Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this Annual Report. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a medical diagnostic company headquartered in Morristown, New Jersey, that was previously focused on the development of drug therapy for treatment of chronic liver diseases. Our cyclophilin inhibitor, rencofilstat (formerly CRV431), was being developed to offer benefits to address multiple complex pathologies related to the progression of liver disease.

We were developing rencofilstat as our lead molecule. Rencofilstat is a compound that binds and inhibits the function of a specific class of isomerase enzymes called cyclophilins that regulate protein folding, in addition to other activities. Many closely related isoforms of cyclophilins exist in humans. Cyclophilins A, B, and D are the best characterized cyclophilin isoforms. Inhibition of cyclophilins has been shown in scientific literature to have therapeutic effects in a variety of experimental models, including liver disease models.

On April 19, 2024, we announced that we have begun wind-down activities in our ASCEND- NASH clinical trial. We did not have access to sufficient funding to complete the study, as designed. The wind-down activities were implemented to halt further clinical activities other than those which would allow for an orderly and patient safety manner that would meet the minimum FDA requirements for safely closing a clinical trial. All clinical trial activities were completed and the trial was closed in August 2024.

On July 19, 2024, we along with Pharma Two B Ltd., a company organized under the laws of the State of Israel ("Parent"), and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, among other things, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into us (the "Merger"), pursuant to which we would survive the Merger as an indirect wholly owned subsidiary of Parent.

Concurrently with the Merger, on July 19, 2024, we entered into a Securities Purchase Agreement (the "SPA") with certain purchasers pursuant to which we sold an aggregate of $2.9 million in principal amount of our Original Issue Discount Senior Unsecured Nonconvertible Notes (the "Notes"). The Notes are due on the earlier of: (i) December 31, 2024, (ii) the date of the closing of the Merger, (iii) the date that the Merger is terminated pursuant to the terms of the Merger Agreement, or (iv) such earlier date as the Notes are required or permitted to be repaid as provided in the Note, as may be extended at the option of the holder of the Note as described in the Note.

On December 10, 2024, Parent informed us that Nasdaq would not exclude our historical losses from its burn rate calculation and as a result on December 10, 2024, we and Pharma Two B and Pearl entered into an agreement to terminate the Merger Agreement (the "Termination Agreement"). Pursuant to the Termination Agreement, the Merger Agreement was terminated.

On January 23, 2025, we consummated a best-efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846 shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with accrued interest.

On May 9, 2025, we entered into a license agreement (the "License Agreement") with New Day Diagnostics LLC ("New Day") pursuant to which we in-licensed certain diagnostic tests for celiac disease, respiratory multiplex (Covid/Influenza A/B and RSV), helicobacter pylori ("H. pylori") and hepatocellular carcinoma ("HCC"). The celiac, respiratory multiplex and H. pylori tests have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time.

Pursuant to the License Agreement, we paid $525,000 in cash to New Day along with $200,000 in shares of our common stock. In addition, we have agreed to pay New Day up to $17.15 million upon achievement of certain regulatory, sales and reimbursement milestones. In addition, we will pay New Day royalty rates in the upper single to low double digits based on net sales.

FINANCIAL OPERATIONS OVERVIEW

From inception through December 31, 2025, we have an accumulated deficit of $246.1 million, and we have not generated any revenue from operations. We expect to incur additional losses to perform further research and development activities and for ongoing administrative expenses, and do not currently have any commercial biopharmaceutical products. We do not expect to have such for several years, if at all.

RECENT ACCOUNTING PRONOUNCEMENTS

For detailed information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 3, "Recent Accounting Pronouncements" in the accompanying Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

Comparison of the Years ended December 31, 2025 and 2024:

		Year Ended December 31,
		2025				2024				Change
Revenues		$	-			$	-			$	-
Costs and Expenses:
Research and development			445,512				11,847,348				(11,401,836	)
General and administrative			3,315,433				7,499,230				(4,183,797	)
Asset impairment loss			402,746				-				402,746
Loss from operations			(4,163,691	)			(19,346,578	)			(15,182,887	)
Other income (expense):
Interest expense			(24,406	)			(1,247,313	)			1,222,907
Write-off related party note receivable			-				(600,000	)			600,000
Change in fair value of contingent consideration and derivative financial instruments			(4,089,753	)			7,599,263	)			(11,689,016	)
Inducement expense			-				(2,567,044	)			2,567,044
Loss before income taxes			(8,277,850	)			(16,161,672	)			7,883,822
Income tax benefit			-				2,969,252				(2,969,252	)
Net loss		$	(8,277,850	)		$	(13,192,420	)		$	(4,914,570	)

We had no revenues during the years ended December 31, 2025 and 2024, respectively, because we do not have any commercial biopharmaceutical products and we do not expect to have such products for several years, if at all.

Research and development expenses for the years ended December 31, 2025 and 2024 were $0.4 million and $11.8 million, respectively. The decrease of $11.4 million was primarily due to a $10.6 million decrease in clinical trial costs and drug development primarily for our phase 2b study (which includes a partialoffset of $0.4 million in expense related to purchased in-process research and development from the New Day asset acquisition), a $0.5 million decrease in employee compensation costs due to reduced headcounts and a $0.4 million decrease in consulting and outside services.

General and administrative expenses for the years ended December 31, 2025 and 2024 amounted to $3.3 million and $7.5 million, respectively. The decrease of $4.2 million is primarily due to a $0.7 million decrease in employee compensation costs, $0.8 million decrease in stock-based compensation costs, $0.4 million decrease in consulting and outside services, $1.7 million decrease in professional fees, $0.2 million in rent, $0.1 million decrease in software and support, and $0.1 million decrease in insurance expense.

Asset impairment loss for the years ended December 31, 2025 and 2024 were $0.4 million and $0 million, respectively. The increase of $0.4 million was primarily impairment expense related to the asset acquired in the license agreement. We tested the asset for impairment during the reporting period, noting there were triggering events related to delayed timing to market resulting in an adverse effect on estimated cashflow over the next two years. Given that the license agreement requires both parties to agree to renewal after the initial two years, we projected the estimated cashflows for the first two years for the assets available for sales in eligible markets, noting the projected cashflow will not be enough to recover the allocated cost in the first two years of the license agreement, resulting in an impairment loss.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations through December 31, 2025 primarily through the issuance of convertible preferred stock, warrants, the issuance and sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market offerings.

On January 23, 2025, we consummated a best efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846 shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with accrued interest.

Future Funding Requirements

We have no products approved for commercial sale in the United States. However, with the assets related to the New Day licensing agreement, there are three products that have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and how much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. As of December 31, 2025, we had an accumulated deficit of $246.1 million. We expect to continue to incur significant losses for the foreseeable future.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders' equity and working capital.

We will require additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our operations.

Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for our non-replicating and replicating technologies and our product candidates derived from these technologies. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of acquired assets in connection with our strategic alternatives strategy. In addition, other unanticipated costs may arise.

Our future capital requirements depend on many factors, including:

	●	the scope, progress, results and costs of researching and developing our current and future product candidate and programs, and of conducting preclinical studies and clinical trials;
	●	the number and development requirements of other product candidates that we may pursue, and other indications for our current product candidate that we may pursue;
	●	the stability, scale and yields during the manufacturing process as we scale-up production and formulation of our product candidate for later stages of development and commercialization;
	●	the timing of, and the costs involved in, obtaining regulatory and marketing approvals and developing our ability to establish sales and marketing capabilities, if any, for our current and future product candidates we develop if clinical trials are successful;
	●	our ability to establish and maintain collaborations, strategic licensing or other arrangements and the financial terms of such agreements;
	●	the cost of commercialization activities for our current and future product candidates that we may develop, whether alone or with a collaborator;
	●	the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
	●	the timing, receipt and amount of sales of, or royalties on, our future products, if any; and

A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.

The consolidated financial statements as of December 31, 2025 have been prepared under the assumption that we will continue as a going concern within one year after the financial statements are issued. Due to our accumulated deficit and our recurring and expected continuing losses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern without additional capital becoming available to attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will be required to raise additional capital to continue to fund operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to (i) acquire new product candidates; or (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize on unfavorable terms.

Cash Flows

The following table summarizes our cash flows for the following periods:

		Year Ended December 31,
		2025				2024
Net cash provided by (used in):
Operating activities		$	(3,271,520	)		$	(18,216,303	)
Investing activities			(132,117	)			(600,000	)
Financing activities			4,825,291				4,349,707

As of December 31, 2025, we had a working capital of $2.8 million compared to working capital deficit of $1.5 million as of December 31, 2024. The increase of $4.3 million in working capital is primarily due to $8.2 million in net proceeds received from equity issuance offset by the $3.4 million related to settlement of a note payable, and the Company's other operating costs for the 12 months ended December 31, 2025.

Operating Activities:

As of December 31, 2025, we had $1.8 million in cash. Net cash used in operating activities was $3.3 million for the year ended December 31, 2025 consisting primarily of our net loss of $8.3 million, adjusted non-cash charges of $4.5 million, including $0.4 million for asset impairment, and $4.1 million in change in fair value of derivative warrants. Changes in working capital accounts had a negative impact of $0.4 million on cash primarily due to an increase in accounts payable, accrued expenses and prepaid expenses.

As of December 31, 2024, we had $0.4 million in cash. Net cash used in operating activities was $18.3 million for the year ended December 31, 2024 consisting primarily of our net loss of $13.2 million, adjusted for an increase in non-cash charges of $5.3 million, primarily for stock-based compensation, amortization of debt discount, write-off of the loan to Pharma Two B and warrant related inducement expense, partially offset by $7.6 million in change in fair value of contingent consideration and the change in fair value of derivative warrants. Changes in working capital accounts had a negative impact of $2.7 million on cash primarily due to an increase in accounts payable, accrued expenses and prepaid expenses.

Investing Activities:

Net cash used in investing activities was $0.1 million for the year ended December 31, 2025 related to the acquisition of licenses from New Day Diagnostics. Net cash used in investing activities was $0.6 million for the year ended December 31, 2024 related to the to the loan Pharma Two B.

Financing Activities:

Net cash provided by financing activities was $4.8 million for the year ended December 31, 2025, due primarily to $8.3 million proceeds received from common stock and warrant, net of issuance costs offset by $3.4 million payment on notes payable.

Net cash provided by financing activities was $4.4 million for the year ended December 31, 2024 primarily due to the exercise of warrants (induced), and the equity and debt issuance under a Securities Purchase Agreement.

CRITICAL ACCOUNTING ESTIMATE

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the assumptions and estimates associated with fair value of derivative financial instruments-warrants, has the greatest potential impact on our consolidated financial statements. We evaluate this estimate on an ongoing basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material. For further information on all of our significant accounting policies, see Note 3 of the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.

Fair Value of Derivative Financial Instruments- Warrants

Derivative financial instruments are related to the issuance of warrants accounted for as a liability. The Black-Scholes model, which uses significant assumptions including risk-free interest rate, volatility, stock price and expected term to calculate fair value. To calculate the fair value of the 2025 warrants, we performed a back solve at inception that contemplated a Discount for Lack of Marketability (DLOM) and dilution adjustments. Refer to Note 4.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance sheet arrangements as of December 31, 2025.