GENELUX Corp

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

(In thousands, except for share amounts and per share data)

NOTE 1 –BASIS OF PRESENTATION

Genelux Corporation (“Genelux” or the “Company”), a Delaware Corporation, incorporated on September 4, 2001, is a late clinical-stage biopharmaceutical company located in Westlake Village, California. The Company is engaged in the research and development of diagnostic and therapeutic solutions for cancer for which there is no effective treatment today. The Company is focused on developing a pipeline of next-generation oncolytic viral immunotherapies for patients suffering from aggressive and/or difficult-to-treat solid tumor types.

Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company has experienced recurring losses from operations since inception and incurred a net loss of $29,869 and used cash in operations of $21,228 during the year ended December 31, 2024. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of December 31, 2024, we had cash and short-term investments of $30,895, however we do not have any committed external source of funds or other support for our development efforts. Until we can generate sufficient product revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings and debt financings, or other capital sources such as potential collaborations, strategic alliances, licensing arrangements and other arrangements. Based on our research and development plans, we expect that our existing cash balance may not enable us to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months from the date of filing of this Annual Report. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. In addition, because the design and outcome of our anticipated and any future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of Olvi-Vec or any future product candidates. Our existing cash balance may not be sufficient to complete the development of Olvi-Vec or any other product candidate. Additionally, although we have commitments from investors to fund the remaining aggregate investment amounts in connection with our Private Placements, we may not receive some or all of the committed proceeds, due to ongoing liquidity constraints or other factors. The failure to receive all or some of the committed proceeds would exhaust our available capital resources sooner than expected and will require us to obtain further funding to achieve our business objectives.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in the valuation of accruals for potential liabilities, valuations of stock-based compensation, and realization of deferred tax assets, among others. Actual results could differ from these estimates.

Income (Loss) Per Share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued.

For the years ended December 31, 2024 and 2023, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. The potentially dilutive securities consisted of the following:

Revenue Recognition

The Company records revenue under the guidance of Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers (Topic 606) which requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

The Company determines revenue recognition through the following steps:

Under certain of the Company’s licensing, supply and collaboration agreements, it is entitled to receive payment upon the achievement of contingent milestone events or the performance of obligations. The Company recognizes revenue based on guidance in ASC 606. In evaluating revenue recognition under a license agreement, the Company uses a two-step process for determining whether a promised good or service (including a license of intellectual property) is distinct and, therefore, is a performance obligation: (1) consideration of the individual good or service (i.e., whether the good or service is capable of being distinct); and (2) consideration of whether the good or service is separately identifiable from other promises in the contract (i.e., whether the promise to transfer the good or service is distinct in the context of the contract). Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the Company’s balance sheet. Amounts expected to be recognized as revenue in the next 12 months following the balance sheet date are classified as current liabilities.

During the year ended December 31, 2022, the Company, under its agreement with Newsoara BioPharma Co. Ltd (“Newsoara”), invoiced and collected $170 relating to supplying product for Newsoara to use in their clinical trials. As the product did not ship during the year ended December 31, 2022, the Company recorded the cash received as deferred revenue until the product was shipped. During the year ended December 31, 2023, the Company shipped the product to Newsoara and thus recognized the revenue. During the year ended December 31, 2024, the Company recognized revenue of $8 relating to its license agreement with ELIAS Animal Health, LLC.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash deposits. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company has not experienced any losses on deposits since inception.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. Cash equivalents consisted of money market funds as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, the amount of cash equivalents included in cash and cash equivalents totaled $7,578 and $7,924, respectively.

Short-Term Investments

The Company’s short-term debt security investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and non-credit related losses reported as a component of accumulated other comprehensive loss and included in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other income (expense), net in the Statements of Operations. There were no realized gains or losses during the years ended December 31, 2024 and 2023.

Bonds with maturity dates subsequent to December 31, 2025 are classified as long-term investments, while bonds with maturity dates on or before December 31, 2025 are classified as short-term investments. All of the Company’s bond investments as of December 31, 2024 and 2023 had maturities of less than one year, and as such, are classified as short-term investments.

For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a charge to interest income. For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers such factors as, among other things, the severity of the impairment, any changes in interest rates, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the short-term debt security investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss on the statements of operations and comprehensive loss.

No credit-related losses or impairments have been recognized on the Company’s investments in available-for-sale securities during the years ended December 31, 2024 and 2023.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Property and equipment is depreciated over the estimated useful life of the asset or the term of the lease using the straight-line method, whichever is shorter. Maintenance and repairs are charged to expense as incurred. At the time depreciable property is retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in operations. The Company has determined the estimated useful lives of its property and equipment, as follows:

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Fair Value of Financial Instruments

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

The Company’s short-term investments and cash equivalents are carried at fair value, determined according to the fair value hierarchy described in Note 3 below. The carrying amounts of financial instruments such as cash, short-term investments, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments.

Income Taxes

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a valuation allowance against its deferred tax assets as of December 31, 2024 and 2023.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. 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 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Patents and Patent Application Costs

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are therefore expensed as incurred and are included in General and Administrative expenses on the accompanying Statements of Operations. Patent expenses were $110 and $107 during the years ended December 31, 2024 and 2023, respectively.

Research and Development Costs

Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including compensation-related expenses for research and development personnel, including stock-based compensation expense, preclinical and clinical activities, costs of manufacturing, overhead expenses including facilities and laboratory expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation and amortization.

Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company’s balance sheet and are then charged to research and development costs in the Company’s statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s balance sheet, with a corresponding charge to research and development costs in the Company’s statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis.

The Company may at times make advance payments on clinical trials on behalf of partners that are reimbursable to the Company. The Company will record such reimbursement at the time of receipt when collectability is assured.

Research Contract Costs and Accruals

The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. These agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred. The Company records prepaid expenses and accruals for estimated ongoing research costs. When evaluating the adequacy of the prepaid expenses and accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Stock-Based Compensation

The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each option is estimated using the Black-Scholes option-pricing model. The Company was a private company through January 30, 2023, and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is recognized in the period of the forfeiture

Prior to January 30, 2023, the common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with shareholders. For the years ended December 31, 2024 and 2023, comprehensive loss included $50 and $12, respectively, of unrealized gains on short-term investments, net of tax.

Leases

The Company accounts for its leases in accordance with the guidance of ASC 842,Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company adopted ASU 2023-07 beginning January 1, 2024. The adoption of this new guidance did not have a material impact to its financial position, results of operations and cash flows.

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

NOTE 3 -FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023:

The underlying securities in the money market funds held by the Company are all government backed securities.

Valuation of cash equivalents and short and long-term investments

Cash equivalents consisted of money market funds at December 31, 2024 and 2023. Money market funds were valued by the Company using quoted prices in active markets for identical securities, which represent a Level 1 measurement within the fair value hierarchy. U.S. Government Agency bonds and U.S. Treasury bonds are government backed securities representing a Level 2 measurement

NOTE 4 -SHORT-TERM INVESTMENTS

As of December 31, 2024 and 2023, the Company’s available-for-sale investments by type, consisted of the following:

As of December 31, 2024 and 2023, all available-for-sale securities consisted of investments that mature within one year.

NOTE 5 -PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2024 and 2023:

Depreciation expense for each of the years ended December 31, 2024 and 2023 was $235 and $499, respectively.

NOTE 6 –ACCRUED PAYROLL AND PAYROLL TAXES

As of December 31, 2022, the Company had accrued compensation owed to the Company’s Chief Executive Officer, another employee and two former employees that had accrued over a several year period in the amount of $2,852. During the year ended December 31, 2023, the Company repaid $1,187 of the amounts that were accrued. In addition, during the period, the Company incurred payroll tax liabilities of $2,168 relating to stock option exercises, restricted stock unit vesting, and other payroll related taxes, and repaid $1,716 of that liability, leaving a balance of $321 due as of December 31, 2023. As of December 31, 2023, a total of $2,117 was owed to the Company’s Chief Executive Officer and another employee for past due balances that had accrued over a several year period, and for current accrued payroll and payroll taxes, and other compensation related benefits, including payroll tax liabilities of $321 relating to stock option exercises and restricted stock unit vesting.

During the year ended December 31, 2024, the Company repaid all of the past due accrued amounts owed to the employees and the $321 of current payroll tax liabilities. As of December 31, 2024, no amounts were owed to employees for these past due balances, and $1,004 was owed for current accrued payroll and payroll taxes, accrued bonuses and other compensation related benefits.

NOTE 7 –LEASE LIABILITIES

Operating Leases

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest (“discount rate”) in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

In December 2020, the Company entered into a long-term non-cancellable lease agreement for a laboratory facility that requires aggregate average monthly payments of $18 beginning January 2021. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $439, respectively, using a discount rate of 4.00%. Effective February 2023, the Company extended the lease term through December 2024, with no changes to any of the other terms of the lease.

In July 2018, the Company entered into a long-term non-cancellable lease agreement for its manufacturing facility that requires aggregate average monthly payments of $10 beginning October 2018 through September 2023. Effective April 2022, the Company extended the lease for the additional five-year period, through September 2028, with no changes to any of the other terms of the lease and hasthe option to extend the lease for an additional five years. Effective July 2023, the Company extended the lease for an additional two-year period, through October 2030, with no changes to any of the other terms of the lease and has the option to extend the lease for an additional five years. Prior to the extension, the remaining lease liability amounted to $701. On the date of the extension, the Company determined that the value of the new right of use asset and lease liability was $909, respectively, using a discount rate of 7.00%. As such, the Company recorded an increase in the lease liability of $208 in 2023 as a result of the lease extension.

In July 2021, the Company entered into a long-term non-cancellable lease agreement for its new corporate headquarters that requires aggregate average monthly payments of $10 beginning August 2021. The lease terminates in July 2027. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $656, respectively, using a discount rate of 4.00%.

In November 2023, the Company entered into a long-term non-cancellable lease agreement for a second manufacturing facility that requires aggregate average monthly payments of $12 beginning November 2023. The lease terminates in October 2030, with a Company option toextend for an additional five years. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $803, respectively, using a discount rate of 7.00%.

As of December 31, 2024, the Company has three operating leases with average monthly payments of approximately $66 per month through October 2030.

During the years ended December 31, 2024 and 2023, the Company made combined aggregate payments of $651 and $523, respectively, towards the lease liabilities. As of December 31, 2024 and 2023, the combined lease liability amounted to $1,868 and $2,519, respectively.

During the years ended December 31, 2024 and 2023, the Company reflected combined amortization of the right of use assets of $668 and $519, respectively, related to the leases, resulting in a combined net asset balance of $1,760 and $2,428 as of December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, lease costs totaled $808 and $666, respectively.

The maturities of the Company’s lease liabilities are as follows as of December 31, 2024:

Other Leases

In November 2019, the Company entered into a short-term lease agreement for one of its office facilities, which was subsequently extended until December 2022 and is currently on a month-to-month basis. Rent expense was $36 during the years ended December 31, 2024 and 2023, respectively.

NOTE 8 –NOTES PAYABLE – SHAREHOLDERS

During the year ended December 31, 2022, the Company, in anticipation of closing its IPO, entered into note payable agreements with several shareholders totaling $1,100. As of December 31, 2022, the outstanding principal and accrued and unpaid interest balances on the notes were $1,100 and $5, respectively.

During the year ended December 31, 2023, the Company borrowed an additional $900 from its shareholders, repaid $600 of principal and $11 of accrued interest, and $1,400 of principal and $63 of accrued interest was converted into 73,134 shares of the Company’s common stock with a fair value of $1,865. The notes accrued interest of $69 during the year. As of December 31, 2023, there was no outstanding principal and accrued and unpaid interest owed on the notes. Upon conversion of the notes payable, the Company incurred a debt extinguishment cost of $402, as the conversion price was lower than the fair value of the shares on the conversion date. This amount was recorded as debt extinguishment costs in the Statements of Operations during the year ended December 31, 2023.

In consideration for the notes issued in 2022, the Company issued the noteholders stock warrants to purchase up to an aggregate total of 44,441 shares of its common stock with an exercise price per share equal to 90% of the IPO price, or $5.40 per share, based on the IPO closing price. The issuance of the warrants was contingent upon the closing of the IPO, and as such, were not formally granted until the closing of the IPO in January 2023. The warrants expire in December 2025. The Company determined the warrants should be accounted for as a liability on the date of issuance.

The Company recognized a liability and recorded a debt discount at the date of issuance in 2022 in the amount of $169. The Company recorded the fair value of the warrants as warrant liabilities as of December 31, 2022. During the year ended December 31, 2022, the Company amortized $61 of debt discount, leaving an unamortized balance of $108 at December 31, 2022. During the year ended December 31, 2023, the Company amortized $108 of debt discount, leaving no unamortized balance at December 31, 2023.

NOTE 9 –CONVERTIBLE NOTES PAYABLE – SHAREHOLDERS

Prior to December 31, 2022, the Company entered into several note payable agreements with its shareholders. Asof December 31, 2022, total principal of $15,407, total interest of $3,812 and total accrued loan fees of $560 were owed on the notes. On January 30, 2023, the date of the closing of the IPO, total principal, accrued interest and accrued loan fees of $19,686 were owed on the notes.

Upon the closing of the IPO, all the principal plus accrued and unpaid loan fees automatically converted into 3,158,141 shares of the Company’s common stock based on the conversion prices of $5.40 and $6.78 per share. As of December 31, 2024 and 2023, no principal, interest or loan fees were due on the notes.

NOTE 10 –CONVERTIBLE NOTES PAYABLE

During the years ended December 31, 2020 and 2021, the Company entered into convertible note payable agreements with an investing group under which the Company borrowed an aggregate amount of $9,065. In consideration for the notes, the Company issued the noteholder stock warrants to purchase up to 146,641 shares of its common stock with an exercise price of $10.50 per share. The warrants expire in September 2025. During the year ended December 31, 2023, all of the warrant shares were exercised with a cashless exercise and the Company issued 70,265 shares of its common stock to the note holder relating to the exercise.

The Company calculated the relative fair value of the warrants issued to the noteholder and recognized a debt discount at the date of issuance. As of December 31, 2022, the notes had an unamortized debt discount balance of $541. During the year ended December 31, 2023, the Company amortized $541 of debt discount, leaving no unamortized balance at December 31, 2023.

As of December 31, 2022, the Company owed $9,065 of principal on the notes and $1,178 of accrued and unpaid interest. On January 30, 2023, the date of the closing of the IPO, total principal and total accrued and unpaid interest of $10,288 was owed on the notes.

Upon the closing of the IPO, all of the principal plus accrued and unpaid interest automatically converted into 979,619 shares of the Company’s common stock based on the conversion price of $10.50 per share. As of December 31, 2024 and 2023, no principal or interest was due on the notes.

NOTE 11 -SHAREHOLDERS’ EQUITY

Preferred Stock

As of December 31, 2022, there were 22,094,889 shares of preferred stock issued and outstanding. Upon the closing of the Company’s IPO on January 30, 2023, all of the Company’s outstanding shares of Series A through Series K preferred stock automatically converted into 8,359,143 shares of common stock, of which 994,705 shares were attributable to conversion price adjustments based on a weighted-average anti-dilution formula.

As of January 30, 2023, earned but undeclared and unpaid Series H dividends were $3,443. Upon the closing of the IPO, the unpaid dividends were automatically converted into 272,101 shares of the Company’s common stock.

In January 2023, the Company’s Certificate of Incorporation with the state of Delaware was amended to change the number of authorized preferred shares from 29,927,994 to 10,000,000.

Common Stock

Authorized shares

The Company’s Certificate of Incorporation authorizes the Company to issue up to 200,000,000 of its common shares. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Company’s board of directors (the “Board”) out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of December 31, 2024 and 2023, there were 34,728,140 and 26,788,986 shares of common stock issued and outstanding, respectively.

In January 2023, the Company’s Certificate of Incorporation with the state of Delaware was amended to change the number of authorized common shares from 75,000,000 to 200,000,000.

Common Stock Issued for Cash Upon Closing of the Company’s IPO

On January 30, 2023, the Company completed its underwritten IPO of its common stock, in which the Company issued and sold 2,500,000 shares of its common stock at a public offering price of $6.00 per share. In February 2023, the Company sold an additional 153,000 shares of common stock at $6.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The total gross proceeds of the IPO were $15,918 and the Company raised $12,632 in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Common Stock Issued for Cash Upon Closing of the Company’s Private Placements

In May and June 2023, the Company entered into securities purchase agreements with certain investors pursuant to which the Company agreed to sell and issue shares of its common stock in two private placement transactions. As of December 31, 2023, the Company sold 1,292,079 shares of its common stock under the agreements resulting in net proceeds to the Company of $25,142. Certain investors who were obligated under the securities purchase agreements to fund the remaining committed investment amounts totaling $24,000 have not made such payments. The Company is currently evaluating its potential remedies with respect to these investors’ non-compliance with their contractual obligations to the Company.

Common Stock Issued for Cash Upon Closing of the Company’s Second Public Offering

In May 2024, the Company completed an underwritten public offering of its common stock and accompanying warrants, in which the Company issued and sold 7,500,000 shares of its common stock and accompanying warrant to purchase 7,500,000 shares of the Company’s common stock, including the partial exercise of the underwriters’ option to purchase 625,000 shares of the Company’s common stock and accompanying warrants to purchase 625,000 shares of the Company’s common stock, at a combined offering price of $4.00 per share and accompanying warrant. The total gross proceeds of the offering were $30,000 and the Company raised $27,678 in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Each warrant has an exercise price of $5.25 per share. The warrants expire five years from the date of grant.

At-the-Market Facility

During the three months ended December 31, 2024, the Company sold 5,460 shares of its common stock under an At-the-Market (ATM) offering for net proceeds of $15.

Grant of Restricted Stock Units

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

In February 2023, the Company’s Board of Directors approved the issuance of a combined total of 113,500 RSUs to certain of its officers, directors and consultants. The fair value of the RSUs on the date of grant was $746. All of the RSUs vested and were issued to the RSU holders during the year ended December 31, 2023. The RSUs were granted under the Company’s 2022 Equity Incentive Plan (“the 2022 Plan”).

In September 2023, the Company’s Board of Directors approved the issuance of a combined total of 57,900 RSUs to certain of its employees and directors. The fair value of the RSUs on the date of grant was $1,297. All of the RSUs vest in one to four years. The RSUs were granted under the Company’s 2022 Equity Incentive Plan. As none of the RSUs vested during the year ended December 31, 2023, no shares were issued relating to the grant.

During the year ended December 31, 2023, the Company recorded $940 of stock compensation for the fair value vesting of RSUs.

During the year ended December 31, 2024, the Board approved the issuance of a combined total of 879,930 RSUs to certain of its employees and its directors. The fair value of the RSUs on the date of grant was $2,843. The RSUs were granted under the Company’s 2022 Equity Incentive Plan. A total of 303,389 RSUs vested and were issued to the RSU holders during the year ended December 31, 2024.

During the year ended December 31, 2024, the Company recorded $2,044 of stock compensation for the fair value vesting of RSUs. As of December 31, 2024, $1,902 of unamortized compensation remained.

Stock Options

In August 2009, the Board approved the adoption of the 2009 Equity Incentive Plan (“the 2009 Plan”). The 2009 Plan was initiated to encourage and enable employees, directors and consultants of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 6,166,666 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the 2009 Plan. As of December 31, 2024, no shares were available for grant under the 2009 Plan.

In September 2018, the Board approved the adoption of the 2019 Equity Incentive Plan (“the 2019 Plan”). The 2019 Plan was initiated to encourage and enable employees, directors and consultants of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. The 2019 Plan allows for the following types of awards: (i) incentive stock options (“ISOs”); (ii) nonstatutory stock options (“NSOs”); (iii) stock appreciation rights; (iv) restricted stock awards; (v) RSUs; (vi) other stock awards. The maximum number of shares of our common stock that may be issued under our 2019 Plan is 2,059,073 shares. Outstanding stock awards granted under the 2009 Plan that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of failure to meet a contingency or condition required to vest such shares or otherwise return to us; or (iii) are required or withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award can be added to the authorized shares as returning shares, not to exceed 3,774,260 shares. The maximum number of shares of our common stock under our 2019 Plan that may be issued is 5,833,333 shares. As of December 31, 2024, no options to acquire common shares were granted and 1,637,562 shares were available for grant under the 2019 Plan.

In June 2022, the Board approved the adoption of the 2022 Plan. The 2022 Plan provides for the grant of ISOs to employees, including employees of any parent or subsidiary, and for the grant of NSOs, stock appreciation rights, restricted stock awards, RSUs, performance awards and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our affiliates. The 2022 Plan is a successor to the 2019 Plan. No further grants will be made under the 2019 Plan. The maximum number of shares of the Company’s common stock under the 2022 Plan that may be issued is 2,800,000 shares. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2024 and continuing through and including January 1, 2032, in an amount equal to 5% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Board. During the year ended December 31, 2024,872,860 options were granted under the 2022 Plan. As of December 31, 2023, a total of 1,922,212 shares were available for grant under the 2022 Plan. In January 2024, the number of shares available to be issued under the 2022 Plan automatically increased by 1,339,449 shares, as determined by the 2022 Plan, and 1,545,431 shares were available for grant under the 2022 Plan as of December 31, 2024. In January 2025, the number of shares available to be issued under the 2022 Plan automatically increased by 1,729,664 shares, as determined by the 2022 Plan.

In September 2023, the Board approved the adoption of the Company’s 2023 Inducement Plan (the “Inducement Plan”) to reserve 1,000,000 shares of the Company’s common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as an inducement material to the individual’s entry into employment with the Company. The Inducement Plan provides for the grant of NSOs, stock appreciation rights, restricted stock awards, RSUs, performance-based cash and stock awards, and other stock-based awards. In addition, forms of (i) Stock Option Grant Notice, Stock Option Agreement and Notice of Exercise and (ii) Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement, for both (a) executive officers and (b) employees at or below the vice president level, were adopted and approved for use with the Inducement Plan. The terms and conditions of the Inducement Plan are substantially similar to the Company’s stockholder-approved 2022 Plan. During the year ended December 31, 2024, no awards were granted under the Inducement Plan. As of December 31, 2024, a total of 555,700 shares were available for grant under the Inducement Plan.

Option exercise prices are set forth in the grant notice, without commission or other charge, provided however, that the price per share of the shares subject to the option shall not be less than the greater of(i) 100% of the fair market value of a share of stock on the grant date, or (ii) 110% of the fair market value of a share of stock on the grant date in the case of a Participant then owning more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company. Options to employees, directors and consultants generally vest and become exercisable over a period not exceeding four years. Options typically expire ten years after the date of grant.

The Company’s policy is to recognize compensation cost for awards with only service conditions on a straight- line basis over the requisite service period for the entire award. Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises. The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

Stock Option Grants During the Year Ended December 31, 2024

During the year ended December 31, 2024, under its 2022 Plan, the Board approved the granting of options to certain employees to purchase 872,860 shares of its common stock with exercise prices from $1.96 to $7.44 per share. The options vest over four years, expire ten years from the date of grant and had an aggregate fair value of $1,616 at the date of grant. The Company valued the options using a Black-Scholes option pricing model.

The assumptions used for the options granted during the year ended December 31, 2024 are as follows:

Stock Option Grants During the Year Ended December 31, 2023

During the year ended December 31, 2023, under its 2022 Plan and Inducement Plan, the Board approved the granting of options to certain employees and directors to purchase 1,150,688 shares of its common stock with exercise prices of $13.97 and $22.40 per share. The options vest over various periods, but none longer than four years, expire ten years from the date of grant and had an aggregate fair value of $20,676 at the date of grant. The Company valued the options using a Black-Scholes option pricing model.

The assumptions used for the options granted during the year ended December 31, 2023 are as follows:

The table below summarizes the Company’s stock option activities for the years ended December 31, 2023 and 2024:

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2024:

During the year ended December 31, 2023, a total of 232,787 option shares were exercised for total proceeds of $1,474. There were no options exercised during the year ended December 31, 2024.

During the years ended December 31, 2024 and 2023, the Company recorded $5,738 and $2,515, respectively, of stock compensation for the value of all options vested during the period. As of December 31, 2024, unvested compensationof $15,482 remained that will be amortized over the remaining vesting period, through December 2028. The aggregate intrinsic value for option shares outstanding at December 31, 2024 was $123.

The following table summarizes the stock-based compensation expense, for stock options only, by line item in the statements of operations for the years ended December 31, 2024 and 2023, respectively.

In September 2022, the Board approved a stock option repricing whereby the exercise prices of previously granted and unexercised options held by certain employees, directors and key advisers with exercise prices between $9.00 and $10.50 per share, would be adjusted (the “Stock Option Repricing”) to equal the initial offering price, contingent and effective upon the completion of the Company’s IPO. In connection with the closing of the IPO, the Stock Option Repricing was completed and the options to purchase 4,092,887 shares of the Company’s common stock, with exercise prices previously between $9.00 and $10.50, were repriced to the initial offering price of $6.00 per share, of which a total of 2,796,400 shares of common stock are held by executive officers and directors. The total cost of the repricing was $2,733, of which $29 and $2,689 was recorded during the years ended December 31, 2024 and 2023, with the remainder of the cost being recorded over the future vesting periods of the options.

During the year ended December 31, 2024, the Company extended the option term for two option holders for an additional year through December 31, 2024. The total number of shares that were extended was 51,581 shares. The cost of the stock option modifications was $303 and was recorded during the year ended December 31, 2024.

Stock Warrants

The table below summarizes the Company’s warrants activities for the years ended December 31, 2023 and 2024:

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2024:

There wasno aggregate intrinsic value for warrant shares outstanding at December 31, 2024.

Warrant Transactions During the Year Ended December 31, 2024

During the year ended December 31, 2024, the Company issued warrants to purchase 7,500,000 shares of its common stock with an exercise price of $5.25 per share to the underwriters of its second public offering. The warrants expire five years from the date of grant.

During the year ended December 31, 2024, warrant holders exercised 76,487 warrants to acquire common stock at an exercise price of $9.00 per share for proceeds of $688.

Warrant Transactions During the Year Ended December 31, 2023

Upon the closing of the IPO and the overallotment exercises, the Company agreed to issue the underwriters warrants entitling them to purchase up to 185,694 shares of the Company’s common stock. The warrants have an exercise price of $6.00 per share and expire on the fifth anniversary of the closing date of the IPO, or January 2028. During the year ended December 31, 2023, the underwriters completed cashless exercises of their warrants to purchase 185,694 shares of common stock at an exercise price of $6.00 per share. Pursuant to this exercise, the warrant holder received 140,303 shares of the Company’s common stock. As of December 31, 2023, no shares were still outstanding.

During the year ended December 31, 2023, the Company granted warrants to certain of its lenders to purchase up to 44,441 shares of the Company’s common stock (see Note 8). The warrants have an exercise price of $5.40 per share and expire three years from the date of the grant. None of these warrants have been exercised as of December 31, 2023.

During the year ended December 31, 2023, the Company granted warrants to certain of its lenders to purchase up to 217,771 shares of the Company’s common stock. The warrants have exercise prices of $9.00 and $10.50 per share. The Company calculated the aggregate fair value of the warrants on the date of grant to be $3,152 using a Black-Scholes pricing model. As all of the debt converted during the year ended December 31, 2023, the value of the warrants was recorded as a financing cost during the same period. During the year ended December 31, 2023,217,771 warrant shares were exercised for proceeds of $2,175.

During the year ended December 31, 2023, a warrant holder completed a cashless exercise of their warrants to purchase 146,641 shares of common stock at an exercise price of $10.50 per share. Pursuant to this exercise, the warrant holder received 70,265 shares of the Company’s common stock.

During the year ended December 31, 2023, a warrant holder completed a cashless exercise of a warrant to purchase 16,666 shares of common stock at an exercise price of $9.00 per share. Pursuant to this exercise, the warrant holder received 11,666 shares of the Company’s common stock. Warrant holders also exercised 88,751 warrant shares for proceeds of $814.

During the year ended December 31, 2023, a total of 126,767 shares were forfeited by the warrant holders in connection with their cashless exercises.

Employee Stock Purchase Plan

The Company’s 2022 Employee Stock Purchase Plan (“ESPP”) permits eligible employees to purchase Company shares on an after-tax basis in an amount between 1% and 15% of their earnings: (i) on May 16 th of each year at a 15% discount of the fair market value of the Company’s common stock on November 17 of the previous year or May 16 th, whichever is lower, and (ii) on November 15 th of each year at a 15% discount of the fair market value of the Company’s common stock on May 17 thor November 15 th, whichever is lower. Subsequent offerings will automatically begin on the day that immediately follows the conclusion of the preceding offering. An employee may not purchase more than 7,500 shares per offering or 15,000 shares per calendar year or more than $25,000 annually. A maximum of 700,000 shares of the Company’s shares of common stock may be sold pursuant to purchase rights under the ESPP. The ESPP includes an “evergreen” feature, which provides that an additional number of shares of common stock will automatically be added to the shares authorized for issuance under the ESPP on January 1 st of each year, beginning on January 1, 2024 and ending on (and including) January 1, 2032. The number of shares added each calendar year will equal the lesser of 1% of the Company’s common stock outstanding on December 31 st of the preceding calendar year or 2,100,000 or a lesser number as determined by the Board. The evergreen provision added 267,890 shares of common stock to the ESPP in 2024. During the year ended December 31, 2024, employees purchased 53,818 shares of common stock for an aggregate purchase price of $125 under the ESPP. As of December 31, 2024,914,072 shares remain authorized and available for issuance under the ESPP. As of December 31, 2024, the Company held $11 on behalf of employees for future purchases under the ESPP, and this amount was recorded in accrued payroll and payroll taxes in the Company’s balance sheet.

NOTE 12 -INCOME TAXES

Significant components of the provision for income taxes for the years ended December 31, 2024 and 2023 are as follows:

The reconciliation of income tax attributable to income before provision for income taxes at the U.S. federal statutory tax rate to income tax expense for the years ended December 31, 2024 and 2023 is as follows:

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will not be realized. Due to uncertainties surrounding the realizability of the deferred tax assets, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2024 and 2023.

At December 31, 2024 and 2023, the Company had federal income tax net operating loss carryforwards of approximately $165,000 and $148,000, respectively. At December 31, 2024 and 2023, the Company had California income tax net operating loss carryforwards of approximately $160,000 and $140,000, respectively. Of the total federal net operating loss, approximately $70,000 has an indefinite carryforward period as of December 31, 2024. The remaining federal and California net operating loss carryforwards will expire through December 31, 2044, unless previously utilized. At December 31, 2024, the Company also has federal and California research and development tax credits of approximately $4,000 and $3,100, respectively. The federal credits will expire through 2044 unless previously utilized. The California credits carryforward indefinitely. The utilization of net operating loss and tax credit carryforwards may be subject to limitation under the provisions of the Internal Revenue Code Section 382 and similar state provisions.

The Company has adopted the provisions in ASC 740 relating to the accounting for uncertain tax positions. This provision requires that the Company recognize the impact of a tax position in its financial statements if the position is more likely than not to be sustained upon examination and on the technical merits of the position. The Company’s also has a policy to recognize interest and/or penalties on the income tax expense related to uncertain tax positions. The Company had no material uncertain tax positions as of December 31, 2024 and 2023, respectively, and consequently, no interest or penalties have been accrued by the Company.

The Company is subject to taxation in the United States and state jurisdictions. The Company’s tax years for 2010 and forward are subject to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses.

NOTE 13 -LEGAL MATTERS

To the Company’s knowledge, it is not currently the subject of any material legal proceeding. In the future, the Company may be involved in actual and/or threatened legal proceedings, claims, investigations and government inquiries arising in the ordinary course of our business, including legal proceedings, claims, investigations and government inquiries involving intellectual property, data privacy and security, other torts, illegal or objectionable content, consumer protection, securities, employment, contractual rights, civil rights infringement, false or misleading advertising, or other legal claims relating to our business.

NOTE 14 –SEGMENT INFORMATION

The Company operates and manages its business asone reportable and operating as a clinical stage biopharmaceutical company. The Company’s current focus is on developing oncolytic immunotherapies for the treatment of cancer. The Company’s Chief Operating Decision Maker (“CODM”) reviews financial information presented and decides how to allocate resources based on net income (loss). Net income (loss) is used for evaluating financial performance.

Significant segment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all remaining costs necessary to operate our business, which primarily include external professional services and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

NOTE 15 –REIMBURSEABLE COSTS

In October 2024, the Company announced that the first patient had been dosed in a Phase 2, open-label, randomized, and controlled clinical trial designed to evaluate the efficacy and safety of intravenously delivered Olvi-Vec oncolytic VACV for patients with recurrent non-small cell lung cancer (“NSCLC”) in the United States. In accordance with our license agreement with our partner in China, Newsoara, Newsoara is generally obligated to fund the Phase 2 clinical trial in its entirety. In November 2023, we agreed with Newsoara that the Company would directly engage a contract research organization on mutually agreeable terms to conduct certain startup activities for the NSCLC trial in the U.S. only, with Newsoara reimbursing the Company for the costs and expenses of such agreed-upon startup activities. Newsoara is permitted to defer such reimbursement payments until the completion of its next round of financing, which Newsoara expects to occur in 2025. During the three months ended September 30, 2024, the Company entered into a Clinical Trial Services Agreement with Hong Kong Tigermed Consulting Co., Ltd., to provide regulatory and development support services for the NSCLC trial in the U.S. During the years ended December 31, 2024 and 2023, the Company incurred $2,068 of costs relating to the Phase 2 clinical trial and they are included in Research and development expenses during the year ended December 31, 2024. All of these costs are to be reimbursed by Newsoara upon their successful financing, which the Company believes will occur by the end of 2025. Once reimbursement is received from Newsoara, the Company will reduce R&D expenses during the period they are received.

NOTE 16 -SUBSEQUENT EVENTS

On March 26, 2025, the Company completed an underwritten offering of 3,000,000 shares of its common stock at an offering price of $3.50 per share. The gross proceeds received from the offering were $10.5 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.