Ensysce Biosciences, Inc.

Notes to the Consolidated Financial Statements

NOTE 1 –ORGANIZATION AND PRINCIPAL ACTIVITIES

Ensysce Biosciences, Inc. (“Ensysce”), along with its 79.2%-owned subsidiary, EBIR, Inc. (“EBIR”, formerly known as Covistat, Inc.) and its wholly-owned subsidiaries EBI Operating, Inc. and EBI OpCo, Inc. (collectively, the “Company”), is a clinical-stage biotech company using its proprietary technology platforms to develop safer prescription drugs. The primary focus of the Company is its program developing abuse and overdose resistant pain technology with a clinical stage program being the abuse resistant, TAAP (Trypsin Activated Abuse Protection) opioid product candidate, PF614. In addition, the Company is developing its MPAR® (Multi-Pill Abuse Resistance) technology for overdose protection which will be applied to the PF614 program. The Company is also applying its TAAP and MPAR® technology to a methadone prodrug for use in the treatment of Opioid Use Disorder.

NOTE 2 -BASIS OF PRESENTATION

The consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Ensysce Biosciences, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has not generated any product revenue. There is no assurance that profitable operations will ever be achieved, and, if achieved, would be sustained on a continuing basis. Product development activities, clinical and pre-clinical testing, and commercialization of the Company’s product candidates are necessary to develop the Company’s products and will require significant additional financing. There can be no assurance the Company will be able to obtain such funds. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company believes in the viability of its strategy to ultimately realize revenues and in its ability to raise additional funds, management cannot be certain that additional funding will be available on acceptable terms, or at all. The Company’s ability to continue as a going concern is dependent upon its ability to obtain adequate financing and achieve profitable operations. As a result, these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months following the date these consolidated financial statements were issued.

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates and Assumptions

Preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosed in the accompanying notes. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include, but are not limited to, the expense recognition for certain accrued research and development services.

Cash and Cash Equivalents

For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and cash equivalents are deposited in accounts at large financial institutions and amounts currently exceed federally insured limits. The Company has no financial instruments with off-balance sheet risk of loss. Additionally, the Company had a concentration in accounts payable, asthree research and development vendors made up greater than 10% individually, and 78% and 82% in aggregate, of the outstanding accounts payable balance as of March 31, 2026, and December 31, 2025, respectively.

Segments

The Company operates and manages its business asone reportable and operating segment. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is the Chief Executive Officer, who reviews consolidated financial information on a company-wide basis for purposes of allocating resources and assessing financial performance and does not regularly review expenses or financial results on a more granular level.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over an estimated useful life offive years. As of March 31, 2026, property and equipment consists of laboratory equipment. During the three months ended March 31, 2026, the Company recognized depreciation expense of $6,533. There wasno property and equipment as of March 31, 2025, and as such, there wasno depreciation expense recognized during the three months ended March 31, 2025.

Fair Value Measurement

ASC 820,Fair Value Measurements, (“ASC 820”) provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. This determination requires significant judgments to be made by the Company.

As of March 31, 2026, and December 31, 2025, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses and other liabilities approximate their fair values due to the short-term nature of these items.

Federal Grants

In September 2018, the NIH through NIDA awarded the Company a research and development MPAR Grant. The initial grant was extended several times and cumulative funding under this grant of approximately $10.7 million was completed in December 2023. A second multi-year MPAR Grant was awarded by NIH through NIDA in August 2024, providing total funding of $15.1 million through May 2027, as adjusted. As of March 31, 2026, remaining funding under the grant is $6.0 million.

In September 2019, the NIH/NIDA awarded the Company a third research and development grant related to the development of its TAAP/MPAR abuse deterrent technology for OUD Grant. The total approved budget was approximately $5.4 million, and the grant period ended August 31, 2024.

The Company recognizes revenue when costs related to the grants are incurred and assessed as reimbursable. The Company believes this policy is consistent with the overarching premise in Accounting Standards Codification Topic 606,Revenue from Contracts withCustomers (“ASC 606”), applied by analogy, to ensure that it recognizes revenues to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services, even though there is no “exchange” as defined in ASC 606. The Company believes the recognition of revenue as costs are incurred, and reimbursable amounts become due is analogous to the concept of transfer of control of a service over time under ASC 606.

The revenue recognized under the MPAR Grant and OUD Grant was as follows:

Amounts requested or eligible to be requested through the NIH payment management system, but for which cash has not been received, are presented as an unbilled receivable on the Company’s consolidated balance sheet. As all amounts are expected to be remitted timely, no valuation allowances are recorded.

Unbilled receivable from the MPAR Grant consisted of the following:

Research and Development Costs

The Company’s research and development expenses consist primarily of third-party research and development expenses, consulting expenses, preclinical and clinical studies, and any allocable direct overhead, including facilities and depreciation costs, as well as salaries, payroll taxes, and employee benefits for those individuals directly involved in ongoing research and development efforts. Research and development expenses are charged to expense as incurred. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs associated with the Company’s executive, finance, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees.

Stock-based Compensation

The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards using a graded amortization approach. The Company accounts for forfeitures as they occur.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. 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. Stock-based compensation costs are recorded in research and development and general and administrative expenses in the consolidated statements of operations.

From time-to-time equity classified awards may be modified. On the modification date, the Company estimates the fair value of the awards immediately before and immediately after modification. The incremental increase in fair value is recognized as expense immediately to the extent the underlying equity awards are vested and on a straight-line basis over the same remaining amortization schedule as the unvested underlying equity awards.

Income Taxes

Income taxes are recorded in accordance with ASC 740,Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.

Earnings (loss) per Share

The basic earnings (loss) per share is calculated by dividing the Company’s net income or loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. The diluted earnings (loss) per share is calculated by dividing the Company’s net earnings attributable to common stockholders by the diluted weighted average number of common shares outstanding during the period, determined using the treasury stock method and the average stock price during the period.

The following weighted average shares have been excluded from the calculations of diluted weighted average common shares outstanding because they would have been anti-dilutive (the Company has utilized the principal balance outstanding and the end of period conversion price for the Convertible Notes for the purposes of the weighted average share calculation below):

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this pronouncement on its related disclosures.

In November 2024, the FASB issued ASU 2024-04, “Debt – Debt with Conversion and other Options (Subtopic 470-20)”, which set forth to improve the relevance and consistency in the application of induced conversion guidance in Subtopic 470-20, Debt— Debt with Conversion and Other Options such as clarifying the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for all entities after December 15, 2025, with early adoption permitted. The Company adopted the standard with an effective date of January 1, 2026. The adoption did not have a significant impact on the consolidated financial statements for the three months ended March 31, 2026.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants by Business Entities, which set forth new amendments that require entities to recognize government grants when it is probable that the grant conditions will be met and the grant will be received, and to provide enhanced disclosures regarding the nature, terms, and financial statement effects of such grants. The new amendments are effective for public companies with annual reporting periods beginning after December 15, 2028, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11,Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the scope, form and content, and disclosures required for interim financial reporting. For public business entities, the amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its interim financial statement disclosures.

In December 2025, the FASB issued ASU 2025-12,Codification Improvements, which includes amendments intended to clarify and improve various aspects of existing accounting guidance across multiple topics under U.S. GAAP. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-12 on its financial statements and disclosures.

In April 2026, the FASB issued ASU 2026-01, which provides guidance on the measurement of paid-in-kind (PIK) dividends on equity-classified preferred stock. Under the amendments, entities are required to measure such dividends by multiplying the stated PIK dividend rate by the liquidation preference of the shares. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its financial statements.

Reclassification

Certain reclassifications have been made to the December 31, 2025 financial statements to conform to the March 31, 2026 financial statement presentation. Such reclassifications had no effect on net income as previously reported.

NOTE 4 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

NOTE 5 –ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following:

NOTE 6 -COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of March 31, 2026, the Company’s commitments included an estimated $17.0 million related to the Company’s open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations for multi-year pre-clinical and clinical research studies funded by federal grants. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on its business needs prior to the delivery of goods or the performance of services.

Litigation

As of March 31, 2026, and December 31, 2025, there were no pending legal proceedings against the Company that are expected to have a material adverse effect on cash flows, financial condition or results of operations. From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.

Consultant Dispute

In April 2025, the Company entered into an agreement with a former independent contractor to resolve a dispute over payment. The Company denied the allegations but agreed to settle the matter. In connection with the settlement agreement, the Company issued 20,000 shares of common stock to the consultant in April 2025. As of March 31, 2026, the Company accrued a total settlement value of $0.2 million.

Galephar Agreement

In January 2025, the Company entered into a product development and supply agreement with Galephar Pharmaceutical Research, Inc., a Puerto Rico specialty drug manufacturer (“Galephar”), to support the development, manufacture, packaging and testing of the Company’s PF614 and PF614-MPAR drug products for use in clinical trials and potential future commercial launch.

Upon execution of the agreement, the Company committed to issue 13,801 restricted shares of common stock (approximately 1% of shares outstanding), subject to vesting in three tranches upon achievement of specific operational and regulatory milestones. The Company accounts for this share grant as nonemployee share-based compensation under ASC 718.

One-third of the shares vested immediately upon grant, and the remaining two-thirds will vest as services are performed. During the three months ended March 31, 2026 and 2025, the Company recognized $0 and $25,806 of stock-based compensation related to the one-third immediate vesting of 4,600 shares upon grant date. As of March 31, 2026,4,600 shares had been issued and outstanding.

The agreement also provides for milestone-based payments, to be settled in common stock (50% restricted, 50% freely tradeable). The number of shares issuable upon achievement of each milestone is based on the trailing five-day average closing price at the time of each milestone achievement.

Share-based expense for these milestone grants will be recognized as services are rendered. These awards are liability-classified until shares are issued, at which point they will be reclassified to equity. During the three months ended March 31, 2025, the Company recognized $20,000 of research and development stock-based compensation to be settled in shares that was related to milestone progression. During the three months ended March 31, 2026, there has beenno research and development expense related to milestone progression for awards to be settled in shares.

As of March 31, 2026,468,750 shares had been issued pursuant to these milestone-based awards.

Lease

The Company’s current lease agreement (as amended) has a term that extends through October 31, 2026, with no option to renew. As of March 31, 2026, the future lease payments totaled $21,508. The Company recognized total rent expense of $9,443 and $9,088 in the three months ended March 31, 2026 and 2025, respectively.

NOTE 7 -NOTES PAYABLE

The following table provides a summary of the Company’s outstanding debt as of March 31, 2026:

The following table provides a summary of the Company’s outstanding debt as of December 31, 2025:

Interest expense

The interest expense recognized for financed insurance was $834 and $909 for the three months ended March 31, 2026 and 2025, respectively. Interest expense recognized for the 2023 Notes was $3,089 and $2,947 for the three months ended March 31, 2026 and 2025, respectively.

2023 Notes

In October 2023, the Company entered into a Securities Purchase Agreement (“SPA”) for an aggregate financing of $1.8 million with investors, including $0.2 million with a board member. At the first closing under the SPA, which occurred on October 25, 2023, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $612,000 for an aggregate purchase price of $566,667 and (ii) warrants to purchase 83,714 shares of the Company’s common stock, par value $0.0001 per share in the aggregate. At the second closing under the SPA, which occurred on November 29, 2023, the Company issued to the investors referenced above, (i) additional notes in the aggregate principal amount of $1,224,000 for an aggregate purchase price of $1,133,333 and (i) additional warrants to purchase 167,427 shares of the common stock in the aggregate.

The warrants have an exercise price of $23.5125, the same as the conversion price, and are exercisable for five years following the issuance date. The warrants were equity classified as they are indexed to the Company’s stock and only settleable in shares. The warrants were initially measured at fair value using a Black-Scholes valuation model and were allocated along with the 2023 Notes using the relative fair value method. The original debt discount, debt issuance costs, and value associated with the warrants were fully amortized to interest expense as of March 31, 2026.

During 2024, the Company converted 49,702 shares of common stock with a conversion value of $1.2 million related to the 2023 Notes. In addition, in connection with the SPA, the Company incurred a $1.0 million waiver fee as a result of the 2024 February Warrant Inducement (see Note 8) to pay down $0.5 million of the 2023 Notes and incurred $0.5 million in transaction costs recorded as such in the consolidated statement of stockholders’ equity. As of March 31, 2026, the remaining $0.2 million of the 2023 Notes relates to senior secured convertible promissory notes held by a Company board member (see Note 10).

Financed Insurance Premiums

In June 2025, the Company renewed and financed its directors’ and officers’ liability insurance in the amount of $0.2 million. Monthly payments were scheduled from July 2025 through March 2026 and were fully paid as of March 31, 2026.

NOTE 8 -STOCKHOLDERS’ EQUITY

The Company’s current Certificate of Incorporation authorizes 250,000,000 shares of common stock and 1,500,000 shares of preferred stock, both with par value equal to $0.0001. As of March 31, 2026,4,500 shares have been designated as Series B Preferred Stock. The remaining authorized preferred shares are undesignated and available for future issuance. As of March 31, 2026, the Company had convertible preferred stock as follows:

Series B Preferred Stock Financing

On November 13, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”) providing for (i) a registered direct offering and (ii) a concurrent private placement (collectively, the “Offerings”) for aggregate financing of $4.0 million, with the right to purchase up to an additional $16.0 million under the facility

In the registered direct offering, the Company issued 1,513 shares of Series B Preferred Stock convertible to 665,922 shares of the Company’s common stock. In the concurrent private placement, the Company issued 2,487 unregistered shares of Preferred Stock convertible into shares of common stock, subject to adjustment, and warrants to purchase up to 880,000 shares of common stock, subject to adjustment. The Series B Preferred Stock has a stated value of $1,100 per share. The preferred stock and common stock each have a par value of $0.0001 per share.

The Warrants have an exercise price of $2.50 per share, subject to anti-dilution adjustments, are exercisable beginning six months after issuance, and expire on the fifth anniversary of the later of (i) the effectiveness of a resale registration statement covering the Warrants and (ii) receipt of required stockholder approval.

The Series B Preferred Stock has the following rights and privileges:

Voting- Holders of preferred shares shall have no voting rights, except as required by Delaware law and Company’s Certificate of Designation. To the extent required under the Delaware General Corporation Law, holders of the preferred shares are entitled to vote as a separate class (or series, if applicable) to approve certain corporate actions. Approval of such matters requires the affirmative vote or written consent of the holders of a majority of the outstanding preferred shares voting together as a single class, unless separate series voting is required by law. In matters where preferred shareholders are entitled to vote together with common shareholders as a single class, each preferred share is entitled to the number of votes equal to the number of shares of common stock into which it is then convertible, subject to applicable beneficial ownership limitations.

Dividends - Holders of preferred shares shall accrue dividends at a rate of 4.0% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends accrue daily and are payable in arrears on the first trading day of each fiscal quarter. Dividends are not payable in cash but are capitalized and added to the stated value of the preferred shares on each dividend payment date. Accrued dividends are included in the conversion amount upon conversion of the preferred shares and are payable upon certain bankruptcy triggering events. Upon the occurrence and continuation of a triggering event, as defined in the agreement, the dividend rate increases to 8.0% per annum until such triggering event is cured.

Liquidation - In the event of a liquidation, dissolution or winding up of the Company, holders of preferred shares are entitled to receive, prior to any distribution to holders of Junior Stock (shares of capital stock that are junior in rank to all preferred shares with respects to preferences of dividends, distributions and payments upon distribution.) and pari passu with holders of any outstanding Parity Stock, a cash payment per Preferred Share equal to the greater of (i)125% of the applicable Conversion Amount or (ii) the amount that would have been received if such Preferred Shares had been converted into Common Stock immediately prior to the Liquidation Event. If available assets are insufficient to pay the full liquidation preference to holders of Preferred Shares and Parity Stock, such amounts will be distributed ratably among such holders in proportion to their respective full liquidation preference entitlements. The Company is required to take all actions, including causing its subsidiaries to distribute available proceeds to the extent permitted by law, to ensure that such liquidation preferences are satisfied before any distributions are made to holders of Junior Stock.

Conversion Price Per Share: Each share of Series B Preferred Stock is convertible, at the option of the holder, into shares of common stock. The number of shares issuable upon conversion is determined by dividing the conversion amount by the conversion price. The conversion amount equals the stated value of $1,100 per share, plus accrued and unpaid dividends and any other amounts owed under the applicable transaction documents. Upon receipt of a valid conversion notice, the Company is required to issue the applicable number of shares of common stock within one trading day, subject to applicable settlement requirements. Conversions are subject to a beneficial ownership limitation following conversion.

The conversion price is initially $2.50 per share, subject to adjustment. At the holder’s election, the conversion price may be adjusted to 95% of the lowest volume-weighted average price (“VWAP”) of the Company’s common stock during the five trading days preceding conversion, subject to a floor price of $0.4104. Conversions are subject to customary beneficial ownership limitations.

Alternate Conversion Upon a Triggering Event - Following the occurrence of a triggering event, holders may elect to convert Series B Preferred Stock at an alternate conversion price equal to 90% of the lowest VWAP over the five trading days preceding the conversion date, subject to a floor price of $0.4104.

Exchange Right - The holder has the right, in connection with a subsequent financing by the Company, to apply the stated value of the preferred stock at 120% of the applicable conversion amount toward the purchase price of securities issued in such subsequent placement.

Additional Purchase Right - The Preferred Stock includes participation rights that entitle each holder of preferred stock to participate in any pro rata distribution of options, convertible securities, warrants or other purchase rights granted to holders of Common Stock (other than equity awards issued under the Omnibus Incentive Plan). In such events, each holder is entitled to receive the amount of such rights the holder would have received if all Preferred Shares were converted into Common Stock at the Alternate Conversion Price as of the applicable record date, without regard to conversion limitations. Participation is subject to the beneficial ownership limitation. To the extent participation would cause a holder and its attribution parties to exceed such limitation, the excess portion is held in abeyance and becomes exercisable when such participation would no longer result in exceeding the beneficial ownership limitation.

Anti-dilution: The Series B Preferred Stock includes price-based anti-dilution protections that adjust the conversion price upon future issuances of equity or equity-linked securities at prices below the then-effective conversion price, including issuances of options or convertible securities and variable-price securities.

The Company evaluated the terms of the Series B Preferred Stock for embedded features that may require bifurcation as derivative instruments under ASC 815. Certain features were identified that met the definition of a derivative. As March 31, 2026 and December 31, 2025, the Company concluded that the fair value of such features was not material to the financial statements and accordingly did not recognize them as separate derivative liabilities. The Company will continue to reassess this conclusion at each reporting period.

2025 April Warrant Inducement

In April 2025, the Company entered into an Inducement Letter with certain warrant holders for the exercise of certain outstanding warrants to purchase up to an aggregate of 630,376 shares of common stock of the Company, par value $0.0001 per share. The warrants were issued in March 2025 and have an exercise price of $3.24 per share. The shares of common stock issuable upon exercise of such outstanding warrants are registered pursuant to an effective registration statement on Form S-3.

In consideration for the immediate exercise of the warrants for cash and the payment of an additional $0.125 per new unregistered warrant (an additional $157,594 included in the gross proceeds to the Company), pursuant to the Inducement Agreement, the Company agreed to issue and sell unregistered warrants to purchase shares of common stock. The new warrants (the “Common Warrants”) are exercisable for an aggregate of up to 1,260,752 shares of common stock. The Common Warrants have an exercise price of $1.90 per share and are immediately exercisable for shares of common stock. One half of the Common Warrants will expire after eighteen (18) months and the other half will expire after five (5) years. The gross proceeds to the Company from the exercise of the warrants and payment for Common Warrants was approximately $2.2 million, prior to deducting placement agent fees and estimated offering expenses.

The Company utilized a placement agent for the 2025 April Warrant Inducement and incurred approximately $0.3 million in legal fees and other closing costs. Additionally, the Company issued to the placement agent as compensation unregistered warrants to purchase up to 44,126 shares of common stock, equal to 7.0% of the aggregate number of shares of Common Stock (or warrants) placed in the transaction. The placement agent warrants expire on April 24, 2030, and have an exercise price of $4.05 per share of common stock. The closing of the offering occurred on April 24, 2025.

2025 Registered Direct Offering and 2025 March Warrant Offering

In March 2025, the Company entered into a definitive SPA with certain institutional investors, pursuant to which the Company agreed to issue and sell in a registered direct offering, (i) an aggregate of 239,594 shares of common stock, par value $0.0001 per share at an offering price of $3.49 per share, (ii) pre-funded warrants to purchase up to 75,594 shares of common stock, at a price per pre-funded warrant equal to $3.4899, the price per share less $0.0001, for gross proceeds of approximately $1.1 million before the deduction of placement agent fees and offering expenses. The pre-funded warrants were fully exercised as of March 31, 2025, and the related common shares were issued in April 2025.

In a concurrent private placement, pursuant to the terms of the SPA, the Company also agreed to issue and sell unregistered warrants to purchase up to 315,188 shares of Common Stock (the “Series A-5 Warrants”), and Series A-6 warrants to purchase up to 315,188 shares of Common Stock (the “Series A-6 Warrants”), to purchase up to an aggregate 630,376 shares of Common Stock. The warrants have an exercise price of $3.24 per share and are exercisable immediately. The Series A-5 Warrants will expire eighteen (18) months after issuance and the Series A-6 Warrants will expire five (5) years after issuance.

Warrants

The following table provides a summary of outstanding warrants to purchase shares of common stock as of March 31, 2026:

NOTE 9 -STOCK-BASED COMPENSATION

The Company assumed the 2021 Omnibus Incentive Plan (“Plan”) in 2021. In January 2026, shareholders approved an increase of 600,000 shares available for future grant under the Plan. In February 2026, the Company’s Board approved an annual increase of 228,749 shares available for future grant under the Plan.

The Company recognized within general and administrative expense stock-based compensation expense of $3,533 and $10,996 for the three months ended March 31, 2026 and 2025, respectively. During three months ended March 31, 2026 and 2025, the Company recognized within research and development expense stock-based compensation of $5,210 and $51,348, respectively.

Option Activity

The following table summarizes the Company’s stock option activity during the three months ended March 31, 2026:

Option Valuation

The fair value of each stock option is determined on their respective grant date(s) using the Black-Scholes option-pricing model. The material assumptions used in the Black-Scholes model in estimating the fair value of the options granted are as follows:

As of March 31, 2026, the Company had an aggregate of $9,186 of unrecognized share-based compensation cost, which is expected to be recognized over the weighted average period of 1.80 years.

Shares Reserved for Future Issuance

The following shares of common stock are reserved for future issuance:

NOTE 10 -RELATED PARTIES

As of March 31, 2026, the Company held a $0.2 million senior secured convertible promissory note plus accrued interest and 29,547 warrants exercisable for common stock at $23.51 per share issued to a board member in connection to the issuance of the 2023 Notes. The Company and the board member have entered into a forbearance agreement that will expire on April 25, 2026 (see Note 11).

NOTE 11 -SUBSEQUENT EVENTS

On April 23, 2026, the Company amended its senior secured convertible promissory note payable to its board member to provide that the notes were converted into an aggregate of 508,614 unregistered shares of common stock and unregistered warrants to purchase up to 254,307 unregistered shares of common stock at an exercise price of $0.4840 per share, immediately exercisable and terminating two years after the issuance date.

On April 6, 2026, the Company closed a private placement with an institutional investor pursuant to a Securities Purchase Agreement originally entered into on November 13, 2025. The Company issued 2,000 shares of Series B Preferred Stock convertible into up to 4,363,636 shares of common stock at a conversion price of $0.55 per share, for gross proceeds of $2.0 million before fees and expenses. In connection with the closing, the Company also issued (i) warrants to purchase up to 4,363,637 shares of common stock exercisable for 18 months and (ii) warrants to purchase up to 4,363,636 shares of common stock exercisable forfive years, in each case at an exercise price of $0.55 per share and exercisable immediately upon issuance. Additionally, warrants to purchase up to 261,818 shares of common stock were issued to the Company’s financial advisor. All warrants are subject to anti-dilution adjustments. In connection with closing, the Company amended its Certificate of Designation to increase the stated value per share of all outstanding Series B Preferred Stock from $1,100 to $1,200 per share.

Since April 1, 2026, the Company has issued 4.9 million shares of common stock upon the conversion of 1,686 shares of Series B Preferred Stock.