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 Management's Discussion and Analysis of Financial Condition and Results of Operations (the "MD&A") should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this Quarterly Report and our financial statement and related notes contained in our annual report on From 10-K for the fiscal year ended December 31, 2025. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under "Risk Factors" in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2025.

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report, except as required by U.S. federal securities laws.

Overview

On November 21, 2025, we acquired substantially all of the assets of Molecule.ai, a pharmaceutical software company building an artificial intelligence driven platform for molecular discovery and early-stage drug development, were acquired by a wholly owned subsidiary of ours. By combining modern AI techniques with structured scientific workflows, the Molecule.ai platform helps researchers explore the chemical space more efficiently, evaluate molecular ideas with greater clarity and make more informed decisions during the earliest stages of drug development. The platform is engineered to accelerate the iteration cycles that characterize modern drug discovery while preserving scientific reproducibility, traceability and operational reliability. Molecule.ai adapts state-of-the-art AI algorithms to create a practical, domain-specific AI infrastructure layer for molecular research and development. We will seek to leverage Molecule.ai's molecular modeling and predictive analytics platform to significantly augment our drug discovery and development business purpose. In tandem with the Molecule.ai asset acquisition, on November 20, 2025, we committed to a plan to wind-down the Clinical Trials of Ropidoxuridine.

On March 9, 2026, we completed an underwritten public offering consisting of 223,880 shares of common stock and 476,120 pre-funded warrants, resulting in gross proceeds of approximately $3.5 million and net proceeds of approximately $3.2 million after underwriting discounts, commissions and estimated offering expenses. We used a portion of the proceeds to support marketing efforts and intend to use the remaining proceeds for working capital and general corporate purposes.

On May 6, 2026, we completed a PIPE Financing consisting of 1,910 shares of Series B-2 Convertible Preferred Stock and common stock purchase warrants exercisable for up to 927,185 shares of our common stock. The PIPE Financing generated gross proceeds of approximately $9.6 million and net proceeds of approximately $8.4 million after deducting placement agent fees, legal costs and other transaction costs. Subject to stockholder approval and the achievement of specified milestone events, investors may become entitled to receive pre-funded warrants exercisable for up to approximately 3,148,619 shares of our common stock. We are using the proceeds primarily to support digital asset and AI infrastructure initiatives through our United Dogecoin, Inc. subsidiary, with the remainder available for working capital and general corporate purposes.

Also on May 6, 2026, we completed the concurrent merger by and among the Company, Shuttle Merger Sub, Inc. and United Dogecoin, pursuant to the merger agreement entered into on April 30, 2026. Upon the closing of the merger, Shuttle Merger Sub, Inc. merged with and into United Dogecoin, with United Dogecoin surviving the Merger. As a result of the merger, United Dogecoin became a direct wholly-owned subsidiary of the Company (however, we do not have a controlling interest in United Dogecoin, as discussed further in Note 7 to the accompanying consolidated financial statements).

United Dogecoin was founded as a Dogecoin mining company built on three foundational advantages: scale, preferential access to best-in-class equipment, and an industry leading management team. Its mission was to establish and maintain category leadership in the Dogecoin sector through high-efficiency, low-cost mining operations and strategic coin accumulation, combining operational excellence, consistency and expert execution to build a robust reserve. Since the acquisition, UD has sought to become a start-up digital infrastructure company focused on the development, ownership, and operation of large-scale computing infrastructure supporting blockchain networks, AI, and high-performance computing ("HPC") workloads. Our United Dogecoin subsidiary is currently seeking to build an energy-first digital infrastructure platform designed to deploy computing capacity across multiple end markets as demand evolves, with a strategy to identify, acquire, develop, and operate energy infrastructure capable of supporting large-scale computing operations. It is seeking opportunities where long-term access to reliable, low-cost power can provide a sustainable competitive advantage.

Initially, United Dogecoin intends to deploy infrastructure supporting Dogecoin mining while designing its facilities to accommodate AI, HPC, cloud computing, and other computational workloads over time. This flexible approach is expected to allow management to allocate computing capacity based on market demand and expected returns. To date, United Dogecoin has purchased 500 rigs and has initiated a co-location agreement for these units. United Dogecoin continues to evaluate strategic acquisitions, infrastructure development opportunities, commercial partnerships, and financing transactions intended to expand its digital infrastructure platform.

Nasdaq Listing Compliance

On December 31, 2024, we received a letter from the Staff of the Nasdaq Stock Market stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until June 30, 2025, to regain compliance with the Minimum Bid Price Requirement.

Following our March 2025 $5.75 million equity financing, on March 14, 2025, Nasdaq acknowledged that we had regained compliance with the Listing Rule 5550(b)(1) but indicated that if we failed to evidence compliance upon filing the March 31, 2025 Form 10-Q, we may have been subject to delisting. We evidenced compliance through maintaining a minimum closing bid price of our common stock of $1.00 per share or greater from June 16, 2025 to July 1, 2025. Accordingly, we regained compliance with the Minimum Bid Price Requirement.

On June 16, 2025, in order to maintain the Minimum Bid Price Requirement, we effectuated a 1-for-25 reverse stock split of our issued and outstanding common stock, rounding up to account for any fractional shares. The reverse stock split had no effect on our authorized shares of common stock or preferred stock and the par value remained unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these consolidated financial statements and related disclosures.

On July 2, 2025, we received notification from Nasdaq acknowledging that we maintained the requisite minimum closing bid price of our common stock of $1.00 per share or greater. Accordingly, we regained compliance with Listing Rule 5550(a)(2), and the matter was closed.

We reported stockholders' equity of $1,394,161 in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2025, and, as a result, were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders' equity for continued listing (the "Stockholders' Equity Requirement"). We believe as of November 17, 2025, we regained compliance with the Stockholders' Equity Requirement based upon our private placement consummated on November 4, 2025, pursuant to which we raised aggregate gross proceeds of approximately $2.5 million, before deducting placement agent fees and offering expenses payable by us.

For the year ended December 31, 2025, we reported stockholders' equity of $2,254,446, and, as a result, were not in compliance with the Stockholders' Equity Requirement. As of March 31, 2026, we regained compliance with the Stockholders' Equity Requirement based upon our underwritten public offering of 223,880 shares of common stock at a public offering price of $5.00 per share, resulting in gross proceeds of $3,500,000 and net proceeds of approximately $3,100,000 after deducting underwriting discounts, commissions, and estimated offering expenses of $396,000. The offering included 476,120 pre-funded warrants at a price of $5.00 per warrant, each exercisable for one share of common stock at a nominal exercise price of $0.001 per share.

On June 11, 2026, we effectuated a 1-for-10 reverse stock split of our issued and outstanding common stock, rounding up to account for any fractional shares. The reverse stock split had no effect on our authorized shares of common stock or preferred stock and the par value remained unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these consolidated financial statements and related disclosures.

Results of Operations

Comparison of the three months ended June 30, 2026 and 2025

The following table summarizes the results of our operations:

		Three Months Ended June 30,
		2026				2025				Change				%
Revenue		$	-			$	-			$	-				-
Operating expenses
Research and development			55,661				1,025,547				(969,886	)			(95	)%
General and administrative			1,984,907				2,346,323				(361,416	)			(15	)%
Legal and professional			1,908,967				538,536				1,370,431				254	%
Total operating expenses			3,949,535				3,910,406				39,129				1	%
Net loss from operations			(3,949,535	)			(3,910,406	)			(39,129	)			-1	%
Other income (expense):
Interest expense - related parties			-				(2,614	)			2,614				(100	)%
Interest expense			-				(19,129	)			19,129				(100	)%
Interest income			90				81				9				11	%
Change in fair value of derivative liabilities			48,785				11,673				37,112				318	%
Change in fair value of convertible notes			-				213,930				(213,930	)			100	%
Gain on extinguishment of debt			755,121				-				755,121				100	%
Total other income (expense)			803,996				203,941				600,055				294	%
Net loss		$	(3,145,539	)		$	(3,706,465	)		$	560,926				-15	%

Research and Development. Total research and development ("R&D") expense was $0.1 million for the three months ended June 30, 2026, as compared to $1.0 million to the three months ended June 30, 2025. The decrease in total R&D expense of $1.0 million, or 95%, is primarily related to a $0.7 million decrease in subcontractor expenses and $0.3 million decrease in R&D compensation related expenses. Subcontractor expense made up 70% of total R&D expenses in the three months ended June 30, 2026 and 71% of total R&D expenses during the three months ended June 30, 2025. R&D compensation related expenses were an insignificant amount in the three months ended June 30, 2026 as compared to $0.3 million in the three months ended June 30, 2025. The decrease is largely attributable to the lower employee headcount year over year and retirement of our CSO.

General and Administrative Expenses. General and administrative expenses in the three months ended June 30, 2026 decreased by $0.3 million, or 15%, from $2.3 million in the three months ended June 30, 2025 to $2.0 million in the three months ended June 30, 2026. The decrease in general and administrative expenses was primarily due to a $1.0 million decrease in advertising costs associated with investor relations, reflecting a one-time engagement fee paid to an investor relations agency during the three months ended June 30, 2025 that did not recur in the current-year period. The decrease was partially offset by a $0.7 million increase in amortization expense for developed technology, associated with the Molecule.ai intangible asset acquired in November 2025, which had no comparable amortization expense during the three months ended June 30, 2025.

Legal and Professional Expenses. During the three months ended June 30, 2026, legal and professional expenses increased by $1.4 million or 254% compared to the same period in 2025. The increase in legal and professional fees was primarily attributable to legal, accounting, valuation and regulatory compliance activities related to the merger with United Dogecoin during the three months ended June 30, 2026.

Other Income (Expense). During the three months ended June 30, 2026, other income increased by $0.8 million or 294% compared to other expense of the same period in 2025. The increase was primarily driven by a $0.8 million increase in gain on extinguishment of debt, partially offset by a $0.2 million decrease in change in fair value of convertible notes.

Comparison of the six months ended June 30, 2026 and 2025

		Six Months Ended June 30,
		2026				2025				Change				%
Revenue		$	-			$	-			$	-				-
Operating expenses
Research and development			322,901				2,599,475				(2,276,574	)			(88	)%
General and administrative			3,145,463				2,943,209				202,254				7	%
Legal and professional			2,697,993				1,318,963				1,379,030				105	%
Total operating expenses			6,166,357				6,861,647				(695,290	)			(10	)%
Net loss from operations			(6,166,357	)			(6,861,647	)			695,290				(10	)%
Other income (expense):
Interest expense - related parties			-				(8,009	)			8,009				(100	)%
Interest expense			(12,122	)			(25,664	)			13,542				(53	)%
Interest income			299				81				218				269	%
Change in fair value of derivative liabilities			125,049				14,316				110,733				773	%
Change in fair value of convertible notes			-				121,451				(121,451	)			(100	)%
Gain on extinguishment of debt			755,121				-				755,121				N/A
Total other income (expense)			868,347				102,175				766,172				750	%
Net loss		$	(5,298,010	)		$	(6,759,472	)		$	1,461,462				22	%

Research and Development. Total R&D expense was $0.3 million for the six months ended June 30, 2026, as compared to $2.6 million to the six months ended June 30, 2025. The decrease in total R&D expense of $2.3 million or 88%, is primarily related to a $1.5 million decrease in subcontractor expenses and $0.8 million decrease in R&D compensation related. Subcontractor expense made up 42.14% of total R&D expenses in the six months ended June 30, 2026 and 63% of total R&D expenses during the six months ended June 30, 2025. R&D compensation related expenses were an insignificant amount in the six months ended June 30, 2026 as compared to $0.9 million in the six months ended June 30, 2025. For the six months ended June 30, 2026, R&D compensation related expenses were 20% as a percent of total R&D expense, representing a decrease from the 34% of total R&D incurred in the six months ended June 30, 2025. The decrease is largely attributable to the lower employee headcount year over year and retirement of our CSO.

General and Administrative Expenses. General and administrative expenses in the six months ended June 30, 2026 increased by $0.2 million, or 7%, from 2.9 million in the six months ended June 30, 2025 to $3.1 million in the six months ended June 30, 2026. The increase in general and administrative expenses was primarily due to costs associated with investor relations of $0.5 million and amortization expense for developed technology of $1.3 million for the six months ended June 30, 2026.

Legal and Professional Expenses. During the six months ended June 30, 2026, legal and professional expenses increased by $1.4 million or 105% compared to the same period in 2025. The increase in legal and professional fees was primarily attributable to legal, accounting, valuation and regulatory compliance activities in connection with the Company's May 2026 PIPE Financing, the United Dogecoin acquisition, and the Second Amendment to our Molecule.ai APA, during the six months ended June 30, 2026.

Other Income (Expense). During the six months ended June 30, 2026, other income increased by $0.8 million or 750% compared to other expense of the same period in 2025. The increase was primarily driven by a $0.8 million increase in gain on extinguishment of debt and a $0.1 million increase in change in fair value of derivative liabilities, partially offset by a $0.1 million decrease in change in fair value of convertible notes.

Liquidity and Capital Resources

Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have incurred losses since inception and had a net loss of $5.3 million and no revenues generated during the six months ended June 30, 2026 and working capital deficit of approximately $3.1 million as of June 30, 2026. We do not expect to generate positive cash flows from operating activities in the near future.

In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. As disclosed in our SEC Form 8-K filings on October 21, 2025 and November 21, 2025, the Company received a letter from Theradex Systems, Inc., providing written notice of termination of the master agreement, dated November 1, 2018 (the "Master Agreement"), between us and Theradex, and all work orders thereunder, and demanding immediate payment of all outstanding amounts owed thereunder in the aggregate amount of $1.1 million. Pursuant to the notice of termination, on November 20, 2025, we entered into a release and settlement agreement (the "Settlement Agreement") with Theradex, pursuant to which we will pay a partial payment of $300,000 to Theradex as full and final payment of any and all claims relating to the debt or obligation previously owed by us to Theradex, totaling approximately $557,000 (the "Outstanding Liabilities") and in consideration of such payment, each party will release, acquit and discharge each other from all claims arising from the Outstanding Liabilities and Theradex will properly wind down operations in a manner compliant with the Food and Drug Administration. After the payments pursuant to the Settlement Agreement, we will still owe amounts, under five separate research site agreements between the Company and various hospitals, as disclosed in the Settlement Agreement. As part of the Company's wind down of its Clinical Trials, the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include right of use asset impairment charges, accelerated expense recognition of share-based payments, and contract termination costs. Costs associated with the wind down of the Clinical Trials are recorded within research and development expenses in the consolidated financial statements of operations.

In March 2025, we entered into a consulting services agreement (the "Bowery Consulting Agreement") with Bowery Consulting Group Inc. (the "Consultant"). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. We agreed to pay the Consultant $0.3 million for their services, which we are not obligated to pay until we regain full Nasdaq listing requirement. We received notice from Nasdaq on July 2, 2025 that we had regained compliance with the listing requirement and have since paid the fee.

On April 3, 2025, the Company entered into a consulting agreement with the IR Agency LLC (the "IR Agency"). Pursuant to the consulting agreement, IR Agency agreed to provide certain marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid IR Agency $2.0 million on April 5, 2025. The term of the consulting agreement was three months starting on April 3, 2025. For the year ended December 31, 2025, the Company incurred $2.0 million of costs under the consulting agreement.

On September 15, 2025, the Company entered into another consulting agreement with the IR Agency. Pursuant to the consulting agreement, IR Agency agreed to provide marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid IR Agency $1.5 million. The term of the consulting agreement will be two months. For the year ended December 31, 2025, the Company incurred $1.5 million of costs under the consulting agreement.

In October 2025, the October 2024 Convertible Bridge Notes mandatorily converted into 11,761 shares of common stock due to reaching maturity. The Convertible Bridge Notes converted at a share price of $63.8, which is the conversion price with a 15% discount per the Convertible Bridge Notes' terms. See Note 5 for more information.

On November 20, 2025, the Company entered into an asset purchase agreement to acquire Molecule.ai. The total purchase consideration was $10,117,304. For the year ended December 31, 2025, the Company made a $3,000,000 cash payment and issued 32,050 shares of common stock with a fair value of $564,073. As of December 31, 2025, the Company had contingent consideration payable and consideration payable of $2,000,000 and $4,435,927, respectively, related to the Molecule.ai acquisition. See Footnote 6 to the unaudited condensed consolidated financial statements included earlier in this Quarterly Report on Form 10-Q.

On March 19, 2026, the Company entered into a consulting agreement with IR Agency LLC. Pursuant to the consulting agreement, IR Agency agreed to provide certain marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the services, the Company paid $1.3 million to IR Agency. The term of the consulting agreement was three months starting on March 19, 2026. For the six months ended June 30, 2026, the Company incurred $1.3 million of costs under the consulting agreement.

Our ability to continue as a going concern is dependent upon our ability to successfully raise additional equity or debt financing to fund ongoing operations, commercialize and further develop the Molecule.ai platform, develop and expand United Dogecoin's digital asset infrastructure operations and other business strategies, and generate sufficient revenues and cash flows from our business activities. The Company and UD are currently negotiating a data center land deal and exploring other acquisition opportunities. Building on this anticipated transaction, management plans to undertake a significant capital raise in the near term, targeting between $120 million and $150 million. This financing will leverage the Company and UD's existing sector network, investment bankers, and established industry relationships. The successful completion of the acquisition or any other acquisition, or such financing, however, cannot be guaranteed. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements contained in this report are issued.

Recent Financings

On March 9, 2026, the Company closed an underwritten public offering of 223,880 shares of our common stock at a public offering price of $5.00 per share, resulting in gross proceeds of $3.5 million and net proceeds of approximately $3.2 million after deducting underwriting discounts, commissions, and estimated offering expenses of $0.3 million. The offering included 476,120 pre-funded warrants at a price of $5.00 per warrant, each exercisable for one share of common stock at a nominal exercise price of $0.001 per share. The Company used $1.25 million of the net proceeds from this offering for marketing efforts and the remainder will be used for working capital and general corporate purposes.

In May 2026, the Company closed the PIPE Financing consisting of (i) 1,910 shares of Series B-2 Preferred Stock and (ii) common stock purchase warrants exercisable for up to 927,185 shares of the Company's common stock at an exercise price of $10.30 per share. In addition, subject to stockholder approval and the achievement of specified milestone events, investors may receive the 2026 Pre-Funded Warrants exercisable for up to approximately 3,148,619 shares of the Company's common stock. The PIPE Financing resulted in gross proceeds of $9.6 million and net proceeds of approximately $8.4 million after deducting placement agent fees, legal costs, and other transaction costs of approximately $1.2 million. The Company is using the proceeds for digital asset and AI infrastructure initiatives through our United Dogecoin, Inc. subsidiary and the remainder for working capital and general corporate purposes.

Balance Sheet Data

		June 30, 2026				December 31, 2025				Change				%
Current assets		$	396,353			$	502,911			$	(106,558)				(21	)%
Current liabilities			3,480,761				7,966,891				(4,486,130	)			(56	)%
Working capital (deficit)		$	(3,084,408	)		$	(7,463,980	)		$	4,379,572				(59	)%

As of June 30, 2026, total current assets were $0.4 million and total current liabilities were $3.5 million, resulting in a working capital deficit of $3.1 million. As of December 31, 2025, total current assets were $0.5 million and total current liabilities were $8.0 million, resulting in a working capital deficit of $7.5 million. The Company's current assets as of June 30, 2026 are comprised of $0.1 million of cash and cash equivalents and $0.3 million of prepaid expenses and other current assets. The decrease in current liabilities from December 31, 2025 was primarily due to the extinguishment of the $4.4 million consideration payable pursuant to the Molecule.ai Second Amendment and the Company's remittance of $1.8 million in contingent milestone payments following the achievement of the Technology Development Milestones under the Molecule.ai Asset Acquisition, partially offset by a $1.3 million increase in accounts payable and accrued expenses and the recognition of a $0.4 million payable due to United Dogecoin.

Cash Flows

		Six Months Ended June 30,
		2026				2025				Change				%
Cash used in operating activities			(2,984,949	)			(5,881,979	)			2,897,030				-49	%
Cash used in investing activities			(5,468,642	)			-				(5,468,642	)			100	%
Cash provided by financing activities			8,209,824				8,779,507				(569,683	)			-6	%
Cash and cash equivalents on hand			90,238				4,817,672				(4,727,434	)			-98	%

Cash Flows from Operating Activities

Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements (including marketing expenses) to support the business. We have historically experienced negative cash flows from operating activities as we invested in research and development activities. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally attributable to stock-based compensation, changes in fair value of our derivative liabilities, changes in fair value of our convertible notes, and amortization of debt discounts and finance fees, as well as changes in components of operating assets and liabilities, which are generally attributable to increased expenses and timing of vendor payments.

During the six months ended June 30, 2026, net cash used in operating activities of $3.0 million was primarily due to our net loss of $5.3 million, and change in fair value of derivative liabilities of $0.1 million, partially offset by depreciation and amortization of $1.3 million, and net change in operating assets and liabilities of $1.0 million.

During the six months ended June 30, 2025, net cash used in operating activities of $5.9 million was primarily due to our net loss of $6.8 million, change in fair value of convertible notes of $0.1 million, and interest payments on convertible notes accounted for at fair value of $0.1 million, partially offset by stock-based compensation of $0.6 million and the net change in operating assets and liabilities of $0.5 million.

Cash Flows from Investing Activities

During the six months ended June 30, 2026, net cash used in investing activities of 5.5 million was primarily attributable to $0.1 million of capitalized software purchases to support the Company's operations, $3.6 million of installment payments related to the Molecule.ai asset acquisition, and $1.8 million of cash outflows for contingent consideration associated with the Molecule.ai asset acquisition.

During the six months ended June 30, 2025, the Company did not have investing activities.

Cash Flows from Financing Activities

For the six months ended June 30, 2026, cash flows provided by financing activities of $8.2 million was primarily attributable to $3.2 million of net proceeds from the issuance of common stock and pre-funded warrants in the Company's March 2026 equity financing, net of placement agent costs, and $5.0 million of proceeds from the Company's May 2026 PIPE Financing, net of issuance costs paid.

For the six months ended June 30, 2025, cash flows from financing activities was primarily comprised of proceeds of $5.4 million, from the sale of common stock and pre-funded warrants as part of the March 2025 equity financing, net of placement agent costs of $0.3 million, proceeds of $4.1 million, from the sale of common stock and pre-funded warrants as part of the June 2025 equity financing, net of placement agent costs of $0.2 million, partially offset by $0.5 million payment of other issuance costs for issuance of common stock and equity-classified warrants in the March 2025 and June 2025 equity financings, and $0.1 million of repayment of note payable-related party used to finance our ongoing operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While the significant accounting policies are described in more detail in the notes to the unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

Our most critical accounting policies and estimates relate to the following:

	●	Research and Development Expenses
	●	Fair Value of Convertible Notes
	●	Fair Value of Warrant to Purchase Common Stock
	●	Fair Value of Derivative Financial Instruments
	●	Fair Value of Contingent Pre-Funded Warrants
	●	Useful Life of Molecule.ai Intangible Asset

Research and Development Expense

Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which may include portions of the Company's executives to the extent they are actively involved in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. The periods presented include a portion of the Company's former chief executive officer (prior to his transition to chief scientific officer), former chief operating officer, former vice president regulatory (formerly the chief financial officer) and directors' compensation, prior to the individuals' departures from the Company.

Fair Value of Convertible Notes

As permitted under ASC 825, we elected the fair value option to account for our October 2024 Convertible Bridge Notes. In prior periods, the valuation of the October 2024 Convertible Bridge Notes utilized a Monte Carlo simulation model. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned to not achieving a successful capital raise and a registration of related securities. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average.

The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes' principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted-average price ("VWAP"), (viii) illiquidity discounts, and (ix) probabilities assigned.

In the current reporting period, the Company calculated the fair value of the October 2024 Convertible Bridge Notes assuming a mandatory conversion due to the relatively short duration between the balance sheet date and the maturities in October 2025. The fair value was determined by calculating the number of shares into which the October 2024 Convertible Bridge Notes will convert in a mandatory conversion scenario, multiplied by the fair value per share of the Company's common stock at the balance sheet date.

The October 2024 Convertible Bridge Notes are subject to revaluation at the end of each reporting period, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations, or for changes due to our credit worthiness, if any, as a component of other comprehensive income.

Fair Value of Warrants to Purchase Common Stock

We have issued warrants to investors in our debt and equity offerings. We have also issued warrants to service providers in relation to our financing offerings.

We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC 815 (as well as under ASC 718 for warrants issued as share-based payments). In addition to determining classification, we evaluate these instruments to determine if such instruments meet the definition of a derivative.

For warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid in capital (potentially on a relative fair value basis if issued in a basket transaction with other financial instruments). Warrants that are equity-classified are not subsequently remeasured unless modified or required to be reclassified as liabilities. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of all outstanding warrants, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period.

For warrants with uncertain or more complex terms (such as variability in the warrant shares or exercise price), we may utilize more complex models to address such provisions, including Monte Carlo simulations or Black-Scholes Models. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. Black-Scholes Models require specification of the current stock price, exercise price, expected term, expected volatility, a risk-free interest rate aligned with the expected term, and expected dividend yield.

The use of these valuation models requires the input of highly subjective assumptions. Any change to these inputs could produce significantly higher or lower fair value measurements.

Fair Value of Financial Instruments

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, such as the Acceleration Option in the Alto Warrants (as defined in Note 9 to the financial statements included earlier in this Quarterly Report on Form 10-Q). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period.

For our derivative financial instruments classified as a liability, we use a Black-Scholes Model to value the derivative instruments at inception and on subsequent valuation dates. The model requires specification of the current stock price, exercise price, expected term, expected volatility, a risk-free interest rate aligned with the expected term, and expected dividend yield.

Fair Value of Contingent Pre-Funded Warrants

We issue certain equity instruments that contain contingent settlement, vesting, issuance or exercise provisions. The Company evaluates these instruments to determine the appropriate accounting classification under applicable accounting guidance and estimates the fair value of such instruments when required. When such instruments are required to be measured at fair value, the Company estimates the fair value using a probability-weighted approach that incorporates management's assessment of the likelihood of satisfying the applicable contractual conditions.

Significant assumptions utilized in these valuations may include the Company's stock price, expected timing of contingent events, the probability of satisfying specified performance or operational conditions, and the likelihood of obtaining any required approvals. The selection of assumptions requires significant management judgment and may materially affect the estimated fair value of the instruments.

Changes in the expected timing or probability of achieving contingent events, changes in the Company's stock price, or changes in other valuation inputs could result in materially different fair value measurements.

Useful Life of Molecule.ai Intangible Asset

The Company's identifiable intangible asset consists of the Molecule.ai platform classified as developed technology. The Molecule.ai platform is a definite-lived intangible asset and is amortized on a straight-line basis over its estimated 4-year useful life, which reflects the period over which the asset is expected to generate economic benefits. The Company periodically reviews useful life assumptions and related classifications and updates them when facts and circumstances indicate a change is warranted.