Xenetic Biosciences, Inc.

Previous wording

In some cases, these statements may be identified by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “seek,” “approximately,” “intend,” “predict,” “potential,” “projects,” “upcoming”, “opportunity”, “target” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, the levels of activity, performance or achievements. These statements involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance or achievements to be materially different from those expressed or implied by forward-looking statements.

Current wording

“anticipate,” “believe,” “estimate,” “seek,” “approximately,” “intend,” “predict,” “potential,” “projects,” “upcoming”, “opportunity”, “target” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, the levels of activity, performance or achievements. These statements involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance or achievements to be materially different from those expressed or implied by forward-looking statements.

Previous wording

We incorporate our patented and proprietary technologies into drug candidates currently under development with biotechnology and pharmaceutical industry collaborators to create what we believe will be the next-generation biologic drugs with improved pharmacological properties over existing therapeutics. Our drug candidates have resulted from our research activities or that of our collaborators and are in the development stage. As a result, we continue to commit a significant amount of our resources to our research and development activities and anticipate continuing to do so for the near future. To date, none of our drug candidates have received regulatory marketing authorization or approval in the U.S. by the Food and Drug Administration nor in any other countries or territories by any applicable agencies. We are receiving ongoing royalties pursuant to a license of our legacy PolyXen technology to an industry partner. Although we hold a broad patent portfolio, the focus of our internal efforts during the nine months ended September 30, 2025, was on the advancement of our DNase technology.

Current wording

We incorporate our patented and proprietary technologies into drug candidates currently under development with biotechnology and pharmaceutical industry collaborators to create what we believe will be the next-generation biologic drugs with improved pharmacological properties over existing therapeutics. Our drug candidates have resulted from our research activities or that of our collaborators and are in the development stage. As a result, we continue to commit a significant amount of our resources to our research and development activities and anticipate continuing to do so for the near future. To date, none of our drug candidates have received regulatory marketing authorization or approval in the U.S. by the Food and Drug Administration nor in any other countries or territories by any applicable agencies. We are receiving ongoing royalties pursuant to a license of our legacy PolyXen technology to an industry partner. Although we hold a broad patent portfolio, the focus of our internal efforts during the three months ended March 31, 2026, was on the advancement of our DNase technology.

Previous wording

We and our Board have initiated a formal strategic review process with the assistance of outside financial and legal advisors. We are considering a wide range of alternatives to maximize shareholder value, including, but not limited to, the sale of all or part of the Company or its assets or a business combination, including a “reverse merger”. An independent committee of the Board has engaged in preliminary discussions with third parties regarding potential transactions. Any such completed transaction could have a significant impact on our stockholders, including if the transaction would result in the current investors of the counterparty holding a substantial majority of our outstanding common stock following consummation of the potential transaction. Given the preliminary stage of such discussions, at this time there is no way to quantify the potential impact of a transaction, if any. There is no deadline or definitive timetable set for the completion of the strategic alternatives process, and there can be no assurance any proposal will be made or accepted, any agreement will be executed, or any transaction will be consummated in connection with this review. In addition, if we do enter into definitive agreements with respect to a potential transaction, we expect that consummation of the potential transaction would be subject to a number of conditions, including approval by our stockholders and Nasdaq, and other customary conditions, which would be out of our control and may never be satisfied. We remain committed to advancing our DNase technology and do not intend to make further announcements regarding the review process unless and until the Board approves a specific transaction or otherwise determines that further disclosure is appropriate.

Current wording

We and our Board have initiated a formal strategic review process with the assistance of outside financial and legal advisors. We are considering a wide range of alternatives to maximize shareholder value, including, but not limited to, the sale of all or part of the Company or its assets or a business combination, including a “reverse merger”. An independent committee of the Board has engaged in discussions with third parties regarding potential transactions. Any such completed transaction could have a significant impact on our stockholders, including if the transaction would result in the current investors of the counterparty holding a substantial majority of our outstanding common stock following consummation of the potential transaction. Given the current stage of such discussions, at this time there is no way to quantify the potential impact of a transaction, if any. There is no deadline or definitive timetable set for the completion of the strategic alternatives process, and there can be no assurance any proposal will be made or accepted, any agreement will be executed, or any transaction will be consummated in connection with this review. In addition, if we do enter into definitive agreements with respect to a potential transaction, we expect that consummation of the potential transaction would be subject to a number of conditions, including approval by our stockholders and Nasdaq, and other customary conditions, which would be out of our control and may never be satisfied. We remain committed to advancing our DNase technology and do not intend to make further announcements regarding the review process unless and until the Board approves a specific transaction or otherwise determines that further disclosure is appropriate.

Previous wording

Revenue for the three months ended September 30, 2025 increased by approximately $0.4 million, or 67.2%, to approximately $1.0 million from approximately $0.6 million for the three months ended September 30, 2024. This increase represented an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals Co. Ltd. (“Takeda”) as compared to the same period in 2024 primarily due to royalties recognized from certain countries during the third quarter of 2025 compared to the same period in 2024.

Current wording

Revenue for the three months ended March 31, 2026 increased by approximately $0.2 million, or 36.0%, to approximately $0.8 million from approximately $0.6 million for the three months ended March 31, 2025. This increase represented an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals Co. Ltd. as compared to the same period in 2025 primarily due to royalties recognized from certain countries during the first quarter of 2026 compared to the same period in 2025.

Previous wording

Research & development (“R&D”) expenses for the three months ended September 30, 2025 increased by approximately $0.4 million, or 105.6%, to approximately $0.8 million from $0.4 million in the comparable quarter in 2024. The table below sets forth the R&D costs incurred by the Company by category of expense for the quarters ended September 30, 2025 and 2024:

Current wording

Research & development (“R&D”) expenses for the three months ended March 31, 2026 decreased by approximately $0.2 million, or 24.8%, to approximately $0.7 million from approximately $0.9 million in the comparable quarter in 2025. The table below sets forth the R&D costs incurred by the Company by category of expense for the quarters ended March 31, 2026 and 2025:

Previous wording

The increase in outside services and contract research organizations expense was primarily due to increased manufacturing development efforts and pre-clinical research as well as increased consulting costs during the three months ended September 30, 2025 compared to the same period as last year.

Current wording

The decrease in outside services and contract research organizations expense was primarily due to a decrease in pre-clinical and exploratory study costs both partially offset by an increase in manufacturing development efforts during the three months ended March 31, 2026 compared to the same period in 2025.

Previous wording

General and administrative expenses for the nine months ended September 30, 2025 decreased by approximately $0.6 million, or 21.4%, to approximately $2.1 million from approximately $2.7 million in the comparable period in 2024. The decrease was primarily due to certain severance and benefits expensed in connection with a separation agreement entered into during the second quarter of 2024 with our former Chief Executive Officer. This decrease was partially offset by an increase in legal costs.

Current wording

General and administrative expenses for the three months ended March 31, 2026 decreased by approximately $9,000, or 1.4%, to approximately $648,000 from approximately $657,000 in the comparable quarter in 2025. The decrease was primarily due to a decrease in personnel costs and share-based expense related to our interim Chief Executive Officer substantially offset by an increase in legal expense related to our strategic review process during the first quarter of 2026 compared to the same period in 2025.

Previous wording

Other income was approximately $4,000 for the three months ended September 30, 2025 compared to approximately $1,500 of other income for the comparable quarter in 2024. This increase in other income was primarily related to favorable changes in foreign currency exchange rates during the three months ended September 30, 2025 as compared to the same period in 2024.

Current wording

Other expense was approximately $21 for the three months ended March 31, 2026 compared to approximately $78 of other income for the comparable quarter in 2025. This increase in other expense was primarily related to unfavorable changes in foreign currency exchange rates during the three months ended March 31, 2026 as compared to the same period in 2025.

Previous wording

Interest income, net decreased to approximately $31,000 during the three months ended September 30, 2025 as compared to approximately $61,000 for the same period in the prior year. This decrease is primarily due to lower average invested funds during the three months ended September 30, 2025 as compared to the same period in 2024.

Current wording

Interest income, net increased to approximately $46,000 during the three months ended March 31, 2026 as compared to approximately $39,000 for the same period in the prior year. This increase is primarily due to higher average invested funds during the three months ended March 31, 2026 as compared to the same period in 2025.

Previous wording

We incurred a net loss of approximately $2.1 million for the nine months ended September 30, 2025. We had an accumulated deficit of approximately $199.3 million at September 30, 2025, as compared to an accumulated deficit of approximately $197.2 million at December 31, 2024. Working capital was approximately $4.0 million at September 30, 2025, and approximately $5.7 million at December 31, 2024. During the nine months ended September 30, 2025, our working capital decreased by approximately $1.7 million primarily due to our net loss for the nine months ended September 30, 2025.

Current wording

We incurred a net loss of approximately $456,000 for the three months ended March 31, 2026. We had an accumulated deficit of approximately $200.3 million at March 31, 2026, as compared to an accumulated deficit of approximately $199.9 million at December 31, 2025. Working capital was approximately $6.6 million at March 31, 2026, and approximately $7.1 million at December 31, 2025, respectively. During the three months ended March 31, 2026, our working capital decreased by approximately $445,000 primarily due to our net loss for the three months ended March 31, 2026.

Previous wording

Our principal source of liquidity consists of cash. At September 30, 2025, we had approximately $4.1 million in cash and approximately $1.1 million in current liabilities. At December 31, 2024, we had approximately $6.2 million in cash and $0.9 million in current liabilities. We have historically relied upon sales of our equity securities to fund our operations.

Current wording

Our principal source of liquidity consists of cash. At March 31, 2026, we had approximately $7.3 million in cash and $1.0 million in current liabilities. At December 31, 2025, we had approximately $7.9 million in cash and $1.0 million in current liabilities. We have historically relied upon sales of our equity securities to fund our operations.

Previous wording

We evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. We have incurred substantial losses since our inception, and we expect to continue to incur operating losses in the near-term. We believe that our existing resources will be adequate to fund our operations for a period of at least twelve months from the date of the issuance of these financial statements. In addition, subsequent to quarter end, we raised approximately $3.9 million in an underwritten offering of common stock. However, we anticipate we will need additional capital in the long-term to pursue our business initiatives. While we believe we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations, related party funding, or other means to continue as a going concern, the terms, timing and extent of any future financing will depend upon several factors, including the achievement of progress in our clinical development programs, our ability to identify and enter into licensing or other strategic arrangements, our continued listing on the Nasdaq, and factors related to financial, economic, geo-political, industry and market conditions, many of which are beyond our control. The capital markets for the biotech industry can be highly volatile, which make the terms, timing and extent of any future financing uncertain.

Current wording

We evaluate whether there are conditions or events, considered in the aggregate that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. We have incurred substantial losses since our inception, and we expect to continue to incur operating losses in the near-term. We believe that our existing resources will be adequate to fund our operations for a period of at least twelve months from the date of the issuance of these financial statements. In addition, the Company raised net proceeds of approximately $4.0 million in an underwritten public offering of common stock in October 2025. However, we anticipate we will need additional capital in the long-term to pursue our business initiatives. While we believe that we will continue to have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations, related party funding, or other means to continue as a going concern, the terms, timing and extent of any future financing will depend upon several factors, including the achievement of progress in our product development programs, our ability to identify and enter into licensing or other strategic arrangements, our continued listing on Nasdaq, and factors related to financial, economic, geo-political, industry and market conditions, many of which are beyond our control. The capital markets for the biotech industry can be highly volatile, which make the terms, timing and extent of any future financing uncertain.

Previous wording

Cash flows used in operating activities for the nine months ended September 30, 2025 totaled approximately $2.0 million, which was primarily due to our net loss for the period, partially offset by non-cash charges associated with share-based expense. The decrease in other assets was due to the reclassification of long-term assets to prepaid expenses and other current assets as of September 30, 2025. In addition to the increase of $0.3 million due to the reclassification from other assets, prepaid expenses and other increased approximately $0.2 million and current liabilities increased approximately $0.2 million during the period. Cash flows used in operating activities for the nine months ended September 30, 2024 totaled approximately $2.1 million, which was primarily due to our net loss for the period, partially offset by non-cash charges associated with share-based expense during the period. In addition, prepaid expenses and other decreased approximately $0.4 million and current liabilities increased approximately $0.2 million during the period.

Current wording

Cash flows used in operating activities for the three months ended March 31, 2026 totaled approximately $0.5 million, which was primarily due to our net loss for the period and, to a lesser extent, a decrease in accounts payable, accrued expenses and other liabilities. Cash flows used in operating activities for the three months ended March 31, 2025 totaled approximately $1.0 million, which was primarily due to our net loss for the period and, to a lesser extent, a decrease in accounts payable, accrued expenses and other liabilities due to payments made in accordance with severance arrangements.

Previous wording

There were no cash flows from investing activities for the nine months ended September 30, 2025 and 2024.

Current wording

There were no cash flows from investing activities for the three months ended March 31, 2026 and 2025.

Previous wording

There were no cash flows from financing activities for the nine months ended September 30, 2025 and 2024.

Current wording

There were no cash flows from financing activities for the three months ended March 31, 2026 and 2025.

Previous wording

As of September 30, 2025, there were no material changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 18, 2025, as amended on April 29, 2025 and May 13, 2025.

Current wording

As of March 31, 2026, there were no material changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026, as amended on April 24, 2026.

Previous wording

See Note 3 in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 18, 2025, as amended on April 29, 2025 and May 13, 2025, for a discussion of recent accounting standards.

Current wording

See Note 3 in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026, as amended on April 24, 2026, for a discussion of recent accounting standards.

Previous wording

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results and outcomes may differ materially from our estimates, judgments and assumptions. There have been no material changes in our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 18, 2025, as amended on April 29, 2025 and May 13, 2025.

Current wording

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results and outcomes may differ materially from our estimates, judgments and assumptions. There have been no material changes in our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026, as amended on April 24, 2026.