 2026, and 2025

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 $369,990 for the six months ended June 30, 2026, as compared to $264,484 for the six months ended June 30, 2025, an increase of $105,506, or 39.89%. Sell-through volume to pharmacies and dispensaries declined 4% over the same period, from 2,661 to 2,563 16-ct box equivalents. Revenue increased notwithstanding lower sell-through volume because the prior-year period was affected by a shortage of Arakoda 16-ct boxes, as previously disclosed, and because shipments in the current period exceeded sell-through as our 3PL moved to higher inventory levels. Revenue for the current period is not indicative of future results.

For the six months ended June 30, 2026, our third-party logistics partner ("3PL"), which purchases product from us and resells it to three large U.S. pharmaceutical wholesalers and to a compounding pharmacy, Infuserve America ("IA"), and IA accounted for 92% and 0% of our total net product sales of Arakoda, respectively, and Kodatef sales to our Australian distributor accounted for 8% of total net product sales (61%, 34%, and 5% for the six months ended June 30, 2025, respectively). During the shortage described above, we imported Kodatef from Australia under a temporary FDA authorization that facilitated patient access, and sold it directly to IA, which dispensed it to patients. That authorization has expired, and IA has since resumed purchasing through our 3PL. The introduction of a new 8-ct Arakoda bottle into the commercial supply chain in June 2025 also mitigated the shortage.

We recognize revenue on transfer of control of product to our 3PL, which generally occurs upon shipment. Unit volumes described as sold to pharmacies and dispensaries, and volumes reported by our distributors in Australia and Europe, represent sell-through to their respective customers and are not directly correlated to the revenue we recognize in any period.

We offer discounts and rebates to the civilian U.S. supply chain distribution channel. Our 3PL partner receives a distribution rebate of 10% of amounts invoiced and a 2% discount conditional on prompt payment, and we pay our 3PL partner a fixed fee of $5,500 per month together with data fees incurred in connection with serialization and distribution requirements. The product is then transferred usually to one of the three large U.S. pharmaceutical wholesalers or to IA, where rebates are 10% of their purchases from 3PL. Under our partnership with GoodRx, which commenced on February 2, 2026, eligible patients may obtain savings of up to 30% on Arakoda; amounts recorded under that program, including associated program fees, were $23,219 for the six months ended June 30, 2026. 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. Because rebates payable to wholesalers and PBMs are paid to parties that are not our customers, we account for them as variable consideration rather than as trade discounts. We estimate these forms of variable consideration using the expected value method and constrain estimates to amounts for which it is probable that a significant reversal of cumulative revenue will not occur when the related uncertainties are resolved. For the six months ended June 30, 2026, discounts and rebates were $259,207 compared to $174,205 for the six months ended June 30, 2025. The increase reflects higher gross sales volume; as a percentage of gross U.S. product sales, discounts and rebates decreased period over period, reflecting the conclusion of the temporary IA arrangement, under which a substantially higher proportion of sales were subject to PBM rebates.

Product returns for the six months ended June 30, 2026 were $211,346, compared to a net credit of $18,025 for the six months ended June 30, 2025. Returns consist of authorized returns of expired product from our 3PL and returns from wholesalers and pharmacies processed through a third-party administrator for destruction. The increase was primarily attributable to the expiration of product lots held in the distribution channel.

Kodatef sales to our distributor Biocelect in Australia for the six months ended June 30, 2026 were $31,278 ($13,285 for the six months ended June 30, 2025). Biocelect, which acts as a distributor in the Australian and New Zealand market, reported a 9% year-over-year increase, the equivalent of 851 boxes sold for the six months ended June 30, 2026, compared to 782 boxes for the six months ended June 30, 2025. For the six months ended June 30, 2026, 900 boxes of Kodatef were sold to Biocelect (200 boxes for the six months ended June 30, 2025). Amounts we recognize as revenue reflect shipments to Biocelect, which are made periodically to replenish its inventory.

Arakoda sales volume in Europe has been flat. We ship Arakoda to our European distributor, Scandinavian Biopharma ("SB"), periodically rather than each quarter, and did not recognize revenue on shipments to SB during either period presented. For the six months ended June 30, 2026, SB reported 180 boxes sold (183 boxes sold for the six months ended June 30, 2025).

Cost of Revenues, Gross Profit, and Gross Margin

Cost of revenues was $236,815 for the six months ended June 30, 2026, as compared to $123,323 for the six months ended June 30, 2025. The increase reflects higher unit volumes shipped together with a higher cost per unit. Cost of revenues in the prior-year period was uniquely low for three reasons: a substantial portion of product sold consisted of imported Kodatef, which does not require the child-resistant packaging applied to Arakoda in the United States and therefore carried a significantly lower cost per unit; the prior-year period included a higher proportion of 8-ct bottles, which carry a lower packaging cost per box equivalent; and product sold in the prior-year period was manufactured using active pharmaceutical ingredient acquired in 2018 at a lower cost per kilogram than the material used in current lots. Cost of revenues in the current period also included yield losses incurred during tableting, blistering and final packaging of new product lots, higher storage costs charged by our secondary packager, and the destruction of product lots that expired during the period. Yield losses are incurred only in periods in which new lots are produced. The Gross Margin % decreased from 53.37% for the six months ended June 30, 2025 to 35.99% for the six months ended June 30, 2026.

Other Operating Revenues

The research revenues earned by us were $0 for the six months ended June 30, 2026, as compared to $299,670 for the six months ended June 30, 2025. The decrease in research revenues is primarily due to the 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 $0 related to the USAMMDA grant for the six months ended June 30, 2026 ($194,914 for the six months ended June 30, 2025). We recognized research revenues of $0 from the University of Kentucky for the six months ended June 30, 2026 ($89,302 for the six months ended June 30, 2025). Other research revenues were $0 for the six months ended June 30, 2026 ($15,454 for the six months ended June 30, 2025).

Operating Expenses

Research and Development

Research and development costs increased by $277,392 for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025. The increase is primarily attributable to having three Babesiosis trials fully active for the first time. Direct trial-related costs represent 73% of the total research and development costs at $638,959 for the six months ended June 30, 2026, compared to 75% of the costs at $452,525 for the six months ended June 30, 2025.

General and Administrative Expenses

For the six months ended June 30, 2026, our general and administrative expenses increased by approximately 7.86% or $263,749 from the six months ended June 30, 2025. For the six months ended June 30, 2026, we incurred significantly higher sales, advertising and promotion expenses at $1,092,408, up from $680,384 for the six months ended June 30, 2025. This was partially offset by decreased investor outreach expenses of $423,934 for the six months ended June 30, 2026, as compared to $759,211 for the six months ended June 30, 2025.

Interest and Other Income, net

Interest Expense

For the six months ended June 30, 2026, we recognized $2,792 of interest expense ($3,011 for the six months ended June 30, 2025). Our interest expense for the periods presented primarily relates to our single outstanding loan from the SBA. Cash paid for interest expense was $4,390 and $4,386 for the six months ended June 30, 2026 and June 30, 2025, respectively.

Change in Fair Value of Derivative Liabilities

For the six months ended June 30, 2026, we recognized a net loss on the change in fair value of derivative liabilities of $10,232 compared to $135,342 for the six months ended June 30, 2025. 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. This method requires significant judgment and is sensitive to changes in assumptions related to the expected timing of payment, the likelihood of potential exit scenarios, and the selected discount rate. The losses recognized during the periods presented are non-cash in nature and do not impact our liquidity or cash flows.

Other Income, net

For the six months ended June 30, 2026, we recognized $23,346 in other income compared to $43,388 for the six months ended June 30, 2025. For the six months ended June 30, 2026, we recognized interest income from cash invested in interest-bearing accounts and investments in certificates of deposit of $23,794 ($47,584 for the six months ended June 30, 2025).

Cash Flows

Cash Used in Operating Activities

Net cash used in operating activities was $4,973,280 for the six months ended June 30, 2026, as compared to $3,047,494 for the six months ended June 30, 2025. Our net cash used in operating activities increased primarily due to higher general and administrative expenses at $3,619,121 for the six months ended June 30, 2026 ($3,355,372 for the six months ended June 30, 2025), as a result of higher sales, advertising and promotion costs, as discussed above. In addition, cash outflows increased due to higher levels of vendor prepayments primarily due to initiating new API production at Piramal during the six months ended June 30, 2026 when compared to the six months ended June 30, 2025.

Cash Provided by Investing Activities

Net cash provided by investing activities was $1,107,576 for the six months ended June 30, 2026, as compared to $1,650,834 for the six months ended June 30, 2025. For the six months ended June 30, 2026, we received proceeds of $1,235,000 from maturities of certain short-term investments in certificates of deposit ($1,708,000 for the six months ended June 30, 2025). The cash proceeds are partially offset by fixed asset purchases of $30,000 for the six months ended June 30, 2026 ($50,001 for the six months ended June 30, 2025). Additionally, for the six months ended June 30, 2026, we paid cash of $64,376 for capitalized website development costs associated with enhancements to the functionality of our corporate website. We did not have any cash outflows for capitalized website development costs for the six months ended June 30, 2025.

Cash Provided by Financing Activities

Net cash provided by financing activities was $3,369,752 for the six months ended June 30, 2026, as compared to $1,696,899 for the six months ended June 30, 2025. The increase in net cash provided by financing activities is attributable to higher net proceeds from the sale of common stock under our At-the-Market (ATM) Sales Agreement between January and March 2026, which exceeded the aggregate net proceeds of $1,712,973 received from our common stock and warrant offerings completed in January and February 2025.

The increase was partially offset by lower proceeds from warrant exercises, which were $0 for the six months ended June 30, 2026, compared to $1,926 for the six months ended June 30, 2025. In addition, during the six months ended June 30, 2025, we withheld shares valued at $18,000 to cover tax withholdings associated with the net share settlement of certain 2024 performance bonuses awarded to our executives. No such share withholding or net share settlement activity occurred during the six months ended June 30, 2026.

Effect of Foreign Currency Translation on Cash

Our foreign operations were small relative to U.S. operations for the six months ended June 30, 2026 and June 30, 2025, 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 were further subject to profit sharing agreements for boxes sold to customers.

Inventory

We report inventories at the lower of cost or net realizable value. Cost is comprised of direct materials and, where applicable, costs we incur in bringing the inventories to their present location and condition. We use the Specific Identification method per lot. A box or a bottle price is calculated per lot number and sales are recognized by their lot number.

We regularly monitor our inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value, and record write-downs for inventory that has expired, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected sales requirements. We charge any write-downs of inventories to Cost of Revenues in the Consolidated Condensed Statements of Operations and Comprehensive Loss.

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 assess the classification of our derivative financial instruments each reporting period, and determined that such instruments initially qualified for treatment as derivative liabilities as they met the criteria for liability classification under ASC 815. As of June 30, 2026, our derivative liabilities consist of contingent payment arrangements.

We analyze all financial instruments with features of both liabilities and equity under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic No. 480, Distinguishing Liabilities from Equity ("ASC 480") and FASB ASC Topic No. 815, Derivatives and Hedging ("ASC 815"). 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, as a component of other income or expense as change in fair value of derivative liabilities. 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 2026 and 2025, 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 ("ASUs") to amend the authoritative literature in the ASC. We regularly evaluate new ASUs to determine the impact that these pronouncements may have on our 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 our consolidated condensed financial statements or related 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.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"), which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40. The amendments modernize the recognition and disclosure framework for internal-use software costs, removing the previous "development stage" model and introducing a more judgment-based approach. The ASU is effective for all entities for interim and annual periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact that ASU 2025-06 will have on our financial statements.

In September 2025, the FASB issued ASU 2025-07, Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract ("ASU 2025-07"). ASU 2025-07 adds a new scope exception from derivative accounting under ASC 815 for certain non-exchange-traded contracts with customers with an underlying that is based on operations or activities specific to one of the parties to the contract. Further, ASU 2025-07 clarifies that an entity should apply the guidance in ASC 606 to a contract with stock-based noncash consideration. The ASU is effective for annual periods beginning after December 15, 2026 and interim periods within those annual periods, with early adoption permitted. We are currently evaluating the impact that ASU 2025-07 will have on our financial statements.