Cero Therapeutics Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that CERo Therapeutics Holdings, Inc. (“the Company”) management believes is relevant to an assessment and understanding of its results of operations and financial condition. The discussion should be read together with (i) the Company’s unaudited condensed consolidated financial statements and related notes that are presented above and (ii) the Company’s audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2025. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements resulting from various factors. Please see “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and the subsequent Quarterly Report on Form 10-Q as filed with the SEC. Unless the context otherwise requires, references in this section to “Predecessor” is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.

Overview

CERo Therapeutics, Inc. (the “Predecessor”) was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.

On June 4, 2023, Predecessor entered into a Business Combination Agreement (as amended by that certain Amendment No. 1 to the Business Combination Agreement, dated as of February 5, 2024 and Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, the “Business Combination Agreement”) by and among PBAX and PBCE Merger Sub, Inc., pursuant to which Merger Sub merged with and into Predecessor, with Predecessor surviving as a wholly-owned subsidiary of PBAX (the “Merger”). In connection with the consummation of the Business Combination on February 14, 2024, PBAX changed its corporate name to “CERo Therapeutics Holdings, Inc.”

At the effective time of the Merger, (i) each outstanding share of Predecessor common stock, was cancelled and converted into the right to receive shares of Common Stock; (ii) each outstanding option to purchase Predecessor common stock was converted into an option to purchase shares of Common Stock, par value $0.0001 per share; (iii) each outstanding share of Predecessor preferred stock, was converted into the right to receive shares of Common Stock, and (iv) each outstanding warrant to purchase Predecessor preferred stock was converted into a warrant to acquire shares of Common Stock. In addition, each outstanding Predecessor convertible bridge note was exchanged for shares of Series A Preferred Stock.

In addition, the holders of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing, the Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are not satisfied: (i) 600 shares of Common Stock (giving retroactive effect to the Reverse Stock Splits), which will be fully vested upon the achievement of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 438 shares of Common Stock (giving retroactive effect to the Reverse Stock Splits), pursuant to a Letter Agreement, dated as of February 14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 500 shares of Common Stock (giving retroactive effect to the Reverse Stock Splits), which were fully vested upon the June 28, 2024 achievement of certain regulatory milestone-based earnout targets.

As consideration for the Merger, the Company issued to Predecessor stockholders an aggregate of 4,038 shares of Common Stock, including 1,100 Earnout Shares and 187 shares issuable upon exercise of rollover options or warrants (giving retroactive effect to the Reverse Stock Splits).

Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its R&D activities and meet its obligations on a timely basis. As of September 30, 2025, the Company reported approximately $1.9 million of cash and cash equivalents, with an accumulated deficit of approximately $86.3 million.

On February 5, 2025, we entered into a securities purchase agreement, with participation from a member of the Board and a single institutional investor, for the purchase and sale of (i) 127,551 shares of Common Stock or Common Stock equivalents in lieu thereof; and (ii) February 2025 Common Warrants to purchase up to 127,551 shares of Common Stock at an exercise price of $39.20. In connection with such offering, we received net proceeds of approximately $4.2 million. Additionally, during the nine months ended September 30, 2025, we received net proceeds from the exercise of the remaining Series A Preferred Warrants, the collection of subscriptions receivable and equity line of credit fundings of approximately $4.2 million.

On April 21, 2025, the Company entered into a Securities Purchase Agreement (the “Fourth Securities Purchase Agreement”) with certain accredited investors named therein. Further, on April 22, 2025, the Company filed the Certificate of Designations of Rights and Preferences of the Series D Preferred Stock (the “Series D Certificate of Designations”) for the purpose of designating and establishing the Company’s Series D Preferred Stock. Pursuant to the Securities Purchase Agreement, up to 10,000 shares of the Company’s Series D Preferred Stock shall be purchased for an aggregate purchase price of up to $8 million in one or more closings (each a “Closing”).

On April 22, 2025, the Company issued 6,250 shares of its Series D preferred stock to investors in exchange for 1,000,279 shares of Series D preferred stock of Stella Diagnostics. The transaction was completed in lieu of a cash payment. The value of Stella’s Series D Preferred Stock received was determined to be $500,000 as of the transaction date, based on the subsequent sale of the 1,000,279 Stella Series D Preferred Stock for $500,000 in cash, pursuant to a Stock Purchase Agreements dated August 20, 2025. Accordingly, the Company recognized the issuance of its Series D preferred stock to investors at a cost of $500,000, which represents the fair value of the consideration received. The difference between the stated value of the Company Series D Preferred Stock ($5.0 million) and the fair value of the consideration received ($500,000) was recorded as a decrease to additional paid-in capital, which amounted to $4.5 million. The investment in Stella’s Series D Preferred Stock is classified as an equity security without a readily determinable fair value and is accounted for under the measurement alternative in accordance with ASC 321, Investments – Equity Securities. Under this method, the investment is initially recorded at cost, which was determined to be equal to the fair value of the consideration received, and is subsequently adjusted for observable price changes in orderly transactions for the same or similar securities and for impairment, if any. There was no impairment identified on the investment in equity securities during the period ended September 30, 2025. This non-cash transaction did not impact the Company’s cash flows and is disclosed as a non-cash investing and financing activity in the condensed consolidated statement of cash flows in accordance with ASC 230, Statement of Cash Flows. As of September 30, 2025, the value of Stella’s Series D Preferred Stock received was determined to be $500,000, based on the subsequent sale of the 1,000,279 Stella Series D Preferred Stock for $500,000 in cash, pursuant to Stock Purchase Agreements dated August 20, 2025.

On June 5, 2025, we sold an additional 938 shares of Series D Preferred Stock for gross cash proceeds of $750,400 in an additional closing of the Fourth PIPE Financing. On June 25, 2025, we entered into an amendment (the “Amendment”) to the Fourth Securities Purchase Agreement pursuant to which the Company added certain new institutional investors to the schedule of buyers in the Fourth Securities Purchase Agreement, to issue and sell to such investors, in one or more closings shares of the Company’s Series D Preferred Stock. Also, on June 25, 2025, we sold an additional 2,315 shares of Series D Preferred Stock for gross cash proceeds of $1,852,000 in an additional closing of the Fourth PIPE Financing. On July 18, 2025, the Company sold an additional 497 shares of Series D Preferred Stock for gross cash proceeds of $432,600 in an additional closing, and the Company received net proceeds of $320,801.

Each additional closing of the PIPE Financings is at the option of the investors upon notice to the Company and subject to satisfaction of customary closing conditions. Additional funds are necessary to maintain current operations and to continue R&D activities. However, there can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&D activities and planned regulatory filings with the FDA. If the Company is unable to obtain the necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company’s business, results of operations, and prospects. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these accompanying financial statements are issued. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Recent Developments

Reverse Stock Splits

At 12:01 a.m. Eastern time on January 8, 2025, the Company effected the Reverse Stock Split pursuant to which each 100 shares of Common Stock outstanding immediately prior thereto was converted into 1 share of Common Stock outstanding immediately thereafter, and at 12:01 a.m. Eastern time on June 13, 2025, the Company effected the Reverse Stock Split pursuant to which each 20 shares of Common Stock outstanding immediately prior thereto was converted into 1 share of Common Stock outstanding immediately thereafter.

April 2025 PIPE Financing

As discussed above, on April 21, 2025, the Company entered into the Fourth Securities Purchase Agreement, pursuant to which the Company agreed to issue and sell up to 10,000 shares of Series D Preferred Stock for an aggregate purchase price of up to $8 million in one or more closings which were completed between April 22, 2025 through July 18, 2025.

In connection with the Fourth PIPE Financing, we entered into the Fourth PIPE Registration Rights Agreement with the investors. The terms of the Fourth PIPE Registration Rights Agreement require us to register the number of shares of Common Stock equal to 250% of the maximum number of Common Stock issuable upon conversion of the Series D Preferred Stock (assuming for purposes hereof that (x) the Series D Preferred Stock is convertible at the Alternate Conversion Price (as defined in the Series D Certificate of Designations) assuming an Alternate Conversion Date (as defined in the Series D Certificate of Designations) of such date of determination, and (y) any such conversion shall not take into account any limitations on the conversion of the Series D Preferred Stock set forth in the Series D Certificate of Designations).

July 2025 ELOC Transaction

On July 11, 2025, the Company entered into an agreement to issue and sell 12,500,000 shares of Common Stock under the New Keystone Purchase Agreement. As the New Keystone Purchase Agreement constitutes a continuation of the equity line program commenced under the February 2024 Purchase Agreement, the Commitment Shares issued to the Investor pursuant to the February 2024 Purchase Agreement shall satisfy in full the Company’s obligation to deliver any additional shares of Common Stock to the Investor as consideration for entering into the New Keystone Purchase Agreement.

Investigational New Drug Application

In July 2025, CER-1236 received an FDA Orphan Drug Designation for the treatment of acute myeloid leukemia. In September 2025, the FDA granted Fast Track Designation to our lead investigational compound, CER-1236 for acute myeloid leukemia, which is in addition to the existing Orphan Drug Designation for the same compound. The FDA’s Fast Track Designation is designed to accelerate the development and review of therapies for serious or life-threatening conditions with unmet medical need. The designation provides us with the opportunity for increased FDA interactions, potential eligibility for priority review, and the ability to submit data on a rolling basis. Further, it also requires us to potentially provide expanded access to the investigational drug on an as approved basis under pre-specified conditions.

Fifth PIPE Financing

On October 14, 2025, we entered into the Fifth Securities Purchase Agreement, pursuant to which we agreed to issue and sell up to 9,750 shares of Series E Preferred Stock for an aggregate purchase price of up to $7 million in one or more closings. On October 16, 2025, we and the requisite buyers party to the Fifth Securities Purchase Agreement entered into Amendment No. 1 to the Securities Purchase Agreement (the “SPA Amendment”) to add an additional Buyer (as defined in the Fifth Securities Purchase Agreement) and increase the size of the Initial Closing (as defined in the Fifth Securities Purchase Agreement) by $500,000 to an aggregate of approximately $2.25 million of gross proceeds and reduce the size of the Additional Closings (as defined in the Fifth Securities Purchase Agreement) by an offsetting amount. There was no change to the aggregate amount of up to $7 million of proceeds to be funded pursuant to the Fifth Securities Purchase Agreement upon consummation of all of the Closings (as defined in the Fifth Securities Purchase Agreement) provided for therein. On October 16, 2025, pursuant to the Fifth Securities Purchase Agreement, we issued and sold, and the PIPE Investors purchased 3,816 shares of the Series E Preferred Stock for aggregate proceeds of approximately $2.25 million, paid in cash. Each Additional Closing under the Fifth Securities Purchase Agreement is subject to a mutual option of the Company and certain PIPE Investors and satisfaction of customary closing conditions. The Fifth Securities Purchase Agreement includes the consent of the holders of the Company’s outstanding Series C and Series D convertible preferred stock to the issuance of the Series E Preferred Stock pari passu therewith, in consideration for the reduction of the conversion price for the Company’s outstanding Series C and Series D convertible preferred stock to $1.76, effective as of the date of the Fifth Securities Purchase Agreement.

Nasdaq Notices of Non-compliance and Nasdaq Panel Decision

As previously disclosed, on January 17, 2025, the Company received a letter setting forth the determination of a panel convened by Nasdaq (the “Nasdaq Panel”) granting the Company’s request for an extension (the “Extension”) to regain compliance with certain continued listing requirements of the Nasdaq Stock Market until April 22, 2025. The Company presented its plan (the “Plan”) for regaining compliance with such requirements at a hearing conducted on December 17, 2025. The Company’s Plan included completion of a reverse stock split, which occurred on January 8, 2025, and transferring the listing of its securities to the Nasdaq Capital Market, which was completed on February 12, 2025, and certain other conditions, including the satisfaction of the $2.5 million minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market.

In addition, as previously disclosed, from November 2024 through September 30, 2025, the Company raised approximately $4.4 million of net proceeds from its equity line of credit entered into November 2024, and an additional approximately $4.2 million of net proceeds from its public offering of shares of common stock, pre-funded warrants and warrants to purchase shares of common stock that closed on February 7, 2025 (the “February 2025 Offering”). As a result of such capital raising activities and the proceeds of the Private Placement received on the First Closing Date, as well as successful negotiations with certain service providers to reduce outstanding balances payable, the Company received a notification letter from Nasdaq on May 7, 2025, stating that the Company had regained compliance with the Nasdaq continued listing standard under Nasdaq Listing Rule 5550(b)(1), which requires, among other things, that the Company maintain at least $2.5 million in stockholders’ equity.

On June 11, 2025, we received a Bid Price Requirement Letter notifying us that, for the 30 consecutive business day period between April 25, 2025 through June 9, 2025, the closing bid price for our Common Stock was below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market set forth in Nasdaq Listing Rule 5550(a)(2), which is required for continued listing of the Common Stock on Nasdaq. We timely appealed the delisting determination by requesting a hearing before the Nasdaq Panel. Such request for a Nasdaq Panel hearing stayed the suspension of the Company’s securities. On July 7, 2025, Nasdaq informed us that they had determined that we have regained compliance with the Bid Price Requirement and were therefore in compliance with the continued listing requirements. As a result, Nasdaq canceled the hearing and the Common Stock will continue to be listed and traded on the Nasdaq Capital Market, subject to maintaining all listing standards.

On August 28, 2025, we received a letter from the staff at the Nasdaq Listing Qualifications department notifying us that such staff had determined that we do not comply with the Stockholders’ Equity Requirement. We previously had been out of compliance with Nasdaq continued listing requirements until, on May 7, 2025, we received a determination of a Nasdaq hearings panel (a “Hearings Panel”) that we had regained compliance with such requirements. Accordingly, pursuant to Nasdaq Rule 5815(d)(4)(B), we are subject to a mandatory hearings panel monitor until one year after regaining compliance with such requirements. As a result, Nasdaq staff lack the discretion to grant us a cure period for demonstrating regaining compliance with the Stockholders’ Equity Requirement. The Nasdaq staff indicated that our securities would be suspended from trading on Nasdaq and delisted on September 8, 2025, subject to our right to appeal described below.

On September 3, 2025, we requested a hearing to appeal such determination before the Hearings Panel. The hearing request stayed the suspension of the trading of our Common Stock and delisting thereof pending such hearing or any extension provided by the Hearings Panel. The hearing was held on October 14, 2025.

On October 29, 2025, we received the determination of the Nasdaq Hearings Panel (the “Panel”) to deny our request to continue the listing of our shares of common stock on Nasdaq and that the trading in our securities would be suspended at the open of trading on October 31, 2025. We submitted a request for review of the Panel’s decision by the Nasdaq Listing and Hearing Review Council. On October 31, 2025, the Company’s shares of common stock have commenced trading on the OTC Pink Sheets.

Results of Operations

Revenue

Predecessor and the Company have not recognized any revenue from any sources, including from product sales, and the Company does not expect to generate any revenue from the sale of products in the foreseeable future. If the development efforts for the Company’s product candidates, each of which is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license agreements with third parties, the Company may generate revenue from R&D services, from the achievement of development milestones or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated, if at all.

Operating Expenses

Research and Development Expenses

R&D expenses consist of discovery activities, manufacturing development and production, preclinical and clinical development, and regulatory filing for product candidates. R&D expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in R&D are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions, if incurred, will be charged to R&D expense if the licensed technology has not reached technological feasibility and has no alternative future use. R&D expenses include or could include:

• employee-related expenses, including salaries, bonuses, benefits, stock-based compensation and other related costs for those employees involved in R&D efforts;
• external R&D expenses incurred under agreements with preclinical research organizations, clinical research organizations, investigative sites, centralized clinical laboratories, and consultants to conduct preclinical and clinical studies;
• costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract development and manufacturing organizations;
• product-liability insurance for clinical development product(s);
• laboratory supplies and research materials;
• software and systems related to R&D activities;
• costs related to regulatory filing and compliance; and
• facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, and equipment.

Product candidates in later stages of development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. The Company plans to substantially increase its R&D expenses for the foreseeable future as it continues the development of its product candidates through clinical development. The Company cannot determine with certainty the timing of initiation, the duration or the costs of current or future preclinical studies and clinical trials required for regulatory approval due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. The Company anticipates that it will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and ongoing assessments as to each product candidate’s commercial potential. The Company will need to, and plans to, raise substantial additional capital in the future. Future R&D expenses may vary significantly between periods and from current expectations based on factors such as:

• expenses incurred to conduct preclinical studies required to advance product candidates into clinical trials;
• per patient clinical trial costs based on a number of factors, including number of patient clinical visits, clinical laboratory testing, and potential medical imaging;
• the number of clinical trials required for approval, the number of patients who enroll in each clinical trial, and the number and geographic locations of sites included in the clinical trials;
• the length of time required to screen and enroll eligible patients, screen-failure rate, or the discontinuation rates of enrolled patients;
• potential additional safety monitoring requested by regulatory agencies;
• the cost of insurance, including product liability insurance, in connection with clinical trials; and
• suspension or termination of clinical development activities by regulators or institutional review boards for various reasons, including regulatory noncompliance or a finding that the participants are being exposed to unacceptable health risks.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal, accounting and tax-related services, consulting fees, insurance costs, and investor relations fees.

The Company anticipates that its general and administrative expenses will increase in the future as the Company increases headcount and contracted services for operational support for expanded operations and infrastructure. The Company also anticipates that general and administrative expenses will increase as a result of expenses for accounting, audit, legal and consulting services, as well as costs associated with maintaining compliance with SEC requirements, director and officer liability insurance, investor and public relations activities and other expenses associated with operating as a public company.

Other Income (Expense), Net

Other income (expense), net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, gains recorded on settlements reached with vendors on payables, and the gain or loss on the revaluation of earnout and derivative liabilities, which represents the change in fair value of earnout liabilities or outstanding warrants between periods.

Results of Operations for the Three Months Ended September 30, 2025 and 2024

Research and Development Expenses

Research and development expenses were $2,386,000 for the three months ended September 30, 2025 as compared to $1,774,000 for the three months ended September 30, 2024, reflecting an increase of $612,000. The increase was primarily attributable to an increase in clinical expenses of approximately $202,000, an increase in scientific consulting fees of $210,000, and an increase in drug manufacturing costs of $278,000, offset by a decrease in lab and other expenses of $19,000, a decrease in depreciation expense of $43,000 and a decrease in other research and development expenses of $16,000. During the first quarter of 2025, we began clinical trials related to the IND for CER-1236.

The Company anticipates that its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.

General and Administrative Expenses

General and administrative expenses were $1,976,000 for the three months ended September 30, 2025 as compared to $2,628,000 for the three months ended September 30, 2024, reflecting a decrease of approximately $652,000. The decrease during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, was primarily due to a decrease in professional fees of $869,000 related to a decrease in legal fees of $561,000 and a decrease in consulting fees of $464,000, offset by an increase in accounting fees of $149,000 and an increase in director fees of $7,000. Additionally, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, salaries and benefits increased by $50,000, and other general and administrative expenses increased by $167,000 primarily attributable to an increase in transfer agent and filing fees.

Other Income (Expense), Net

Other expenses was $(494,000) for the three months ended September 30, 2025 as compared to other income of $174,000 for the three months ended September 30, 2024, reflecting a negative change of $668,000. The negative change was primarily due to the recording of a $170,000 gain from change in value of the Company’s earnout liability during the three months ended September 30, 2024 as compared to $0 during the three months ended September 30, 2025 and the recording of a $500,000 write off of deferred offering costs during the three months ended September 30, 2025 as compared to $0 during the three months ended September 30, 2024.

Net loss and net loss attributable to common stockholders

For the three months ended September 30, 2025 and 2024, net loss amounted to $4,856,000 and $4,228,000, respectively, which represents an increase in net loss of $628,000, or 14.9%. During the three months ended September 30, 2025, in connection with our Series D Preferred Stock down round triggering event, we recorded deemed dividends of $6,650,000. Accordingly, for the three months ended September 30, 2025 and 2024, net loss attributable to common stockholders amounted to $11,506,000, or $(9.10) per common share, and $4,228,000, or $(170.22) per common share, respectively.

Results of Operations for the Nine Months Ended September 30, 2025 and 2024

The results of operations for the nine months ended September 30, 2024 are pro forma as the period presented in the following table and discussion includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14, 2024 through September 30, 2024. This pro forma period from January 1, 2024 to September 30, 2024 does not include the Merger transactions that occurred on-the-line.

Research and Development Expenses

Research and development expenses were $8,048,000 for the nine months ended September 30, 2025 as compared to $6,157,000 for the nine months ended September 30, 2024, reflecting an increase of $1,891,000. The increase was primarily attributable to an increase in clinical expenses of $2,564,000, an increase in scientific consulting fees of $706,000 and an increase in drug manufacturing costs of $276,000. In the first quarter of 2025, we began clinical trials related to the IND for CER-1236. This increase was primarily offset by a decrease in lab expenses of $481,000 primarily attributable to a decrease in toxicology studies performed in the 2025 period as compared to the 2024 period, a decrease in research and development salaries and benefits of approximately $973,000 which included a decrease in stock-based compensation expense of $775,000 primarily attributable to a decrease in accretion in stock-based option expense and a decrease in other development salaries and benefits of $198,000, a decrease in depreciation expense of $120,000 and a decrease in other research and development costs of $81,000.

The Company anticipates that its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.

General and Administrative Expenses

General and administrative expenses were $5,989,000 for the nine months ended September 30, 2025 as compared to $7,946,000 for the nine months ended September 30, 2024, reflecting a decrease of $1,957,000. The decrease during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, was primarily due to a decrease of $1,750,000 in underwriting fees from the PBAX initial public offering, which were incurred upon the consummation of the business combination in February 2024, a decrease in professional fees of $343,000 attributable to a decrease in legal fees of $377,000 and consulting fees of $415,000, offset by an increase in accounting fees of $399,000, and an increase in director fees of $50,000. Additionally, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, we had a decrease in outside services of $299,000 primarily due to a decrease in recruitment fees, an increase in other general and administrative expenses of $332,000 primarily attributable to transfer agent and proxy fees, and an increase in public communications of $103,000.

Other Income (Expense), Net

Other expenses, net was $(1,343,000) for the nine months ended September 30, 2025 as compared to other income of $5,126,000 for the nine months ended September 30, 2024, reflecting a negative change in other income, net of $6,469,000. The negative change was primarily due to (1) the recording of a $4,870,000 gain from change in value of the Company’s earnout liability and a $320,000 gain recorded for the change in value of the Predecessor’s preferred stock warrant liability during the nine months ended September 30, 2024 as compared to $0 during the nine months ended September 30, 2025, (2) the recording of a gain on settlement of vendor liabilities of $589,000 during the nine months ended September 30, 2024 compared to $0 during the nine months ended September 30, 2025, (3) the recording of stock-based inducement expense of $864,000 during the nine months ended September 30, 2025 as compared to $0 during the nine months ended September 30, 2024, and (4) the recording of a $500,000 write off of deferred offering costs during the nine months ended September 30, 2025 as compared to $0 during the nine months ended September 30, 2024. These decreases in other income and increases in other expenses, net were offset by the recording of other expense of $631,000 during the nine months ended September 30, 2024 related to registration rights penalties recorded compared to $0 during the nine months ended September 30, 2025, and an increase in interest income, net of $43,000.

Net loss and net loss attributable to common stockholders

For the nine months ended September 30, 2025 and 2024, net loss amounted to $15,380,000 and $8,976,000, respectively, which represents an increase in net loss of $6,403,000, or 71.3%. During the nine months ended September 30, 2025, in connection with our Series A, Series B and Series C preferred stock conversions and the redemption of Series C Preferred Stock, we recorded deemed dividends of $31,614,000, in connection with the triggering of a down round provision in connection with our Series D Preferred Stock, we recorded a deemed dividend of $6,650,000, and in connection with the adjustment in the exercise price of Series C Common Warrants, we recorded deemed dividends of $84,000. Accordingly, for the nine months ended September 30, 2025 and 2024, net loss attributable to common stockholders amounted to $47,078,000, or $(72.94) per common share, and $8,976,000, or approximately $(587.00) per common share, respectively.

Liquidity and Capital Resources

Capital Requirements

Predecessor and the Company have not generated any revenue from any source and the Company does not expect to generate revenue for at least the next few years. If the Company fails to complete the timely development of, or fails to obtain regulatory approval for, its product candidates, the ability of the Company to generate future revenue will be adversely affected. The Company does not know when, or if, it will generate any revenue from its product candidates, and does not expect to generate revenue unless and until the Company obtains regulatory approval and commercialization of its product candidates.

The Company expects its expenses to increase significantly in connection with its ongoing activities, particularly as it continues and expands research, preclinical development, and clinical development to support marketing approval for its product candidates. In addition, if the Company obtains approval for any of its product candidates, the Company expects to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. Furthermore, the Company expects to incur additional costs associated with operating as a public company.

The Company, therefore, anticipates that substantial additional funding will be needed in connection with its continuing operations. As of September 30, 2025, the Company had approximately $1.9 million in cash and cash equivalents. The Company intends to devote most of the available cash to the preclinical and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes that the cash available as of September 30, 2025 will not fund its operations and capital requirements for 12 months after the filing of these unaudited condensed financial statements for the period ended September 30, 2025. The Company has arranged two equity lines of credit, one providing for the sale of up to 25,000,000 newly issued shares of Common Stock and the other providing for the purchase of up to $17.5 million of Common Stock on the satisfaction of certain conditions. The Company has no guarantee that the conditions will be satisfied to require the purchase of all, or any additional amount, of the ELOC funds. On February 5, 2025, the Company entered into the SPA, with participation from a member of the Company’s Board and a single institutional investor, for the purchase and sale of (i) 127,551 shares of our common stock or common stock equivalents in lieu thereof; and (ii) February 2025 Common Warrants to purchase up to 127,551 shares of common stock, at a combined public offering price of $39.20 per share and warrant. In connection with this offering, the Company received net proceeds of approximately $4.2 million. Additionally, during the nine months ended September 30, 2025, the Company received net proceeds from the exercise of the remaining Series A Preferred Warrants, the collection of subscriptions receivable and ELOC fundings of approximately $4.2 million. Furthermore, during the nine months ended September 30, 2025, we received net proceeds from the sales of Series D Preferred Stock of $2.6 million.

On October 14, 2025, we entered into the Fifth Securities Purchase Agreement, pursuant to which we agree to issue and sell up to 9,750 shares of Series E Preferred Stock for an aggregate purchase price of up to $7 million in one or more closings. On October 16, 2025, we and the requisite buyers party to the Fifth Securities Purchase Agreement entered into Amendment No. 1 to the Securities Purchase Agreement (the “SPA Amendment”) to add an additional Buyer (as defined in the Fifth Securities Purchase Agreement) and increase the size of the Initial Closing (as defined in the Fifth Securities Purchase Agreement) by $500,000 to an aggregate of approximately $2.25 million of gross proceeds and reduce the size of the Additional Closings (as defined in the Fifth Securities Purchase Agreement) by an offsetting amount. There was no change to the aggregate amount of up to $7 million of proceeds to be funded pursuant to the Fifth Securities Purchase Agreement upon consummation of all of the Closings (as defined in the Fifth Securities Purchase Agreement) provided for therein. On October 16, 2025, pursuant to the Fifth Securities Purchase Agreement, we issued and sold, and the PIPE Investors purchased 3,816 shares of the Series E Preferred Stock for aggregate proceeds of approximately $2.25 million, paid in cash.

Any estimate as to how long the Company expects the net proceeds from the ELOC and Series D Preferred Stock and Series E Preferred Stock funding may fund the Company’s operations is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current expectations. On October 31, 2025, the Common Stock ceased trading on Nasdaq as a result of the Panel’s delisting determination. The OTC Pink Sheets and, if the Common Stock is admitted for trading thereon, the OTC Markets, are expected to be less liquid markets for the Common Stock. Such lack of liquidity may cause the investors party to the Fifth Securities Purchase Agreement to be less likely to exercise their option to acquire additional shares of Series E Preferred Stock and otherwise make it more difficult for us to raise capital. Changing circumstances, some of which may be beyond the Company’s control, could result in less cash and cash equivalents available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company may need to seek additional funds from additional sources sooner than planned.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drug products, the Company is unable to estimate the exact amount of its operating capital requirements. The Company’s future funding requirements will depend on many factors, including, but not limited to those listed under “Factors Affecting Our Performance” above.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and the Company may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, the Company’s product candidates, if approved, may not achieve commercial success. Commercial revenues, if any, will be derived from sales of product candidates that the Company does not expect to be commercially available in the near term, if at all. Accordingly, the Company will need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict the Company’s ability to operate. Any future debt financing and equity financing, if available, may involve covenants limiting and restricting the ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If the Company raises additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, it may be required to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to the Company. If the Company is unable to raise capital when needed or on acceptable terms, the Company could be forced to delay, reduce or eliminate its R&D programs or future commercialization efforts.

Cash Flows

Net cash used in operating activities

Net cash used in operating activities for the nine months ended September 30, 2025 primarily reflected a net loss of $15,380,000, adjusted for the reconciliation of non-cash items such as depreciation expense of $215,000, stock-based compensation of $836,000, stock-based inducement expense of $864,000, write off of deferred offering costs of $500,000, and amortization of right-of-use asset of $595,000, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $257,000, an increase in accounts payable of $1,426,000, a decrease in accrued liabilities of $429,000, and a decrease in operating lease liabilities of $644,000.

Net cash used in operating activities for the nine months ended September 30, 2024 primarily reflected a net loss of $8,976,000, adjusted for the reconciliation of non-cash items such as a gain of settlement of liabilities with vendors of $589,000, depreciation expense of $342,000, stock-based compensation of $1,904,000, amortization of right-of-use asset of $537,000 and a gain on revaluation of earnout liability and the preferred stock warrant liability of $5,190,000, and changes in operating asset and liabilities primarily consisting of a decrease in accounts payable of $232,000, an increase in accrued liabilities of $1,476,000, and a decrease in operating lease liabilities of $642,000.

Net cash provided by investing activities

Net cash provided by investing activities for the nine months ended September 30, 2025 amounted to $500,000 as compared to $0 for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we received $500,000 from the sale of equity securities.

Net cash provided by financing activities

Net cash provided by financing activities for the nine months ended September 30, 2025 amounted to $10,469,000 as compared to $12,241,000 for the nine months ended September 30, 2024.

During the nine months ended September 30, 2025, net cash provided by financing activities of $10,469,000 was primarily attributable to the receipt of net proceeds of $500,000 from the exercise of Series A Preferred Warrants, net proceeds of $3,704,000 from the sale of common stock under the ELOC and collection of stock subscription receivables, net proceeds of $2,561,000 from the sale of Series D Preferred Stock, and net proceeds from sale of common stock and pre-funded warrants of $4,273,000, offset by the cash redemption of Series C Preferred Stock of $395,000 and the payment of offering costs of $174,000.

During the nine months ended September 30, 2024, net cash provided by financing activities of $12,241,000 was primarily attributable to the receipt of net proceeds of $6,758,000 from the sale of Series A Preferred Stock, $408,000 from short-term borrowings, net proceeds of $500,000 from the sale of Series B Preferred Stock, net proceeds of $704,000 from the sale of Series C Preferred Stock and net proceeds of $4,139,000 from the sale of common stock under the ELOC, offset by the repayment of short-term borrowings of $300,000.

Critical Accounting Estimates

Investment in equity securities - The Company’s investment in equity securities consists of Series D Preferred Stock of Stella Diagnostics, Inc. Investments in equity securities are initially measured at cost. Cost is based upon either the cost of the investment or the estimated market value of the investment at the time it was acquired, whichever can be more clearly determined. The Company has elected the measurement alternative for equity securities without readily determinable fair values. Under this alternative, if the Company identifies an observable price change in an orderly transaction for an identical or similar investment of the same issuer, the Company measures the equity security at fair value as of the date that the observable transaction occurred. Any adjustments resulting from observable price changes are recognized in earnings. The Company monitors these investments for changes in observable prices from orderly transactions and assesses them for impairment. If an equity security is deemed to be impaired, an impairment loss is recognized in earnings, measured as the difference between the investment’s cost and its fair value at the impairment assessment date.

Earnout liability - As a result of the Merger in February 2024, the Company recognized an earnout liability of $4.9 million on the merger date. The earnout liability is measured using unobservable (Level 3) inputs and was included in current liabilities on balance sheet. The Company estimated the fair value of the earnout liability by applying a Monte-Carlo simulation method using the Company’s projection of future operating results and the estimated probability of achievement of the earnout target metrics. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value of the earnout liability. The liability is remeasured to fair value using the Monte-Carlo simulation method at each reporting period, and the change in fair value is recognized in other income (expense) until the contingency is resolved. During the three and nine months ended September 30, 2024, the Company recorded a gain from change of fair value of the earnout liability of $170,000 and $4,870,000, which is included in other income (expenses), net on the accompanying condensed consolidated statement of operations, respectively.

Stock-based compensation – The Company periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The fair value of restricted stock awards is based upon the estimated share price of the common stock on the date of grant. Forfeitures are accounted for as they occur, and the Company applies the simplified method to estimate expected term of “plain vanilla” options. All options and restricted stock awards granted since inception are expensed on a straight-line basis over the requisite service period, which is usually the vesting period, or as certain performance-based vesting terms become probable and the related amounts are recognized in the condensed consolidated statements of operations.

The accounting for stock options granted to outside consultants is consistent with the accounting for stock-based payments to officers and directors, as described above, by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as stock-based compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards.

Recent Accounting Standards

See the section titled in Note 2 to the Company’s condensed consolidated financial statements for the quarter ended September 30, 2025, appearing elsewhere herein.

As a smaller reporting company defined by Rule 12b-2 of the Securities Exchange Act of 1934, we are not required to provide the information required by this Item.

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

The Company’s Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the certifying officers concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective due to the existence of material weaknesses in internal control over financial reporting.

Material Weaknesses Identified

The material weaknesses identified include:

• A lack of sufficient personnel with appropriate technical accounting expertise and experience in U.S. GAAP and SEC reporting requirements;
• Inadequate processes for assessing and accounting for the impact of preferred stock conversions, including the failure to properly evaluate embedded features and related classification and measurement considerations; and
• Deficiencies in the initial recognition and valuation of investments in equity securities, including insufficient documentation and analysis supporting fair value determinations.

These control deficiencies have resulted in the Company’s inability to timely file periodic reports and have led to errors in the initial accounting treatment of complex financial instruments.

Remediation Plan

Management is actively developing a remediation plan to address these material weaknesses. The plan includes:

• Recruiting additional qualified accounting personnel with expertise in financial reporting and complex financial instruments;
• Engaging third-party consultants to assist with technical accounting matters; and
• Implementing enhanced financial reporting systems and internal controls.

Execution of this remediation plan is contingent upon the availability of adequate financial resources.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Nasdaq has delisted our securities from trading on Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

On October 29, 2025, we received the determination of the Nasdaq Hearings Panel (the “Panel”) to deny our request to continue the listing of our shares of common stock on Nasdaq and that the trading in our securities would be suspended at the open of trading on October 31, 2025. We submitted a request for review of the Panel’s decision by the Nasdaq Listing and Hearing Review Council. On October 31, 2025, we have since commenced trading of our common stock on the OTC Pink Sheets.

As previously disclosed, we have not been in compliance with the requirement set forth in Nasdaq Listing Rule 5550(b)(1) to maintain stockholders’ equity of at least $2.5 million (the “Equity Rule”). In January 2025, a previous Nasdaq panel provided us with an extension until April 22, 2025 to obtain compliance with the Equity Rule. On April 21, 2025, we announced that, following the completion of a financing round including the issuance of shares of Series D Preferred Stock in exchange for marketable securities (the “Marketable Securities”) of another public company convertible under its terms into shares of common stock of such other public company with an aggregate value of $5 million, as well as the application of the proceeds of our February 2025 public offering of shares of common stock and warrants and the proceeds of sales under its equity line of credit, as well as successful negotiations with service providers to reduce outstanding balances payable, we believed that we had regained compliance with the Equity Rule, subject to Nasdaq’s determination, as well as the completion of valuation procedures. In August 2025, in connection with the finalization of our financial statements for the quarter ended June 30, 2025, as a result of difficulties of completing the valuation of the Marketable Securities in a timely manner, we sold such Marketable Securities at a substantial discount to the face value thereof and recorded the value of such Marketable Securities at the sale price thereof. Following the disclosure of such valuation, the Staff informed us of its determination that, as a result of such revised valuation, we were not in compliance with the Equity Rule.

We have submitted a request for review of the Staff’s decision by the Nasdaq Listing and Hearing Review Council (the “Council”). We have also commenced the process of seeking to trade our shares of common stock on the OTC Markets. Currently, we are trading on the OTC Pink Sheets. . However, we can provide no assurance that the review by the Council will result in the continued listing of our shares of common stock or that the shares of common stock will be admitted for trading on the OTC Markets. The OTC Markets also are a less liquid market than Nasdaq, which may have a material adverse effect on the trading price and volume for the common stock. We are also considering listing alternatives, including applying to list our shares of common stock on another securities exchange.

The delisting of our securities by Nasdaq could adversely affect the trading market for our securities, as price quotations may not be as readily obtainable, which would likely have a material adverse effect on the market price of our securities and the Company’s ability to raise additional capital.

Moreover, we can provide no assurance that trading in our securities will continue over the counter or otherwise. As a result of the delisting, we could face significant material adverse consequences, including:

• a limited availability of market quotations for our securities;
• reduced liquidity with respect to our securities;
• a determination that our shares of common stock are “penny stock”, which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;
• a limited amount of news and analyst coverage for our company; and
• a decreased ability to issue additional securities or obtain additional financing, including pursuant to the Fifth Securities Purchase Agreement, the July 2025 Keystone Purchase Agreement, or otherwise, in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because they have been delisted, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities. This state level regulation introduces additional compliance requirements for brokers to consider making markets in our securities and will further negatively impact any trading liquidity in our securities.

We may pursue orphan drug designation for certain of our product candidates, and we may not be able to obtain such designation, or obtain or maintain the benefits of such designation including orphan drug exclusivity, and even if we do, that exclusivity may not prevent regulatory authorities from approving other competing products.

In June 2025, the FDA granted orphan drug designation to CER-1236 for the treatment of AML. We may seek orphan designation for additional product candidates in the future; however, we may never receive such designations. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug or biologic intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S. Orphan drug designation must be requested before submitting an NDA. A similar regulatory scheme governs orphan products in the EU.

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and application fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. In addition, if a product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same product for the same therapeutic indication for seven years.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition. In addition, even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity may also be lost if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of the patients with the rare disease or condition.

Additionally, the FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

The issuance of shares of our Common Stock upon conversion or exercise of our outstanding Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Common Warrants and other securities that we may issue in future financing transactions may result in substantial dilution to our stockholders.

On October 31, 2025, the Common Stock ceased trading on Nasdaq as a result of the Panel’s delisting determination and has commenced trading on the OTC Pink Sheets. Pursuant to the Certificate of Designations for each of Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, the suspension from trading or failure of the Company’s Common Stock to be trading or listed on either The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market constitutes a Triggering Event (as defined in the applicable Certificate of Designations) with regards setting the conversion price for each of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock. As of November 19, 2025, the Company currently has outstanding (i) 1,429 shares of Series A Preferred Stock with a conversion value of approximately $1.4 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $0.05; (ii) 7 shares of Series C Preferred Stock with a stated value of approximately $7,000, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a conversion price of $0.05 (iii) Series A Warrants to purchase 306 shares of Common Stock at an exercise price of $2,780.00 per share; (iv) Series C Warrants to purchase 4,088 shares of Common Stock at an exercise price of $0.80; (v) December 2024 and January 2025 Common Warrants to purchase an aggregate of 12,396 shares of Common Stock at an exercise price ranging from $112.20 to $116.40, (vi) February 2025 Common Warrants to purchase an aggregate of 127,551 shares of Common Stock at an exercise price of $39.20, (vii) Pre-Funded Warrants to purchase an aggregate of 10,787 shares of Common Stock at an exercise price of $0.002, (ix) Public Warrants and Private Placement Warrants to purchase an aggregate of 4,596 shares of Common Stock at an exercise price of $23,000.00 per share, (x) 5,352 shares of Series D Preferred Stock with a conversion value of approximately $5.4 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $0.05, and (xi) 3,816 shares of Series E Preferred Stock with a conversion value of approximately $3.8 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $4.1625.

Although each of the conversion price of most of the Preferred Shares and the exercise prices of the December 2024 Common Warrants, January 2025 Common Warrants, Series A Warrants and February 2025 Common Warrants are at or above the trading price of our Common Stock as of the date of this Quarterly Report, if such trading price increases, such conversion prices and exercise prices will not change as a result thereof and could be below the trading price of our Common Stock as of the date of any future conversion or exercise thereof, resulting in dilution to our stockholders. In addition, the terms of the Series A Preferred Stock, the Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock contain certain penalties and adjustments to the amount included in determination of the conversion rate following certain breaches of the Company’s obligations thereunder, including, among other things, as a result of a failure to file or cause the SEC to declare one or more registration statements relating to the resale of the shares of Common Stock issuable upon conversion thereof by specified deadlines, certain defaults under indebtedness of the Company or judgments against the Company and failure to deliver shares of Common Stock upon conversion in a timely manner. For example, the penalties and adjustments include a 25% premium added to the stated value for determining the conversion rate in connection with breaches other than the breach of the requirement to redeem the shares of Series A Preferred Stock and Series B Preferred Stock by August 19, 2025, which results in a 50% premium, and the addition to the stated value of an amount equal to the value of the shares of Common Stock into which the Series A Preferred Stock or Series B Preferred Stock would have been convertible if the conversion price were equal to 80% of the lowest volume weighted average price during the five trading days immediately prior to conversion. Such penalties and adjustments, which applied during the period when substantially all of the conversions since the Business Combination occurred as a result of a failure to file and cause the SEC to declare a registration statement with respect to the resale of the underlying shares in a timely manner, have resulted and may in the future result in the issuance of shares of Common Stock at an effective conversion price below the trading price of our Common Stock at the time of such conversion.

We cannot assure you that we will remain in compliance with all of the terms of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock and that such penalties and adjustments will not apply in the future. In addition, we cannot assure you that we will not issue additional convertible or other derivative securities with highly dilutive penalty or adjustment provisions. As described elsewhere in this Quarterly Report, the Company needs to obtain financing to fund its research and development activities and clinical trials, as well as other operations. Under challenging conditions in the equity capital markets, particularly for pre-commercialization biotech companies, we may have no viable alternatives to agreeing to inclusion of such provisions in the terms of future financings.

Disruptions at the FDA, the SEC and other government agencies caused by reduction in staffing, funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including staffing levels, government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund R&D activities is subject to the political process, which is inherently fluid and unpredictable. The Trump Administration has issued executive orders seeking to greatly reduce the size of the federal workforce, including through layoffs and severance packages offered to employees of federal agencies within the executive branch and independent agencies, including the SEC and the FDA. Any such reduction in personnel may result in longer review times by the FDA or SEC.

Disruptions and personnel turnover, as a result of leadership changes, staff reductions or otherwise, at the FDA and other government agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. In addition to the potential reduction in staffing, a government shutdown could adversely affect the FDA review process. Over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Similar consequences would also result if the shutdown of the federal government continues for an extended period. Currently, federal agencies in the U.S. are operating under a federal government shutdown due to the expiration of the continuing resolution that expired on September 30, 2025. The duration of the current government shutdown is unknown. In addition, the Trump administration has issued executive orders and taken other measures seeking to greatly reduce the size of the federal workforce, including through layoffs and severance packages offered to employees of federal agencies within the executive branch and independent agencies, including the FDA. Any such reduction in personnel may result in longer review times by the FDA, the SEC and other agencies. If a prolonged government shutdown occurs, or if geopolitical or global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could materially adversely affect our business, financial condition, results of operations and prospects. Further, in our operations as a public company, future government shutdowns or substantial leadership, personnel, and policy changes could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

The impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending on us is currently unknown, and may adversely affect our business model.

Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations and financial condition.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. For more information, see the section of titled “Business – Healthcare Laws and Regulations – Healthcare Reform” in the Annual Report on Form 10-K for the year ended December 31, 2024.

For example, the Medicare Drug Price Negotiation Program, administered by CMS as part of the Inflation Reduction Act of 2022, commonly referred to as the IRA, may apply to our products if they are selected for negotiation, which could materially reduce the amount of revenue we can generate from our products if they are approved. Prior to the enactment of the One Big Beautiful Bill Act of 2025 (“OBBBA”), orphan drugs were exempt from Medicare price negotiation under the IRA only if they had received a single orphan designation and were approved solely for the corresponding rare disease or condition. The OBBBA amended this exemption to apply more broadly: now, any orphan-designated drug is exempt from price negotiation, regardless of the number of orphan designations it has received, provided the drug’s approved indications are exclusively for those rare diseases. The OBBBA also included significant reforms to Medicaid, including an estimated $1 trillion in reduced federal Medicaid spending from 2025 through 2034, the imposition of work requirements for certain adult enrollees, more frequent eligibility redeterminations, and increased cost-sharing for beneficiaries. These changes are expected to reduce overall Medicaid enrollment and access to care. Although the effect on our future product candidates or business is unknown, any decrease in the number of insured patients or reimbursement levels for our products could adversely affect our potential for revenue and our commercial prospects.

In addition, multiple executive actions in the first half of 2025 signal the federal government’s increasing focus on lowering prescription drug prices, adding to the uncertainty surrounding future drug pricing and reimbursement frameworks. For example:

• On May 12, 2025, President Trump signed the executive order titled “Delivering Most-Favored-Nation Prescription Drug Pricing,” which directs the Secretary of Health and Human Services (“HHS”) to identify and communicate most-favored-nation price targets for prescription drugs and to propose a rulemaking plan to impose such pricing if “significant progress” is not made. The order also directs the federal government to explore regulatory pathways that would facilitate direct-to-patient sales for manufacturers that meet these price targets. Additionally, it signals potential further action against manufacturers that fail to offer most-favored-nation pricing, including evaluating whether to modify or rescind marketing approvals or allow individual drug importation waivers. In July 2025, President Trump sent letters to pharmaceutical companies demanding further reduced prices more in line with most-favored-nation pricing. On September 30, 2025, the White House announced the first MFN agreement (Pfizer), and reports indicate additional negotiations are ongoing. The scope, timing, and ultimate impact of any further actions or agreements remain uncertain. Further, in September and October 2025, multiple drug manufacturers announced plans to, for certain of their drugs, lower prices to reflect similar pricing around the world, and to sell these reduced-price drugs on a direct-to-consumer purchasing platform that is yet to be developed by the federal government.
• Previously, on April 15, 2025, President Trump issued the executive order “Lowering Drug Prices by Once Again Putting Americans First,” which contains a broad set of directives aimed at reducing drug costs. Among other actions, the order directs HHS to revise guidance under the Inflation Reduction Act (“IRA”) to eliminate the so-called “pill penalty,” which currently subjects small molecule drugs to Medicare price negotiation four years earlier than biologics. The order also calls for a comprehensive evaluation of the role played by pharmacy benefit managers (“PBMs”) in drug pricing and market access.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

• the demand for our product candidates, if we obtain regulatory approval;
• our ability to set a price that we believe is fair for our products;
• our ability to obtain coverage and reimbursement approval for a product;
• our ability to generate revenue and achieve or maintain profitability;
• the level of taxes that we are required to pay; and
• the availability of capital.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.

We face risks associated with tariffs and other trade restrictions, which may have a material adverse impact on our results of operations and financial condition.

We face risks related to tariffs and other trade protection measures—including those that have been or may be imposed by the United States or other countries—as well as import or export licensing requirements, trade embargoes, sanctions (including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control), and other trade barriers (including further legislation or actions taken by the United States or other countries that restrict trade). These risks include protectionist or retaliatory measures that may limit or complicate the sourcing of raw materials, equipment, and other components critical to our research and development activities.

The United States has imposed significant tariffs on a range of imported goods, including a baseline tariff of 10% and higher rates targeting specific countries. In response, several countries have enacted retaliatory measures, and the situation remains unpredictable. While pharmaceutical end-products are currently excluded from certain tariffs, current or future tariffs will result in increased research and development expenses, including with respect to increased costs associated with active pharmaceutical ingredients (APIs), raw materials, laboratory equipment and research materials and components. In addition, the U.S. Department of Commerce is conducting a Section 232 investigation to assess the national security implications of pharmaceutical and API imports. The outcome of this investigation could result in additional trade restrictions, including tariffs, consistent with ongoing efforts to reshore pharmaceutical manufacturing. Further, the United States and the European Union have announced the framework of a trade agreement that could impose a 15% tariff on most imports from the EU, including pharmaceutical products and inputs. However, the details of this trade agreement remain uncertain, including whether and to what extent such agreement may be impacted by the results of the Section 232 investigation.

We may face increased costs and operational disruptions if existing or future tariffs are applied to materials or components used in the development and manufacture of our product candidates. These risks also extend to indirect effects, such as retaliatory tariffs imposed by other countries or additional non-tariff trade barriers. As a result, our research and development activities, manufacturing timelines, and overall financial condition could be materially adversely affected.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the OBBBA was signed into law on July 4, 2025 and made significant changes to U.S. federal tax law. Under Section 174 of the Code, in taxable years beginning after December 31, 2021, expenses that are incurred for research and development performed outside the U.S. will be capitalized and amortized, which may have an adverse effect on our cash flow. The OBBBA provides that for taxable years beginning after December 31, 2024, expenses that are incurred for research and development performed in the United States may, at the taxpayer’s election, be immediately deducted or capitalized and amortized. In addition, the OBBBA provides that for taxable years beginning after December 31, 2021 and before January 1, 2025, certain eligible taxpayers generally may elect to retroactively deduct expenses for research and development performed in the U.S. in such taxable years by filing amended tax returns for such taxable years, and all other taxpayers that are not eligible to make such an election and that amortized expenses for research and development performed in the U.S. in such taxable years generally may elect to accelerate and deduct the remaining unamortized amounts of such research and development expenses (i) in the first taxable year beginning after December 31, 2024, or (ii) ratably over the two-taxable year period beginning with the first taxable year beginning after December 31, 2024. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

We have identified a material weaknesses in our internal control over financial reporting. If our remediation of such material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

We are required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal controls over financial reporting. In 2026, five years after our Initial Public Offering, we may be required to comply with auditor attestation requirements, as required by Section 404. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts.

In preparing each of our consolidated financial statements for the fiscal year ended December 31, 2024 and the accompanying consolidated financial statements for the three and nine months ended September 30, 2025 and related comparison periods, we identified material weaknesses in our system of internal financial and accounting controls and procedures, as defined in the SEC guidelines for public companies. The material weaknesses identified relate to our conclusion that due to a lack of sufficient and qualified resources, we lack effective processes and controls to ensure the accuracy and completeness of our financial statements, including processes for assessing and accounting for the impact of preferred stock conversions and deficiencies in the recognition and valuation of investments in equity securities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. As a result of the material weakness identified in connection with the preparation of the accompanying financial statements, we were unable to file this Quarterly Report on Form 10-Q in a timely manner. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

Our control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If our financial statements are not accurate, investors may not have a complete understanding of our operations. If we do not file financial statements on a timely basis as required by the SEC, we could face severe consequences. If we are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities. Moreover, responding to such investigations are likely to consume a significant amount of our management resources and cause us to incur significant legal and accounting expenses. Failure to remedy any material weakness in internal control over financial reporting, or to maintain effective control systems, could also restrict our future access to the capital markets. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

As a public reporting company, we are subject to filing deadlines for reports that we file pursuant to the Exchange Act, and our failure to timely file such reports may have material adverse consequences on our business.

Following the consummation of the Business Combination, we failed to timely file our Form 8-K with Form 10 information prior to the “staleness” date (as determined in accordance with the applicable rules and regulations of the SEC) applicable to the financial statements that were required by the applicable accounting requirements and other rules and regulations of the SEC to be included in such filing (including pro forma financial information); thus, we have not remained timely in our reporting requirements with the SEC since we became an SEC reporting company on February 14, 2024. Although we regained status as a current filer by filing a Form 8-K/A with current financial statements on April 1, 2024, we were unable to remain timely in our reporting requirements as a result of our failure to file our Quarterly Report on Form 10-Q for the period ended June 30, 2025 by August 19, 2025, the extended deadline resulting from our filing of a notice on Form 12b-25 on August 15, 2025, as a result, we will not be eligible to file any new registration statement on Form S-3 and, following any requirement to amend any existing registration statement on Form S-3, including as a result of the updating of such registration statement pursuant to Section 10(a)(3) of the Securities Act upon the filing of our Annual Report on Form 10-K for the fiscal year ending December 31, 2025, we will not be eligible to use any existing registration statement on Form S-3, in each case, that would allow us to continuously incorporate by reference our SEC reports into the registration statement, or to use “shelf” registration statements to conduct offerings, until approximately one year from the date we regained (and maintain) status as a current and timely filer. Until such time, if we determine to pursue an offering, we would be required to conduct the offering on an exempt basis, such as in accordance with Rule 144A, or file a registration statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings using alternative methods, adversely impact our liquidity, ability to raise capital or complete acquisitions in a timely manner. The use of Form S-1 would also prevent us from conducting offerings on a “shelf basis,” limiting our flexibility as to the terms, timing or manner of any such offering.

We cannot guarantee that in the future our reporting will always be timely. If we are unable to satisfy SEC filing deadlines or otherwise provide disclosures of material information on a timely basis, stockholders and potential investors in our Common Stock may have incomplete information about our business and results of operations, which may impact their ability to make an informed investment decision, result in a reduction in the trading price, trading volume or analyst coverage of our Common Stock or expose us to potential liability.