FF EAI Robotics Ecosystem Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024

NOTE 1 —ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Organization

Ritter Pharmaceuticals, Inc. (the Company’s predecessor) was formed as a Nevada limited liability company on March 29, 2004 under the name Ritter Natural Sciences, LLC. In September 2008, this company converted into a Delaware corporation under the name Ritter Pharmaceuticals, Inc. On May 22, 2020, upon completing a “reverse recapitalization” transaction with Qualigen, Inc., Ritter Pharmaceuticals, Inc. was renamed Qualigen Therapeutics, Inc. (the “Company”). Qualisys Diagnostics, Inc. was formed as a Minnesota corporation in 1996, reincorporated to become a Delaware corporation in 1999, and then changed its name to Qualigen, Inc. in 2000. Qualigen, Inc. was a wholly-owned subsidiary of the Company. On July 20, 2023, the Company sold all of the issued and outstanding shares of common stock of Qualigen, Inc. to Chembio Diagnostics, Inc. (“Chembio”), a wholly-owned subsidiary of Biosynex, S.A. (“Biosynex”). Following the consummation of this transaction, Qualigen, Inc. became a wholly-owned subsidiary of Chembio (see Note 6 – Discontinued Operations).

On May 26, 2022, the Company acquired 2,232,861 shares of Series A-1 Preferred Stock of NanoSynex, Ltd. (“NanoSynex”) from Alpha Capital Anstalt (“Alpha”), a related party, in exchange for 7,000 reverse split adjusted shares of the Company’s common stock and a prefunded warrant to purchase 6,629 reverse split adjusted shares of the Company’s common stock at an exercise price of $0.001 per share. These warrants were subsequently exercised on September 13, 2022. Concurrently with this transaction, the Company also entered into a Master Funding Agreement for the Operational and Technology Funding of NanoSynex Ltd., dated May 26, 2022, with NanoSynex (the “NanoSynex Funding Agreement”), to, among other things, provide for the further funding of NanoSynex, and purchased 381,786 shares of Series B preferred stock from NanoSynex for a total purchase price of $600,000. The transactions resulted in the Company acquiring a 52.8% interest in NanoSynex (the “NanoSynex Acquisition”). NanoSynex is a nanotechnology diagnostics company domiciled in Israel. On July 20, 2023, the Company entered into an Amendment and Settlement Agreement with NanoSynex (the “NanoSynex Amendment”), which amended the NanoSynex Funding Agreement, to, among other things, eliminate most of the Company obligation for the further funding of NanoSynex. Pursuant to the terms of the NanoSynex Amendment, the Company lost its controlling interest in NanoSynex (see Note 6 – Discontinued Operations).

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), Regulation S-X and rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its former wholly-owned and majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment . See the section Segment Reporting below for more information. In general, the functional currency of the Company and its subsidiaries is the U.S. dollar. For NanoSynex, the functional currency was the local currency, New Israeli Shekels (NIS). As such, assets and liabilities for NanoSynex were translated into U.S. dollars with the effects of foreign currency translation adjustments reflected as a component of accumulated other comprehensive loss within the Company’s consolidated statements of changes in stockholders’ equity (deficit).

As of July 20, 2023, NanoSynex was deconsolidated from these financial statements as the transactions contemplated by the NanoSynex Amendment resulted in a loss of control of a subsidiary that constitutes a business under ASC 810. The retained investment in NanoSynex is accounted for prospectively as an equity method investment. See Note 6 – Discontinued Operations for further information.

Discontinued Operations

On July 20, 2023, the Company completed the sale of Qualigen, Inc. to Chembio Diagnostics, Inc. The sale of Qualigen Inc. constituted a significant disposition and as such, the Company concluded that the disposition of ownership in Qualigen, Inc. represented a strategic shift that had a major effect on its operations and financial results. Therefore, Qualigen, Inc. is classified as discontinued operations for all periods presented herein.

On July 20, 2023, the Company entered into the NanoSynex Amendment, which amended the Master Funding Agreement for the Operational and Technology Funding of NanoSynex Ltd., dated May 26, 2022, by and between the Company and NanoSynex (the “NanoSynex Funding Agreement”), a former majority owned subsidiary of the Company, to, among other things, forfeit 281,000 Series B Preferred Shares of NanoSynex held by the Company, resulting in the deconsolidation of NanoSynex. The disposition represents a strategic shift that will have a material effect on the Company’s operations and financial results. Accordingly, the business of NanoSynex is classified as discontinued operations for all periods presented herein.

See Note 6 - Discontinued Operations for further information.

Equity Method Investments

Following deconsolidation of NanoSynex on July 20, 2023, the Company accounts for its retained investment under the equity method of accounting as it retained the ability to exercise significant influence over the operating and financial policies of the investee. Under the equity method, the Company recognizes its proportionate share earnings or losses each reporting period with an adjustment to the carrying value of the investment. As of December 31, 2024 and 2023, the carrying value of the retained investment was zero, and therefore the Company has suspended application of the equity method as the Company is not liable for the obligations of the investee nor otherwise committed to provide financial support. Future equity method earnings, if any, will not be recognized until the amount exceeds the unrecognized net losses in prior periods. See Note 6 – Discontinued Operations for further information.

Accounting Estimates

Management uses estimates and assumptions in preparing its consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant estimates relate to the estimated fair value of convertible notes, warrant liabilities, determination of the allowance for credit losses, and stock-based compensation. Actual results could vary from the estimates that were used.

Reverse Stock Splits

On November 23, 2022, the Company effected a 1-for-10 reverse stock split of its outstanding shares of common stock (the “2022 Reverse Stock Split”). The 2022 Reverse Stock Split reduced the Company’s shares of outstanding common stock, stock options, and warrants to purchase shares of common stock. Fractional shares of common stock that would have otherwise resulted from the 2022 Reverse Stock Split were rounded down to the nearest whole share and cash in lieu of fractional shares was paid to stockholders.

On November 20, 2024, the Company effected a 1-for-50 reverse stock split of its outstanding shares of common stock (the “2024 Reverse Stock Split”). The 2024 Reverse Stock Split reduced the Company’s shares of outstanding common stock, stock options, and warrants to purchase shares of common stock. Fractional shares of common stock that would have otherwise resulted from the 2024 Reverse Stock Split were rounded down to the nearest whole share and cash in lieu of fractional shares was paid to stockholders.

All share and per share data for all periods presented in the accompanying financial statements and the related disclosures have been adjusted retrospectively to reflect both reverse stock splits. The number of authorized shares of common stock and the par value per share remains unchanged.

Cash

The Company considers all highly liquid investments purchased with an initial maturity of 90 days or less and money market funds to be cash equivalents.

The Company maintains the majority of its cash in accounts at banking institutions in the U.S. that are of high quality. Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. If such banking institutions were to fail, the Company could lose all or a portion of amounts held in excess of such insurance limitations. As of December 31, 2024, the Company had not experienced losses on these accounts, and management believes the Company is not exposed to significant risk on such accounts.

Segment Reporting

The Company adopted Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, as of January 1, 2024. See the section Recent Accounting Pronouncements below for more information. Operating segments are identified as components of an enterprise about which separate discrete financial information is regularly reviewed for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily within the United States (and in Israel prior to the NanoSynex deconsolidation). The Company is an early stage clinical therapeutics company focused on developing treatments for adult and pediatric cancer. The Company’s operations are organized and reported as a single reportable segment, which includes all activities related to the discovery, development, and commercialization of its products. The Company’s CODM, its chief executive officer, reviews operating results on an aggregate basis and manages the operations as a single operating segment. The accounting policies of the Company’s single operating and reportable segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM evaluates performance and allocates resources based on consolidated net income (loss) that also is reported on the consolidated statements of operations as net loss, and consolidated cash used in operations. The significant expenses regularly reviewed by the CODM are consistent with those reported on the Company’s consolidated statement of operations, and expenses are not regularly provided to or reviewed on a more disaggregated basis for purposes of assessing segment performance and deciding how to allocate resources.

Research and Development

Except for acquired in process research and development (IPR&D), the Company expenses research and development costs as incurred including therapeutics license costs.

Patent Costs

The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the consolidated statements of operations.

Derivative Financial Instruments and Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations and comprehensive loss. Depending on the features of the derivative financial instrument, the Company uses either the Black-Scholes option-pricing model or a Monte-Carlo simulation to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period (See Note 8 – Warrant Liabilities and Note 9 – Convertible Debt).

Fair Value Measurements

The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Fair Value of Financial Instruments

Cash, prepaid expenses, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. Short-term notes receivable are valued subject to a current expected credit loss (“CECL”) model (see Note 4 - Short-Term Notes Receivable).

Comprehensive Loss

Comprehensive loss consists of net income and foreign currency translation adjustments related to the discontinued operations of NanoSynex. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss and as a separate component in the statements of stockholders’ equity (deficit) for all periods presented.

Stock-Based Compensation

Stock-based compensation cost for equity awards granted to employees and non-employees is measured at the grant date based on the calculated fair value of the award using the Black-Scholes option-pricing model, and is recognized as an expense, under the straight-line method, over the requisite service period (generally the vesting period of the equity grant). If the Company determines that other methods are more reasonable, or other methods for calculating these assumptions are prescribed by regulators, the fair value calculated for the Company’s stock options could change significantly. Higher volatility, lower risk-free interest rates, and longer expected lives would result in an increase to stock-based compensation expense to employees and non-employees determined at the date of grant.

Income Taxes

Deferred income taxes are recognized for temporary differences in the basis of assets and liabilities for financial statement and income tax reporting that arise due to net operating loss carry forwards, research and development credit carry forwards and from using different methods and periods to calculate depreciation and amortization, allowance for doubtful accounts, accrued vacation, research and development expenses, and state taxes. A provision has been made for income taxes due on taxable income and for the deferred taxes on the temporary differences. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in future years. See Note 15 - Income Taxes for further information.

Foreign Currency Translation

The functional currency for the Company is the U.S. dollar. The functional currency for the discontinued operations of NanoSynex was the New Israeli Shekel (NIS). The financial statements of NanoSynex were translated into U.S. dollars using exchange rates in effect at each period end for assets and liabilities; using exchange rates in effect during the period for results of operations; and using historical exchange rates for certain equity accounts. The adjustment resulting from translating the financial statements of NanoSynex was reflected as a separate component of other comprehensive income (loss) (see Note 6 – Discontinued Operations).

Accounting Standards Updates - Recently Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issuedAccounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures (ASU 2023-07), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Effective January 1, 2024, the Company adopted the new standard on a retrospective basis for annual periods, and interim periods beginning for the first quarter of 2025. The Company does not believe the impact of the new guidance and related codification improvements had a material impact to its financial position, results of operations and cash flows.

Accounting Standards Updates - Not Yet Adopted

In December 2023, the FASB issuedASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the disclosure requirements related to the new standard.

In November 2024, the FASB issuedASU 2024-03,Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. This update requires entities to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses. Accounting Standards Update 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. Accounting Standards Update 2024-03 may be applied retrospectively or prospectively. The Company is evaluating the disclosure requirements related to the new standard.

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on our consolidated financial statements or disclosures.

Global Economic Conditions

Ongoing Wars in Ukraine and Israel

In February 2022, Russia invaded Ukraine. While the Company has no direct exposure in Russia and Ukraine, the Company continues to monitor any broader impact to the global economy, including with respect to inflation, supply chains and fuel prices. The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the conflict and its impact on regional and global economic conditions.

In October 2023, Hamas conducted terrorist attacks in Israel resulting in ongoing war. There continue to be hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which have resulted in rockets being fired into Israel, causing casualties and disruption of economic activities. In early 2023, there were a number of changes proposed to the political system in Israel by the current government which, if implemented as planned, could lead to large-scale protests and additional uncertainty, negatively impacting the operating environment in Israel. Populist uprisings in various countries in the Middle East over the last few years have also affected the political stability of those countries and have led to a decline in the regional security situation. Such instability may also lead to deterioration in the political and trade relationships that exist between Israel and these countries. Any armed conflicts, terrorist activities or political instability involving Israel or other countries in the region could adversely affect the Company’s minority interest in NanoSynex, its results of operations, financial condition, cash flows and prospects (see Note 6 – Discontinued Operations).

Inflation and Global Economic Conditions

Beginning in 2022 and continuing into the current fiscal year, global commodity and labor markets experienced significant inflationary pressures attributable to government stimulus and recovery programs, government deficit spending and supply chain issues. The Company cannot provide assurance that it will be successful in fully offsetting increased costs resulting from inflationary pressure. In addition, the global economy suffers from slowing growth and rising interest rates, and some economists believe that there may be a global recession in the near future. If the global economy slows, the Company’s business may be adversely affected.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has had a dramatic impact on businesses globally and on the Company’s business as well. During the height of the pandemic, sales of diagnostic products decreased significantly and the Company’s net loss increased significantly, as clinics and small hospitals’ demand for Qualigen, Inc.’s FastPack™ diagnostic test kits was reduced sharply, largely due to deferral of patients’ non-emergency visits to physician offices. In July 2023 the Company sold Qualigen, Inc., its wholly-owned subsidiary, to Chembio (see Note 6 - Discontinued Operations).

NOTE 2 —LIQUIDITY AND GOING CONCERN

As of December 31, 2024, the Company had approximately $1.2 million in cash and an accumulated deficit of $123.1 million. For the years ended December 31, 2024 and 2023, the Company used cash of $6.3 million and $10.3 million, respectively, in operations.

The Company’s cash balances as of the date that these financial statements were issued, without additional financing, are expected to fund operations only into the third quarter of 2025. The Company expects to continue to have net losses and negative cash flow from operations, which will challenge its liquidity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the date that these financial statements were issued.

There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis.

Historically, the Company’s principal sources of cash have included proceeds from the issuance of common and preferred equity and proceeds from the issuance of debt. During the year ended December 31, 2024 the Company raised approximately $1.5 million from the sale of Convertible Debentures (see Note 9 – Convertible Debt), and an additional $2.0 million from the sale of a nonconvertible 18% Senior Note, which was subsequently repaid in September 2024. The Company raised additional net proceeds of approximately $3.1 million from the sale of common stock and prefunded warrants in a public offering, raised approximately $4.6 million from the sale of newly designated Series A-2 Convertible Preferred Stock in a private placement, and $0.4 million from warrant exercises. At the closing of the private placement, approximately $1.2 million in Convertible Debentures and accrued interest were exchanged for shares of Series A-2 Convertible Preferred stock, and the remaining outstanding balance of $0.5 million in Convertible Debentures and accrued interest was repaid. From January to June 2025, we borrowed a total of $3,470,000 from eight investors as short-term borrowings, each due within six months after the date of borrowing. There can be no assurance that further financing can be obtained on favorable terms, or at all. If the Company is unable to obtain funding, the Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect the Company’s business prospects.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying financial statements.

NOTE 3 —PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at December 31, 2024 and 2023:

**NOTE 4 —SHORT-TERM NOTES RECEIVABLE **

Short term notes receivable - consisted of the following at December 31, 2024 and 2023:

Allowance for credit losses consisted of the following at December 31, 2024 and 2023:

During the year ended December 31, 2024, the Company advanced to Marizyme, Inc., $2,257,400, against which Marizyme delivered demand promissory notes to the Company of like principal amounts (the “Marizyme Notes”). As of December 31, 2024, accrued interest related to the Marizyme Notes was $113,292 and interest income of this amount was recognized in other income in the consolidated statement of operations and is included in short-term notes receivable on the consolidated balance sheet. As of December 31, 2023 there were no amounts due to the Company under the Marizyme Notes.

The Marizyme Notes bear at interest the rate of eighteen percent (18%) per annum. Marizyme may pre-pay all or any part of the outstanding principal or interest at any time and from time to time, in whole or in part, without premium or penalty.

Under ASC 326-20, known as the current expected credit loss (“CECL”) model, the Company was required to estimate credit losses expected over the life of an exposure (or pool of exposures) based on historical information, current information, and reasonable and supportable forecasts. The Company is unable to use its historical data to estimate losses as it has no relevant loss history to date. To determine the estimate of expected credit losses, the Company used a probability-weighted approach that incorporates multiple settlement scenarios, including recovery of amounts due upon an acquisition of the debtor, and recovery in different liquidation scenarios, and determines the expected recoverable amount of the loan in each scenario. This model requires management to make certain assumptions including the likelihood of each outcome, the estimated value of the debtor’s assets, and the Company’s expected claim and recovery rate on the debtor’s assets in the event of an insolvency or a liquidation proceeding. As of December 31, 2024, the estimate for expected credit losses on the Marizyme Notes is $360,000. Given the inherently uncertain nature of the debtor’s financial condition and future outcomes, actual credit losses may differ materially from this estimate. The Company will continue to monitor relevant events and conditions and update its assumptions and allowance as necessary.

The Company is also party to a Co-Development Agreement with Marizyme (see Note 12 - Research and License Agreements).

NOTE 5 —OTHER ASSETS

Other non-current assets consisted of the following at December 31, 2024 and 2023:

NOTE 6 —DISCONTINUED OPERATIONS

The summary of gain (loss) from discontinued operations, net of tax, for the years ended December 31, 2024 and 2023 are as follows:

Sale of Qualigen, Inc.

On July 20, 2023, the Company completed the sale of Qualigen, Inc., its formerly wholly-owned subsidiary, to Chembio Diagnostics, Inc. for net cash consideration of $5.4 million, of which $4.9 million was received during the year ended December 31, 2023, and $450,000 was being held in escrow until January 20, 2025 to satisfy certain Company indemnification obligations. On June 4, 2024, the escrow account was settled early by mutual agreement of the Company and the buyer resulting in cash proceeds to the Company of $350,000 and a loss on disposal of discontinued operations of $100,000 for the year ended December 31, 2024. There was no other activity related to Qualigen, Inc. during the year ended December 31, 2024.

There were no assets and liabilities remaining related to Qualigen, Inc. as of December 31, 2024 or 2023.

The Company reclassified the following statement of operations items to discontinued operations for the year ended December 31, 2023:

The Company recorded a gain on the sale of Qualigen, Inc. in its consolidated financial statements for the years ended December 31, 2023 as follows:

Amendment and Settlement Agreement with NanoSynex Ltd.

On July 20, 2023, the Company entered into and effectuated the NanoSynex Amendment, reducing its ownership from approximately 52.8% to approximately 49.97% of the voting equity of NanoSynex, and deconsolidation of the subsidiary. On November 22, 2023, the Company further agreed to eliminate the Company’s obligations to lend additional funds to NanoSynex by surrendering shares of Series A-1 Preferred Stock of NanoSynex in an amount that reduced the Company’s ownership in NanoSynex voting equity from approximately 49.97% to 39.90%.

On the date of deconsolidation, the Company recognized its retained investment at fair value, which was determined to be de minimis based on various economic, industry, and other factors. As a result, the Company has discontinued recognition of its proportionate share of equity method losses following the date of initial recognition. As of December 31, 2024 and 2023, the carrying value of the retained investment was zero. Future equity method earnings, if any, will not be recognized until the amount exceeds the unrecognized net losses in prior periods.

There were no assets and liabilities recognized related to NanoSynex as of December 31, 2024 or 2023.

The Company reclassified the following statement of operations items to discontinued operations for the year ended December 31, 2023:

The Company recorded a loss on disposal of discontinued operations from the deconsolidation of NanoSynex in its consolidated financial statements for the year ended December 31, 2023 as follows:

NOTE 7 —ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at December 31, 2024 and 2023:

As of December 31, 2023, accrued liabilities attributable to Qualigen Inc, and NanoSynex were deemed disposed of as discontinued operations (see Note 6 – Discontinued Operations).

NOTE 8 –WARRANT LIABILITIES

In 2004, the Company issued warrants to various investors and brokers for the purchase of Series C preferred stock in connection with a private placement (the “Series C Warrants”). The Series C Warrants were subsequently extended and, upon closing of the reverse recapitalization transaction with Ritter, exchanged for warrants to purchase common stock of the Company. The Series C Warrants were determined to be liability-classified pursuant to the guidance in ASC 480 and ASC 815-40, based on the inclusion of a leveraged ratchet provision for subsequent dilutive issuances. As of December 31, 2022 there were 26,992 Series C Warrants outstanding with an exercise price of $66.00 per share. On November 24, 2023,21,952 Series C Warrants expired, and on December 5, 2023 the remaining Series C Warrants were repriced from an exercise price of $66.00 per share to an exercise price of $36.50 per share, with 4,074 additional ratchet Series C Warrants issued, resulting in 9,113 Series C Warrants outstanding and exercisable as of December 31, 2023.

On February 27, 2024, these Series C Warrants were repriced again as a result of a down-round provision triggered by a Securities Purchase Agreement with Alpha for the purchase of the February 2024 Debentures described below, from an exercise price of $36.50 per share to an exercise price of $13.00 per share, with 16,473 additional ratchet Series C Warrants issued, resulting in 25,586 Series C Warrants, which expired on June 26, 2024. During the year ended December 31, 2024, the Company recorded a gain on change in fair value of warrant liabilities of $54,600 for the Series C Warrants.

In December 2022, in conjunction with the issuance of a convertible debenture to Alpha (see Note 9 – Convertible Debt), the Company issued to Alpha a warrant to purchase 50,000 shares of the Company’s common stock (the “Alpha Warrant”). The exercise price of the Alpha Warrant was $82.50 (equal to 125% of the conversion price of the Debenture on the closing date). The Alpha Warrant may be exercised by Alpha, in whole or in part, on or after June 22, 2023 and at any time before June 22, 2028, subject to certain terms and conditions described in the Alpha Warrant. On December 5, 2023, the Company entered into an Amendment No. 1 with regard to a Securities Purchase Agreement with Alpha. This Amendment eliminated certain adjustment provisions of the Warrant. The Company determined that the event resulted in equity classification for the Alpha Warrant and, accordingly, the Company remeasured the fair value on that date and reclassified to noncompensatory equity classified warrants (see Note 13 – Stockholders Equity (Deficit)).

On February 27, 2024, in connection with an 8% Convertible Debenture (the “2024 Alpha Debenture”) in the principal amount of $550,000 issued to Alpha (see Note 9 – Convertible Debt), the Company issued a noncompensatory equity classified warrant to Alpha (the “2024 Alpha Warrant”) to purchase 18,001 shares of common stock, at an exercise price of $13.00 per share, which may be exercised in whole or in part, at any time before February 27, 2029. On September 6, 2024 as a result of the down-round provision triggered by shares sold in a public offering, the above warrants were repriced from $13.00 per share exercise price to $6.50 per share exercise price. As a result of a partial voluntary conversion of the 2024 Alpha Debenture on September 9, 2024, the Company no longer had sufficient shares to settle the 2024 Alpha Warrant in full until shareholder approval was obtained, and a portion (2,314 warrant shares with a fair value of $14,997) was reclassified to liabilities. Shareholder approval was subsequently obtained on October 25, 2024, and as of that date, the Company determined that shareholder approval resulted in equity classification for the warrant and, accordingly, the Company remeasured the warrant liability to fair value, and reclassified to noncompensatory equity classified warrants (see Note 13 – Stockholders Equity (Deficit)). During the year ended December 31, 2024, the Company recorded a gain on change in fair value of warrant liabilities of $3,072 for these warrants.

On April 12, 2024 , in connection with an 8% Convertible Debenture in the principal amount of $1,100,000 issued to Yi Hua Chen (“Chen”) (see Note 9 – Convertible Debt), the Company issued a liability classified warrant to Chen to purchase 36,001 shares of common stock, exercisable until February 27, 2029. On September 6, 2024 , as a result of a down-round provision triggered by shares sold in a public offering, the warrant was repriced from an exercise price of $13.00 per share to an exercise price of $6.50 per share. The warrant was initially liability classified due to an insufficient number of authorized shares to settle the warrant prior to the receipt of shareholder approval, which was subsequently obtained on October 25, 2024. As of that date, the Company determined that shareholder approval resulted in equity classification for the warrant and accordingly, the Company remeasured the warrant liability to fair value, and reclassified to noncompensatory equity classified warrants (see Note 13 – Stockholders Equity (Deficit)). The fair value of this warrant was $565,582 on the issuance date and $185,531 on the date of reclassification to equity. During the year ended December 31, 2024, the Company recorded a gain on change in fair value of warrant liabilities of $380,051 for this warrant.

On November 20, 2024, the Company closed its private placement transaction resulting in the issuance of newly designated Series A-2 Preferred Stock (see Note 13 – Stockholders Equity (Deficit)). As a result of the issuance of a new class of voting securities, the Company evaluated its equity classified warrants’ respective terms, and concluded that warrants for 68,712 common shares with a weighted average exercise price of $2.00 and a fair value of $247,262 were required to be reclassified to liabilities as of November 20, 2024. During the year ended December 31, 2024 the Company recorded a loss on change in fair value of warrant liabilities of $21,913 for these warrants.

The following table summarizes the activity in liability classified warrants for the year ended December 31, 2024:

The following table summarizes the activity in liability classified warrants for the year ended December 31, 2023:

The following table presents the Company’s fair value hierarchy for its warrant liabilities measured at fair value on a recurring basis as of December 31, 2024:

During the year ended December 31, 2024, warrants for 71,026 common shares with a weighted average exercise price of $2.14 and a fair value of $262,259 were reclassified from equity to liabilities, and warrants for 38,315 common shares with a weighted average exercise price of $6.50 and a fair value of $197,456 were reclassified from liabilities to equity. There were no transfers of financial assets or liabilities between category levels for the year ended December 31, 2024.

The following table presents the Company’s fair value hierarchy for its warrant liabilities measured at fair value on a recurring basis as of December 31, 2023:

There were no transfers of financial assets or liabilities between category levels for the year ended December 31, 2023.

The value of the warrant liabilities was based on valuations received from an independent valuation firm determined using a Monte-Carlo simulation and internally generated Black Scholes valuations. Due to the nominal exercise price of the 2024 Pre-Funded Warrants and indefinite term, the Company calculated an implied value of the 2024 Pre-Funded Warrants based on the underlying common stock price on the valuation date, less the exercise price. For volatility, the Company considers comparable public companies as a basis for its expected volatility to calculate the fair value of common stock warrants and transitions to its own volatility as the Company develops sufficient appropriate history as a public company. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the common stock warrant. The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future. Any significant changes in the inputs may result in significantly higher or lower fair value measurements.

The following are the weighted average and the range of assumptions used in estimating the fair value of warrant liabilities (weighted average calculated based on the number of outstanding warrants on each issuance) as of December 31, 2024 and 2023:

**NOTE 9 —CONVERTIBLE DEBT **

2022 Convertible Debenture (Related party)

On December 22, 2022, the Company issued to Alpha an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 (the “2022 Debenture”) for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022 (the “2022 Securities Purchase Agreement”). The 2022 Debenture carried a maturity date of December 22, 2025 and was convertible, at any time, at Alpha’s option, into shares of the Company’s common stock (the “Conversion Shares”), at a price initially equal to $66.00 per share, subject to adjustment as described in the 2022 Debenture. On July 13, 2023, the Company obtained stockholder approval, for purposes of complying with Nasdaq Listing Rule 5635(d), to allow for the issuance to Alpha of more than 20% of our issued and outstanding shares of common stock pursuant to the terms and conditions of the 2022 Debenture, and the common stock purchase warrant dated December 22, 2022 (the “2022 Warrant”) issued by us to Alpha.

Commencing June 1, 2023, the Company was required to redeem $110,000 monthly, plus accrued and unpaid interest in cash, or, subject to the Equity Conditions (as defined in the 2022 Debenture) having been satisfied or waived, in shares of our common stock, based on a conversion price equal to the lesser of (i) the then-effective conversion price of the 2022 Debenture and (ii)85% of the average of the VWAPs (as defined in the 2022 Debenture) for the five consecutive trading days ending on the trading day immediately before the applicable monthly redemption date. The 2022 Debenture accrued interest at the rate of 8% per annum beginning on December 1, 2023, and was payable on a monthly or quarterly basis in cash or, subject to the Equity Conditions having been satisfied or waived, shares or a combination thereof at our option.

In December 2022, pursuant to the terms of the 2022 Securities Purchase Agreement, we entered into a registration rights agreement with Alpha (the “Registration Rights Agreement”), pursuant to which we agreed to file one or more registration statements, as necessary, and to the extent permissible, to register under the Securities Act the resale of the remaining shares (underlying the 2022 Debenture and the 2022 Warrant) not otherwise registered under the Company’s registration statement on Form S-3 (File No. 333-266430). We filed a resale registration statement on Form S-3 pursuant to the requirements of the Registration Rights Agreement on December 2022 (File Number 333-269088), which registration statement was declared effective by the SEC on January 5, 2023. On September 1, 2023, we filed a Post-Effective Amendment No. 1 to Form S-3 on Form S-1 (File No. 333-269088), which Post-Effective Amendment was declared effective by the SEC on September 7, 2023. On May 1, 2024, we filed a Post-Effective Amendment No. 2 to Form S-1 on Form S-3 (File No. 333-269088), which Post-Effective Amendment was declared effective by the SEC on May 2, 2024.

The Company evaluated the 2022 Debenture and the 2022 Warrant and determined that the 2022 Warrant is a freestanding financial instrument. Initially, the 2022 Warrant is not considered indexed to the Company’s own stock, because the settlement amount would not equal the difference between the fair value of a fixed number of the Company’s equity shares and a fixed strike price and all of the adjustment features in Section 3(b) of the Alpha Warrant are not down round provisions, as defined in ASU 2017-11. Accordingly, the 2022 Warrant was classified as a liability and recognized at fair value, with subsequent changes in fair value recognized in earnings.

The proceeds from the 2022 Debenture were allocated to the initial fair value of the 2022 Warrant, with the residual balance allocated to the initial carrying value of the 2022 Debenture. The Company has not elected the fair value option for the 2022 Debenture. The 2022 Debenture was recognized as proceeds received after allocating the proceeds to the 2022 Warrant, and then allocating remaining proceeds to a suite of bifurcated embedded derivative features (conversion option, contingent acceleration upon an Event of Default, and contingent interest upon an Event of Default), with the resulting difference, if any, allocated to the loan host instrument. The suite of derivative features was measured and initially determined to have no fair value.

On December 5, 2023, the Company and Alpha executed Amendment No. 1 to the 2022 Securities Purchase Agreement (the “SPA Amendment”), pursuant to which the Company and Alpha agreed to, among other things, reduce the Conversion Price of the 2022 Debenture from $66.00 per share to $36.50 per share and reduce the exercise price of the 2022 Warrant from $82.50 per share to $36.50 per share, in each case subject to certain adjustments. In addition, the SPA Amendment revised certain provisions of the 2022 Warrant to (i) limit the circumstances which would trigger a potential adjustment to the exercise price of the 2022 Warrant and (ii) clarify the treatment of the 2022 Warrant upon a Fundamental Transaction. The purpose of these revisions was to remove the terms that caused the 2022 Warrant to be liability-classified under U.S. GAAP. The Company performed an assessment and concluded that (i) all remaining adjustment features in the revised language meet the FASB’s definition of a down-round feature, and (ii) the 2022 Warrant, as amended, met all of the additional requirements for equity classification. Accordingly, as of December 5, 2023, the Company remeasured the 2022 Warrant to its fair value immediately prior to the modification and recognized the change in fair value in earnings. The incremental fair value impact from the 2022 Warrant modification of $0.09 million was included in the Company’s evaluation of the 2022 Debenture modification under ASC 470, discussed further below. The Company then reclassified the 2022 Warrant liability to equity at its post-modification fair value of $1.6 million.

In accordance with ASC 470-50, the Company determined that the modified terms of the 2022 Debenture were substantially different when compared to the original terms that existed prior to the SPA Amendment, and thus the event was required to be accounted for as a debt extinguishment. Accordingly, the Company derecognized the net carrying value of the original Debenture, and recorded the new debt instrument at its fair value of $1.4 million, and recorded a $0.6 million loss on debt extinguishment. The difference between the remaining 2022 Debenture principal and its fair value on December 5, 2023 was recorded as a debt discount, which was amortized to interest expense over the expected term of the Debenture using the effective interest method, in accordance with ASC 835-30.

During the year ended December 31, 2023, the Company issued a total of (i)16,834 shares of our common stock upon Alpha’s partial voluntary conversion of the 2022 Debenture at a conversion price of $66.00 per share, extinguishing a total of $1,111,078 principal, and (ii)6,193 shares of common stock to Alpha in lieu of cash for monthly redemption payments totaling $220,000 due on the 2022 Debenture at a weighted average conversion price of $35.52 per share. During the year ended December 31, 2023, the Company paid monthly redemption payments of $550,000 in cash, and recorded accrued interest of approximately $1.5 million in other expenses in the consolidated statements of operations. As of December 31, 2023, the fair value of the suite of bifurcated embedded derivative features was $0.

During the year ended December 31, 2023, the Company recognized an extinguishment loss on voluntary conversions of the 2022 Debenture of approximately $1.1 million, and a loss on debt extinguishment totaling $0.6 million upon monthly redemptions of the 2022 Debenture and the December 2023 modification, which are presented in the expenses in the consolidated statements of operations.

On February 27, 2024, in connection with the issuance of an additional warrant to Alpha with an exercise price of $13.00 per share, and pursuant to certain antidilution provisions in the 2022 Debenture, the Conversion Price of the 2022 Debenture was reduced from $36.50 per share to $13.00 per share.

During the year ended December 31, 2024, the Company issued a total of 45,496 shares of common stock to Alpha in lieu of cash for monthly redemption payments totaling $660,000 due on the 2022 Debenture at a weighted average conversion price of $14.51 per share, resulting in a net loss on debt extinguishment of approximately $209,000 in other expenses on the consolidated statements of operations. No redemption payments were paid in cash during the year ended December 31, 2024. Interest expense on the 2022 Debenture was approximately $162,000 for the year ended December 31, 2024, of which approximately $120,000 was attributable to discount amortization), which is reported in other expenses in the consolidated statement of operations.

In June and July 2024, Alpha voluntarily converted the aggregate remaining principal of the 2022 Debenture of $758,922, extinguishing the Company’s obligations in full with respect to the 2022 Debenture and suite of bifurcated embedded derivative features. As a result of such voluntary conversions, the Company issued a total of 58,378 shares of common stock at a weighted average conversion price of $13.00. The Company recorded a gain on voluntary conversions of approximately $85,000 during the year ended December 31, 2024. As of December 31, 2024, there wereno amounts outstanding under the 2022 Debenture.

2024 Alpha Debenture (Related party)

On February 27, 2024, pursuant to a Securities Purchase Agreement executed with Alpha on February 27, 2024 (the “2024 Securities Purchase Agreement”) we issued to Alpha an 8% Convertible Debenture (the “2024 Alpha Debenture”) with a principal amount of $550,000, for a gross purchase price of $500,000 less expenses. The 2024 Alpha Debenture carried a maturity date of December 31, 2024 and was convertible, at any time, and from time to time, at Alpha’s option, into shares of common stock of the Company, at a conversion price initially equal to $30.56 per share, subject to adjustment as described in the 2024 Alpha Debenture. Upon the closing of the public offering on September 6, 2024 per the terms of the antidilution provisions in the 2022 Debenture, the conversion price of the 2024 Alpha Debenture was reduced from $30.56 to $6.50 per share. The 2024 Alpha Debenture accrued interest on its outstanding principal balance at the rate of 8% per annum, payable at maturity. In connection with this issuance, we also issued to Alpha a noncompensatory equity classified 5-year common stock purchase warrant (the “2024 Alpha Warrant”) to purchase 18,001 shares of our common stock at an exercise price initially equal to $13.00 per share (see Note 13 - Stockholders Equity (Deficit)).

Pursuant to the 2024 Securities Purchase Agreement, we also granted to Alpha an option (the “Option”), exercisable until July 1, 2024, to purchase from us an additional 8% Convertible Debentures, of like tenor, with a face amount of up to $1.1 million (and with a proportional number of accompanying common stock warrants of like tenor, up to a total of 36,001 additional warrants), for a purchase price of $1.0 million.

The Company evaluated the terms of the 2024 Securities Purchase Agreement and determined that the 2024 Alpha Warrant and the Option issued to Alpha are each considered freestanding financial instruments. The 2024 Alpha Warrant was further determined to initially (i) be indexed to the Company’s own stock, and (ii) meet all of the additional criteria for permanent equity classification. As the Option required the Company to issue convertible debt with multiple cash settlement alternatives, the Option was classified as a liability and recognized at fair value, with subsequent changes in fair value recognized in earnings.

The net proceeds from the issuance of the 2024 Alpha Debenture were allocated first to the liability-classified Option and the bifurcated embedded features in the 2024 Alpha Debenture (conversion option, contingent acceleration upon an Event of Default, and contingent interest upon an Event of Default), with the resulting difference, if any, allocated to the loan host instrument and the equity-classified warrant on a relative fair value basis. The fair value of the Option was estimated to be $0.8 million at issuance, and the suite of bifurcated embedded derivative features was $0.08 million. As the fair value of the liability-classified instruments and features exceeded the net proceeds received, the Company recognized a loss on issuance of convertible debt of $0.4 million, presented in other expenses in the consolidated statements of operations. As a result, the Company recorded a debt discount at the maximum amount equal to the principal of $550,000, which was amortized as additional interest expense over the expected term of the 2024 Alpha Debenture.

On September 9, 2024 we issued 7,842 shares of common stock upon Alpha’s partial voluntary conversion of the 2024 Alpha Debenture at a conversion price of $6.50 per share for a total of $50,979 in principal. The Company recognized a loss on partial voluntary conversion of approximately $29,000.

During the year ended December 31, 2024, interest expense on the 2024 Alpha Debenture was approximately $486,000, of which approximately $473,000 was attributable to discount amortization), which is reported in other expenses in the consolidated statements of operations.

On November 20, 2024, in connection with the closing of the Company’s private placement transaction and issuance of Series A-2 Preferred Stock, the Company used $530,839 of the proceeds to repay the outstanding principal and accrued interest on the Alpha Debenture, in full settlement of the obligation. The Company recognized a debt extinguishment loss of $68,000 on the settlement date, representing the difference between (i) the cash reacquisition price, and (ii) the net carrying value of the debt, inclusive of unamortized discounts and issuance costs and the fair value of the associated suite of bifurcated derivative liabilities on the settlement date. As of December 31, 2024, there wereno amounts outstanding under the 2024 Alpha Debenture.

2024 Chen Debenture (Related party)

In April 2024, Alpha assigned the Option to Yi Hua Chen (“Chen”) and Chen exercised the option in full, in exchange for $1,000,000, less expenses, we issued to Chen an 8% Convertible Debenture (the “2024 Chen Debenture”) with a principal amount of $1,100,000. The 2024 Chen Debenture carried a maturity date of December 31, 2024 and was convertible, at any time, and from time to time, at Chen’s option, into shares of common stock of the Company at a conversion price initially equal to $30.56 per share, subject to adjustment as described in the 2024 Chen Debenture. Upon the closing of the public offering on September 6, 2024 per the terms of the antidilution provision, the conversion price of the 2024 Chen Debenture was reduced from $30.56 to $6.50 per share. The 2024 Chen Debenture accrues interest on its outstanding principal balance at the rate of 8% per annum, payable at maturity. In connection with this issuance, we also issued to Chen a 5-year liability classified common stock purchase warrant (the “2024 Chen Warrant”) to purchase 36,001 shares of our common stock at an exercise price initially equal to $13.00 per share (see Note 8 - Warrant Liabilities).

The Company evaluated the terms of the 2024 Chen Debenture and the 2024 Chen Warrant and determined that the 2024 Chen Warrant was considered a freestanding financial instrument. The 2024 Chen Warrant was further determined to be indexed to the Company’s own stock. However, the 2024 Chen Warrant failed to meet the additional criteria for permanent equity classification due to a lack of authorized shares available to settle the instrument, as the Company was required to obtain shareholder approval to issue all shares underlying the 2024 Securities Purchase Agreement to comply with the rules of Nasdaq. The Company has adopted a sequencing approach under ASC 815-40,Derivatives and Hedging - Contracts in Entity’s Own Equity to determine the classification of its contracts at issuance and at each subsequent reporting date, whereby shares are allocated based on the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving the first allocation of shares. In the event of identical issuance dates, shares are then allocated beginning with instruments with the latest maturity date first. Pursuant to this sequencing approach, as of April 27, 2024, we determined that the authorized shares were sufficient to settle the 2024 Alpha Warrant and was therefore classified in equity. The Company determined the remaining shares were not sufficient to settle the 2024 Chen Warrant and therefore classified as a liability at fair value, with subsequent changes in fair value recognized in earnings, until such shareholder approval was obtained on October 25, 2024 (see Note 8 - Warrant Liabilities).

The net proceeds from the issuance of the 2024 Chen Debenture, inclusive of the fair value of the settled Option on April 12, 2024 of $0.7 million, was first allocated to the liability-classified 2024 Chen Warrant and the bifurcated embedded features in the 2024 Chen Debenture, with the resulting difference, if any, allocated to the loan host instrument. As a result, the fair value of the 2024 Chen Warrant at issuance of $0.6 million at issuance and the suite of bifurcated embedded derivative features of $0.03 million comprised the initial debt discount, which was amortized to interest expense over the expected term of the 2024 Chen Debenture using the effective interest method, in accordance with ASC 835-30.

During the year ended December 31, 2024, interest expense on the 2024 Chen Debenture was approximately $78,000, of which approximately $23,000 was attributable to discount amortization), which is reported in other expenses in the consolidated statements of operations.

On November 20, 2024, in connection with the closing of the Company’s private placement transaction and issuance of Series A-2 Preferred Stock, on November 18, 2024, the Company and Chen executed an Exchange Agreement (the “Exchange Agreement”), agreeing to convert all outstanding principal and accrued interest on the 2024 Chen Debenture as of November 20, 2024 (totaling approximately $1,154,000), in exchange for 1,154 shares of newly designated Series A-2 Preferred Stock, in full settlement of the Company’s obligations with respect to the Chen Debenture. The Company recognized a debt extinguishment gain of $13,000 upon conversion, representing the difference between (i) the reacquisition price, consisting of the fair value of the preferred shares issued, and (ii) the net carrying value of the debt, inclusive of unamortized discounts and issuance costs and the fair value of the associated suite of bifurcated derivative liabilities on the settlement date. As of December 31, 2024, there wereno amounts outstanding under the 2024 Chen Debenture.

Convertible debt is comprised of the following as of December 31, 2024 and December 31, 2023:

A reconciliation of the beginning and ending balances for the derivative liabilities arising from the issuance of convertible debt is as follows for the year ended December 31, 2024:

The value of the derivative liabilities was estimated based on valuations received from an independent valuation firm determined using a Monte-Carlo simulation or a binomial lattice model. For volatility, the Company considers comparable public companies as a basis for its expected volatility to calculate the fair value of derivative liabilities and transitions to its own volatility as the Company develops sufficient appropriate history as a public company. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the debt. The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future. Any significant changes in the inputs may result in significantly higher or lower fair value measurements.

As of December 31, 2024, no derivative liabilities measured at fair value using significant unobservable inputs are outstanding.

NOTE 10 —EARNINGS (LOSS) PER SHARE

Basic loss per share (“EPS”) is computed by dividing net loss including deemed dividends by the weighted-average number of common shares outstanding plus unexercised pre-funded warrants. Diluted EPS is computed based on the sum of the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from preferred stock, convertible debt, stock options and warrants.

These potentially dilutive securities have been excluded from diluted net loss per share as of December 31, 2024 and 2023 because their effect would be anti-dilutive:

The following potentially dilutive securities have been excluded from diluted net loss per share as of December 31, 2024 and 2023 because their effect would be anti-dilutive:

NOTE 11 —COMMITMENTS AND CONTINGENCIES

Litigation and Other Legal Proceedings

On January 29, 2025, the Company was named as a defendant in an action brought by LifeSci Capital LLC (“LifeSci”) in the U.S. District Court for the Southern District of New York. The complaint alleges that the Company failed to pay $503,483 in connection with offerings of the Company’s common stock that occurred during the tail period of the agreement, pursuant to an engagement under which the Company retained LifeSci to serve as its placement agent and financial advisor.

The Company filed its answer on March 17, 2025, denying the material allegations in the complaint and asserting various affirmative defenses. As of May 29, 2025, the matter is in the discovery phase.

The Company disputes that any amount is owed and is vigorously defending the lawsuit. Based on the current stage of the proceedings and the information available at this time, the Company does not believe a loss is probable or reasonably estimable.

NOTE 12 —RESEARCH AND LICENSE AGREEMENTS

UCL Business Limited

In January 2022, the Company entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) The program’s lead compound is now being developed at the Company under the name QN-302 as a candidate for treatment for pancreatic ductal adenocarcinoma, which represents the vast majority of pancreatic cancers. The License Agreement required a $150,000 upfront payment, reimbursement of past patent prosecution expenses (approximately $160,000), and (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments and a percentage of any non-royalty sublicensing consideration paid to the Company.

For the years ended December 31, 2024 and 2023 there were license costs of $2,000 and approximately $128,000, respectively, related to this agreement which are included in research and development expenses in the consolidated statements of operations and other comprehensive loss.

QN-302 Phase 1 Study

In June 2023, the Company entered into a Master Clinical Research Services Agreement with Translational Drug Development, LLC (“TD2”) whereby TD2 agreed to perform certain clinical research and development services for the Company including but not limited to trial management, side identification and selection, site monitoring/management, medical monitoring, project management, data collection, statistical programming or analysis, quality assurance auditing, scientific and medical communications, regulatory affairs consulting and submissions, strategic consulting, and/or other related services. From time to time, the Company may enter into statements of work with TD2 for the performance of specific services under this Master Clinical Research Services Agreement.

In June 2023, the Company entered into a Master Laboratory Services Agreement with MLM Medical Labs, LLC (“MLM”) whereby MLM agreed to perform certain clinical research and development services for the Company including but not limited to laboratory, supply, testing, validation, data management, and storage services. From time to time, the Company may enter into work orders with MLM for the performance of specific services under this Master Laboratory Services Agreement.

In June 2023, the Company entered into a Master Services Agreement with Clinigen Clinical Supplies Management, Inc. (“Clinigen”) whereby Clinigen agreed to provide certain pharmaceutical products and/or services. From time to time, the Company may enter into statements of work with Clinigen for the performance of specific services under this Master Services Agreement.

In July 2023, pursuant to the above agreements, the Company entered into work orders and statements of work for clinical trial services for the conduct of the QN-302 Phase 1 study. Given our financial situation, the company slowed the development of the QN-302 Phase 1 Study beginning in the second quarter of 2024.

University of Louisville Research Foundation

In March 2019, the Company entered into a sponsored research agreement and an option for a license agreement with University of Louisville Research Foundation, Inc. (“ULRF”) for development of several small-molecule RAS interaction inhibitor drug candidates. Under the terms of this agreement, the Company agreed to reimburse ULRF for sponsored research expenses of initially up to $693,000 for this program. This agreement was amended in February 2021, March 2022 and August 2023, with the current term of this agreement expired in December 2023 and the aggregate amount that the Company would reimburse ULRF for sponsored research expenses increased to approximately $2.9 million. In July 2020, the Company entered into an exclusive license agreement with ULRF for RAS interaction inhibitor drug candidates. Under the agreement, the Company took over development, regulatory approval and commercialization of the candidates from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received approximately $112,000 for an upfront license fee and reimbursement of prior patent costs. In addition, the Company has agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the licensed patent, and 2.5% (on net sales for any sales not covered by Licensed Patents), (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to July 2020, and (iv) payments ranging from $50,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic indication would be $50,000 for first dosing in a Phase 1 clinical trial, $100,000 for first dosing in a Phase 2 clinical trial, $150,000 for first dosing in a Phase 3 clinical trial, $300,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales. The Company also must pay ULRF shortfall payments if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $20,000 to $100,000) for such year.

Sponsored research expenses related to these agreements for the years ended December 31, 2024 and 2023 were $0 and $743,000. License costs were approximately $68,000 and $133,000 related to these agreements for the years ended December 31, 2024 and 2023, respectively, and are included in research and development expenses in the consolidated statements of operations and other comprehensive loss.

Between June 2018 and April 2022, the Company entered into license and sponsored research agreements with ULRF for QN-247, a novel aptamer-based compound that has shown promise as an anticancer drug. Under the agreements, the Company took over development, regulatory approval and commercialization of the compound from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received a $50,000 convertible promissory note in payment of an upfront license fee, which was subsequently converted into the Company’s common stock, and the Company agreed to reimburse ULRF for sponsored research expenses of up to approximately $805,000 and prior patent costs of up to $200,000. In addition, the Company agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization of anti-nucleolin agent-conjugated nanoparticles, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the last to expire of the licensed patents, (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to June 2018, and (iv) payments ranging from $100,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic indication would be $100,000 for first dosing in a Phase 1 clinical trial, $200,000 for first dosing in a Phase 2 clinical trial, $350,000 for first dosing in a Phase 3 clinical trial, $500,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales. The Company also agreed to pay another $500,000 milestone payment for any additional regulatory marketing approval for each additional therapeutic (or diagnostic) indication. The Company must also pay ULRF shortfall payments if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $10,000 to $50,000) for such year.

The sponsored research agreement for QN-247 expired in August 2022 and there wereno sponsored research expenses related to these agreements for the years ended December 31, 2024 and 2023. License costs related to these agreements for the years ended December 31, 2024 and 2023 were approximately $1,000 and $23,000, respectively, and are included in research and development expenses in the consolidated statements of operations and other comprehensive loss.

Marizyme

On April 11, 2024, we entered into a Co-Development Agreement with Marizyme. Under the Co-Development Agreement (as amended), we agreed to pay Marizyme Funding Payments and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024, and is included in research and development expenses in the consolidated statements of operations and other comprehensive loss. The Exclusivity Fee entitled us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payments are designed to provide financial support for commercialization of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. In return for the Funding Payments we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payments provided. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States. During the year ended December 31, 2024, the Company advanced $2,257,400 to Marizyme, against which Marizyme had previously delivered demand promissory notes to the Company. Accrued interest related to the Marizyme Notes was $113,292 and interest income of this amount was recognized, and a $360,000 loan loss reserve was recorded in other income in the consolidated statement of operations (see Note 4 - Short Term Notes Receivable).

NOTE 13 —STOCKHOLDERS’ EQUITY (DEFICIT)

As of December 31, 2024 and 2023, the Company had two classes of authorized capital stock: common stock and preferred stock.

Common Stock

Holders of common stock generally vote as a class with the holders of the preferred stock and are entitled to one vote for each share held. Subject to the rights of the holders of the preferred stock to receive preferential dividends, the holders of common stock are entitled to receive dividends when and if declared by the Board of Directors. Following payment of the liquidation preference of the preferred stock, any remaining assets will be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of any preferred stock upon liquidation, dissolution or winding up of the affairs of the Company. The holders of common stock have no preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions.

At December 31, 2024, the Company has reserved 3,593,702 shares of authorized but unissued common stock for possible future issuance as follows:

Preferred Stock

There are a total of 15,000,000 shares of Preferred Stock authorized. On November 18, 2024 a Certificate of Designation for 10,000 shares of Series A-2 Preferred Stock was filed.

On November 20, 2024 in a private placement transaction, the Company sold and issued to certain institutional and accredited investors 5,102 shares of the newly designated Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred Stock”), at a purchase price of $1,000 per share, for an aggregate purchase price of $5.1 million. The Company also entered into an Exchange Agreement with Yi Hua Chen on November 18, 2024, pursuant to which it issued 1,154 shares of Series A-2 Preferred Stock in full settlement of the outstanding balance of the 2024 Chen Debenture of approximately $1.15 million. At December 31, 2024 the Company had 6,256 shares of Series A-2 preferred stock outstanding.

At December 31, 2023, there wereno shares of preferred stock outstanding.

The shares of Series A-2 Preferred Stock have the rights, preferences, powers, restrictions and limitations as set forth below.

Conversion Rights – Each share of Series A-2 Preferred Stock is convertible at any time, at the option of the holder, into a number of shares of common stock equal to $1,000 (the “Stated Value”), divided by a conversion price initially equal to $3.64, subject to adjustment for any stock splits, stock dividends and similar events (the “Conversion Price”). The Conversion Price is also subject to “ratchet” antidilution adjustments if the Company at any time while the Series A-2 Convertible Preferred Stock is outstanding issues common stock or common stock equivalents at a lower effective price per share than the then-effective Conversion Price, in all cases subject to a floor price of $1.82. Conversion of the Series A-2 Convertible Preferred Stock will be prohibited if, as a result of such conversion, the holder, together with its affiliates, would beneficially own more than 4.99% (or 9.99% at the option of the holder) of the total number of shares of the Company’s common stock issued and outstanding. The Conversion Price at December 31, 2024 was $3.64.

Liquidation Preference – Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders shall be entitled to an amount equal to the Stated Value for each share of Series A-2 Preferred Stock before any distribution or payment shall be made to the holders of common stock.

Voting Rights – The holders of Series A-2 Preferred Stock are entitled to vote, together as a single class with the common stock, on all matters presented to the common stockholders for a vote. Each share of Series A-2 Preferred Stock is entitled to a number of votes equal to the number of shares into which such share of Series A-2 Preferred Stock would be convertible, as of the record date for determination of stockholders entitled to vote as to such matter, if the conversion price was equal to the “Minimum Price” (as defined in Nasdaq Listing Rule 5635(d)) as of November 20, 2024, taking into account for such purposes the beneficial ownership limitation as then in effect.

Dividends – The holders of Series A-2 Preferred Stock are entitled to receive dividends, if and when such dividends are paid to holders of common stock, in the same form and at the same time on an as-converted to common stock basis.

Protective Provisions – At all times while the Series A-2 Preferred Stock are outstanding, without the consent of the holders of at least 67% of the Stated Value of the then-outstanding Series A-2 Preferred Stock, the Company is prohibited from amending its charter documents in any manner that adversely affects the rights of the Series A-2 Preferred Stock, repurchase junior securities of the Company, pay cash dividends or distributions on junior securities of the Company, or enter into a material transactions with an affiliate of the Company (unless it is at arm’s length and expressly approved by a majority of the disinterested directors).

Stock Options and Warrants

Stock Options

The Company recognizes all compensatory share-based payments as compensation expense over the service period, which is generally the vesting period.

In April 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of incentive or non-statutory common stock options and other types of awards to qualified employees, officers, directors, consultants and other service providers. At December 31, 2024 and 2023, there were 1,870 and 7,978 outstanding stock options, respectively, under the 2020 Plan and on such dates there were 13,244 and 7,136 shares reserved under the 2020 Plan, respectively, for future grant.

The following represents a summary of the options granted to employees and non-employee service providers that were outstanding at December 31, 2024, and changes during the twelve-months then ended:

The following represents a summary of the options granted to employees and non-employee service providers that were outstanding at December 31, 2023 , and changes during the twelve months then ended:

There were approximately $128,000 and $1.1 million of compensation costs related to outstanding options for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was approximately $5,000 of total unrecognized compensation cost related to unvested stock-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 0.58 years.

The exercise price for an option issued under the 2020 Plan is determined by the Board of Directors, but will be (i) in the case of an incentive stock option (A) granted to an employee who, at the time of grant of such option, is a 10% stockholder, no less than 110% of the fair market value per share on the date of grant; or (B) granted to any other employee, no less than 100% of the fair market value per share on the date of grant; and (ii) in the case of a non-statutory stock option, no less than 100% of the fair market value per share on the date of grant. The options awarded under the 2020 Plan will vest as determined by the Board of Directors but will not exceed a ten-year period. A forfeiture is recognized as incurred if the option holder does not exercise after 90 days following termination of service.

Fair Value of Equity Awards

The Company utilizes the Black-Scholes option pricing model to value awards under its equity plans. Key valuation assumptions include:

There were no options granted during the years ended December 31, 2024 and 2023.

The Company recorded share-based compensation expense and classified it in the consolidated statements of operations as follows:

Equity Classified Compensatory Warrants

As part of the May 2020 reverse recapitalization transaction, the Company issued equity classified compensatory common stock warrants to an advisor and its designees. In addition, various service providers hold equity classified compensatory common stock warrants issued in 2017 and earlier (originally exercisable to purchase Series C convertible preferred stock, and now instead exercisable to purchase common stock). These are to be differentiated from the Series C Warrants described in Note 8 – Warrant Liabilities.

On February 27, 2024, as a result of a down-round provision triggered by a Securities Purchase Agreement with Alpha for the purchase of the February 2024 Debenture,1,353 warrants were repriced from $36.50 per share exercise price to $13.50 per share exercise price. The increase in fair value of $9,737 for the modification of these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. On September 6, 2024 as a result of a down-round provision triggered by shares sold in the public offering, these 1,353 warrants were repriced again from $13.50 per share exercise price to $6.50 per share exercise price. The increase in fair value of $2,299 for the modification of these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.

On November 20, 2024, the Company closed its private placement transaction resulting in the issuance of newly designated Series A-2 Preferred Stock. As a result of the issuance of a new class of voting securities, the Company evaluated its equity classified compensatory warrants’ respective terms, and concluded that compensatory warrants to purchase 1,353 common shares with a weighted average exercise price of $6.50 and a fair value of $904 were required to be reclassified to liabilities as of November 20, 2024.

No new compensatory warrants were issued during the years ended December 31, 2024 or 2023.

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2024:

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2023:

There was $12,036 in compensation costs related to outstanding warrants for the year ended December 31, 2024 and $7,945 for the year ended December 31, 2023. As of December 31, 2024 and 2023, there was no unrecognized compensation cost related to nonvested warrants.

Noncompensatory Equity Classified Warrants

On May 22, 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to Alpha for the purchase of common stock, of which warrants for 141 common shares remain outstanding and exercisable as of December 31, 2024 and may be exercised in whole or in part, at any time before May 22, 2025.

On December 22, 2022, in conjunction with the issuance of a debenture to Alpha (see Note 9 – Convertible Debt), the Company issued to Alpha a warrant to purchase 50,000 shares of the Company’s common stock. The exercise price of this warrant was initially $82.50, and may be exercised in whole or in part, on or after June 22, 2023 and at any time before June 22, 2028. On December 5, 2023, the Company entered into an Amendment No. 1 with regard to the related Securities Purchase Agreement, with Alpha. This Amendment reduced the Exercise Price of the December 22, 2022 warrant from $82.50 per share to $36.50 per share. The Amendment also revised certain provisions of the warrant which resulted in reclassification of the warrant from liabilities to equity during the year ended December 31, 2023.

On February 27, 2024 the Company entered into a new Securities Purchase Agreement with Alpha for the purchase of the February 2024 Debenture (see Note 9 – Convertible Debt). This Securities Purchase Agreement resulted in the reduction of the exercise price of the December 22, 2022 warrant and the May 2020 warrant from $36.50 per share to $13.00 per share. The company recognized a deemed dividend of $60,017, which represents the incremental fair value of the outstanding warrants as a result of the down-round provision. As the Company has an accumulated deficit, the deemed dividend was recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the consolidated statements of changes in stockholders’ equity. In addition, on February 27, 2024, the Company issued to Alpha a warrant to purchase 18,001 shares of the Company’s common stock at an exercise price of $13.00 per share, which may be exercised in whole or in part, at any time before February 27, 2029.

On September 6, 2024 as a result of the down-round provision triggered by shares sold in a public offering, the above warrants were repriced from $13.00 per share exercise price to $6.50 per share exercise price. The company recognized an additional deemed dividend of $27,587, which represents the incremental fair value of the outstanding warrants as a result of the down-round provision. As the Company has an accumulated deficit, the deemed dividend was recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the consolidated statements of changes in stockholders’ equity (deficit).

As a result of a partial voluntary conversion of the 2024 Alpha Debenture on September 9, 2024, the Company no longer had sufficient shares to settle the 2024 Alpha Warrant in full until shareholder approval was obtained, and a portion (2,314 warrant shares with a fair value of $14,997) was reclassified to liabilities (see Note 8 – Warrant Liabilities). Shareholder approval was subsequently obtained on October 25, 2024, and as of that date, the Company determined that shareholder approval resulted in equity classification for the warrant again and, accordingly, the Company remeasured the warrant liability to fair value, and reclassified to noncompensatory equity classified warrants.

On September 6, 2024, upon the closing of a public offering, the Company issued pre-funded warrants to purchase 239,456 common shares at a price of $6.45 per share with an exercise price of $0.05 per share (the “pre-funded warrants”). The pre-funded warrants are exercisable upon issuance and will remain exercisable until all the pre-funded warrants are exercised in full. Pre-funded warrants for 188,257 common shares were exercised during the year ended December 31, 2024. At December 31, 2024 pre-funded warrants for 51,199 common shares remained outstanding.

On September 6, 2024, upon the closing of a public offering,16,019 warrants were issued to the placement agent. These warrants were not exercisable until March 5, 2025 and expire on September 6, 2029.

On November 20, 2024, the Company closed its private placement transaction resulting in the issuance of newly designated Series A-2 Preferred Stock. As a result of the issuance of a new class of voting securities, the Company evaluated its equity classified noncompensatory warrants’ respective terms, and concluded that non-compensatory warrants for 67,359 common shares with a weighted average exercise price of $1.91 and an aggregate fair value of $246,357 were required to be reclassified to liabilities as of November 20, 2024.

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2024:

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2023:

NOTE 14 —RELATED PARTY TRANSACTIONS

Convertible Debt

On December 22, 2022, the Company issued to Alpha, an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022. As of December 31, 2023, the remaining principal balance was $1,418,922. During the year ended December 31, 2024, the remaining principal balance of this Debenture was converted into 103,876 shares of common stock of the Company, at a weighted average price of $13.66 per share.

On February 27, 2024, the Company issued to Alpha, an 8% Convertible Debenture in the principal amount of $550,000 for a purchase price of $500,000 less expenses pursuant to the terms of a Securities Purchase Agreement dated February 26, 2024. During the year ended December 31, 2024, a principal amount of $50,979 of this Debenture was converted into 7,846 shares of common stock of the Company, at a weighted average price of $6.50 per share. On November 20, 2024 the Company paid to Alpha in cash the remaining principal amount of $499,021 plus outstanding accrued interest of $31,818.

On April 12, 2024, the Company issued to Chen an 8% Convertible Debenture with a principal amount of $1,100,000 for a purchase price of $1,000,000 less expenses pursuant to the terms of a Securities Purchase Agreement dated February 26, 2024. The Company entered into an Exchange Agreement with Yi Hua Chen on November 18, 2024, pursuant to which it issued 1,154 shares of Series A-2 Preferred Stock in full settlement of the outstanding balance of the 2024 Chen Debenture of approximately $1.15 million (see Note 13 — Stockholders Equity (Deficit)).

See Note 9 – Convertible Debt for additional information concerning convertible debt – related party transactions.

Warrants

On May 22, 2020, as a commitment fee, the Company issued warrants to Alpha for the purchase of common stock. As of December 31, 2024,141 of these warrants remain outstanding and exercisable, and may be exercised in whole or in part, at any time before May 22, 2025. During years ended December 31, 2024 and 2023 there wereno exercises of this warrant. This warrant was equity classified as of December 31, 2023 and was reclassified to warrant liabilities during the year ended December 31, 2024 (see Note 8 - Warrant Liabilities).

On December 22, 2022, in conjunction with the issuance of a debenture to Alpha, the Company issued to Alpha a warrant to purchase 50,000 shares of the Company’s common stock. This warrant may be exercised by Alpha, in whole or in part, on or after June 22, 2023 and at any time before June 22, 2028, subject to certain terms and conditions described in the warrant. During the year ended December 31, 2024, Alpha partially exercised this warrant to purchase 31,998 shares respectively, of the Company’s common stock at a weighted average exercise price of $13.00, for total cumulative proceeds to the Company of $416,000. During the year ended December 31, 2023, there wereno exercises of this warrant. This warrant is included in equity on the Company’s consolidated balance sheets (see Note 13 – Stockholders’ Equity (Deficit)).

On February 27, 2024, in conjunction with the issuance of a debenture to Alpha, the Company issued to Alpha, a warrant to purchase 18,001 shares of the Company’s common stock, exercisable in whole or in part, until February 27, 2029, subject to certain terms and conditions described in the warrant.

On September 6, 2024 as a result of the down-round provision triggered by shares sold in a public offering, the above warrants were repriced from $13.00 per share exercise price to $6.50 per share exercise price. The company recognized an additional deemed dividend of $27,587, which represents the incremental fair value of the outstanding warrants as a result of the down-round provision. As the Company has an accumulated deficit, the deemed dividend was recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the consolidated statements of changes in stockholders’ equity (deficit).

As a result of a partial voluntary conversion of the 2024 Alpha Debenture on September 9, 2024, the Company no longer had sufficient shares to settle the 2024 Alpha Warrant in full until shareholder approval was obtained, and a portion (2,314 warrant shares with a fair value of $14,997) was reclassified to liabilities (see Note 8 – Warrant Liabilities). Shareholder approval was subsequently obtained on October 25, 2024, and as of that date, the Company determined that shareholder approval resulted in equity classification for the warrant again and, accordingly, the Company remeasured the warrant liability to fair value, and reclassified to noncompensatory equity classified warrants.

During the year ended December 31, 2024, there were no exercises of this warrant. This warrant is included in equity on the Company’s consolidated balance sheets (see Note 13 – Stockholders’ Equity (Deficit)).

As of December 31, 2024, the exercise price of all of the above warrants issued to Alpha was $6.50.

On April 12, 2024, in connection with the issuance of a debenture to Chen (see Note 9 – Convertible Debt), the Company issued a liability classified warrant to Chen to purchase 36,001 shares of common stock, exercisable until February 27, 2029. On September 6, 2024, as a result of a down-round provision triggered by shares sold in a public offering, the warrant was repriced from an exercise price of $13.00 per share to an exercise price of $6.50 per share. The warrant was initially liability classified due to an insufficient number of authorized shares to settle the warrant prior to the receipt of shareholder approval, which was subsequently obtained on October 25, 2024. As of that date, the Company determined that shareholder approval resulted in equity classification for the warrant and accordingly, the Company remeasured the warrant liability to fair value, and reclassified to noncompensatory equity classified warrants (see Note 13 – Stockholders Equity (Deficit)). The fair value of this warrant was $565,582 on the issuance date and $185,531 on the date of reclassification to equity. During the year ended December 31, 2024, the Company recorded a gain on change in fair value of warrant liabilities of $380,051 for this warrant.

NOTE 15 —INCOME TAXES

The following table presents domestic and foreign components of consolidated loss before income taxes from continuing operations for the periods presented:

A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:

The components of deferred tax assets and liabilities are as follows:

During 2024 and 2023, the aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows:

Based on the available objective evidence, including the Company’s history of cumulative losses, management believes it is likely that the Company’s U.S. federal and state net deferred tax assets will not be realizable. Accordingly, the Company provided for a full valuation allowance against its U.S. federal and state net deferred tax assets at December 31, 2024, and December 31, 2023.

Due to the full valuation allowance already in place on the Company’s U.S. federal and state net deferred tax assets, the Company does not anticipate significant changes in the Company’s effective tax rate.

The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research or experimental (“R&E”) expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&E expenditures that are paid or incurred in connection with their trade or business which represent costs in the experimental or laboratory sense. Specifically, costs for U.S. based R&E activities must be amortized over five years and costs for foreign R&E activities must be amortized over 15 years; both using a midyear convention. The Company has incorporated the impact of this new tax legislation into its 2022, 2023, and 2024 consolidated financial statements, noting that the impact on the Company’s consolidated financial statements was immaterial.

At December 31, 2024, the Company has U.S. federal and state net operating loss carryforwards of approximately $5,946,000 and $5,403,000, respectively, which are available to offset future taxable income. U.S. federal net operating loss carryforwards can be carried forward indefinitely. State net operating loss carryovers begin to expire in 2043.

The Company’s net operating loss and tax credit carryforwards may be subject to an annual limitation under sections 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), and similar state provisions if the Company experienced one or more ownership changes, which would limit the amount of net operating loss and tax credit carryforwards that may be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by section 382, results from equity shifts that increase ownership of certain stockholders or public groups in the stock of the corporation of more than 50% over a three-year period. As a result of the May 2020 reverse recapitalization transaction, a section 382 ownership change has occurred. Prior to the reverse recapitalization transaction, the Ritter business was discontinued resulting in any pre-ownership change net operating loss and tax credit carryforwards becoming fully limited under section 382. The pre-ownership change net operating losses and tax credit carryforward DTAs are considered worthless and have been written-off the deferred tax table presented above. Subsequent ownership changes may have also occurred due to the Company’s equity activity in recent years. The Company has not completed an Internal Revenue Code Section 382 analysis. As a result, there could be additional limitations on the Company’s ability to utilize its net operating loss and tax credit carryforwards. These additional limitations may result in both a permanent loss of certain tax benefits related to net operating loss and tax credit carryforwards, and an annual utilization limitation.

The Company also has research and development credit carryforwards for federal and state tax purposes of approximately $323,000 and $235,000, respectively. The research and development credit carryforwards begin to expire in 2043 for federal tax purposes and have an indefinite life for state tax purposes.

The Company files income tax returns in the U.S. federal jurisdiction and in California. The Company’s U.S. federal income tax returns remain subject to examination by the Internal Revenue Service. The Company’s California income tax returns remain subject to examination by the California Franchise Tax Board. Due to net operating losses, research and development credits and other tax credit carryforwards that may be utilized in future years, all U.S. federal and state tax years are open to examination.

Generally accepted accounting principles clarify the accounting for uncertainty in income taxes recognized in the Company’s financial statements and prescribe thresholds for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provide guidance on de-recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company adopted these provisions effective April 1, 2009.

The Company had unrecognized tax benefits of $279,105 as of December 31, 2024. Due to the existence of the valuation allowance, future changes in unrecognized tax benefits would have no effect on the Company’s effective tax rate. The Company does not foresee any material changes over the next 12 months. In accordance with generally accepted accounting principles, the Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2024, the Company has not accrued any interest or penalties related to uncertain tax positions.

NOTE 16 —SUBSEQUENT EVENTS

From January through April 2025, a total of 3,272.5 shares of Series A-2 Preferred Stock were converted into 899,044 shares of common stock at a conversion price of $3.64 per share.

From January through June 2025, we borrowed a total of $3,470,000 from eight investors as short-term borrowings, each due within six months after the date of borrowing.

From January through June 2025, an additional $1,518,500 was advanced to Marizyme against which Marizyme delivered demand promissory notes to the Company of like principal amounts with terms similar to the Marizyme Notes described in Note 4 - Short Term Notes Receivable.