Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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

The following discussion and analysis of our financial condition and results of operations for the three months ended September 30, 2025 should be read together with our unaudited condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025 (this "Form 10-Q"), as well as the audited financial statements, the related notes thereto and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 contained in our Annual Report on Form 10-K for the year ended December 31, 2024, that was filed with the U.S. Securities and Exchange Commission (the "SEC") on March 28, 2025 (our "Annual Report"), and all risk factors disclosed herein and therein.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

	●	the success of our current or planned clinical trials through all phases of clinical development, including our ability to conduct and complete clinical trials in accordance with projected timelines, our ability to achieve the desired results, and our ability to successfully complete requisite regulatory review and approval processes;
	●	our ability to obtain the necessary financing to continue to conduct our business operations as planned, and to conduct our ongoing and planned trials, and continue and complete the planned development and commercialization of our product candidates;

	●	our ability to raise additional capital will be more difficult as a company whose common stock is traded on the OTC markets;
	●	if we are unable to raise additional capital, we may be forced to curtail or cease operations or file for bankruptcy protection or pursue a dissolution and liquidation of all of our remaining assets;

	●	our ability to grow and manage growth economically;
	●	our ability to retain key executives and medical and science personnel;
	●	the possibility that our products in development succeed in or fail clinical trials or are not approved by the U.S. Food and Drug Administration or other applicable authorities;
	●	the possibility that we could be forced to delay, reduce or eliminate our planned clinical trials or development programs;
	●	our ability to obtain approval from regulatory agents in different jurisdictions for our current or future product candidates;
	●	changes in applicable laws or regulations;
	●	changes to our relationships within the pharmaceutical ecosystem;
	●	the performance of third-party suppliers and manufacturers and our ability to find additional suppliers and manufacturers and obtain alternative sources of raw materials;
	●	our current and future capital requirements to support our development and commercialization efforts and our ability to satisfy our capital needs;
	●	our ability to access capital on acceptable terms in a rising interest rate and tighter credit environment;
	●	expectations regarding our ability to continue as a going concern;
	●	the accuracy of our estimates regarding expenses and capital requirements, including estimated costs of our clinical studies;
	●	our history of operating losses in each year since inception and expectation that we will continue to incur operating losses for the foreseeable future;
	●	changes in the markets that we target;
	●	our ability to maintain or protect the validity of our patents and other intellectual property;
	●	our exposure to any liability, protracted and costly litigation or reputational damage relating to data security;

	●	the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;
	●	any disruption to our business that may occur on a longer-term basis should we be unable to remediate the material weaknesses we have identified in our internal controls;
	●	our ability to relist our common stock, par value $0.0001 per share (the "Common Stock"), on a national securities exchange; and
	●	the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements. Please see "Part II-Item 1A-Risk Factors" for additional risks which could adversely impact our business and financial performance.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-Q or the date of the document incorporated by reference into this Form 10-Q. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

Overview

We are a clinical-stage biotechnology company focused on developing new drugs by reformulating the active agents in existing generic drugs and optimizing these reformulations for new applications. We believe that this strategy combines many of the cost efficiencies and risk abatements derived from using existing generic drugs with potential patent protections for our proprietary formulations; this strategy allows us to expedite, protect, and monetize our product candidates. Additionally, we maintain a therapeutic focus on diseases with significant, unaddressed morbidity and mortality where no approved drug therapy currently exists. We believe that this focus can potentially help reduce the cost, time and risk associated with obtaining marketing approval.

Consistent with our strategy, we are currently addressing two indications via development of our product candidates, which we have designated as LP-10 for the indication of hemorrhagic cystitis ("HC") and LP-310 for the indication of oral lichen planus ("OLP"). HC is chronic, uncontrolled urinary blood loss that results from certain chemotherapies (such as alkylating agents) or pelvic radiation therapy (also called "radiation cystitis"). Many radiation cystitis patients experience severe morbidity (and in some cases, mortality), and currently, there is no therapy for their condition approved by the U.S. Food and Drug Administration ("FDA"), or, to our knowledge, any other regulatory body.

LP-310 employs a formulation similar to LP-10, for the treatment of OLP. OLP is a chronic, T-cell-mediated, autoimmune oral mucosal disease, and LP-310 contains tacrolimus which inhibits T-lymphocyte activation. Symptoms of OLP include painful burning sensations, bleeding and irritation with tooth brushing, painful, thickened patches on the tongue, and discomfort when speaking, chewing or swallowing. These symptoms frequently cause weight loss, nutritional deficiency, anxiety, depression, and scarring from erosive lesions. OLP can also be a precursor to cancer, predominately squamous cell carcinoma, with a malignant transformation rate of approximately one percent.

LP-10 is the development name of our reformulation of tacrolimus (an approved generic active agent) specifically optimized for topical deposition to the internal surface of the urinary bladder lumen using a proprietary drug delivery platform that we have developed and that we refer to as our metastable liposome drug delivery platform (our "Platform"). We are developing LP-10 and our Platform to be, to our knowledge, the first drug candidate and drug delivery technology that could be successful in treating cancer survivors who acquire HC.

LP-310 is the development name of our oral, liposomal formulation of tacrolimus (the same approved generic active agent in LP-10) specifically optimized for local delivery to oral mucosa. We believe that our approach of using metastable liposomal tacrolimus as a treatment for OLP is novel. To date, upon review of relevant FDA public data resources on approved drugs and biologics, we are not aware of any other liposomal products developed to treat such disease. In the fourth quarter of 2024, we announced the completion of dosing for the first cohort in a multi-center Phase 2a clinical trial of LP-310. No product-related serious adverse events were reported. Pharmacokinetic data demonstrated that whole blood tacrolimus levels in all patients were either undetectable or minimal, highlighting LP-310's potential to deliver localized therapeutic effects while minimizing systemic exposure. Additionally, all patients tolerated LP-310 without significant adverse reactions. The top line data from the first two dose cohorts of this trial was presented at the 2025 American Association of Oral Medicine and European Association of Oral Medicine Joint Meeting that was held in Las Vegas, NV on May 15, 2025. The trial was completed in the third quarter of 2025, with results announced on September 18, 2025.

In a third program, we are developing an oral, liposomal formulation of tacrolimus, LP-410, for the treatment of oral graft-versus-host disease ("GVHD"). LP-410 is an oral rinse, similar to LP-310, but will have a different containment system. Hematopoietic cell transplantation ("HCT") is used to treat a wide range of malignancies, hematologic and immune deficiency states, and autoimmune diseases. GVHD is a clinical syndrome where donor-derived immunocompetent T-cells react against patient tissues directly or through exaggerated inflammatory responses following HCT. Oral GVHD is a rare and serious disease, with a prevalence of approximately 30,000 patients in the US annually in 2023 (Bachier et al., 2019; Bachier et al., 2021, Orphanet 2023). GVHD remains a major cause of morbidity and mortality for patients who undergo HCT treatment, with chronic GVHD being the leading cause of non-malignant fatality for such patients who receive such HCT treatment. Topical and local management of symptomatic oral GVHD can reduce oral symptoms that can interfere with oral function and quality of life and can reduce the need for more intensive immunosuppressive systemic therapies. However, there is currently no FDA approved local drug treatment of oral GVHD (Martini et al., 2022). We developed LP-410 for the topical delivery directly to the mouth surface, targeting the underlying mechanisms of oral GVHD, potentially providing a safe and effective treatment option for affected individuals. On November 11, 2023, we received "orphan drug" designation from the FDA for LP-410 for oral GVHD. We received investigational new drug approval from the FDA for LP-410's treatment of oral GVHD on March 5, 2024.

In a fourth program, we are also developing an intravesical formulation of immunoglobulins including checkpoint inhibitors, referred to as LP-50, for the treatment of non-muscle invasive bladder cancer, offering the potential for increasing efficacy while minimizing systemic toxicity. Additional information regarding this preclinical program is included in the International Journal of Molecular Sciences 2024, 25(9), 4945, titled "Enhancing Therapeutic Efficacy and Safety of Immune Checkpoint Inhibition for Bladder Cancer: A Comparative Analysis of Injectable vs. Intravesical Administration," as well as in US patent publication number 2024/0115503 titled "Intravesical Delivery of Hydrophilic Therapeutic Agents Using Liposomes."

Our Platform includes proprietary drug delivery technologies optimized for use with epithelial tissues that coat lumenal surfaces, such as the colon, the various tissues lining the mouth and esophagus, and the tissues lining the bladder and urethra. We have two issued patents in the United States that should exclude competitors from making, selling or using our LP-10 and LP-310 formulations in the United States until July 11, 2035. We also have issued patents in Australia, Canada, and Europe that do not expire until October 22, 2034. Corresponding patent applications are pending in the United States Patent Offices. We also have a pending United States patent application on an improvement to the technology. In some jurisdictions, such as the US, Europe, Canada, and some Asian countries, such patents may be extendable for regulatory delay. Market data exclusivity may also be available for the approved products.

Since our inception in 2005, we have focused primarily on business planning, progressing our lead product candidates, including progressing LP-10 through clinical development, raising capital, organizing and staffing our Company.

Recent Developments

Resignation of Chief Medical Officer

On October 3, 2025, Dr. Michael Chancellor notified the Company of his intention to retire from his positions as the Company's Chief Medical Officer and a member of the Company's Board of Directors, effective December 4, 2025.

Results of Operations

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

The following table summarizes our results of operations for the three months ended September 30, 2025 and 2024 (in thousands):

		For the three months ended
		September 30,								Increase
		2025				2024				(Decrease)
(in thousands)
Revenue		$	-				80			$	(80	)
Operating expenses:
R&D			721				1,047				(326	)
General and administrative			553				493				60
Total operating expenses			1,274				1,540				(266	)
Loss from operations			(1,274	)			(1,460	)			186
Other income			20				15				5
Net loss		$	(1,254	)		$	(1,445	)		$	191

Grants and Other Revenue

We have not yet commercialized any products, and we do not expect to generate revenue from sales of any product candidates for several years. We have recognized revenue from a grant awarded by the National Institutes of Health ("NIH") in September of 2022 (the "2022 NIH Grant"), which was an award of an aggregate of $673,000. NIH approved an additional year of funding under the 2022 NIH Grant in June 2023, increasing the total funding provided under the 2022 NIH Grant to $1,353,000. The grant expired in June 2025.

We recognize revenue from grants when the related costs are incurred and the right to payment is realized. For the three months ended September 30, 2025, we recognized $0 of revenue in connection with the 2022 NIH Grant, compared with $80,380 of revenue in the three months ended September 30, 2024. The decrease in grant revenue was due to the fact that the funds awarded under the grant were fully depleted and the grant expired during the quarter ended June 30, 2025.

Operating Expenses

Our operating expenses consist of (i) R&D expenses and (ii) general and administrative expenses.

Research and Development Expenses

R&D costs primarily consist of direct costs associated with consultants and materials, biologic storage, third party CRO costs and contract development and manufacturing expenses, salaries and other personnel-related expenses. R&D costs are expensed as incurred. More specifically, these costs include:

●

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

●

costs of manufacturing drug supply and drug product;

●

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

●

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

●

costs related to compliance with clinical regulatory requirements; and

●

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

Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data, such as information provided to us by our vendors, and analyzing the progress of our nonclinical and clinical studies or other services performed. Significant judgment and estimates are made in determining the accrued expense balances at the end of any reporting period. Advance payments that we make for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

We expect that our R&D expenses will increase substantially in connection with our clinical development activities for our LP-10 and LP-310 programs, and other product candidates and we will need to obtain additional capital to continue to develop our product candidates. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of, or obtain regulatory approval for, any of our current or future product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the specific factors set forth in the section of our Annual Report titled "Risk Factors." If any events described in the applicable risk factors included in the section of our Annual Report titled "Risk Factors" occur, then the costs and timing associated with the development of any of our product candidates could significantly change. We may never succeed in obtaining regulatory approval for, of commercialization of, LP-10, LP-310, or any of our other product candidates.

R&D expenses decreased by approximately $326,000, to $720,793, for the three months ended September 30, 2025, as compared to $1,046,693 for the three months ended September 30, 2024. R&D expense decreased primarily as a result of a decrease in stock option expense, which decreased approximately $338,000, as all outstanding option grants were expensed prior to 2025. Legal and patent costs decreased by approximately $8,000 in the three months ended September 30, 2025. This was offset by an increase in lab supplies purchases of about $26,000.

General and Administrative Expenses

General and administrative expenses consist primarily of management and overhead expenses, such as rent and utilities, software and regulatory compliance costs, business consultants and other related costs. General and administrative expenses also include board of directors' expenses, stock based compensation costs, and professional fees for legal, patent, consulting, accounting, auditing and tax services, and insurance costs.

General and administrative expenses were $552,375 for the three months ending September 30, 2025, compared to $493,102 for the three months ended September 30, 2024, an increase of approximately $60,000. The increase was primarily due to professional and outside services costs which were higher by approximately $99,000. This was offset by decrease stock option expense of approximately $41,000.

Net Other Income (Expense)

Net other income for the three months ended September 30, 2025 was $20,194, as compared to $14,778 for the three months ended September 30, 2024. There was an approximately $6,000 increase in interest income on our short-term investment portfolio, due to a higher investment balance during the period, reduced by slightly higher interest expense of approximately $2,000.

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

The following table summarizes our results of operations for the nine months ended September 30, 2025 and 2024 (in thousands):

		For the nine months ended
		September 30,								Increase
		2025				2024				(Decrease)
(in thousands)
Revenue		$	216				363			$	(147	)
Operating expenses:
R&D			2,506				2,551				(45	)
General and administrative			1,669				1,441				228
Total operating expenses			4,175				3,992				183
Loss from operations			(3,959	)			(3,629	)			(330	)
Other income			71				55				16
Net loss		$	(3,888	)		$	(3,574	)		$	(314	)

Grants and Other Revenue

For the nine months ended September 30, 2025, we recognized $216,117 of revenue in connection with the 2022 NIH Grant, compared with $282,311 of revenue in the nine months ended September 30, 2024. The decrease in grant revenue was due to the fact that the grant expired in June 2025, and therefore there were only six months of grant funding in 2025 versus nine months in 2024.

Operating Expenses

Research and Development Expenses

The following table summarizes our R&D expenses by program for the nine months ended September 30, 2025 and 2024 (in thousands):

		Nine months Ended
		September 30,								Increase
(rounded to the nearest thousand)		2025				2024				(Decrease)
Direct R&D expenses for the LP-10 & LP-310 product candidates:
Employee-related costs		$	724,000			$	355,000			$	369,000
Employee stock option expense			-				388,000				(388,000	)
Outsourced R&D			1,072,000				739,000				333,000
Facility-related costs and overhead			326,000				210,000				116,000
Platform development, early-stage research:
Employee-related costs			141,000				324,000				(183,000	)
Employee stock option expense			-				197,000				(197,000	)
Outsourced R&D			197,000				158,000				39,000
Facility-related costs			46,000				180,000				(134,000	)
Total research and development expenses		$	2,506,000			$	2,551,00			$	(45,000	)

R&D expenses for the nine months ended September 30, 2025 were $2,506,028, as compared to $2,550,852 for the nine months ended September 30, 2024. This decrease of approximately $45,000 in R&D expenses was primarily attributable to a decrease in stock opstion expense of approximately $585,000, offset by increases in outside services of approximately $372,000 and salaries and benefits of about $186,000, primarily for work done on our current clinical trial for LP-310. Indirect costs related to operational overhead and facilities decreased about $18,000.

General and Administrative Expenses

General and administrative expenses were $1,668,757 for the nine months ended September 30, 2025, compared to $1,441,089 for the nine months ended September 30, 2024, an increase of approximately $228,000. The increase was primarily due to professional and outside services costs which were higher by approximately $329,000, including for legal counsel and investor relations, product commercialization and board compensation. facility and overhead costs increased by approximately $25,000. This was offset by decreases in employee costs of approximately $44,000 and stock option expense of $84,000.

Net Other Income (Expense)

Net other income for the nine months ended September 30, 2025 was $70,581, as compared to $54,658 for the nine months ended September 30, 2024. There was an approximately $15,000 increase in interest income on our short-term investment portfolio, due to a higher investment balance during the period.

Liquidity and Capital Resources

Sources of Liquidity

We have not yet commercialized any products, and we do not expect to generate revenue from sales of any product candidates for several years, if at all. Cash and cash equivalents totaled $1,855,771 as of September 30, 2025. We consider all highly liquid investments that mature in 90 days or less when purchased to be cash equivalents.

We have incurred operating losses and experienced negative operating cash flows for the nine months ended September 30, 2025 and the year ended December 31, 2024, and we anticipate that we will continue to incur losses for the foreseeable future. Our net loss totaled $1,254,078 and $1,444,637 for the three months ended September 30, 2025 and 2024, respectively. We incurred net losses for the nine months ended September 30, 2025 and 2024 of $3,888,087 and $3,574,592, respectively, and $5,016,264 for the year ended December 31, 2024.

Historically, we have financed our operations through a combination of grant revenue and equity financing, however, our goals for the foreseeable future will likely require significant equity financing. Our ability to achieve significant profitability depends on our ability to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, LP-10, LP-310 and/or our other product candidates, which may not occur for several years, if ever. The net losses we incur may fluctuate significantly from quarter to quarter.

Cash Flows

The following table provides information regarding our cash flows for each of the periods presented (in thousands):

		For the nine months ended September 30,
Dollars in thousands		2025				2024
Net cash (used) provided in operating activities		$	(3,785	)			(2,960	)
Net cash (used) provided by investing activities			-				-
Net cash provided in financing activities			3,456				1,020
Net increase (decrease) in cash and cash equivalents		$	(329	)			(1,940	)

Net Cash (Used) Provided in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $3,785,321. This comprised a net loss for the period of approximately $3,888,000 and a decrease of approximately $109,000 in operating liabilities.

This was offset by a decrease in prepaid expenses (primarily insurance policies and clinical trial operations services) of approximately $124,000. Cash increased as a result of a decrease in our grants receivable asset of approximately $85,000.

Net cash used in operating activities for the nine months ended September 30, 2024 was $2,960,334. This comprised a net loss for the period of approximately $3,575,000, and increased prepaid expenses (primarily insurance policies, outside services, and clinical trial operations services) of $592,000, offset by increased operating liabilities of $334,000. In addition, noncash adjustments reduced the net loss by approximately $669,000 in stock option expense and $200,000 in shares of Common Stock issued for services.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $3,456,228. This reflects net proceeds from the issuance of preferred stock and warrants in connection with a private placement transaction. Net cash provided by financing activities for the nine months ended September 30, 2024 was $200,000, received for the issuance of Common Stock, and approximately $800,000 for the issuance of pre-funded warrants, net of issuance costs.

There were no cash flows related to investing activities in either period.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing R&D activities, particularly as we continue R&D, advance clinical trials of LP-10 and LP-310, and advance the preclinical development of our other programs. In addition, we expect to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operations and capital expenses through the end of 2025. However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of LP-10, LP-310 and our other and future product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on, and could increase significantly as a result of, many factors, including, but not limited to, those referenced above in "- Results of Operations - Operating Expenses - Research and Development Expenses".

Going Concern

Our unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. We have generated losses from operations since inception. We expect operating losses to continue in the foreseeable future because of additional costs and expenses related to research and development activities, plans to expand our product portfolio, and increasing our market share. Our ability to transition attaining profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure. The timing and amount of our actual expenditure will be based on many factors, including cash flows from operations and the anticipated growth of our business.

Our management may raise additional funds through the issuance of equity securities or debt. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and 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. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing stockholders. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, discontinue the development of our product candidates or cease operations or file for bankruptcy protection or pursue a dissolution of and liquidation of all of our remaining assets. These factors raise substantial doubt about the our ability to continue as a going concern. The accompanying unaudited condensed financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Off-Balance Sheet Arrangements

We did not have during the three months ended September 30, 2025, or the year ended December 31, 2024, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission ("SEC") rules.

Contractual Obligations

We did not have during the nine months ended September 30, 2025 or the year ended December 31, 2024, and we do not currently have, any material contractual obligations, such as license agreements or similar arrangements, other than as described below and in the financial notes to our unaudited condensed financial statements included in this Form 10-Q and in our Annual Report.

Employment Agreements

We are party to employment agreements with each of Drs. Kaufman and Chancellor and Mr. Johnston, executive officers of the Company, the material terms of each of which are described in the section entitled "Executive Compensation - Executive Employment Agreements" of our Annual Report.

Lease Agreement

We are party to a lease agreement, dated June 1, 2019, with Bridgeway Development Corporation, as amended, for the lease of 2,690 square feet of office and lab and manufacturing space in Pittsburgh, Pennsylvania, commencing on July 1, 2020 (the "Lease"). On March 20, 2025, we notified Bridgeway Development Corporation of our intent to renew the Lease at the end of its existing term, September 30, 2025, for an additional five year term beginning July 1, 2025. The annual base rent under the Lease is approximately $67,000. On July 26, 2023, the Company entered into a second lease for additional space in the same building (the "Additional Lease"), commencing August 1, 2023 and co-terminating with the Lease on September 30, 2025. Annual rent under the Additional Lease was approximately $28,000. As space became available in the immediate proximity to our existing offices at the beginning of 2024, we terminated the Additional Lease upon mutual agreement with the landlord and replaced it with a lease for Suite 504 (the "Suite 504 Lease", and together, the "Leases"). The Suite 504 Lease became effective January 1, 2024, and the term co-terminates with the Lease. The annual base rent for the current year for the Suite 504 Lease is approximately $29,000. The Leases were renewed for an additional five year term, commencing July 1, 2025. See Note 13 of the notes to our unaudited condensed financial statements included in this Form 10-Q for more details.

Service Agreements

We enter into service agreements in the normal course of business with CROs and for clinical trials, preclinical research studies and testing, manufacturing, and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments. Certain agreements provide for termination rights subject to termination fees or wind down costs. Under such agreements, we are contractually obligated to make certain payments to vendors, mainly to reimburse them for their unrecoverable outlays incurred prior to cancellation. The exact amounts of such obligations are dependent on the timing of termination, and the exact terms of the relevant agreement cannot be reasonably estimated. The expense we incurred pursuant to these agreements for the nine months ended September 30, 2025 was approximately $1,147,000, which was an increase of approximately $453,000 from the approximately $694,000 of expense incurred for the nine months ended September 30, 2024. The spending was primarily attributable to expenses relating to our ongoing research and development work, and the increase in costs related to our active clinical trials for LP-310.

Critical Accounting Policies and Significant Judgments and Estimates

This management's discussion and analysis is based on our unaudited condensed financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles. The preparation of these unaudited condensed financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reported periods. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates.

While our accounting policies are described in more detail in the notes to our financial statements included in our Annual Report, we believe the following accounting policies used in the preparation of our financial statements require the most significant judgments and estimates. See Note 3 of the notes to our financial statements in our Annual Report for a description of our other significant accounting policies.

Accrued Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued third-party R&D expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued R&D expenses include the costs incurred for services performed by our vendors in connection with R&D activities for which we have not yet been invoiced.

We base our expenses related to R&D activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct R&D activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the R&D expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly. Non-refundable advance payments for goods and services that will be used in future R&D activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts incurred.

Stock-Based Compensation

We measure stock-based compensation based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting period. We account for forfeitures as they occur. On January 1, 2018, we adopted, using the modified retroactive approach, the guidance of Accounting Standard Update 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), and account for awards to non-employees using the grant date fair value without subsequent periodic remeasurement. The adoption of ASU 2018-07 did not have a material effect on our financial statements.

We classify stock-based compensation expense in our statements of operations in the same manner in which the award recipient's salary and related costs are classified or in which the award recipient's service payments are classified. In future periods, we expect stock-based compensation expense to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain our employees.

We determine the fair value of restricted stock awards granted based on the fair value of our Common Stock. We have historically determined the fair value of the underlying Common Stock based on input from management and the board of directors and our enterprise value determined utilizing various methods, including the "back-solve" method. The total enterprise value, determined from the back-solve method, is historically then allocated to the various outstanding equity instruments, including the underlying Common Stock, utilizing the option pricing method ("OPM") or a hybrid of the probability-weighted expected return method ("PWERM") and the OPM.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield. As the public market for our Common Stock has been limited and prior our initial public offering on December 22, 2022 (the "IPO") there was no such public market, we have historically determined the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies along with our own. We expect to continue estimating expected volatility based on the group of guideline companies until we have adequate historical data regarding the volatility of our own traded stock price. The expected term of our stock options granted to employees and non-employees has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. We have not paid, and do not anticipate paying, dividends on our Common Stock; therefore, the expected dividend yield is assumed to be zero.

As there was no public market for our Common Stock prior to the IPO, the estimated fair value of our Common Stock prior to our IPO had been approved by our board of directors, with input from management, as of the date of each award grant, considering our most recently available independent third-party valuations of our Common Stock and any additional objective and subjective factors that we believed were relevant and which may have changed from the date of the most recent valuation through the date of each award grant. We estimated the value of our equity using the market approach and a precedent transaction method which "back-solves" the equity value that yielded a specific value for our Series A Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock"). We allocated the equity value to our Common Stock and shares of our Series A Preferred Stock using either an OPM or a hybrid method, which is a hybrid between the OPM and the PWERM. The hybrid method we utilized estimated the probability-weighted value across multiple scenarios but used the OPM to estimate the allocation of value within at least one of the scenarios. In addition to the OPM, the hybrid method considered the IPO scenario in which the shares of our Series A Preferred Stock converted to Common Stock. The future value of the Common Stock in the IPO scenario was discounted back to the valuation date at an appropriate risk adjusted discount rate. In the hybrid method, the present value indicated for each scenario was probability weighted to arrive at an indication of value for our Common Stock.

In addition to considering the results of the valuations, management considered various objective and subjective factors to determine the fair value of our Common Stock as of each grant date, which may be a date later than the most recent third-party valuation date, including:

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the progress of our R&D efforts, including the status of preclinical studies;

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the lack of liquidity of our equity as a private company;

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our stage of development and business strategy and the material risks related to our business and industry;

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the achievement of enterprise milestones;

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the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

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any external market conditions affecting the biotechnology industry and trends within the biotechnology industry;

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the likelihood of achieving a liquidity event for the holders of our Series A Preferred Stock and Common Stock, such as an IPO, or a sale of the Company, given prevailing market conditions; and

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the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.

There are significant judgments and estimates inherent in these valuations. These judgments and estimates include assumptions regarding our future operating performance, the stage of development of our programs, the timing of a potential offering, or other liquidity event, and the determination of the appropriate valuation methodology at each valuation date. The assumptions underlying these valuations represent management's best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. Subsequent to the completion of the IPO, the fair value of our Common Stock is determined based on the market price of our Common Stock on Nasdaq.

With respect to stock options granted during the nine months ended September 30, 2025 and 2024, the following table sets forth by grant date the (i) number of shares of our Common Stock issuable upon exercise of such stock options, (ii) per share exercise price of such options and (iii) estimated fair value per share of our Common Stock on each such date. All amounts have been adjusted to reflect the reverse stock split that occurred on November 7, 2024. We did not grant any shares of restricted stock during this period.

Grant date		Number of shares of Common Stock issuable upon exercise of stock options granted				Exercise price per share of Common Stock				Estimated fair value per share of Common Stock at grant date
03/15/2024			55,000			$	6.16			$	4.40

The per share values at each such grant date, which we applied to determine the per share estimated fair value of the respective awards for accounting purposes, were based upon the calculations described above used to determine the fair value of our Common Stock as of each grant date.

Emerging Growth Company Status

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" may 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. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include, among other things:

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reduced disclosure about the compensation paid to our executive officers;

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not being required to submit to our stockholders' advisory votes on executive compensation or golden parachute arrangements;

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an exemption from the auditor attestation requirement in the pursuant to the Sarbanes-Oxley Act of 2002; and

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an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation.

We may take advantage of these exemptions until such time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest of

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the last day of the fiscal year on which we have $1.235 billion or more in annual revenue;

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the date on which we become a "large accelerated filer" (i.e., as of our fiscal year end, the total market value of our common equity securities held by non-affiliates is $700 million or more as of September 30);

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the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period; or

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the last day of our fiscal year following the fifth anniversary of the date of the completion of the IPO (December 31, 2027).

We may choose to take advantage of some but not all of these exemptions.

Recent Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements and have determined that, other than as disclosed in Note 3 to our unaudited condensed financial statements included in this Form 10-Q, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.