Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operation

Critical Accounting Policies and Estimates

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), we have adopted various accounting policies. Our most significant accounting policies are disclosed in Note 1 to the consolidated financial statements.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to the ability to continue as a going concern, the recoverability of inventory and long-lived assets, the fair value of stock-based compensation, the fair value of debt, the fair value of derivative liabilities, recognition of loss contingencies and deferred tax valuation allowances are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.

We believe that our critical accounting policies and estimates include our ability to continue as a going concern, revenue recognition, accounts receivable and allowance for doubtful accounts, inventory obsolescence, accounting for long-lived assets and accounting for stock based compensation.

Ability to Continue as a Going Concern: Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

Revenue Recognition: The Company accounts for revenue from contracts with customers in accordance with Financial Accounting Standard Board ("FASB") Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). Under ASC Topic 606, revenue recognition has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied.

Our revenues are primarily derived from customer orders for the purchase of our products. We recognize revenues as performance obligations are fulfilled upon shipment of products. We record revenues net of promotions and discounts. For certain product sales to a distributor, we record revenue including a portion of the cash proceeds that is remitted back to the distributor.

Accounts Receivable and Allowance for Credit Losses: We grant credit without collateral to our customers based on our evaluation of a particular customer's credit worthiness. Accounts receivable are due 30 days after the issuance of the invoice. In addition, the Company maintains an allowance for credit losses to reflect the current expected credit losses ("CECL") over the contractual life of the receivables. Accounts receivable are written off after collection efforts have been deemed to be unsuccessful. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts, while subsequent recoveries are netted against the provision for doubtful accounts expense. We generally do not charge interest on accounts receivable. We use third party payment processors and are required to maintain reserve balances, which are included in accounts receivable.

Our accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers and third party payment processors, net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.

Inventory Obsolescence: Inventories are valued at the lower of cost or net realizable value. We periodically perform an evaluation of inventory for excess, impairments and obsolete items. At December 31, 2024, our inventory consisted entirely of raw materials and finished goods that are utilized in the manufacturing of finished goods. These raw materials generally have expiration dates in excess of 10 years. Commencing on October 1, 2019, we classify inventory as short-term or long-term inventory based on timing of when it is expected to be consumed.

Long-Lived Assets: The carrying value of long-lived assets is reviewed annually and when events or changes in circumstances may suggest impairment has occurred. If indicators of impairment are present, we determine whether the sum of the estimated undiscounted future cash flows attributable to the long-lived asset in question is less than its carrying amount. If less, we measure the amount of the impairment based on the amount that the carrying value of the impaired asset exceeds the discounted cash flows expected to result from the use and eventual disposal of the impaired assets.

Derivative Financial Instrument: Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

Convertible Debt: The Company adheres to ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40). The update eliminates certain separation models, including the beneficial conversion feature and cash conversion models, so convertible instruments issued after adoption are generally accounted for as a single liability or equity instrument, unless a conversion feature requires separate derivative accounting under ASC 815. ASU 2020-06 also amends diluted EPS guidance.

The Fair Value Measurement Option: We have elected the fair value measurement option for convertible debt with embedded derivatives that require bifurcation, and record the entire hybrid financing instrument at fair value under the guidance of ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"). The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes and derivatives in the accompanying consolidated statements of operations.

Derivative Accounting for Convertible Debt and Options and Warrants: The Company evaluated the terms and conditions of the convertible debt under the guidance of ASC 815, Derivatives and Hedging. The conversion terms of some of the convertible notes are variable based on certain factors, such as the future price of the Company's common stock. The number of shares of common stock to be issued is based on the future price of the Company's common stock. The number of shares of common stock issuable upon conversion of the debt is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company's authorized share limit, the equity environment is tainted, and all additional convertible debt and options and warrants are included in the value of the derivative liabilities. Pursuant to ASC 815-15, Embedded Derivatives, the fair values of the convertible debt, options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.

Share-Based Compensation: We record share-based compensation in accordance with FASB ASC 718, Stock Compensation. FASB ASC 718 requires that the cost resulting from all share-based transactions are recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. FASB ASC 718 also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions.

Accomplishments during 2024 & Subsequent Accomplishments

On March 22, 2024, we announced that we had reached a settlement in the civil lawsuit brought by the SEC.

Results of Operations

Status of Operations

In November 2014, we announced the recertification of our laboratory facility as the first step in re-engaging our drug development activities. In September 2015, we received Orphan designation from the FDA for our lead drug candidate, RPI-78M for the treatment of Pediatric Multiple Sclerosis. This will allow us to shorten the timeline on clinical studies and may allow an eventual Fast Track through the approval process. We are currently working with our consultants to prepare a pre-IND meeting with the FDA in order to gain approval of a protocol for a Phase I/II clinical study in Pediatric MS. Our goal is to begin the study in early 2026.

We estimate that we will require approximately $900,000 to fund our existing operations over the next twelve months. These costs include: (i) compensation for six (6) full-time employees; (ii) compensation for various consultants who we deem critical to our business; (iii) product liability insurance; and (iv) outside legal and accounting services. These costs reflected in (i) - (iv) do not include research and development costs or other costs associated with clinical studies.

We began generating revenues from the sale of Cobroxin in the fourth quarter of 2009 and from the sale of Nyloxin and Nyloxin Extra Strength in January of 2011. We began sales of Pet Pain-Away in December 2014. We began selling private label versions of our OTC products in 2021. While sales have increased year over year, they have been limited and inconsistent. Our ability to meet our future operating expenses is highly dependent on the amount of such future revenues. If future revenues from the sale of our private label products, Nyloxin and Pet Pain-Away are insufficient to cover our operating expenses we may need to raise additional equity capital, which could result in substantial dilution to existing shareholders. There can be no assurance that we will be able to raise sufficient equity capital to fund our working capital requirements on terms acceptable to us, or at all. We may also seek additional loans from our officers and directors; however, there can be no assurance that we will be successful in securing such additional loans.

Comparison of Years Ended December 31, 2024 and 2023

Net sales to unrelated customers were $246,309 for the year ended December 31, 2024, compared to $205,564 for the year ended December 31, 2023-an increase of $40,745, or approximately 19.82%. The increase was driven by higher private label customer order volumes and the timing of orders during 2024.

Net sales to a related party were $145,841 for the year ended December 31, 2024, compared to $389,316 for the year ended December 31, 2023-a decrease of $243,475, or approximately 62.54%. There is a decline in sales to Avini, as Avini has begun manufacturing its own products.

Cost of sales for the year ended December 31, 2024 is $84,827 compared to $177,525 for the year ended December 31, 2023. Our cost of sales includes the direct costs associated with manufacturing, shipping and handling costs. Gross profit for the year ended December 31, 2024 was $247,323, representing a gross margin of 63.07%, compared to $396,455, or 66.64%, for the year ended December 31, 2023. The year-over-year decline in gross margin was primarily attributable to the recognition of a $60,000 reserve for undelivered venom and slow-moving inventory during 2024, compared to a $20,900 reserve recorded in 2023. Excluding the impact of these reserves, gross margin would have increased to 78.37% in 2024 from 70.16% in 2023, reflecting lower manufacturing costs associated with reduced sales volumes to a related party beginning in the third quarter of the prior year.

Selling, general and administrative expenses decreased $52,225 or 4.43% from $1,177,969 for the year ended December 31, 2023 to $1,125,744 for the year ended December 31, 2024. The decrease is primarily due to reductions in certain payroll and office-related costs under the new arrangement with Avini, as well as an overall decline in legal fees following the settlement of the Company's major lawsuit in late March 2024. These decreases were partially offset by increased compensation related to newly appointed officers. In addition, we incurred bad debt expense of $0 and $105,465 from the receivables from companies controlled by the Company's former CEO for the year ended December 31, 2024 and 2023, respectively.

Other income was $103,450 and $73,061 for the years ended December 31, 2024 and 2023, respectively. A portion of other income relates to the amortization of debt discounts on convertible notes receivable, which totaled $3,450 and $3,031 for the year ended December 31, 2024 and 2023, respectively. For 2023, other income primarily includes $39,667 from the gain on sale of equipment and $30,363 related to services rendered in exchange for a convertible note receivable. The significant higher amount of other income recognized in 2024 was attributable to income earned under a short-term research and development services contract.

Interest expense, including related party interest expense, decreased $76,191 or 19.06%, from $399,759 for the year ended December 31, 2023 to $323,568 for the year ended December 31, 2024. This decrease was primarily due to a decrease in amortization of loan discounts in the year ended December 31, 2024 compared to the year ended December 31, 2023.

We carry certain of our debentures and common stock warrants at fair value. Due to the fact that the number of shares of common stock issuable could exceed the Company's authorized share limit, the equity environment is tainted, and all additional convertible debt, options and warrants are included in the value of the derivative liabilities. For the years ended December 31, 2024 and 2023, the liability related to these hybrid instruments fluctuated, resulting in a loss of $220,902 and $187,829, respectively. Interest expense related to these debentures is included in the fair value loss in the accompanying consolidated statements of operations.

Gain on settlement of debts, accrued expense and vendor payable increased $25,628 or 314.45%, from a gain of $8,150 for the year ended December 31, 2023 to a gain of $33,778 for the year ended December 31, 2024. This increase in the gain was primarily due to more outstanding obligations being settled in the year ended December 31, 2024 compared to the same period in 2023.

As a result of the foregoing, our net loss decreased by $107,693 or 7.73%, from net loss of $1,393,356 for the year ended December 31, 2023 to a net loss of $1,285,663 for the year ended December 31, 2024.

For the year ended December 31, 2024, net cash used in operating activities was approximately $0.42 million, compared to approximately $0.55 million for the year ended December 31, 2023, representing an improvement of approximately $0.13 million year over year. The decrease in cash used in operations was primarily attributable to favorable changes in working-capital accounts during 2024 and increased deferrals of officer compensation, as well as higher non-cash adjustments. Significant non-cash adjustments in 2024 included a $0.22 million non-cash loss related to the change in fair value of convertible notes, $0.13 million of amortization of loan discounts, $0.08 million of amortization of operating lease right-of-use assets, $0.06 million increase in the reserve for supplier advances, and $0.01 million of depreciation expense, partially offset by a $0.03 million gain on settlement of outstanding obligations. In addition, working-capital changes during 2024 included decreases in inventory, as well as increases in accounts payable and accrued expenses reflecting the deferral of certain vendor and officer payments, increase in deferred revenue and related-party payables. These favorable movements were partially offset by increases in other receivables, prepaid expenses, and operating lease obligation payments. Collectively, these changes reduced the amount of cash used in operating activities compared with the prior year.

Net cash provided by investing activities was approximately $0.04 million for the year ended December 31, 2024, compared to approximately $0.12 million for the year ended December 31, 2023. The decrease primarily reflects the absence of proceeds from the sale of equipment and StemSation stock in 2024. Investing cash flows in 2024 consisted mainly of $0.04 million of repayments on convertible notes receivable, partially offset by approximately $0.001 million of new advances.

For the year ended December 31, 2024, net cash provided by financing activities was approximately $0.42 million, compared to approximately $0.43 million in the prior year. Financing cash inflows in both periods were primarily attributable to proceeds from convertible notes and borrowings under other notes payable, including advances from related parties, partially offset by repayments of officer loans, convertible notes, and other notes payable. The slight decrease in financing cash inflows during 2024 reflects reduced borrowing activity compared with 2023.

Liquidity and Capital Resources

During December 31, 2024 and 2023, respectively, we had negative cash from operations of approximately $0.42 million and $0.55 million. Our lack of cash, significant losses and working capital deficits and stockholders' deficits raise substantial doubt about our ability to continue as a going concern. For the years ended December 31, 2024 and 2023, we have experienced net loss of $1,285,663 and a net loss of $1,393,356, respectively, and had an accumulated deficit of $76,231,137 for the period from our inception to December 31, 2024. In addition, we had working capital and stockholders' deficits at December 31, 2024 of $14,892,355 and $14,807,914, respectively.

Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

As of December 31, 2024, we had $36,447 in cash and owed approximately $4.99 million in vendor payables and accrued expenses. We currently do not have sufficient cash to sustain our operations for the next 12 months and will require additional financing or an increase in sales in order to execute our operating plan and continue as a going concern. Our plan is to continue to increase sales of our products and attempt to secure adequate funding to bridge the commercialization of our Nyloxin and Pet Pain-Away products. We cannot predict whether additional financing will be in the form of equity, debt, or another form and we may be unable to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that these financing sources do not materialize, or that we are unsuccessful in increasing our revenues and profits, we may be unable to implement our current plans for expansion, repay our obligations as they become due or continue as a going concern, any of which circumstances would have a material adverse effect on our business prospects, financial condition and results of operations.

Historically, we have relied upon loans from our former Chief Executive Officer, Rik J Deitsch, to fund costs associated with our operations. These loans are unsecured, accrue interest at a rate of 4.0% per annum and are due on demand. At December 31, 2024, the balance due to Rik Deitsch, the Company's former CEO, and the companies majority owned and controlled by him (collectively referred to as "Due to Officer") in the aggregate is $986,264, which balance is unsecured and accruing interest at 4%. During the year ended December 31, 2024, in the aggregate, we repaid $206,982 and were advanced $530,396 on this balance. Additionally, accrued interest on the outstanding balance was $12,579 and is included in the due to officer account. The Company had fully reserved receivables from companies owned by the Company's former CEO. The reserve was $177,261 as of December 31, 2024. No bad debt expense was recorded for the year ended December 31, 2024.

During the year ended December 31, 2024, we raised net cash proceeds of $229,000 and $212,390 through the issuance of convertible notes and promissory notes, respectively. Current operations are being funded through a combination of product sales, loans from our former CEO and convertible notes.

Uncertainties and Trends

Our operations and possible revenues are dependent now and in the future upon the following factors:

	●	Whether we successfully develop and commercialize products from our research and development activities.
	●	If we fail to compete effectively in the intensely competitive biotechnology area, our operations and market position will be negatively impacted.
	●	If we fail to successfully execute our planned partnering and out-licensing of products or technologies, our future performance will be adversely affected.
	●	The recent economic downturn and related credit and financial market crisis may adversely affect our ability to obtain financing, conduct our operations and realize opportunities to successfully bring our technologies to market.
	●	Biotechnology industry related litigation is substantial and may continue to rise, leading to greater costs and unpredictable litigation.
	●	The decline in sales to Avini, as Avini has begun manufacturing its own products. This shift is expected to reduce our revenues going forward and may require us to develop new customer relationships or product lines to offset the reduction.
	●	If we fail to comply with extensive legal/regulatory requirements affecting the healthcare industry, we will face increased costs, and possibly penalties and business losses.

Off-Balance Sheet Arrangements

We have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under whom we have:

	●	An obligation under a guarantee contract.
	●	A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets.
	●	Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument.
	●	Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.

We do not have any off-balance sheet arrangements or commitments that have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material, other than those which may be disclosed in this Management's Discussion and Analysis of Financial Condition and the audited Consolidated Financial Statements and related notes.