Processa Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

Note 1 –Organization

Organization

We are a clinical-stage biopharmaceutical company focused on incorporating our Regulatory Science Approach into the development of our Next Generation Cancer therapy (“NGC”) drugs to improve the safety and efficacy of cancer treatment. Our NGC drugs are modifications of existing FDA-approved oncology drugs resulting in an alteration of the metabolism and/or distribution while maintaining the well-known and established existing mechanisms of killing the cancer cells. By modifying the NGC drugs in this manner, we believe our NGC treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts.

On January 22, 2024, we filed a Certificate of Amendment to our Certificate of Incorporation, as amended with the Secretary of State of Delaware that effected a 1-for-20 reverse stock split of our common stock, par value $0.0001 per share (the “Reverse Stock Split”). Pursuant to the Certificate of Amendment, our issued common stock decreased from 24,706,474 shares to 1,291,000 shares and our outstanding common stock decreased from 24,606,474 to 1,286,000. The Reverse Stock Split did not affect our authorized common stock of 100,000,000 shares or our common stock par value. All shares of common stock, including common stock underlying warrants, stock options, and restricted stock units, as well as exercise prices and per share information in these consolidated financial statements give retroactive effect to the Reverse Stock Split.

Liquidity

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. We have incurred losses since inception, currently devoting substantially all of our efforts toward research and development of our NGC drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $87.2 million at December 31, 2024. During the year ended December 31, 2024, we generated a net loss of $11.9 million and used $11.2 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future.

We have financed our operations primarily through public equity issuances, including an offering we sold on January 27, 2025 where we sold 1,030,972 shares of our common stock, pre-funded warrants to purchase up to 7,019,700 shares of our common stock, and accompanying Series A warrants to purchase up to 8,050,672 shares of our common stock (the “Series A Warrants”) and Series B warrants to purchase up to 4,025,336 shares of our common stock (the “Series B Warrants” and collectively with the Series A Warrants, the “Common Warrants”) for net proceeds of $4.5 million, after deducting placement agent fees and offering-related expenses (see Note 14 for additional details). On January 30, 2025, pre-funded warrants to purchase 525,700 shares of our common stock were exercised and, as of March 12, 2025, pre-funded warrants for the purchase of 6,494,000 remain outstanding. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows from its operations.

At December 31, 2024, we had cash and cash equivalents totaling $1.2 million. Together with the $4.5 million net proceeds we raised in January 2025, and based on our current business plans, we believe these funds will satisfy our capital needs into mid-2025. Our ability to execute our longer-term operating plans, including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be no assurance that future funding will be available when needed.

Absent additional funding, we believe that our cash and cash equivalents will not be sufficient to fund our operations for a period of one year or more after the date that these consolidated financial statements are available to be issued based on the timing and amount of our projected net loss from continuing operations and cash to be used in operating activities during that period of time. As a result, substantial doubt exists about our ability to continue as a going concern within one year after the date that these consolidated financial statements are available to be issued. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should we be unable to continue as a going concern based on the outcome of these uncertainties described above.

Note 2 –Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), and reflect all of our activities, including those of our wholly-owned subsidiary. All material intercompany accounts and transactions have been eliminated in consolidation. Operating results for the year ended December 31, 2024 are not necessarily indicative of future results.

Use of Estimates

In preparing our consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, we make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to stock-based compensation, intangible assets, future milestone payments and income taxes. These estimates and assumptions are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. While we believe the estimates to be reasonable, actual results could differ materially from those estimates and could impact future results of operations and cash flows.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and money market funds. We consider all highly liquid investments maturing within three months from the date of purchase as cash equivalents.

Prepaid Expenses

Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. The majority of our prepaid expenses relate to advanced payments made to CROs and other vendors for our ongoing clinical trials. We allocate the prepaid expenses between current and non-current assets based on the anticipated timing of utilizing the advances. At December 31, 2024, we determined that $1.3 million would not be applied until after December 31, 2025.

Property and Equipment

Property is stated at cost, less accumulated depreciation. Costs of renewals and improvements that extend the useful lives of the assets are capitalized. Expenditures for maintenance and routine repairs are charged to expense as incurred. Depreciation is recognized on a straight-line basis over the estimated useful lives of the assets, which generally range from 3 to 5 years. We amortize leasehold improvements over the shorter of the estimated useful life of the asset or the term of the related lease. Upon retirement or disposition of assets, the costs and related accumulated depreciation are removed from the accounts with the resulting net gain or loss, if any, reflected in the consolidated statement of operations.

Impairment of Long-Lived Assets and Intangibles Other Than Goodwill

We account for the impairment of long-lived assets in accordance with ASC 360*, Property, Plant and Equipment* and ASC 350,Intangibles – Goodwill and Other, which require that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its expected future undiscounted net cash flows generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amounts of the assets exceed the fair value of the assets based on the present value of the expected future cash flows associated with the use of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Fair Value Measurements and Disclosure

We apply ASC 820,Fair Value Measurements and Disclosures, which expands disclosures for assets and liabilities that are measured and reported at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 – Quoted market prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 2 – Quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. Fair value determined using models or other valuation methodologies.

Level 3 – Significant unobservable inputs for assets or liabilities that cannot be corroborated by market data. Fair value is determined by the reporting entity’s own assumptions utilizing the best information available and includes situations where there is little market activity for the asset or liability.

The asset’s or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. Our policy is to recognize transfers between levels of the fair value hierarchy in the period the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, 2, or 3 during the periods presented.

Stock-based Compensation

We measure compensation expense for stock options and other stock awards in accordance with ASC 718,Compensation—Stock Compensation. Stock-based compensation is measured at fair value on grant date and recognized as compensation expense over the requisite service period. Generally, we issue stock options and other stock awards with service-based and/or performance-based vesting conditions. For awards with only service-based vesting conditions, we record compensation cost for these awards using the straight-line method over the service period. For awards that contain performance vesting conditions, we do not recognize compensation expense until achieving the performance condition is probable. We estimate the fair value of stock option and warrant grants using the Black-Scholes option pricing model, and 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. We value restricted stock awards (RSAs) and restricted stock units (RSUs) based on the closing share price of our common stock on the date of grant. Stock-based compensation costs are recorded as general and administrative or research and development costs in the statements of operations based upon the underlying individual’s or entity’s role.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees or consultants who receive these awards, and subsequent events are not indicative of the reasonableness of our original estimates of fair value. We account for forfeitures in the period in which they occur, rather than estimate expected forfeitures.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average common stock outstanding (which excludes unvested RSAs) and vested, but unissued RSUs. Diluted loss per share is computed by dividing our net loss available to common shareholders by the diluted weighted average number of shares of common stock outstanding during the period. Since we have experienced a net loss for all periods presented, basic and diluted net loss per share are the same. As such, diluted loss per share for the years ended December 31, 2024 and 2023 excludes the impact of potentially dilutive common shares related to outstanding stock options, unvested restricted stock awards (RSAs), unvested RSUs and common stock purchase warrants.

Our diluted net loss per share for the years ended December 31, 2024 and 2023 excluded 2,013,154 and 296,326 of potentially dilutive common shares, respectively, related to outstanding stock options, unvested RSAs, unvested RSUs and warrants since those shares would have had an anti-dilutive effect on loss per share during the years then ended.

Segments

We have one reportable segment, which is focused on discovering and developing a pipeline of Next Generation Cancer therapy drugs. Our Chief Executive Officer, who is the chief operating decision maker (CODM), assesses segment performance and decides how to allocate resources based on net loss that is also reported on the Consolidated Statements of Operations and Comprehensive Loss. See Note 11 for additional information.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value because of the short-term maturity of these instruments.

Research and Development

Research and development costs are expensed as incurred and consist of direct and overhead-related expenses related primarily to clinical trials, including development personnel salaries and related costs. Expenditures to acquire technologies, including licenses, which are utilized in research and development and that have no alternative future use are expensed as the acquisition of in-process research and development when incurred. Technology we develop for use in our products is expensed as incurred until technological feasibility has been established after which it is capitalized and depreciated. No research and development costs were capitalized during the years ended December 31, 2024 and 2023.

Income Taxes

We account for income taxes in accordance with ASC Topic 740,Income Taxes. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. As of December 31, 2024 and 2023, we recorded a valuation allowance equal to the full recorded amount of our net deferred tax assets since it is more-likely-than-not that benefits from our deferred tax assets will not be realized. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support its reversal.

We recognize the impact of an uncertain tax position if the position will more likely than not be sustained upon examination by a taxing authority, based on the technical merits of the position. Our policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2024, we hadno unrecognized tax benefits and as such, no liability, interest or penalties were required to be recorded. We do not expect this to change significantly in the next twelve months.

Recently Adopted Accounting Standard

In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment. We adopted this standard effective for the year ending December 31, 2024 and the primary impact of which was the additional segment disclosures included in Note 11.

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements. We have considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. We believe that these recent pronouncements will not have a material effect on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. We are evaluating this standard to determine if adoption will have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. This ASU is effective for public entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact ASU 2024-03 will have on our consolidated financial statements.

Note 3 -Stock-based Compensation

The Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) allows us to make grants of stock options, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors. The 2019 Plan originally provided for the aggregate issuance of 150,000 shares of our common stock. On June 28, 2024, our shareholders approved an increase of shares available under the 2019 Plan, which now provides for the aggregate issuance of 800,000 shares of our common stock. At December 31, 2024, we have 353,641 shares available for future grants.

Stock Compensation Expense

We recorded stock-based compensation expense for the years ended December 31, 2024 and 2023 as follows:

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for all net deferred tax assets relating to this expense.

Stock Options

The following table summarizes our stock option activity during the years ended December 31, 2023 and 2024:

No forfeiture rate was applied to these stock options. The aggregate intrinsic value of outstanding options, all of which are exercisable, was $0 at both December 31, 2023 and 2024. No stock options were exercised during the years ended December 31, 2023 or 2024 and there is no unamortized expense at December 31, 2024 since the options are fully vested.

Restricted Stock Awards

The following table summarizes our restricted stock award (RSA) activity during the years ended December 31, 2023 and 2024:

Restricted Stock Units

The following table summarizes our restricted stock unit (RSU) activity during the years ended December 31, 2023 and 2024:

During the year ended December 31, 2024, we granted the following RSUs:

Holders of our vested RSUs will be issued shares of our common stock upon the satisfaction of the distribution restrictions contained in their Restricted Stock Unit Award Agreement. The distribution restrictions are typically different (longer) than the vesting schedule, imposing an additional restriction on the holder. Unlike RSAs, while employees may hold fully vested RSUs, the individual does not hold any shares or have any rights of a shareholder until the distribution restrictions are met. Upon distribution to the employee, each RSU converts into one share of our common stock. The RSUs contain dividend equivalent rights.

Warrants

The following table summarizes our warrant activity during the years ended December 31, 2023 and 2024.

During the year ended December 31, 2024, we did not grant any warrants to purchase shares of our common stock other than warrants to purchase 1,617,777 shares of common stock as part of the Offering (see Note 4). Warrants to purchase 7,500 shares of our common stock expired unexercised. We also repurchased a warrant issued to a consultant in 2023 for the purchase of 15,000 shares of our common stock in exchange for a payment of $10,000.

In February 2023, we amended our financial consulting agreement with Spartan Capital Securities, LLC (“Spartan”), our placement agent for our registered direct offering in February 2023, by extending the term until February 10, 2024. We compensated Spartan for financial consulting services provided under the amendment by granting warrants to purchase 158,007 shares of our common stock on April 17, 2023, with an exercise price of $20.40. The warrants expire on April 17, 2026, and contain both call and cashless exercise provision. We also granted warrants to purchase 15,000 shares of our common stock to a consultant on November 18, 2023, of which warrants to purchase 7,500 shares of our common stock were exercisable, with an exercise price of $7.40. These warrants expire on November 18, 2025.

We used the Black-Scholes option pricing model to calculate the grant date fair value of the two warrants granted in 2023 with the following assumptions:

Note 4 –Stockholders’ Equity

Common Stock

Financings

During the year ended December 31, 2024, we issued 2,356,549 shares of our common stock through several fundraising efforts described below:

We also issued to the placement agent warrants to purchase 62,222 shares of common stock, exercisable at $5.625 per share that expire on February 1, 2027.

During the year ended December 31, 2023, we issued 421,611 shares of our common stock through several fundraising efforts described below:

We paid Spartan a cash fee of 8.0% of the gross proceeds from the Offering, excluding proceeds received from our insiders, and reimbursed Spartan for legal fees of $60,000. The engagement agreement with Spartan required us to indemnify Spartan and certain of its affiliates against certain customary liabilities. On February 14, 2023, we amended the consulting agreement with Spartan originally entered into on August 24, 2022, extending the term of the consulting agreement until February 10, 2024. As compensation for services under the agreement, on April 17, 2023, we granted Spartan warrants to purchase 158,007 shares of our common stock with an exercise price of $20.40. The warrants will expire April 17, 2026 and contain both call and cashless exercise provisions.

Note 5 –Net Loss per Share of Common Stock

Basic net loss per share is computed by dividing net loss by the weighted average common stock outstanding (which excludes unvested RSAs) and vested, but unissued RSUs. Diluted net loss per share is computed by dividing net loss by the diluted weighted average common stock outstanding, which includes potentially dilutive effect of stock options, unvested RSAs, unvested RSUs and warrants. The treasury-stock method is used to determine the dilutive effect of our stock options and warrants grants. Since we experienced a loss for both periods presented, basic and diluted net loss per share are the same and, as they would have an anti-dilutive impact on diluted net loss per share, any dilutive common shares outstanding were excluded from the computation shown below.

The computation of net loss per share for the year ended December 31, 2024 and 2023 was as follows:

As described in Note 3, we issued various equity instruments during the years ended December 31, 2024 and 2023 which impact our EPS calculation. All granted RSAs are considered issued and outstanding for purposes of our financial statements. Unvested RSAs are included as dilutive securities, but are excluded from our denominator of basic EPS. At December 31, 2023,1,250 RSAs were not vested and were excluded from the EPS calculation. We hadno unvested RSAs at December 31, 2024. Vested RSUs are included in our computation of the weighted average shares for basic EPS and unvested RSUs are included as dilutive securities. At December 31, 2024 and 2023,234,623 and 102,623 unvested RSUs were excluded from the EPS calculation.

The outstanding stock options, unvested RSAs, unvested RSUs and warrants to purchase common stock were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive for the periods presented below:

Note 6 –Leases

We lease our office space under an operating lease agreement. This lease does not have significant rent escalation, concessions, leasehold improvement incentives, or other build-out clauses. Further, the lease does not contain contingent rent provisions. Our office space lease includes both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs), which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. We also lease office equipment under an operating lease. Our leases do not provide an implicit rate and, as such, we have used our incremental borrowing rate of 8% to determine the present value of the lease payments based on the information available at the lease commencement date.

Lease costs included in our consolidated statements of operations totaled approximately $90,000 and $97,000 for the years ended December 31, 2024 and 2023, respectively. The weighted average remaining lease terms and discount rate for our operating leases at December 31, 2024 were as follows:

Annual lease liabilities for the operating lease were as follows at December 31, 2024:

Annual lease liabilities for the financing lease were as follows at December 31, 2024:

Note 7 –License Agreements

We have entered into license agreements which allow us to develop, manufacture, and/or commercialize the following drug assets:

For more information, you should refer to the summaries described in the Business section of this Annual Report and the copies of such agreements, which have been filed as exhibits to this Annual Report.

Note 8 -Income Taxes

We have incurred net operating losses since inception. At December 31, 2024 and 2023, we had available federal and state net operating loss carryforwards of $36.0 million and $28.6 million, respectively. The federal net operating losses generated in 2018 and later of $29.3 million will carry forward indefinitely. Net operating losses generated prior to 2018 will expire 2037. We have not recognized any deferred tax assets related to the federal orphan drug or other research and development tax credits as of December 31, 2024 or 2023. The federal research and development tax credits have a 20-year carryforward period.

Pursuant to Code Sec. 382 of the Internal Revenue Code (“the Code”), the utilization of our net operating loss carryforwards could be limited as a result of a cumulative change in stock ownership of more than 50% over a three-year period. We have not completed a Sec. 382 study and as such our net operating loss carryforwards may be subject to such limitation.

A reconciliation of our effective income tax rate and statutory income tax rate for the years ended December 31, 2024 and 2023 is as follows:

The significant components of our deferred tax assets and liabilities for Federal and state income taxes consisted of the following:

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five or fifteen years pursuant to IRC Section 174. During 2024 and 2023, for income tax purposes, we capitalized approximately $3.8 million and $3.2 million of research and development expenditures, net of amortization of these costs in each year.

The valuation allowance generally reflects limitations on our ability to use the tax attributes and reduces the value of such attributes to the more-likely-than-not realizable amount. We assessed the available positive and negative evidence to estimate if sufficient taxable income will be generated to use the existing net deferred tax assets. Based on a weighing of the objectively verifiable negative evidence primarily in the form of cumulative operating losses, we believe that it is not more-likely-than-not that the deferred tax assets will be realized and, accordingly, a full valuation allowance has been established. The valuation allowance increased by $2.3 million and $3.1 million for the years ended December 31, 2024 and 2023, respectively.

We recognize potential liabilities for uncertain tax positions using a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more-likely-than-not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. We have not recorded any uncertain tax positions. As of December 31, 2024 and 2023, we hadno accrued penalties or interest related to uncertain tax positions.

We file U.S. Federal income tax returns, as well as state tax returns for California, Florida and Maryland. There are currently no income tax examinations underway for these jurisdictions. However, tax years from and including 2017 remain open for examination by federal and state income tax authorities.

Note 9 –Related Party Transactions

CorLyst, LLC (“CorLyst”) reimburses us for shared costs related to payroll, health insurance and rent based on actual costs incurred, which are recognized as a reduction of our general and administrative operating expenses in our consolidated statements of operations. We recorded approximately $110,000 and $112,000 in reimbursements during the years ended December 31, 2024 and 2023, respectively. At December 31, 2024, $47 was due from CorLyst andno amounts were due at December 31, 2023. Our President, Research and Development is the CEO of CorLyst, and CorLyst is a shareholder.

Note 10 –Litigation

On May 7, 2024, the Company received notification from Elion purporting to terminate the license agreement by and between the Company and Elion as a result of the Company’s alleged breach thereof. The Company believes that Elion’s claims are without merit and disputes that the license agreement has been validly terminated. On July 5, 2024, the Company filed a complaint in New York State Court seeking monetary damages, declaratory judgement and injunctive relief. On August 14, 2024, the Company received Elion’s answer and counterclaims. On October 10, 2024, the Company filed its response to Elion’s counterclaims. The Company intends to enforce its rights under the license agreement and will pursue such other remedies as it determines are appropriate.

On December 3, 2024, Jason Assad and Marc Gyimesi, two of the investors in our February 2021 private offering, filed a lawsuit in New York County Court alleging fraud and negligent misrepresentation in connection therewith and seeking monetary damages.

We intend to vigorously defend ourselves in these lawsuits and cannot at this time predict the likely outcome of any litigation, reasonably determine either the probability of a material adverse result or any estimated range of potential exposure, or reasonably determine how these matters or any future matters might impact our business, our financial condition, or our results of operations, although such impact, including the costs of defense, as well as any judgments or indemnification obligations, among other things, could be materially adverse to us.

Note 11 –Segment Reporting

We manage our operations as a single segment, focused on developing the next generation of cancer therapy drugs. As our CODM, our CEO manages and allocates resources at a consolidated level. He assesses performance, monitors budget versus actual results, and decides how to allocate resources based on net loss that also is reported on the consolidated statement of operations and comprehensive loss as consolidated net loss.

The accounting policies of our single operating segment are the same as those described in the summary of significant accounting policies in Note 2. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. In 2024 and 2023, all our long-lived assets were held in the United States. Expenditures for the addition of long-lived assets are reported on the consolidated statements of cash flows as purchases of property and equipment. We do not have intra-entity sales or transfers since our only subsidiary is currently dormant.

The following table presents reportable segment profit and loss, including significant expense categories, attributable to our reportable segment for the years ended December 31, 2024 and 2023:

Note 12 –Commitments and Contingencies

Purchase Obligations

We enter contracts in the normal course of business with contract research organizations and subcontractors to further develop our products. The contracts are cancellable, with varying provisions regarding termination. If we terminated a cancellable contract with a specific vendor, we would only be obligated for products or services that we received as of the effective date of the termination and any applicable cancellation fees. As of December 31, 2024, we are contractually obligated to pay up to approximately $12.2 million for future services under the agreements with the CROs for our clinical trials in NGC-Cap. Our actual contractual obligations will also vary depending on the progress and results of the remaining clinical trials.

Note 13 –Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of our cash and cash equivalents. We utilize only well-established banks and financial institutions with high credit ratings. Balances on deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits. Total cash held by our banks at December 31, 2024, exceeded FDIC limits.

Note 14 –Subsequent Events

Public Offering

On January 27, 2025, we sold, pursuant to securities purchase agreements (the “Purchase Agreement”),1,030,972 shares of our common stock and accompanying Series A warrants to purchase up to 8,050,672 shares of our common stock (the “Series A Warrants”) and Series B warrants to purchase up to 4,025,336 shares of our common stock (the “Series B Warrants” and collectively with the Series A Warrants, the “Common Warrants”) at a combined purchase price of $0.615 for institutional investors and $0.7975 for the Company’s Chief Executive Officer and certain board members. The Series A and Series B Warrants both have an exercise price of $0.65 per share of common stock, and will be exercisable beginning on the effective date of stockholder approval of the issuance of the shares upon exercise of the warrants (“Warrant Stockholder Approval”). The Series A Warrants will expire on thefive-year anniversary date of stockholder approval and the Series B Warrants will expire on the eighteen-month anniversary date of stockholder approval.

We also sold pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 7,019,700 shares of our common stock to a purchaser whose purchase of shares of common stock in the public offering would have resulted in the purchaser beneficially owning more than 9.99% of our outstanding common stock immediately following the consummation of the public offering. Each Pre-Funded Warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share of common stock. The public offering price per Pre-Funded Warrant, is equal to the public offering price per share and Common Warrants less $0.0001. Each Pre-Funded Warrant will be exercisable upon issuance and will expire when exercised in full. On January 30, 2025, Pre-Funded Warrants to purchase 525,700 shares of our common stock were exercised and, as of March 12, 2025, Pre-Funded Warrants for the purchase of 6,494,000 remain outstanding.

Gross proceeds in connection with this offering were $5.0 million and we received $4.5 million in net proceeds from the offering, after deducting the fees of the placement agent and other offering-related expenses.

Amended and Restated Bylaws

On March 18, 2025, the Board of Directors (the “Board”) of the Company adopted the Amended and Restated Bylaws (as amended, the “Bylaws”). The Bylaws, which became effective immediately, amended Section 2.4 to change the quorum requirements for a stockholders meeting to be the holders of shares of outstanding capital stock of the Company representing one third (1/3) of the voting power of all outstanding shares of capital stock of the Company except if business is to be voted on by a class or series of stock voting as a class, then the holders of shares representing one third (1/3) of the voting power of the outstanding shares of such class or series shall constitute a quorum.

Executive Employment Agreements

On March 19, 2025, we entered into new or amended employment agreements with all members of our executive team that continue until terminated or modified pursuant to the terms of the employment agreements. The agreements establish their base salaries, target bonuses, eligibility to participate in our 2019 Omnibus Incentive Plan, and severance benefits, among other things.