Dogwood Therapeutics Inc

Notes to Condensed Financial Statements

1Organization and Nature of Business

Dogwood Therapeutics, Inc. (“Dogwood”), formerly known as Virios Therapeutics, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on December 16, 2020 through a corporate conversion (the “Corporate Conversion”) just prior to the Company’s initial public offering (“IPO”). The Company was originally formed on February 28, 2012 as a limited liability company (“LLC”) under the laws of the State of Alabama as Innovative Med Concepts, LLC. On July 23, 2020, the Company changed its name from Innovative Med Concepts, LLC to Virios Therapeutics, LLC. On October 7, 2024, the Company acquired Pharmagesic (Holdings) Inc., a Canadian corporation (“Pharmagesic”) and the parent company of Wex Pharmaceuticals, Inc., and changed its name from Virios Therapeutics, Inc. to Dogwood Therapeutics, Inc. (the “Name Change”) on October 9, 2024 (See Note 11 – Subsequent Events in these Notes to condensed financial statements). Because the acquisition was consummated on October 7, 2024, the Company’s condensed financial statements as of September 30, 2024 do not reflect the impact of the Company’s acquisition of Pharmagesic.

Dogwood operates inone segment and is a pre-revenue, development-stage biopharmaceutical company focused on developing new medicines to treat pain and fatigue-related disorders. The Dogwood research pipeline is focused on two separate mechanistic pillars; NaV 1.7 modulation to treat chronic and acute pain disorders and combination antiviral therapies targeting reactivated herpes virus mediated illnesses. The proprietary non-opioid, NaV 1.7 analgesic program is centered on our lead development candidate Halneuron®. Halneuron® is a voltage-gated sodium channel blocker, a mechanism known to be effective for reducing pain. Halneuron® treatment has demonstrated pain reduction of both general cancer related pain and chemotherapy-induced neuropathic pain (“CINP”). Our forthcoming Halneuron® Phase 2b study will commence in Q1 2025. The antiviral program includes IMC-1 and IMC-2, which are novel, proprietary, fixed dose combinations of nucleoside analog, anti-herpes antivirals and the anti-inflammatory agent, celecoxib for the treatment of fibromyalgia (“FM”) and Long-COVID (“LC”). Top-line data from an ongoing IMC-2 Phase 2 LC study are expected in November 2024. IMC-1 is poised to progress into Phase 3 development as a treatment for FM and is the focus of external partnership activities.

Going Concern

Since its founding, the Company has been engaged in research and development activities, as well as organizational activities, including raising capital. The Company has not generated any revenues to date. As such, the Company is subject to all of the risks associated with any development-stage biotechnology company that has substantial expenditures for research and development. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company has funded its losses primarily through issuance of members’ interests, convertible debt instruments and issuance of equity securities. For the three and nine months ended September 30, 2024 and 2023, the Company incurred net losses of $2,280,684 and $4,621,852, respectively, and $1,235,074 and $4,192,842, respectively, and had net cash outflows used in operating activities for the nine months ended September 30, 2024 and 2023 of $2,659,297 and $3,401,318, respectively. As of September 30, 2024, the Company had an accumulated deficit of $66,091,074 and is expected to incur losses in the future as it continues its development activities.

In September 2022, the Company announced the top line results from its FORTRESS study in FM. Overall, the FORTRESS study did not achieve statistical significance on the prespecified primary efficacy endpoint of change from baseline to Week 14 in the weekly average of daily self-reported average pain severity scores comparing IMC-1 to placebo (p=0.302). However, based on post-hoc analysis of the FORTRESS data, “new” FM research patients who have not participated in prior FM clinical trials demonstrated statistically significant improvement on the primary endpoint of reduction in FM related pain versus placebo, irrespective of when they enrolled in the study. The Company believes focusing the forward development of IMC-1 on these “new”

patients represents a viable and manageable path forward. The Company met with the Anesthesiology, Addiction Medicine and Pain Medicine division of the FDA in March 2023. In April 2023, the Company received initial feedback that the FDA is amenable to its proposed Phase 3 program, pending review of its final chronic toxicology program. In August 2023, the FDA informed the Company that its chronic toxicology program studies appear adequate to support the safety of IMC-1 at the dose proposed by the Company for chronic use.

In July 2023, the Company received positive data from an exploratory, open-label, proof of concept study in LC funded by an unrestricted grant provided to the Bateman Horne Center (“BHC”). BHC enrolled female patients diagnosed with LC illness, otherwise known as Post-Acute Sequelae of COVID-19 infection (“PASC”). Patients treated with a combination of valacyclovir and celecoxib (“Val/Cel”), as well as routine care, exhibited clinically and statistically significant improvements in fatigue, pain, and symptoms of autonomic dysfunction as well as ratings of general well-being related to LC when treated open-label for 14 weeks, as compared to a control cohort of female LC patients matched by age and length of illness and treated with routine care only. The statistically significant improvements in PASC symptoms and general health status were particularly encouraging given that the majority of patients in the study had been vaccinated for the COVID-19 virus and the mean duration of LC illness was two years for both the treated and control cohort prior to enrollment in this study. These encouraging results led to BHC requesting a second investigator initiated grant from the Company to assess Val/Cel under double-blind, placebo controlled conditions, with results from this ongoing trial expected in November 2024.

At September 30, 2024, the Company had cash of $2.0 million. On October 7, 2024, the Company received $16.5 million in loan proceeds with an additional $3.0 million expected to be received in February 2025 under a Loan Agreement as described in Note 11 – Subsequent Events in these Notes to condensed financial statements. Based on current projections, and assuming we secure the anticipated $3.0 million of additional loan proceeds under the Loan Agreement, we believe we will have sufficient capital to fund operations until the end of 2025. Due to the inherent uncertainty involved in making estimates and the risks associated with the research, development, and commercialization of biotechnology products, we may have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us.

As of the issuance date of these condensed financial statements, cash is not sufficient to fund operating expenses and capital requirements for at least the next 12 months. Dogwood will need to secure the $3.0 million in additional loan proceeds in February 2025 to fund its operations through the end of 2025 and will require additional financing to fund its ongoing clinical trials and operations beyond 2025 to continue to execute its strategy. Management plans to explore various dilutive and non-dilutive sources of funding, including equity financings, debt financings, collaboration and licensing arrangements or other financing alternatives. There is no assurance that such financings will be available when needed or on acceptable terms. Accordingly, there is substantial doubt about the Company’s ability to operate as a going concern within one year after the issuance date of these condensed financial statements. The condensed financial statements have been prepared on a going concern basis and do not include any adjustments to reflect this uncertainty.

Nasdaq Listing

As previously reported, on November 2, 2023, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that, for the previous 30 consecutive business days, the bid price for the Company’s common stock, par value $0.0001 per share (“Common Stock”) had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq (the “Minimum Bid Price Requirement”). The letter stated that the Company had 180 calendar days, or until April 30, 2024 to regain compliance such that the closing bid price for the Company’s Common Stock is at least $1.00 for a minimum of 10 consecutive business days.

On May 1, 2024, the Company received another letter from Nasdaq informing it that the Company’s Common Stock had failed to comply with the $1.00 minimum bid price required for continued listing and, as a result, the Company’s Common Stock continues to be subject to delisting. Following receipt of the letter, the

Company requested a hearing with Nasdaq. On June 11, 2024, the Company received notice from Nasdaq that the Nasdaq Hearing Panel had granted the Company an exception until October 28, 2024 to regain compliance with the Minimum Bid Price Requirement. On October 29, 2024, the Company received a letter from Nasdaq stating that the Company had regained compliance with the Minimum Bid Price Requirement because the Company’s Common Stock had a closing bid price of at least $1.00 per share for more thanten consecutive business days.

2Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed interim financial statements are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and accompanying notes as found in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023 filed with the SEC on March 8, 2024 (the “2023 Amended Annual Report on Form 10-K/A”). In the opinion of management, the unaudited condensed interim financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2023 balance sheet included herein was derived from the audited financial statements, but does not include all disclosures, including notes, required by U.S. GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Reverse Stock Split

On October 9, 2024, we effected a reverse stock split of 25 shares for 1 share of Common Stock (“the Reverse Stock Split”). The Reverse Stock Split reduced the number of shares of Common Stock issued (which includes outstanding shares and treasury shares) from 27,950,888 shares to 1,118,035 shares, and reduced shares outstanding from 27,757,937 shares to 1,110,317 shares. There was no change to the total number of shares of Common Stock that the Company is authorized to issue and there was no change in the par value of the Common Stock, and no fractional shares were issued. All share and per share amounts in the financial statements and footnotes have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split. As a result of the Reverse Stock Split, the exercise prices and number of shares to be issued under each of our outstanding option and warrant agreements were proportionately adjusted. As a result of the changes, there was a reclassification of $1,867 to additional paid in capital from par value of Common Stock and treasury stock as of December 31, 2023. The cash settlement of fractional shares that occurred in October 2024 was less than $1,000.

Use of Estimates

The preparation of these financial statements and accompanying notes in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company's significant estimates and assumptions include estimated work performed but not yet billed by contract manufacturers, engineers and research organizations, the valuation of equity and stock-based related instruments, and the valuation allowance related to deferred taxes. Some of these judgments can be subjective and complex, and, consequently, actual results could differ from those estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information

available at the time the estimates and assumptions were made. Actual results could differ from those estimates.

Basic and Diluted Net Loss per Share

Basic net loss per common share (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if all potential common shares had been issued and were dilutive. However, potentially dilutive securities are excluded from the computation of diluted EPS to the extent that their effect is anti-dilutive. For the three and nine months ended September 30, 2024 and 2023, the Company had options to purchase 92,777 and 77,745 shares of Common Stock, respectively, and warrants to purchase 7,755 shares of Common Stock outstanding that were anti-dilutive.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided by the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of this ASU on its financial statements.

Prepaid expenses and other current assets consist of the following:

4License Agreement

The Company entered into a Know-How License Agreement (the “Agreement”) with the University of Alabama (“UA”) in 2012. In consideration for the Agreement, UA received a 10% non-voting membership interest in the Company. Upon the adoption of the Second Amended and Restated Operating Agreement (the “Amended Operating Agreement”) on May 1, 2020, the non-voting membership interest converted to a voting membership interest. In conjunction with the Corporate Conversion, all of the Company’s outstanding membership interest converted into shares of Common Stock. The Agreement is in effect for 25 years and will terminate on June 1, 2037.

5Accrued Expenses

Accrued expenses consist of the following:

6Stockholders’ Equity

The Company’s certificate of incorporation, adopted on December 16, 2020, authorizes the issuance of two classes of stock:43,000,000 shares of Common Stock and 2,000,000 shares ofpreferred stock, each with a par value of $0.0001 per share.

At-the-market Offering

On July 14, 2023, the Company entered into a Capital on Demand TM Sales Agreement (the “Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”) relating to shares of Common Stock, par value $0.0001 per share. In accordance with the terms of the Sales Agreement, the Company could offer and sell shares of Common Stock having an aggregate offering price of up to $6,700,000 from time to time through JonesTrading, acting as sales agent or principal, in which is commonly referred to as an “at-the-market” (“ATM”) program. On August 14, 2023, the Company announced a halt to sales under the Sales Agreement and on September 18, 2023, the Company announced the termination of the Sales Agreement with JonesTrading effective September 28, 2023. Before the termination of the Sales Agreement, the Company sold 25,675 shares of Common Stock under the ATM program at a weighted-average gross sales price of approximately $52.78 per share and raised $1,355,090 of gross proceeds. The total commissions and related legal and accounting fees were approximately $198,650, and the Company received net proceeds of approximately $1,156,440.

Public Offering

On May 19, 2024, the Company entered into an agreement with Maxim Group LLC as placement agent in connection with the issuance and sale by the Company in a public offering of 340,000 shares of its Common Stock at a public offering price of $5.00 per share (the “Offering”), pursuant to an effective shelf registration statement on Form S-3 (File No. 333-263700). The Offering closed on May 22, 2024, and the gross proceeds from the Offering were $1,700,000. The net proceeds of the Offering were $1,382,170 after deducting placement agent fees and offering expenses payable by the Company.

7Related Parties

The Company uses Gendreau Consulting, LLC, a consulting firm (“Gendreau”), for drug development, clinical trial design and planning, implementation and execution of contracted activities with clinical research organizations. Gendreau’s managing member is the Company’s Chief Medical Officer (“CMO”). The Company may continue to contract the services of the CMO’s spouse through Gendreau to serve as the Company’s Medical Director and to perform certain activities in connection with the Company’s ongoing clinical development of its product candidates. During the three and nine months ended September 30, 2024 and 2023, the Company paid Gendreau $1,848 and $3,231, respectively, and $26,652 and $101,432, respectively, and had accounts payable to Gendreau of $5,399 as of September 30, 2024 andnone as of December 31, 2023.

8Commitments and Contingencies

Litigation and Other

The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending or ongoing litigation to which we are a party or to which our property is subject that we believe to be material.

9Share-based compensation

Equity Incentive Plan

On June 16, 2022, the stockholders of the Company approved the Amended and Restated 2020 Equity Incentive Plan (the “Plan”) to increase the total number of shares of Common Stock reserved for issuance under the Plan by 50,000 shares to 82,500 total shares issuable under the Plan. As of September 30, 2024,1,423 shares of Common Stock were available for future grants under the Plan. The table below sets forth the outstanding options to purchase shares of Common Stock under the Plan:

During the nine months ended September 30, 2024, the Company granted certain individuals options to purchase 15,031 shares of the Company’s Common Stock with an average exercise price of $8.925 per share, contractual terms of 10 years and a vesting period ofone year. The options had an aggregate grant date fair value of $105,931 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model included: (1) discount rate of 4.2975% based on the daily par yield curve rates for U.S. Treasury obligations, (2) expected life of 5.5 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility of 100.76% based on the average historical volatility of comparable companies’ stock, (4)no expected dividends and (5) fair market value of the Company’s stock of $8.925 per share.

During the nine months ended September 30, 2023, the Company granted certain individuals options to purchase 1,260 shares of the Company’s Common Stock with an average exercise price of $46.25 per share, contractual terms of 10 years and a vesting period ofone year. The options had an aggregate grant date fair value of $45,360 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model included: (1) discount rate of 3.89% based on the daily par yield curve rates for U.S. Treasury obligations, (2) expected life of 5.5 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility of 98.66% based on the average historical volatility of comparable companies’ stock, (4)no expected dividends and (5) fair market value of the Company’s stock of $46.25 per share.

As of September 30, 2024 the aggregate intrinsic value of options outstanding was $0.

The Company recognized share-based compensation expense related to stock options during the three and nine months ended September 30, 2024 and 2023, of $94,302 and $382,219, respectively, and $148,305 and $471,666, respectively. The unrecognized compensation expense for stock options at September 30, 2024 was $263,173.

Stock Options for Unregistered Securities

In addition to the stock options issued under the Plan, and in conjunction with the IPO, the Company granted non-qualified stock options to purchase 11,700 shares of Common Stock as provided for in the President’s employment agreement (the “President Options”). The President Options are exercisable within 10 years of the date of grant at $250.00 per share, were 100% vested at the grant date and have a remaining contractual term of 6.21 years. As of September 30, 2024, there wasno unrecognized compensation expense related to these options as they were 100% vested upon issuance. The shares of Common Stock issuable upon exercise of the President Options will be unregistered, and the option agreement does not include any obligation on the part of the Company to register such shares of Common Stock. Consequently, the Company has not recognized a contingent liability associated with registering the securities for the arrangement. As of September 30, 2024, the aggregate intrinsic value of the President Options was $0.

Underwriters Warrants

In conjunction with the IPO, the Company granted the underwriters warrants to purchase 6,900 shares of Common Stock at an exercise price of $312.50 per share. The warrants became 100% exercisable on December 21, 2021.

In conjunction with the Offering in September 2022, the Company granted the Underwriter warrants to purchase 20,000 shares of Common Stock at an exercise price of $15.625 per share (the “Representative Warrants”). The Representative Warrants became 100% exercisable on March 18, 2023.

For the nine months ended September 30, 2023, there were 19,145 Representative Warrants cashless exercised. As a result,7,718 shares of Common Stock were surrendered at fair value to satisfy the exercise price of these warrants and 11,427 shares of Common Stock were issued. The surrendered shares are shown as treasury stock at a cost of $299,128 in stockholders’ equity at September 30, 2023.

There wereno warrant exercises for the nine months ended September 30, 2024.

There isno unrecognized compensation expense for these awards as of September 30, 2024.

The table below sets forth the outstanding warrants to purchase common shares:

As of September 30, 2024, the aggregate intrinsic value of the warrants outstanding was $0.

10Income Taxes

As of December 31, 2023, the Company had U.S. federal and state net operating loss carryforwards of approximately $26,497,000, which have an indefinite carryforward and Georgia and Florida state net operating loss carryforwards of approximately $33,701,000 and $898,000, respectively, which have a twenty-year carryforward and begin expiring in 2037.

As of September 30, 2024, the Company has not generated sufficient positive evidence for future earnings to support a position that it will be able to realize its net deferred tax asset. The Company has significant negative evidence to overcome in the form of cumulative pre-tax losses from continuing operations since its formation, as well as projected losses for the current year. Therefore, it will continue to maintain a full valuation allowance on its U.S. federal and state net deferred tax asset. The change in the valuation allowance offset the income tax benefit related to the net operating loss for the three and nine months ended September 30, 2024 and 2023. The Company does not have any material unrecognized tax benefits as of September 30, 2024.

11Subsequent Events

Share Exchange Agreement

On October 7, 2024, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Sealbond Limited, a British Virgin Islands corporation (“Sealbond”), pursuant to which the Company acquired 100% of the issued and outstanding common shares of Pharmagesic (Holdings) Inc., a Canadian corporation (“Pharmagesic”) (such transaction, the “Combination”). Prior to the Combination, Pharmagesic was a wholly-owned subsidiary of Sealbond and an indirect wholly-owned subsidiary of CK Life Sciences Int’l., (Holdings) Inc. (“CKLS”), a listed entity on the Main Board of the Hong Kong Stock Exchange.

Under the terms of the Exchange Agreement, on October 7, 2024 (the “Closing”), in exchange for all of the outstanding common shares of Pharmagesic immediately prior to the Effective Time, the Company issued to Sealbond, as sole shareholder of Pharmagesic, an aggregate of (A)211,383 shares of the Company’s unregistered Common Stock, which shares shall represent a number of shares equal to no more than 19.99% of the outstanding shares of Common Stock as of immediately before the Effective Time and (B)2,108.3854 shares of the Company’s unregistered Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”) (as described below). The issuance of the shares of Common Stock and Series A Preferred Stock to Sealbond occurred on October 9, 2024. Each share of Series A Preferred Stock is convertible into 10,000 shares of Common Stock, subject to certain conditions described in the Exchange Agreement. The Combination was intended to be treated as a taxable exchange for U.S. federal income tax purposes. As of the issuance date of these financial statements, the initial accounting for the Combination is not complete.

The Board of Directors of the Company (the “Board”) approved the Exchange Agreement and the related transactions, and the consummation of the Combination was not subject to approval of Company stockholders. Pursuant to the Exchange Agreement, the Company agreed to hold a stockholders’ meeting to submit the certain matters to its stockholders for their consideration, including: (i) the approval of the conversion of shares of Series A Preferred Stock into shares of Common Stock in accordance with the rules of the Nasdaq Stock Market LLC (the “Conversion Proposal”) and (ii) the approval of a “change of control” under Nasdaq Listing Rules 5110 and 5635(b) (the “Change of Control Proposal”); and together with the Conversion Proposal, the “Meeting Proposals”). In connection with these matters, the Company agreed to file a proxy statement on Schedule 14A with the SEC at any time between the interim analysis readout of the Phase 2b study for Halneruon® and June 30, 2026, or earlier, if mutually agreed upon by both parties.

Series A Preferred Stock

Holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock (on an as-if-converted-to-Common-Stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Certificate of Designation), equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of the Common Stock payable in the form of Common Stock) actually paid on shares of the Common Stock when, as if such dividends (other than dividends payable in the form of Common Stock) are paid on the shares of the Common Stock; provided, however, in no event shall Holders of Series A Preferred Stock be entitled to receive the “rights” distributed pursuant to the CVR Agreement, or any amounts paid under the CVR Agreement. In addition, holders of Series A Preferred Stock shall be entitled to receive, and the Company shall pay, payment-in-kind dividends on each share of Series A Preferred Stock, accruing at a rate equal to five percent (5.0%) per annum payable in shares of Series A Preferred Stock on the date that is 180 days after the date of the original issuance of such Series A Preferred Stock or such earlier date that that such holder may convert any portion of the Series A Preferred Stock to Common Stock.

Except as otherwise required by law, the Series A Preferred Stock does not have voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series A Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Charter or Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series A Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series A Preferred Stock, or increase or decrease (other than by conversion) the number of authorized shares of Series A Preferred Stock (iii) prior to the Stockholder Approval (as defined in the Certificate of Designation) or at any time while at least 30% of the originally issued Series A Preferred Stock remains issued and outstanding, consummate either: (A) any Fundamental Transaction (as defined in the Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.

The Series A Preferred Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily.

Following stockholder approval of the Conversion Proposal, each share of Series A Preferred Stock will automatically convert into 10,000 shares of Common Stock, subject to certain limitations provided in the Certificate of Designation, including that the Company shall not affect any conversion of Series A Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”);

provided, however, that the Beneficial Ownership Limitation will not apply after the stockholder approval of the Change of Control Proposal and upon the occurrence of certain other events as set forth in the Certificate of Designation. If at any time following the earliest of (a) Stockholder Approval (as defined in the Certificate of Designation), (b) the interim analysis of the Phase 2b study for Halneuron® proves futile, (c) Dogwood is delisted from Nasdaq, (d) the interim analysis of the Phase 2b study for Halneuron® is not completed by December 31, 2025, or (e) June 30, 2026, the Company fails to deliver to a Holder certificates representing shares of Common Stock or electronically deliver such shares, the Series A Preferred Stock is redeemable for cash at the option of the holder thereof at a price per share equal to the then-current Fair Value (as defined and described in the Certificate of Designation) of the Series A Preferred Stock for any undeliverable shares.

Form of Repurchase Agreement

The terms of the Exchange Agreement provides that Sealbond has the right to exercise an option, but not an obligation, after the Closing and upon the occurrence of certain conditional events including continued listing requirements, to acquire all of the Company’s and its direct and indirect subsidiaries’ intellectual property, rights, title, regulatory submissions, assignment of contracts, data and interests, as of the time of such acquisition, in and to tetrodotoxin and Halneuron®, in accordance with the terms and conditions of the form of Repurchase Agreement for a cash settlement value as defined in the agreement.

Contingent Value Rights Agreement

Concurrently with the Closing of the Combination, the Company entered into a contingent value rights agreement (the “CVR Agreement”) with a rights agent (the “Rights Agent”), pursuant to which each holder of Common Stock as of October 17, 2024, including those holders receiving shares of Common Stock in connection with the Combination, was entitled toone contractual contingent value right (each, a “CVR”) issued by the Company, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of Common Stock held by such holder as of 5:00 p.m. Eastern Daylight Time on October 17, 2024. The CVR Agreement has a term ofseven years.

Each contingent value right entitles the holders (the “Holders”) thereof, in the aggregate, to 87.75% of any Upfront Payment (as defined in the CVR Agreement) or Milestone Payment (as defined in the CVR Agreement) received by the Company in a given calendar quarter.

The distributions in respect of the CVRs that become payable will be made on a quarterly basis and will be subject to a number of deductions, subject to certain exceptions or limitations, including but not limited to for certain taxes and certain out-of-pocket expenses incurred by the Company.

Under the CVR Agreement, the Rights Agent has, and Holders of at least 30% of the CVRs then-outstanding have, certain rights to audit and enforcement on behalf of all Holders of the CVRs. The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than as permitted pursuant to the CVR Agreement. The Holders of the CVRs do not have the rights of a shareholder and do not have the ability to vote, rights to dividends, or other interests. The CVRs also establish certain restrictions of mergers and change in control activities, as defined in the agreement.

Loan Agreement

On October 7, 2024, in connection with the Exchange Agreement, the Company entered into a Loan Agreement (the “Loan Agreement”) with Conjoint Inc., a Delaware corporation (“Lender”) and an affiliate of CKLS. Pursuant to the Loan Agreement, Lender agreed to make a loan to the Company in the aggregate principal amount of $19,500,000, of which (i) $16,500,000 was disbursed on October 7, 2024 and (ii) $3,000,000 will be disbursed on February 18, 2025, subject in each case to certain conditions described in the Loan Agreement. Pursuant to the terms of the Loan Agreement, the proceeds are to be used for the purpose of (1) funding operations and (2) performing clinical and research & development activities related to Halneuron®. The Loan Agreement bears interest at the Secured Overnight Financing Rate (“SOFR”) plus

2.00%, that increases by 1.00% in the event of default that resets on an annual basis on October 1 st. The Loan Agreement is payable in full with principal and accrued interest on October 7, 2027.

Registration Rights Agreement

On October 7, 2024, in connection with the Exchange Agreement, the Company and Sealbond entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, if, at any time after April 30, 2025, the Company receives a request from holders of at least forty percent (40%) of the Registrable Securities (as defined in the Registration Rights Agreement) then outstanding that the Company file a Form S-1 registration statement with respect to at least forty percent (40%) of the Registrable Securities then outstanding; provided, that, if at the time of such request, the only holder of Registrable Securities is Sealbond, there shall be no threshold percent to make such request and such threshold percent that must be covered by such request shall bethirty percent (30%) (or, in each case, a lesser percent if the anticipated aggregate offering price, net of Selling Expenses (as defined in the Registration Rights Agreement), would exceed $10,000,000), then the Company shall as soon as practicable, and in any event within sixty (60) days after the date of such request, file a Form S-1 registration statement with the SEC.

If, at any time after April 30, 2025, the Company receives a request from holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $7,500,000; provided, that, if at the time of such request, the only holder of Registrable Securities is Sealbond, there shall be no threshold percent to make such request and the anticipated aggregate offering price, net of Selling Expenses, must be at least $1,000,000, then the Company shall as soon as practicable, and in any event within thirty (30) days after the date of such request, file a Form S-3 registration statement with the SEC.

Name Change

On October 7, 2024, the Company filed the Charter Amendment pursuant to which, effective October 9, 2024, the Company (i) effectuated the Name Change and (ii) effectuated the Reverse Stock Split described below. Pursuant to the Delaware General Corporation Law, a stockholder vote was not necessary to effectuate the Name Change and it does not affect the rights of the Company’s stockholders.

In addition, effective at the open of market trading on October 9, 2024, the Company’s Common Stock ceased trading under the ticker symbol “VIRI” and began trading on the Nasdaq Stock Market under the ticker symbol “DWTX”.

Support Agreements

In connection with the execution of the Exchange Agreement, the Company entered into stockholder support agreements (the “Company Stockholder Support Agreements”) with certain of the Company’s directors and executive officers (solely in their capacity as stockholders of the Company). Pursuant to the Company Stockholder Support Agreements, among other things, each of the Company stockholder parties thereto has agreed to vote or cause to be voted all of the shares of Common Stock owned by such stockholder in favor of the Meeting Proposals including the Conversion Proposal and the Change of Control Proposal discussed above.

Reverse Stock Split

On October 7, 2024, the Company filed the Charter Amendment to effect the Reverse Stock Split, resulting in outstanding shares of Common Stock of 1,110,317 prior to the issuance of shares pursuant to the Exchange Agreement. The Reverse Stock Split was effective in accordance with the terms of the Charter Amendment at Reverse Split Effective Time, prior to the issuance of shares of Common Stock pursuant to the Exchange

Agreement. At the Reverse Split Effective Time, every 25 shares of the Company’s issued and outstanding Common Stock converted automatically into one issued and outstanding share of Common Stock.

The Reverse Stock Split affected all stockholders uniformly and did not by itself alter any stockholder’s percentage interest in the Company’s equity, except to the extent that the Reverse Stock Split would result in a stockholder owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to receive a fractional share received a cash payment equal to the fair market value of such fractional share as of the Reverse Split Effective Time, as determined in good faith by the Board.

As described in Note 2, all share and per share amounts in the financial statements and footnotes have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

Transaction Costs

​In connection with the Combination, the Company incurred transaction costs, not including financial advisory fees, of approximately $1,033,000 during the three and nine months ended September 30, 2024 that are included as general and administrative expenses in the statement of operations for the three and nine months ended September 30, 2024.

Tungsten Advisors (through its Broker-Dealer, Finalis Securities LLC) (“Tungsten”) acted as the financial advisor to the Company in connection with the Combination. As partial compensation for services rendered by Tungsten, the Company issued to Tungsten and its affiliates and designees an aggregate of 10,568 shares of Common Stock and 105.4190 shares of Series A Preferred Stock and paid $1,155,000 of cash in October 2024. All of the compensation to Tungsten was contingent on the closing of the Combination.

​Additional general and administrative costs will continue to be incurred as Dogwood seeks to satisfy the obligations under the Exchange Agreement, Loan Agreement and related agreements.

Stock Options Modifications

In connection with the Combination, the Company changed its composition of the Board resulting in the resignation of one of its directors. In connection with this change, the Company agreed to accelerate the vesting of 116 stock options and extend the exercise period of all of the outstanding options issued under the Company’s Plan of 851 stock options to the one year anniversary date of the director’s resignation.

Amended and Restated Incentive Plan

In connection with the Combination, the Company’s Board approved a Second Amended and Restated 2020 Equity Incentive Plan that authorizes 2,278,233 shares, after adjusting for the effects of the Reverse Stock Split, and sets annual limits of 20,000 shares for individuals and 8,000 shares for non-employee directors. The plan terminates on the tenth anniversary of its effective date. The effectiveness of the Second Amended and Restated 2020 Equity Incentive Plan remains subject to stockholder approval. Dogwood does not anticipate putting the Second Amended and Restated 2020 Equity Incentive Plan up for stockholder approval by vote at this time.