Lantern Pharma Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization, Principal Activities, and Basis of Presentation

Lantern Pharma Inc., and Subsidiaries (the “Company”) is an artificial intelligence (A.I.) focused company dedicated to developing cancer therapies and transforming the cost, pace, and timeline of oncology drug discovery and development. The Company’s development portfolio includes three clinical stage oncology focused product candidates and consists of small molecule drug candidates that others have tried, but failed, to develop into an approved commercialized drug, as well as new compounds that it is developing with the assistance of its A.I. platform and its biomarker driven approach. The Company’s A.I. platform, known as RADR®, uses big data analytics (combining molecular data, drug efficacy data, data from historical studies, data from scientific literature, phenotypic data from trials and publications, and mechanistic pathway data) and machine learning. The Company’s data-driven, genomically-targeted and biomarker-driven approach allows it to pursue a transformational drug development strategy that identifies, rescues or develops, and advances potential small molecule drug candidates.

Lantern Pharma Inc. was incorporated under the laws of the state of Texas on November 7, 2013, and thereafter reincorporated in the state of Delaware on January 15, 2020. The Company’s principal operations are located in Texas. The Company formed a wholly owned subsidiary, Lantern Pharma Limited, in the United Kingdom in July 2017 and a wholly owned subsidiary, Lantern Pharma Australia Pty Ltd, in Australia in September 2021. In January 2023, the Company formed a wholly owned subsidiary, Starlight Therapeutics Inc. (“Starlight”), to continue with advancing the development of drug candidate LP-184’s central nervous system (CNS) and brain cancer indications.

Since inception, the Company has devoted substantially all its activity to advancing research and development, including efforts in connection with preclinical studies, clinical trials and development of its RADR® platform. This now includes three lead drug candidates and an Antibody Drug Conjugate (ADC) program directed towards 11 disclosed therapeutic targets:

The Company’s fiscal year ends on December 31 of each calendar year. The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as the Company’s annual consolidated financial statements for the fiscal year ended December 31, 2024. In the opinion of the Company’s management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from these estimates.

The December 31, 2024 year-end condensed consolidated balance sheet data in the accompanying interim condensed consolidated financial statements was derived from audited consolidated financial statements. These condensed consolidated financial statements and notes do not include all disclosures required by GAAP and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024 and the notes thereto included in the Company’s Annual Report on Form 10-K, dated March 27, 2025, on file with the Securities and Exchange Commission.

The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Any reference in these notes to applicable guidance refers to Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). To date, the Company has operated its business as one segment.

**Note 2. Liquidity and Going Concern **

The Company incurred a net loss of approximately $13,045,000 and $14,906,000 during the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, the Company had working capital of approximately $9,421,000. The Company plans to pursue periodic capital raises and also plans to apply for grant funding in the future to assist in supporting its capital needs. In July 2025, the Company entered into an ATM Sales Agreement (“ATM”), with ThinkEquity LLC (“ThinkEquity”), as sales agent, pursuant to which the Company may offer and sell up to $15,530,000 of its common stock from time to time, in “at-the-market” offerings to or through its sales agent. During the quarter ended September 30, 2025, we sold 212,444 shares of common stock under the ATM for the gross proceeds of $989,061 and paid ThinkEquity $29,672 of commissions. Between October 1, 2025 and the date of this report, we have sold an additional 144,204 shares of common stock under the ATM for the gross proceeds of $634,333 and paid ThinkEquity $19,030 of commissions. We may also explore the possibility of additional manners of offering our equity securities and entering into commercial credit facilities as an additional source of liquidity. We believe that our cash, cash equivalents, and marketable securities on hand as of the date of this report will enable us to fund our anticipated operating expenses and capital expenditure requirements until at least approximately late June 2026 to mid August 2026. We will need substantial additional funding in the near future, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our drug development programs or commercialization efforts.

The Company’s ability to continue as a going concern is highly contingent on the ability to raise additional capital for ongoing research and development and clinical trials as the Company expects to continue incurring losses for the foreseeable future. The financial statements contained in this Quarterly Report on Form 10-Q have been prepared assuming that the Company will continue as a going concern, and do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company has incurred, and it anticipates it will continue to incur, losses and generate negative operating cash flows and as such will require substantial additional funding in the near future to continue its research and development activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern in the absence of obtaining substantial additional funding. While the Company plans to pursue periodic capital raises, including additional potential sales under the ATM, no assurance can be given that sufficient funding will be available when needed to allow the Company to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant areas of estimation include determining research and development accruals, the inputs in determining the fair value of equity-based awards and warrants issued, the inputs in determining present value of lease payments, and determining the fair value of marketable securities. Actual results could differ from those estimates.

Income Taxes

Due to the Company’s current and prior operating losses, the Company has no corporate income tax liabilities as of September 30, 2025 and December 31, 2024. Because of its history of losses, the Company believes it is more-likely-than-not that all of the Company’s deferred tax assets will not be realized as of September 30, 2025 and December 31, 2024. Therefore, the Company has recorded a full valuation allowance on its deferred tax assets.

On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. Among other things, the legislation reinstates expensing for domestic research and experimental expenditures, imposes new limitations on interest expense deductibility, and expands disallowed deductions for certain employee remuneration. FASB ASC 740Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the relevant legislation is enacted. The OBBB may affect the Company’s gross tax assets and liabilities in future periods. The Company accounted for the tax effects of the legislation in the period of enactment, which was the three months ended September 30, 2025, and concluded the impact was not material.

Foreign Currency

We translate the financial statements of our Australian subsidiary, which has a functional currency of the Australian dollar, to U.S. dollars using month-end exchange rates for assets and liabilities and average exchange rates for income and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Gains and losses resulting from foreign currency transactions that are denominated in currencies other than our functional currency (U.S. dollar) are included within other income, net on the condensed consolidated statements of operations.

Risks and Uncertainties

The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. Operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and other risks, including the potential risk of business failure.

Our marketable securities may be impacted by various risks related to interest rates, market conditions and credit risk. Our marketable securities have had and may in the future have their market value fluctuate due to rises or falls in interest rates. While we believe our cash, cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are federally insured. Interest bearing and non-interest bearing accounts we hold at these banking institutions are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor, per FDIC-insured bank, per ownership category. From time to time, some of our cash balances held at banking institutions may be in excess of FDIC coverage.

We currently rely on foreign third-party manufacturers and service providers in connection with certain aspects of our clinical operations. The U.S. government and persons involved in the Trump administration have made statements and taken certain actions that have led to, and may continue to lead to, changes to U.S. and international trade policies. If maintained, tariffs and the potential escalation of trade disputes with foreign countries could pose a significant risk to our business and could result in higher operating expenses. U.S. policies on tariffs and international trade could also result in fluctuations in interest rates, which could have a negative impact on general economic conditions, on the industry sector in which we operate, and on our business.

Research and Development

Research and development costs are expensed as incurred. These expenses primarily consist of payroll, contractor expenses, research study expenses, costs for manufacturing and supplies, clinical site costs and other costs for the conduct of clinical trials, costs for technical infrastructure on the cloud for the purposes of developing the Company’s RADR® platform, and other costs for identifying, developing, and testing drug candidates. Development costs incurred by third parties are expensed as the work is performed. Costs to acquire technologies, including licenses, that are utilized in research and development and that have no alternative future use are expensed when incurred.

Cash and Cash Equivalents

The Company considers money market funds and other highly liquid instruments with an original maturity of 3 months or less to be cash equivalents. Cash equivalents at September 30, 2025 and December 31, 2024 were approximately $6,283,000 and $6,619,000, respectively, and are included along with cash under the caption cash and cash equivalents on the Company’s condensed consolidated balance sheets.

Leases

The Company determines whether an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and net of current portion of operating lease liabilities on our condensed consolidated balance sheets. Lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The Company does not include options to extend or terminate the lease term unless it is reasonably certain that the Company will exercise any such options. Rent expense is recognized under the operating leases on a straight-line basis. The Company does not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and instead will recognize lease payments as expense on a straight-line basis over the lease term.

Marketable Securities

The Company’s marketable securities consist of government and agency securities, corporate bonds, mutual funds and common stock. We classify our marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our investments, including securities with maturities beyond twelve months, as current assets in the accompanying condensed consolidated balance sheets.

Available-for-sale debt securities are recorded at fair value each reporting period. Unrealized gains and losses on available-for-sale debt securities are excluded from earnings and recorded as a separate component within accumulated other comprehensive income (loss) on the condensed consolidated balance sheets until realized. Interest is reported within interest income on the condensed consolidated statements of operations. We evaluate our available-for-sale debt securities to assess whether the amortized cost basis is in excess of estimated fair value and determine what amount of that difference, if any, is caused by expected credit losses. Allowance for credit losses are recognized as a charge in other income, net on the condensed consolidated statements of operations, and any remaining unrealized losses are included in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets. The allowance for credit losses iszero at September 30, 2025 and December 31, 2024, and there were no credit losses recorded during the three and nine months ended September 30, 2025 and 2024.

Equity securities, which are composed of mutual funds and common stock, are recorded at fair value each reporting period, with changes in fair value of these investments, as well as dividends earned, recorded within other income, net on the condensed consolidated statements of operations.

We determine realized gains and losses on the sale of marketable securities based on the specific identification method and record such gains and losses within other income, net on the condensed consolidated statements of operations.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation table, as well as disclosure of income taxes paid disaggregated by jurisdiction. The standard is effective for our 2025 annual period and can be applied either prospectively or retrospectively. We are currently assessing the effect that the updated standard will have on our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public business entities to provide disaggregated disclosures of relevant income statement expenses. The amendments aim to improve financial reporting by enhancing transparency in the notes to financial statements, specifically regarding expense categories. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is assessing the effect of this update on its condensed consolidated financial statements and related disclosures.

Note 4. Commitments and Contingencies

General

The Company has entered into, and expects to enter into from time to time in the future, license agreements, strategic alliance agreements, assignment agreements, research service agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “License, Strategic Alliance, and Research Agreements”) are described in detail in the Company’s 2024 Form 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding License, Strategic Alliance, and Research Agreements are materially consistent with those described in the 2024 Form 10-K, as supplemented by the discussion in the following paragraph.

As described in the 2024 Form 10-K, the Company previously entered into a work order with Fortrea Inc. (“Fortrea”) to provide contract research organization (CRO) services in connection with the Company’s Phase 2 clinical trial for LP-300. While there has not yet been a formal amendment or contract termination, in July 2025, the Company and Fortrea determined that the CRO services being performed by Fortrea for the LP-300 Phase 2 clinical trial would be transitioned to other service providers.

In addition to the specific agreements described in the 2024 Form 10-K and the Fortrea work order matters described above, the Company has entered into, and will in the future enter into, other research and service provider agreements for the advancement of its product candidates and research and development efforts. The Company expects to pay additional amounts in future periods in connection with existing and future research and service provider agreements.

Set forth below are the approximate amounts expensed for License, Strategic Alliance, and Research Agreements during the three and nine months ended September 30, 2025 and 2024, respectively. These expensed amounts are included under research and development expenses in the accompanying condensed consolidated statements of operations, and also include estimated accruals in connection with the transition of Fortrea’s services.

Set forth below at September 30, 2025 and December 31, 2024, respectively, are (1) the approximate amounts accrued and payable under License, Strategic Alliance, and Research Agreements, and (2) the approximate amount of prepaid expenses and other current assets under License, Strategic Alliance, and Research Agreements. These amounts are included in the accompanying condensed consolidated balance sheets.

Actuate Therapeutics

In May 2021, the Company entered into a Collaboration Agreement with Actuate Therapeutics, Inc. (“Actuate”), a clinical stage private biopharmaceutical company focused on the development of compounds for use in the treatment of cancer, and inflammatory diseases leading to fibrosis. Pursuant to the agreement, the Company and Actuate have collaborated on utilization of the Company’s RADR® platform to develop novel biomarker derived signatures for use with one of Actuate’s product candidates. As part of the collaboration, the Company received 25,000 restricted shares of Actuate stock, subject to meeting certain conditions of the collaboration, as well as the potential to receive additional Actuate stock if results from the collaboration are utilized in future development efforts. In 2023, the term of the Collaboration Agreement was extended to continue until March 31, 2024. Certain affiliates of Bios Partners beneficially own greater than 10% of the Company’s common stock and also hold substantial beneficial ownership interests in Actuate. Through September 30, 2025, no revenues have been recognized under the Collaboration Agreement.

In August 2024, Actuate announced the closing of its initial public offering (“IPO”), which also included a reverse stock split. Following the reverse stock split and the IPO, the Company holds 13,889 shares of common stock, which can be sold by the Company without restriction in accordance with Rule 144 of the Securities Act of 1933. At September 30, 2025 and December 31, 2024, the Actuate common stock held by the Company had a fair value of approximately $93,000 and $111,000, respectively, which amounts were included in the caption marketable securities on the Company’s condensed consolidated balance sheets.

Note 5. Leases

The following provides balance sheet information related to leases as of September 30, 2025 and December 31, 2024:

At September 30, 2025, the future estimated minimum lease payments under non-cancelable operating leases are as follows:

The Company leases office space in the Dallas, Texas and Atlanta, Georgia metropolitan areas under non-cancellable operating leases. In January 2023, the Company renewed its existing lease in the Atlanta area for an additional two years (“Colony Square Lease”). Effective August 31, 2024, the Colony Square Lease was terminated in conjunction with a new lease with the same landlord. The new lease began September 1, 2024 for a period of 24 months, requires payments of approximately $6,800 per month, and is subject to automatic renewal on a month-to-month basis unless the Company provides three-months written notice to the landlord. The exercise of lease renewal options is at the Company’s sole discretion and is assessed as to whether to include any renewals in the lease term at inception.

In January 2023, the Company also entered into two new leases in the Dallas area that commenced in March 2023 and May 2023, respectively (“Legacy West Leases”). Effective April 30, 2024, the Legacy West Leases were terminated in conjunction with a new lease with the same landlord. The new lease began May 1, 2024 for a period of 19 months, requires payments of approximately $11,200 per month, and is subject to automatic renewal on a month-to-month basis unless the Company provides three-months written notice to the landlord. The exercise of lease renewal options is at the Company’s sole discretion and is assessed as to whether to include any renewals in the lease term at inception. In September 2025, the Company signed a 12-month lease with the same landlord for a new space that requires monthly payments of $5,950 and commences on December 1, 2025, after the existing lease ends.

The following table provides a reconciliation for our operating right-of-use assets and operating lease liabilities:

Other supplemental information related to operating leases is as follows:

The Company also leased office space in Dallas, Texas under month-to-month lease arrangements during the three and nine months ended September 30, 2025 and 2024. In April 2023, the Company entered into a two-year lease for material storage and handling. In October 2025, the Company extended this lease to continue through September 2026. The lease is cancellable with 45-days’ written notice. Under these short-term leases, the Company elected the short-term lease measurement and recognition exemption under ASC 842 and recorded rent expense as incurred.

The components of lease expense were approximately as follows for the three and nine months ended September 30, 2025 and 2024:

During the nine months ended September 30, 2025 and 2024, cash used in operating activities associated with operating leases was approximately $162,000 and $140,000, respectively.

Note 6. Stockholders’ Equity

Common Stock

During the three and nine months ended September 30, 2025, the Company issued and expensed 30,000 shares of common stock with a fair value of approximately $134,000. These shares were issued outside of the Company’s Second Amended and Restated Lantern Pharma Inc. 2018 Equity Incentive Plan (“Lantern Pharma Inc. 2018 Equity Incentive Plan”).

During the nine months ended September 30, 2024, the Company issued 20,000 shares of restricted common stock to a consultant with a grant date fair value of approximately $81,000. The restricted shares vested on October 4, 2024. No expense was recorded related to these shares during the three and nine months ended September 30, 2024.

During the three and nine months ended September 30, 2025,13,050 options were exercised for 13,050 shares of common stock at a price of $1.03 per share resulting in cash receipts of $13,442. No options were exercised during the three and nine months ended September 30, 2024.

In July 2025, the Company entered into the ATM, with ThinkEquity, pursuant to which the Company may offer and sell up to $15,530,000 of shares (“Placement Shares”) of its common stock from time to time, in an “at-the-market” offering to or through ThinkEquity. The Company pays ThinkEquity a commission of 3.0% of the aggregate gross proceeds from the sale of the Placement Shares pursuant to the ATM. The ATM contains customary representations, warranties and agreements of the Company, conditions to closing, indemnification rights and obligations of the parties, and termination provisions. The Company issued 212,444 shares of common stock to ThinkEquity during the three and nine months ended September 30, 2025, resulting in aggregate proceeds of $958,339, after commissions and transaction costs of $30,722.

As of September 30, 2025 and December 31, 2024, the Company had 25,000,000 authorized shares of Common Stock, of which 11,040,219 and 10,784,725 shares, respectively, were issued and outstanding.

Warrants

At September 30, 2025 and December 31, 2024, there were zero and 70,000 warrants outstanding, respectively. During the nine months ended September 30, 2025, warrants to purchase 70,000 shares expired unexercised. There wereno warrant issuances or exercises during the three and nine months ended September 30, 2025.

During the three months ended September 30, 2024, the Company issued 2,088 shares of common stock relating to the cashless exercise of warrants to purchase 7,664 shares of common stock. During the nine months ended September 30, 2024, the Company issued 22,220 shares of common stock relating to the cashless exercise of warrants to purchase 86,685 shares of common stock. During the three months ended September 30, 2024, the Company issued 3,832 shares of common stock for aggregate proceeds of $11,994 relating to the exercise of warrants that were expiring. During the nine months ended September 30, 2024, the Company issued 21,313 shares of common stock for aggregate proceeds of $66,710 relating to the exercise of warrants that were expiring.

Options

On September 19, 2025 (the “Effective Date”), the Company’s stockholders approved a one-time stock option repricing (the “Option Repricing”) for certain previously granted and still outstanding options held by the Company’s employees and directors. Pursuant to the Option Repricing, stock options granted under the Lantern Pharma Inc. 2018 Equity Incentive Plan between June 15, 2020 and November 4, 2021 with an exercise price between $10.21 and $15.21 per share, were repriced to $5.04 per share, which was calculated as 125% of the Company’s average daily volume weighted average price as reported by Nasdaq Stock Market, measured over the 10 trading days ending and including the date the option repricing was approved by the Board of Directors (July 24, 2025).

Under the terms of the Option Repricing, a repriced option will only be exercisable at its original exercise price if, prior to the one-year anniversary of the Effective Date, (a) the option holder’s employment or service is terminated by the Company or by the option holder, or (b) the option is exercised. The repriced options otherwise retained their existing terms and conditions as set forth in the Lantern Pharma Inc. 2018 Equity Incentive Plan. The Option Repricing resulted in approximately $285,200 of incremental stock compensation expense, which was calculated using the Black-Scholes option-pricing model.

During the three and nine months ended September 30, 2025, the Company recognized incremental compensation cost of approximately $8,700 relating to the Option Repricing. At September 30, 2025, there was approximately $276,500 of unrecognized stock-based compensation expense, which is expected to be recognized on a straight-line basis over the remaining period between September 30, 2025 and the one-year anniversary of the date the Option Repricing was approved by the Company’s stockholders. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss.

A summary of stock option activity under the Lantern Pharma Inc. 2018 Equity Incentive Plan, as amended and restated, during the nine months ended September 30, 2025 is presented below:

Options were exercisable for 1,071,082 shares of common stock at September 30, 2025 at a weighted average exercise price of $5.93 per share. The intrinsic value of options outstanding and exercisable at September 30, 2025 was approximately $1,554,000 and $1,531,000, respectively. The intrinsic value of options exercised during the three and nine months ended September 30, 2025 was approximately $45,000.

Stock-based compensation relating to stock options was as follows for the three and nine months ended September 30, 2025 and 2024:

Note 7. Marketable Securities

At September 30, 2025, debt and equity securities consisted of the following:

The contractual maturities of the Company’s debt securities, including approximately $5,682,000 classified in cash and cash equivalents, are as follows:

Note 8. Fair Value Measurements

We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Inputs are unobservable inputs based on our assumptions.

Financial Assets

When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. As of September 30, 2025, our available-for-sale debt securities were valued through use of quoted prices for comparable instruments in active markets and are classified as Level 2, and our money markets, common stock and mutual funds were valued using quoted prices in active markets for identical assets and are classified as Level 1.

Based on our valuation of our marketable securities, we concluded that they are classified in either Level 1 or Level 2, and we have no financial assets measured using Level 3 inputs. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories.

Note 9. Loss Per Share of Common Shares

Basic loss per share is derived by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants and stock options, which would result in the issuance of incremental shares of common stock unless such effect is anti-dilutive. In calculating the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remained the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation. Potentially dilutive securities outstanding that have been excluded from diluted loss per share due to being anti-dilutive include the following:

Note 10. Segment Reporting

The Company operates asone operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a condensed consolidated basis. The CODM uses expected research and development study and material costs; cash, cash equivalents and marketable securities balances; operating losses; and budget projections to assess financial performance and allocate resources. During the nine months ended September 30, 2025 and 2024, research and development study and material costs, which include clinical trial and product candidate manufacturing costs, were approximately $5,515,000 and $8,323,000, respectively. During the three months ended September 30, 2025 and 2024, research and development study and material costs, which include clinical trial and product candidate manufacturing costs, were approximately $1,443,000 and $2,475,000, respectively. These financial metrics are used by the CODM to make key operating decisions, such as which research and development studies to commence, extend or discontinue. See the condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024, as well as the condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024.