Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (the "Quarterly Report" or "Report") includes a number of forward-looking statements that reflect management's current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Some of these risks are included in the section entitled "Risk Factors" set forth in this Quarterly Report and in other reports that we file with the SEC. The occurrence of any of these risks, or others of which we are currently unaware, may cause our company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and without limitation:

	●	our ability to successfully commercialize our products and services on a large enough scale to generate profitable operations;
	●	our ability to maintain and develop relationships with customers and suppliers;
	●	our ability to successfully integrate acquired businesses or new products, or to realize anticipated synergies in connection with acquisitions of businesses or products;
	●	expectations concerning our ability to raise additional funding and to continue as a going concern;
	●	our ability to successfully implement our business plan;
	●	our ability to successfully operate GMP Biotechnology Limited ("GMP Bio"), our joint venture with Dragon Overseas Limited ("Dragon"), to develop our product portfolio, or to have a successful IPO for GMP Bio as planned;
	●	GMP Bio anticipates its current fair valuation to be significantly in excess of $1 billion, however, the Company cannot predict or estimate what the fair value may be;
	●	our ability to avoid, or to adequately address any intellectual property claims brought by third parties; and

	●	the anticipated impact of any changes in industry regulation.
	●	building and the success of our nanoparticle platform and the related success of launching the platform
	●	the success of the launch of a company with a DAO infrastructure, the success of the entity and the plans surrounding the pet and animal health, the ability for the Company to register the tokens of Pet2Dao, the actual filing of a registration statement and approval of the tokens as registrable securities with the SEC through a registration statement, the ability of the tokens to be tradable or any value such tokens may have if they become tradable.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

Corporate History

Oncotelic Therapeutics, Inc. ("Oncotelic"), was formed in the State of New York in 1988 as OXiGENE, Inc., was reincorporated in the State of Delaware in 1992, and changed its name to Mateon Therapeutics, Inc. in 2016, and Oncotelic Therapeutics, Inc. in November 2020. Oncotelic conducts business activities through Oncotelic and its wholly-owned subsidiaries, Oncotelic, Inc., a Delaware corporation, PointR Data, Inc. ("PointR"), a Delaware corporation, Pet2DAO Inc., a Delaware corporation and EdgePoint AI, Inc. ("Edgepoint"), a Delaware Corporation for which there are non-controlling interests, (Oncotelic, Oncotelic Inc., PointR, Pet2DAO and Edgepoint are collectively called the "Company" or "We"). The Company completed a reverse merger with Oncotelic Inc in April 2019, a merger with PointR in November 2019 and formed a subsidiary Edgepoint in February 2020. For more information on these mergers, 2024Annual Report on Form 10-K filed with the SEC on April 15, 2025.

Company Overview

We are a clinical stage biopharmaceutical company developing drugs for the treatment of cancer. Our goal is to advance our drug candidates into late-stage pivotal clinical trials and either sell marketing rights to a larger pharmaceutical company or seek FDA approval ourselves.

The Company is currently developing OT-101, through its JV with Dragon Overseas Capital, Limited ("Dragon"), namely GMP Biotechnology, Limited ("GMP Bio") and its wholly owned subsidiaries, and all being affiliates of Golden Mountain Partners ("GMP"), for various cancers and COVID-19, Artemisinin for COVID-19 and 5 additional nanoparticle products for treatments of various cancers; our portfolio products Apomorphine for various indications; OXi4503, as a treatment for acute myeloid leukemia and myelodysplastic syndromes; CA4P, in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma; and AI technologies for clinical development and manufacturing. The Company is also planning to develop OT-101 for certain animal health indications and contemplating using crypto currencies for that platform. The Company has acquired apomorphine for Parkinson's Disease, erectile dysfunction and female sexual dysfunction. In addition, the Company is evaluating the further development of its product candidates OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma.

The Company had secured various financings from GMP between 2020 and early 2022, primarily related to the development of OT-101. For more information on the GMP debt financing and the JV, refer to Notes 5 and 6 of the Notes to the Consolidated Financial Statements.

In November 2022, the Company formed a Decentralized autonomous organization ("DAO") entity, Pet2DAO, Inc. ("Pet2DAO"), as a wholly owned subsidiary. For more information on Pet2DAO, refer to our 2024 Annual Report on Form 10-K filed with the SEC on April 15, 2025.

Since April 2019, we have been operating under significant capital constraints, which has curtailed our ability to achieve meaningful progress in either of the Company's two clinical programs - one of which is developing OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and the other of which is developing CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma. We believe that the merger of Oncotelic and Oncotelic Inc. creates a combined company that has potential to generate shareholder value through a promising pipeline of next generation immunotherapies targeting several significant cancer markets where there is a lack of therapeutic options and lack of an effective immunotherapy protocol.

Forever Prosperity (previously GMP) Note purchase agreements and unsecured notes

Between June 2020 and January 2022, the Company entered into various purchase agreements and promissory notes with GMP, cumulatively totaling $4.5 million. Such notes were assigned to Forever Prosperity, LLC, an affiliated entity of GMP.

For more information on the GMP debt financing, refer to our 2024 Annual Report on Form 10-K filed with the SEC on April 15, 2025.

Joint Venture

In March 2022, the Company entered into (i) a joint venture (the "JV") agreement with Dragon and GMP Bio, both affiliates of GMP, (and the Company, Dragon and GMP Bio are collectively called the "Parties") (the "JVA"), (ii) a license agreement for rights to OT-101 (the "US License Agreement") for the territory within the United States of America (the "US") with Sapu Holdings, LLC, a subsidiary of GMP Bio and (iii) a license agreement for rights to OT-101 for the rest of the world with GMP Bio (the "Ex-US Rights Agreement", and the US License Agreement and the Ex-US License Agreement are collectively called the "Agreements"). For more information on the JV, JVA, and Agreements, 2024 Annual Report on Form 10-K filed with the SEC on April 15, 2025.

The JV is conducting a clinical trial for OT-101 for pancreatic cancer in the US and which the JV is planning to expand to other countries in eastern Europe. In addition, OT-101 is also being evaluated for treatments of gliomas and pediatric DIPG. In late 2023, the JV initiated a plan to start evaluating various nanoparticles that could treat various cancers. In this regard, the JV identified a total of 4 compounds, in addition to OT-101, which had the potential of significant revenue generation for the JV. In the same year, the JV signed a lease agreement to set up a GMP manufacturing facility in San Diego ("SD"), California. The main purpose of this facility was to initially commence an aggressive formulation development of newly planned nanoparticle platform ("Nano Platform"). The GMP manufacturing facility was initiated in January 2024. Upon the initiation of this facility by the JV, the JV commenced the development work on two of the four identified compounds, as well as other activities, in tandem with the development of OT-101. The JV has since completed the formulation development of one of the products and is moving to complete the formulation development for the three additional products. The JV is also working on improved formulations for OT-101 with new nanoparticle sizes. The JV also has started clinical development for OT-101 for pancreatic cancer. Significant progress has been made in the development of the products and the JV anticipates to complete the formulation development work in 2025 and pushing to initiate clinical trials for the various compounds. In late 2024, the GMP facility in SD was issued a Drug Manufacturing License by the State of California Department of Public Health and Food and Drug Branch. Further, in late 2024, the JV identified a sixth candidate as a compound for development for the JV and has already started to work on the formulation development of that compound as well. A lot of the manufacturing, including Phase 1 clinical trial materials, will be performed at the SD site.

Further, in late 2024, the JV identified a sixth candidate as a compound for development for the JV and has already started to work on the formulation development of that compound as well. In early 2025, the Company announced that it had entered into a strategic partnership with Shanghai Medicilon, Inc. ("Medicilon") to access its industry-leading rapid investigational new drug ("IND") development platform to support up to 20 IND projects, the support of which can even be used by the JV. All six of our compounds the JV is developing are planned to be these INDs, and are focused on next-generation anticancer agents. The JV anticipates that all these six anticancer agents have the potential to become significant growth contributors to the JV, which in turn would add substantial value to the Company. In March 2025, the Company announced successfully completing a Phase 1 clinical trial evaluating OT-101, in combination with IL-2 for advanced or metastatic solid tumors, on behalf of the JV. These results set the stage for new studies that combine OT-101, an antisense therapeutic targeting Transforming Growth Factor Beta 2 (TGFβ2), with checkpoint inhibitors ("CKIs") and recombinant IL-2 (aldesleukin) ("IL-2"). The Phase 1 trial (ClinicalTrials.gov ID: NCT04862767) investigated the safety and tolerability of OT-101 in combination with recombinant IL-2 in patients with advanced or metastatic solid tumors. The combination showed a tolerable safety profile at the planned dosing schedule, with no unexpected safety signals identified. Based on the favorable safety data, the JV, through the Company, plans to advance OT-101 plus IL-2 into further clinical studies, exploring synergies with CKIs such as PD-1 blockers.

In 2022, the Company elected to use the fair value option method to account for its equity investment in GMP Bio. Under the fair value option, the Company periodically conducts a fair value assessment and records a change in value when circumstances warrant, such as in connection with a third-party financing event, or other significant event that suggests reassessing the value of investment in GMP Bio is warranted. As of June 30, 2025, the Company assessed the fair value of its investment in GMP Bio and determined that no change in the fair value was required at that time. However, as previously announced, GMP Bio is progressing with its strategic and operational plans, which include efforts to secure third-party financing and a possible initial public offering in Hong Kong during 2026. Based on current information from GMP Bio, the potential valuation for GMP Bio in any third-party financing or initial public offering could be significantly in excess of $1 billion. If a financing or other transaction is completed at such a valuation, the Company will reassess and report the increase in fair value of its investment in GMP Bio at that time. However, there are no contractual arrangements currently in place for any such third-party financing or initial public offering, and the Company cannot guarantee: that GMP Bio will be able to successfully execute its strategic and operating plan or complete any such financing or initial public offering, the valuation for GMP Bio in any such transaction, or that the Company will be able to record a fair value increase of its equity ownership in GMP Bio.

New Private Placement with JH Darbie

Between July 2023 and January 2024, the Company entered into a series of subscription agreements with 46 accredited investors which resulted in a conversion of a gross amount of approximately $2.4 million, consisting of 94 notes, under the prior JH Darbie Financing into new debt to the Company. JH Darbie and the Company are parties to a March 2023 placement agent agreement ("Agreement") pursuant to which JH Darbie has the right to sell/convert a minimum of 10 Units and a maximum of 200 Units on a best-efforts basis. The subscription agreements entered between July 2023 and January 2024 fully converted JH Darbie PPM-1 notes into PPM-2 notes. For more information on the new JH Darbie Financing, refer to Note 8 of these Notes to the Consolidated Financial Statements.

August 2021 Notes

In August 2021, the Company entered into Note Purchase Agreements with Autotelic, the Company's CFO, and certain other accredited investors. Under the terms of the Note Purchase Agreements, the Company issued an aggregate of $698,500 (the "Principal Amount") in debt in the form of unsecured convertible promissory notes (collectively, the "August 2021 Notes"). For more information on the August 2021 Notes, refer to Note 5 of the current Notes to the Consolidated Financial Statements.

November / December 2021 and March 2022 Financing

In November / December 2021, the Company entered into securities purchase agreement with five institutional investors, whereby the Company issued five convertible notes in the aggregate principal amount of $1,250,000 convertible into shares of common stock of the Company. As of March 31, 2025, the November- December 2021 notes and any accrued interest, are fully converted. For more information on the November / December 2021 notes, refer to our 2024 Annual Report on Form 10-K filed with the SEC on April 15, 2025.

Further, in March 2022, the Company entered into a Securities Purchase Agreement with Fourth Man, pursuant to which the Company issued convertible promissory note in the aggregate principal amount of $0.25 million, convertible into shares of common stock of the Company. The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. As of December 31, 2022, this note is in default and Fourth Man has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company's Common Stock at a conversion price established at a fixed rate of $0.10. The Company granted a total number of 1,250,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. The Placement agent was also granted a total of 125,000 warrants convertible into an equivalent number of the Company Common Stock at a strike price of $0.20 up to five years after issuance, as part of a finder's fee agreement.

May 2022 Note

In May 2022, the Company entered into a securities purchase agreement with one institutional investor, whereby the Company issued one convertible note in the aggregate principal amount of $605,000 convertible into shares of common stock of the Company ("May 2022 Mast Note"). The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. Investor has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company's common stock at a conversion price established at a fixed rate of $0.10. The Company granted a total number of 3,025,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. The Placement agent was also granted a total amount of 302,500 as part of a finder's fee agreement. Portion of the proceeds were be used to retire some of the November/December 2021 notes. In August 2025, the May 2022 Note was extended till December 31, 2025.

For more information on the May 2022 Financing, refer to Note 5 of current Notes to the Consolidated Financial Statements.

June 2022 Note

In June 2022, the Company entered into a securities purchase agreement with one institutional investor, whereby the Company issued one convertible note in the aggregate principal amount of $335,000 convertible into shares of common stock of the Company ("June 2022 Blue Lake Note"). The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. The investor has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company's common stock at a conversion price established at a fixed rate of $0.10. The Company granted a total number of 837,500 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. The Placement agent was also granted a total of 83,750 warrants convertible into an equivalent number of the Company Common Stock at a strike price of $0.20 up to five years after issuance, as part of a finder's fee agreement. A portion of the proceeds were used to retire some of the November/December 2021 notes. In May 2024, Blue Lake converted remainder of their debt balance, including accrued interest and penalty, of approximately $531,000 into 7,605,760 shares of the Company's Common Stock.

For more information on the June 2022 Financing, refer to Note 5 of current Notes to the Consolidated Financial Statements.

Securities Purchase Agreement and Secured Note with Mast Hill

On July 31, 2025, the Company entered into a Securities Purchase Agreement (the "2025 Mast Hill Purchase Agreement"), with Mast, and the Company issued a convertible promissory note in the aggregate gross principal amount of $560,000 (the "2025 Mast Hill Note"). The 2025 Mast Hill Note is convertible into shares of the Company's common stock, par value $0.01 per share ("Common Stock"). The 2025 Mast Hill Note has an original issue discount of 10%, carries an interest rate of 10% per annum and matures on the earlier of (a) the one-year anniversary of the date of the 2025 Mast Hill Purchase Agreement, or (b) the acceleration of the maturity of the 2025 Mast Hill Note by Mast Hill upon occurrence of an Event of Default (as defined below) or (c) on prepayment in full. The 2025 Mast Hill Note contains a voluntary conversion mechanism whereby Mast may convert the outstanding principal and accrued interest under the terms of the 2025 Mast Hill Note into shares of Common Stock at a fixed price of $0.07 per share, subject to adjustments upon the occurrence of certain corporate events. The 2025 Mast Hill Note, and a prior note of $605,000 issued to Mast in May 2022, are both secured against the assets of the Company, including all the assets owned by the Company's direct or indirect subsidiaries, but other than and excluding the equity interests and the assets of the Company licensed or assigned within our joint venture agreement with Dragon Overseas Capital Limited, namely GMP Biotechnology and its subsidiaries. These assets include OT-101, CA4P, Oxi4503, AI and AI CDMO technologies and the nanoparticle platform. The Company also issued 2,000,000 warrants to purchase shares (the "Note Warrants") of Common Stock of the Company at an exercise price of $0.15. Prepayment of the 2025 Mast Hill Note may be made at any time upon three trading days' prior written notice to the respective holder, by payment of the then outstanding principal amount plus accrued and unpaid interest and reimbursement of such holder's administrative fees. For more information on the 2025 Mast Hill Note , refer to our Current Report on Form 8-K filed with the SEC on August 6, 2025.

Mast Hill Equity Purchase Agreement

On August 1, 2025, the Company entered into an Equity Purchase Agreement (the "Mast EPA") and a Registration Rights Agreement (the "Mast Registration Rights Agreement") with Mast, pursuant to which the Company shall have the right, but not the obligation, to direct Mast, to purchase up to $25 million (the "Maximum Commitment Amount") in shares of the Company's Common Stock in multiple tranches. Further, under the Agreement and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit put notices (as defined in the Agreement) to Mast (i) in a minimum amount not less than $5,000 and (ii) in a maximum amount up to the lesser of (a) $500,000 or (b) 20% of the Average Daily Trading Value (as defined in the Agreement). In exchange for Mast entering into the Mast EPA, the Company agreed, among other things, (1) to issue warrants to purchase 3,350,000 share of Common Stock and (2) to file a registration statement registering the Common Stock issued or issuable to Mast Hill under the Mast EPA for resale with the SEC within 60 calendar days of the Agreement, as more specifically set forth in the Mast Registration Rights Agreement. For more information on the Mast EPA, refer to our Current Report on Form 8-K filed with the SEC on August 6, 2025.

Jefferson Capital Ventures, LLC and Valor Nation, Inc Independent Contractor Agreements

On August 6, 2025, Oncotelic Therapeutics, Inc. (the "Company" or "Our") entered into independent contractor agreements ("ICA") with Jefferson Capital Ventures, LLC ("Jefferson") and Valor Nation, Inc. ("Valor") for providing certain consulting and advisory services. The ICAs call for Jefferson and Valor to provide consulting and advisory services including strategic planning meetings, coordination non-legal support for SEC compliance, balance sheet and income statement optimization strategies, shareholder and investor communication planning, liaison with investment bankers, analysts, and institutional investors, operational efficiency and cost-saving recommendations and ancillary strategic services not requiring a license, corporate planning, operations and capital markets advisory services not requiring licences. Such services shall be provided by Jefferson and Valor for a period of 18 months from the signing of the ICA, unless terminated earlier by either party under certain predefined conditions. Jefferson has agreed to be compensated $20,000 per month in cash and issued 20,320,930 forfeitable restricted stock awards ("RSAs") of shares of common stock of the Company, par value $0.01 ("Common Stock") and Valor has agreed to be compensated with 4,064,586 shares of Common Stock. While the Common Stock underlying the Jefferson RSAs will be issued as of the date of the Jefferson ICA, Jefferson will earn the RSAs and Common Stock only when certain corporate milestones are achieved. The corporate milestones ("Milestones"), when Jefferson will earn the RSAs and Common Stock, are when the Company's market capitalization exceeds $100 million on any single trading day's close, the cumulative increase of at least $10 million in shareholder equity from the start of engagement and the successful uplisting to a U.S. national exchange (e.g., Nasdaq or NYSE American), with at least one full day of trading. For more information on the Jefferson and Valor ICAs, refer to our Current Report on Form 8-K filed with the SEC on August 12, 2025.

Short-term loans

As of January 1, 2024, approximately $1.5 million was outstanding and payable to Autotelic. During the year ended December 31, 2024 Autotelic Inc. provided additional short-term funding of approximately $0.6 million to the Company. In the three months ended March 31, 2025 Autotelic Inc. provided additional short-term funding of $150,000 to the Company. As such, approximately $2.2 million was outstanding and payable to Autotelic at March 31, 2025.

As of January 1, 2024, approximately $35,000 was outstanding and payable to the Company's CFO. During the year ended December 31, 2024, the CFO provided additional short-term funding of $41,000. In the three months ended March 31, 2025, the CFO provided additional short-term funding of $10,000 to the Company. As such, approximately $86,000 was outstanding and payable to the Company's CFO at March 31, 2025.

In December 2023, the Company received $50,000 from the company's CEO. As such, $50,000 was outstanding to the Company's CEO at March 31, 2025.

Equity Purchase Agreement

In May 2021, the Company entered into an Equity Purchase Agreement (the "EPL") and Registration Rights Agreement (the "Registration Rights Agreement") with Peak One Opportunity Fund, L.P. ("Peak One"), pursuant to which the Company shall have the right, but not the obligation, to direct Peak One to purchase up to $10.0 million (the "Maximum Commitment Amount") in shares of the common stock, par value $0.01 per share ("Common Stock") in multiple tranches. The Company filed a post-effective amendment for EPL on April 15, 2025 with the SEC and the SEC has made the post-effective amendment effective on April 21, 2025. The Company filed a prospectus under rule 424b3 with the SEC on April 29, 2025. For more information on the EPL, refer to Note 10 of the Notes to the Unaudited Consolidated Financial Statements.

Mosaic ImmunoEngineering, Inc. Term Sheet

In April 2024, the Company entered into a binding term sheet (the "Term Sheet") with Mosaic ImmunoEngineering, Inc. ("Mosaic"). For more information on the Term Sheet, refer to the Current Report on Form 8-K filed with the SEC on April 29, 2024. In August 2024, Mosaic and the Company mutually agreed to extend the date of the Term Sheet to expire at the earlier of (1) the signing of definitive agreements or (2) December 31, 2024. Mosaic and the Company further agreed to extend the Term Sheet to expire at the earlier of (1) the signing of definitive agreements or (2) June 30, 2025. Both parties are in discussions to extend the date to the end of 2025 to allow for both Companies to complete due diligence as well as agree and finalize the definitive agreements.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expense during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time we make such estimates. Actual results and outcomes may differ materially from our estimates, judgments and assumptions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Our significant accounting policies are more fully described in Note 2 to our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments are the following:

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.

Intangible Assets

The Company records its intangible assets at cost in accordance with ASC 350, Intangibles - Goodwill and Other. The Company reviews the intangible assets for impairment on an annual basis or if events or changes in circumstances indicate it is more likely than not that they are impaired. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors.

Goodwill

Goodwill represents the excess of the purchase price of acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least once annually, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. The goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the reporting unit. If, on the basis of qualitative factors, it is considered not more likely than not that the fair value of the reporting unit is less than the carrying amount, further testing of goodwill for impairment would not be required. Otherwise, goodwill impairment is tested using a two-step approach.

The first step involves comparing the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit is determined to be greater than its carrying amount, there is no impairment. If the reporting unit's carrying amount is determined to be greater than the fair value, the second step must be completed to measure the amount of impairment, if any. The second step involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of the goodwill in this step is compared to the carrying value of goodwill. If the implied fair value of the goodwill is less than the carrying value of the goodwill, an impairment loss equivalent to the difference is recorded.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815 "Derivatives and Hedging".

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards.

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20 "Debt - Debt with Conversion and Other Options." Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

ASC 815-40 "Derivatives and Hedging - Contracts in Entity's Own Equity" provides that, among other things, generally, if an event is not within the entity's control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

Derivative Financial Instruments Indexed to the Company's Common Stock

We have generally issued derivative financial instruments, such as warrants, in connection with our equity offerings. We evaluate the terms of these derivative financial instruments in order to determine their accounting treatment in our financial statements. Key considerations include whether the financial instruments are freestanding and whether they contain conditional obligations. If the warrants are freestanding, do not contain conditional obligations and meet other classification criteria, we account for the warrants as an equity instrument. However, if the warrants contain conditional obligations, then we account for the warrants as a liability until the conditional obligations are met or are no longer relevant. Because no established market prices exist for the warrants that we issue in connection with our equity offerings, we must estimate the fair value of the warrants, which is as inherently subjective as it is for stock options, and for similar reasons as noted in the stock-based compensation section above. For financial instruments which are accounted for as a liability, we report any changes in their estimated fair values as gains or losses in our Consolidated Statement of Income.

Variable Interest Entity (VIE) Accounting

We evaluate our ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements.

Investments - Equity Method

The Company accounts for equity method investments at cost, adjusted for the Company's share of the investee's earnings or losses, which are reflected in the consolidated statements of operations. The Company periodically reviews the investments for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The Investment in GMP Bio represents the investment into equity securities for which the Company elected the fair value option pursuant to ASC 825-10-15 and subsequent fair value changes in the GMP Bio shares are included in the result from continuing operations. Refer to Note 6 to these Notes to the Consolidated Financial Statements.

Joint Venture agreement

We have equity interest in unconsolidated arrangement that is primarily engaged in the business of drug discovery, development, and commercialization, including but not limited to development and commercialization of TGF-beta therapeutics as well as establishing and operating contract development and manufacturing organization (CDMO) facilities and capabilities. The Company first review the arrangement to determine if it meets the definition of an accounting joint venture pursuant to ASC 323-10-20. In order to meet the definition of a joint venture, the arrangement must have all of the following characteristics, (i) the arrangement is organized within a separate legal entity, (ii) the entity is under the joint control of the venturers, (iii) the venturers must be able to exercise joint control through their equity investments, (iv) the qualitative characteristics of the entity, including its purpose and design must be consistent with the definition of a joint venture

We consolidate arrangements that are considered to be VIEs where we are the primary beneficiary. We analyze our investments in joint ventures to determine if the joint venture is considered a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity investment at risk, (ii) review the voting rights and decision-making authority of the equity investment holders as a group and whether there are limited partners (or similar owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establish whether activities within the venture are on behalf of an investor with disproportionately few voting rights in making this VIE determination. To the extent that we own interests in a VIE and we (i) have the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) have the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent that we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. To the extent that our arrangements do not qualify as VIEs, they are consolidated if we control them through majority ownership interests or if we are the managing entity (general partner or managing member) and our partner does not have substantive participating rights. Control is further demonstrated by our ability to unilaterally make significant operating decisions, refinance debt, and sell the assets of the joint venture without the consent of the non-managing entity and the inability of the non-managing entity to remove us from our role as the managing entity. We use the equity method of accounting for those arrangements where we exercise significant influence but do not have control. Under the equity method of accounting, our investment in each arrangement is included on our consolidated balance sheet; however, the assets and liabilities of the joint ventures for which we use the equity method are not included on our consolidated balance sheet.

When we sell or contribute properties to unconsolidated arrangements and retain a non-controlling ownership interest in such assets, we recognize the difference between the consideration received and the carrying amount of the asset sold or contributed when its derecognition criteria are met. The equity method investment we retain in such partial sale transactions is noncash consideration and is measured at fair value. As a result, the accounting for a partial sale will result in the recognition of a full gain or loss. When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value. The Company elected the fair value option under the fair value option Subsection of Section 825-10-15 to account for its equity-method investment.

Research and Development Expense

Research and development expense consist of costs we incur for the development of our investigational drugs and, to a lesser extent, for preclinical research activities. Research and development costs are expensed as incurred. Research and development expense include clinical trial costs, salaries and benefits of employees, including associated stock-based compensation, payments to clinical investigators, drug manufacturing costs, laboratory supplies and facility costs. Clinical trial costs are a significant component of our research and development expense, and these can be difficult to accurately estimate. Included in clinical trial costs are fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs. We estimate clinical trial expense based on the services performed pursuant to contracts with research institutions such as CROs and the actual clinical investigators. These estimates are based on actual time and expenses incurred by the CRO and the clinical investigators. Also included in clinical trial expense are costs based on the level of patient enrollment into the clinical trial and the actual services performed under the related clinical trial agreement. Changes in clinical trial assumptions, such as the length of time estimated to enroll all patients, rate of screening failures, patient drop-out rates, number and nature of adverse event reports and the total number of patients enrolled can impact the average and expected cost per patient and the overall cost of the clinical trial. Based on patient enrollment reports and services provided, we may periodically adjust estimates for the clinical trial costs. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed, the length of time for these services or the costs of these services, our actual expenses could differ from our estimates.

Share-Based Compensation

We record the estimated fair value of all share-based payments issued to employees and other service providers. Our share-based payments consist primarily of stock options. The valuation of stock options is an inherently subjective process, since market values are not available for any stock options in our equity securities. Market values are also not available on long-term, non-transferable stock options in other equity securities. With no market values on options to trade in our common stock and no comparable market values on any long-term non-transferable stock options, the process of valuing our stock options is even more uncertain and subjective. Accordingly, we use a Black-Scholes option pricing model to derive an estimated fair value of the stock options which we issue. The Black-Scholes option pricing model requires certain input assumptions, including the expected term of the options and the expected volatility of our common stock. Changes in these assumptions could have a material impact on the estimated fair value that we record for share-based payments that we issue. We determine the term of the options based on the simplified method, which averages the vesting period and the contractual life of the stock option. We determine the expected volatility based on the historical volatility of our common stock over a period commensurate with the option's expected term. The Black-Scholes option pricing model also requires assumptions for risk-free interest rates and the expected dividend yield of our common stock, but we feel that these values are more objective and note that changes in these values do not have a significant impact on the estimated value of the options when compared to the volatility and term assumptions.

We are also required to estimate the level of award forfeitures expected to occur and record compensation expense only for those awards that are ultimately expected to vest. Accordingly, we perform a historical analysis of option awards that are forfeited prior to vesting, and record total stock option expense that reflects this estimated forfeiture rate.

Results of Operations

Comparison of the Results of Operations for the three Months Ended June 30, 2025 to the three Months Ended June, 2024

A comparison of the Company's operating results for the three months ended June 30, 2025 and 2024, respectively, is as follows.

		June 30, 2025				June 30, 2024				Variance
Operating expense:
Research and development			297				252				45
General and administrative			65,672				96,330				(30,658	)
Goodwill impairment			-				-				-
Total operating expense			65,969				96,582				(30,613	)
Loss from operations			(65,969	)			(96,582	)			30,613
Reimbursement for expenses - related party			-				10,398				(10,398	)
Interest expense, net			(207,780	)			(215,619	)			7,839
Change in the value of derivatives on debt			484,198				23,630				460,568
Miscellaneous income			-				-				-
Net income (loss) before controlling interests		$	210,449			$	(278,173	)		$	488,622

Net Income (Loss)

We recorded a net income of approximately $0.2 million for the three months ended June 30, 2025, as compared to net loss of approximately $0.3 million for the three months ended June 30, 2024. The primary difference in net income, of approximately $0.5 million, between the three months ended June 30, 2025 as compared to the same period of 2024 was primarily due to lower operating expenses of approximately $30 thousand, lower interest of approximately $8 thousand and change in value of derivatives on debt of approximately $0.5 million, for the three months ended June 30, 2024.

Research and Development Expenses

Research and development ("R&D") expenses for the three months ended June 30, 2025 compared to the same period in 2024 was almost the same. The lower R&D cost was primarily related to lower operational costs, as these costs are now being borne by our JV since April 2022.

Now that we have formed a joint venture with GMP Bio, whereby we are able to transfer the responsibility of our drug development program related to OT-101 to the JV, we plan to increase research and development activities related to apomorphine, the initiation of new clinical trials for our other oncology indications as well continuing or expanding on the trials and development of AI based tools and applications for OT-101 and Artemisinin for COVID-19 and other epidemics, and therefore believe that research and development expense may increase in the future, subject to our continuing ability to secure sufficient funding to continue planned operations.

General and Administrative Expenses

General and administrative ("G&A") expenses reduced by approximately $30 thousand for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to decrease in legal and professional expenses and other expenses.

Now that we have formed a joint venture with GMP Bio, we may be able to transfer the responsibility of some or most of our G&A expenses to the joint venture, however, we may see an increase in G&A expenses, subject to our continuing ability to secure sufficient funding to continue planned operations.

Reimbursement of expenses

The Company was reimbursed approximately $10 thousand, by Autotelic Inc. a related party, during the three months ended June 30, 2024 on behalf of our JV. No similar expenses were reimbursed during the three months ended June 30, 2025.

Interest Expense, Net

We recorded interest expense including amortization of debt costs, of approximately $0.2 million for the three months ended June 30, 2025, in connection with debt raised from various convertible notes, including the JH Darbie Financing and other debt financings, as compared to $0.2 million for the same period of 2024. For more information on debt raised from convertible notes and the JH Darbie Financing, see Note 5 and Note 7 of the Unaudited Consolidated Financial Statements of this Quarterly Report.

Change in Value of Derivatives

During the three months ended June, 2025, we recorded a net gain of approximately $0.5 million due to change in value of the derivative on the notes issued to our CEO and a bridge investor (collectively, the "Convertible Notes"). The Company recorded approximately $24 thousand gain during the same period in 2024 due to change in the value of the derivatives on the notes issued to our CEO and the bridge investors.

Comparison of the Results of Operations for the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

A comparison of the Company's operating results for the six months ended June 30, 2025 and 2024, respectively, is as follows.

		June 30, 2025				June 30, 2024				Variance
Operating expense:
Research and development			594				732				(138	)
General and administrative			166,472				263,071				(96,596	)
Goodwill impairment			-				-				-
Total operating expense			167,066				263,803				(96,734	)
Loss from operations			(167,066	)			(263,803	)			96,734
Reimbursement for expenses - related party			-				22,937				(22,937	)
Interest expense, net			(411,579	)			(450,330	)			38,751
Change in the value of derivatives on debt			424,830				26,106				398,724
Loss on conversion of debt			-				(88,258	)			88,258
Net income (loss) before controlling interests		$	(153,815	)		$	(753,348	)		$	599,530

Net Income (Loss

We recorded a net loss of approximately $0.2 million for the six months ended June 30, 2025 as compared to a net loss of approximately $0.8 million for the six months ended June 30, 2024. The lower net loss, of approximately $0.6 million, for the six months ended June, 2025 as compared to the same period of 2024, was primarily due to lower operating expense of approximately $0.1 million, lower interest cost of approximately $40 thousand, higher change in value of derivatives on debt of approximately $0.4 million, lower loss on conversion of debt of approximately $0. 1 million, offset by lower reimbursement of expenses by a related party of approximately $23 thousand, compared to the same period in 2024.

Research and Development Expenses

Research and development ("R&D") expenses was almost the same for the six months ended June 30, 2025 compared to the same period in 2024. The lower R&D cost was primarily related to lower operational costs, as these costs are now being borne by our JV since April 2022.

Now that we have formed a joint venture with GMP Bio, whereby we are able to transfer the responsibility of our drug development program related to OT-101 to the JV, we plan to increase research and development activities related to apomorphine, the initiation of new clinical trials for our other oncology indications as well continuing or expanding on the trials and development of AI based tools and applications for OT-101 and Artemisinin for COVID-19 and other epidemics, and therefore believe that research and development expense may increase in the future, subject to our continuing ability to secure sufficient funding to continue planned operations.

General and Administrative Expenses

General and administrative ("G&A") expenses decreased by approximately $0.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to lower legal and professional and other operational costs.

Now that we have formed a joint venture with GMP Bio, we may be able to transfer the responsibility of some or most of our G&A expenses to the joint venture, however, we may see an increase in G&A expenses, subject to our continuing ability to secure sufficient funding to continue planned operations.

Interest Expense, Net

We recorded interest expense, including amortization of debt costs, of approximately $0.4 million for the six months ended June 30, 2025 in connection with debt raised from various convertible notes, including the JH Darbie Financing and other debt financing, as compared to $0.5 million for the six months ended June 30, 2024. Interest expense was lower for the six months ended June 30, 2025 as compared to the same period of 2024 due to some of the outstanding loans being retired. For more information on debt raised from convertible notes and the JH Darbie Financing, see Note 5 and Note 7 of the Unaudited Consolidated Financial Statements of this Quarterly Report.

Reimbursement of expenses

The Company was reimbursed approximately $20 thousand during the six months ended June 30, 2024, by Autotelic Inc. a related party, on behalf of our JV. No similar reimbursements were recorded during the six months ended June 30, 2025.

Change in Value of Derivatives

During the six months ended June 30, 2025, we recorded approximately $0.5 million gain in value of derivatives on the notes issued to our CEO and the bridge investors. Correspondingly, we recorded a gain of approximately $26 thousand during the same period of 2024.

Loss on Conversion of Debt

During the six months ended June 30, 2024, we recorded a loss of $0.1 million on conversion of debt. related to the difference in fair value to the price at which the debt was converted. No similar expense was recorded during the six months ended June 30, 2025.

Liquidity, Financial Condition and Capital Resources ($s in '000's)

		June 30, 2025				December 31, 2024
Cash, including restricted cash of $20		$	108			$	106
Working capital			(19,149	)			(19,065	)
Stockholders' Equity			8,300				8,252

The Company has experienced net losses every year since inception and as of June 30, 2025 had an accumulated deficit of approximately $38 million. As of June 30, 2025, the Company had approximately $0.1 million in cash, and current liabilities of approximately $19.3 million. Of the approximately $19.3 million in current liabilities, of which approximately $1.3 million are net assumed liabilities of the Company as part of the Oncotelic Inc. reverse merger, $4.7 million was debt for conducting clinical trials for OT-101 from GMP and $2.6 million related to contingent liability to issue Common Stock of the Company to PointR shareholders upon achievement of certain milestones. Management expects to incur significantly lower costs losses, especially due to the transfer of costs over to the JV, especially in connection with the development of OT-10, in the foreseeable future but also recognizes the need to raise capital to remain viable. The Company's limited capital resources, history of recurring losses and uncertainties as to whether the Company's operations will become profitable raise substantial doubt about its ability to continue as a going concern. The financial statements contained in this report do not include any adjustments related to the recoverability of assets or classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

The principal source of the Company's working capital deficit to date has been the issuance of convertible notes, a substantial part of which has been provided by officers and certain insiders, and sale of equity under the EPA with Peak One. The Company will need to raise additional capital in order to fund its operations and continue development of product candidates. The Company is evaluating the options to further the development of the Company's product candidates, AL-101, Artemisinin for COVID-19, developing AI technologies to support the COVID-19 therapies; in addition to evaluating the development pathway of its product candidates; OXi4503 and/or CA4P. The Company is also independently planning to develop OT-101 for certain animal health indications and contemplating using crypto currencies for that platform. The Company has been developing OT-101 for various cancers, as well as a nanoparticle platform through the JV. Substantial development on that front has occurred during the past year.

The Company anticipates raising substantial additional capital through the sale of equity securities and/or debt, but no other financing arrangements are in place at this time.

If the Company is unable to access additional funds when needed, it may not be able to continue the development of these investigational drugs and the Company could be required to delay, scale back or eliminate some or all of its development programs and operations. Any additional equity financing, if available, would be dilutive to the current stockholders and may not be available on favorable terms. Additional debt financing, if available, may involve restrictive covenants and could also be dilutive. The Company's ability to access capital is not assured and, if access is not achieved on a timely basis, would materially harm the Company's financial condition, the value of its Common Stock and its business prospects.

Cash Flows ($ in '000's)

		Six month ended June 30,
		2025				2024
Net cash used in operating activities		$	(293	)		$	(493	)
Net cash provided by financing activities			295				395
Increase (decrease) in cash		$	2			$	(98	)

Operating Activities

Net cash used in operating activities was approximately $0.30 million for the six months ended June 30, 2025. This was due to the net loss of approximately $0.2 million, approximately $0.4 million gain in fair value of derivative, and primarily offset by approximately $0.1 million due to amortization of debt discounts and deferred financing costs and changes in operating assets and liabilities of approximately $0.2 million.

Net cash used in operating activities was approximately $0.5 million for the six months ended June 30, 2024. This was due to the net loss of approximately $0.8 million, and primarily offset by approximately $0.1 million of loss on conversion of debt, approximately $0.1 million due to amortization of debt discounts and deferred financing costs and changes in operating assets and liabilities of approximately $0.1 million.

Financing Activities

For the six months ended June 30, 2025, net cash provided by financing activities was approximately $0.3 million, primarily due to a receipt of a short term loan from a related party.

For the six months ended June 30, 2024, net cash provided by financing activities was approximately $0.4 million, primarily due to a receipt of a short term loan from a related party.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.

Contractual Obligations

Our current drug development programs are based on a series of compounds called combretastatins, which we have exclusively licensed from Arizona State University, or ASU. If our current drug candidates are approved, we will be required to pay low to mid-single-digit royalties on future net sales of products associated with the ASU patent rights until these patent rights expire.

We also have an exclusive license from Bristol-Myers Squibb, or BMS, for certain patent rights to particular combretastatins, including CA4P. If CA4P is approved, we will be required to pay low-single-digit royalties on future net sales of products associated with the BMS patent rights until these patent rights expire.