Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

The following section of this Annual Report on Form 10-K entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains statements that are not statements of historical fact and are forward-looking statements within the meaning of federal securities laws. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.

In some cases, you can identify forward-looking statements by terms such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "could," "would," "target," "seek," "aim," "believe," "predicts," "think," "objectives," "optimistic," "new," "goal," "strategy," "potential," "likely," "will," "expect," "plan" "project," "permit" and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail in Item 1A. Risk Factors of this Annual Report on Form 10-K. You should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on page ii of this Annual Report on Form 10-K.

Overview

We are a clinical-stage biotechnology company focused on the development of regenerative medicine treatments for disorders of the gastro-intestinal system and other organs that result from cancer, trauma or birth defects.

We believe that our technology represents a next generation solution for restoring organ function because it allows the patient to regenerate their own organ, thus eliminating the need for human donor or animal transplants, the sacrificing of another of the patient's own organs or permanent artificial implants.

Our first esophageal product candidate, our esophageal implant was used in the first successful regeneration of the esophagus in a patient with esophageal cancer. This successful first-in-human experience, plus the research we have performed on over 50 pigs, led the FDA to approve our 10-patient phase 1 clinical trial. This combination trial will measure both safety and efficacy in the patient population.

We have contracted with IQVIA, a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry, as the contract research organization ("CRO") to manage our first clinical trial. We activated the first clinical trial site and started screening patients in the third quarter of 2023.

We have encountered delays in patient recruitment for our ongoing clinical trial, driven by several factors, including the existing comorbid conditions for clinical trial participants, the stringent eligibility criteria required by FDA for our studies, and logistical difficulties in enrolling participants across various sites.

Although we are actively implementing strategies to mitigate these challenges, such as increasing the number of trial sites and enhancing patient outreach efforts, there is a risk that these measures may not completely resolve the recruitment issues. Our product candidates are currently in development and have not yet received regulatory approval for sale anywhere in the world.

In addition to our development of regenerative medicine treatments, we also sell dietary supplements. The Company's subsidiary in Hong Kong, Consumer Health Products focuses on consumer health products. Consumer Health Products plans to include a broad range of products focused on personal healthcare including dietary supplements. These products are commercially marketed to the general public and initially targeted at consumers in Asia through eCommerce (online sales).

We continue to assess the market and regulatory approval pathway in China as to our implant products. We are not certain at this time as to which market, including U.S. or China for example, may provide the most viable initial pathway for regulatory approval to a commercial product. This will depend on a number of factors, including the approval and development processes, related costs, ability to raise capital and the terms and conditions thereof, among other factors. Any development and capital raising efforts in China may include a joint venture in relation to our Hong Kong subsidiary, and would also involve a number of commercial variables, including rights and obligations pertaining to licensing, development, and financing, among others. Our failure to receive or obtain such clearances or approvals on a timely basis or at all, whether that be in the U.S., China or otherwise, would have an adverse effect on our results of operations.

Since our incorporation, we have devoted substantially all of our resources to developing our programs, building our intellectual property portfolio, business planning, raising capital and providing selling, general and administrative support for these operations. To date, we have financed our operations with proceeds from the sales of common stock and preferred stock.

We have incurred substantial operating losses since our inception, and as of December 31, 2025 had an accumulated deficit of approximately $106.6 million and will require additional financing to fund future operations. We expect that our operating cash on-hand as of December 31, 2025 of approximately $1.4 million will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2026. We expect to continue to incur operating losses and negative cash flows from operations in future years. Therefore, as disclosed in Note 1 to our Consolidated Financial Statements, these conditions raise substantial doubt about our ability to continue as a going concern.

We will need to raise additional funds to fund our operations. In the event we do not raise additional capital from outside sources before or during the second quarter of 2026, we may be forced to curtail or cease our operations. Cash requirements and cash resource needs will vary significantly depending upon the timing of the financial and other resource needs that will be required to complete ongoing development, pre-clinical and clinical testing of product candidates, as well as regulatory efforts and collaborative arrangements necessary for our products that are currently under development. We are currently seeking and will continue to seek financings from other existing and/or new investors to raise necessary funds through a combination of public or private equity offerings. We may also pursue debt financings, other financing mechanisms, research grants, or strategic collaborations and licensing arrangements. We may not be able to obtain additional financing on favorable terms, if at all.

Our operations will be adversely affected if we are unable to raise or obtain needed funding and may materially affect our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming that we will continue as a going concern and therefore, the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.

Business Segments

The Company has two separate reportable segments. The Company has one segment, Harvard Apparatus Regenerative Technology, Inc., or Regenerative Biotech, focused on the development and commercialization of therapies to cure patients of cancers, injuries, and birth defects of the gastro-intestinal tract and the airways. The other segment, Consumer Health Products, is focused on personal healthcare including dietary supplements.

2025 Financing Activities

During the year ended December 31, 2025, we completed the following financing activities:

	●	On December 30, 2025, the Company entered into securities purchase agreements with certain investors each named therein (the "December Investor," and collectively the "December Investors") pursuant to which each of the December Investors agreed to purchase in a private placement an aggregate of 411,765 shares of Common Stock for the aggregate gross proceeds of approximately $0.7 million at a purchase price per share of $1.70.
	●	On July 11, 2025, the Company entered into securities purchase agreements with certain investors each named therein (the "July Investor," and collectively the "July Investors") pursuant to which each of the July Investors agreed to purchase in a private placement an aggregate of 1,250,000 shares of Common Stock for the aggregate gross proceeds of approximately $2.0 million at a purchase price per share of $1.60.

2024 Financing Activities

During the year ended December 31, 2024, we completed the following financing activities:

	●	On August 19, 2024, the Company entered into a securities purchase agreement with an investor (the "August Investor") pursuant to which the August Investor agreed to purchase in a private placement an aggregate of 1,388,888 shares of Common Stock for the aggregate purchase price of approximately $5.0 million and a purchase price per share of $3.60.
	●	On various dates in July 2024, investors exercised 215,000 warrants to purchase the Company's common stock for aggregate proceeds of $430,000.
	●	On April 15, 2024, the Company entered into securities purchase agreements, each an "April Purchase Agreement," collectively the "April Purchase Agreements") with certain investors pursuant to which each of the Investors agreed to purchase in a private placement an aggregate of 367,767 shares of Common Stock for the aggregate gross proceeds of approximately $1.5 million at a purchase price per unit of $4.03.
	●	On February 1, 2024, the Company entered into a loan arrangement (the "Bridge Note") with Junli He, the Chairman and Chief Executive Officer of the Company (the "Lender"), pursuant to which the Lender loaned the Company an aggregate amount of $500,000. The principal balance and accrued interest of $22,889 on the Bridge Note were settled in full in cash on August 29, 2024.

As of December 31, 2025, our consolidated business employed 8 individuals.

Components of Operating Loss

Product revenue. Product revenue consists of consumer health product sales in the Asia region.

Research and development expense. Research and development expense consists of salaries and related expenses, including share-based compensation, for personnel and contracted consultants and various materials and other costs to develop our new products, primarily: synthetic scaffolds, including investigation and development of materials and investigation and optimization of cellularization, as well as studies of cells and cell behavior. Other research and development expenses include the costs of outside service providers and material costs for prototype and test units and outside laboratories and testing facilities performing cell growth and materials experiments, as well as the costs of all other preclinical research and testing including animal studies and expenses related to potential patents. We expense research and development costs as incurred.

Sales and marketing expense. Sales and marketing costs include advertising and payroll and related expenses for personnel engaged in marketing and selling activities.

General and administrative expense. General and administrative expense consists primarily of salaries and other related expenses, including share-based compensation. Other costs include professional fees for legal and accounting services, insurance, investor relations and facility costs.

Critical Accounting Estimates

Management's 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 in the United States (U.S. GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Share-based Compensation

We account for our share-based compensation in accordance with the fair value recognition provisions of current authoritative guidance. Share-based awards, including stock options, are measured at fair value as of the grant date and recognized as expense over the requisite vesting period (generally the service period), which we recognize on a straight-line basis. Expense on share-based awards for which vesting is performance or milestone based is recognized on a straight-line basis from the date when we determine the achievement of the milestone is probable to the vesting/milestone achievement date. We estimate the fair value of options granted using the Black-Scholes option valuation model. Significant judgment is required in determining the proper assumptions used in these models. The assumptions used include the risk-free interest rate, expected term, expected volatility and expected dividend yield. We base our assumptions on historical data when available or, when not available, on a peer group of companies. However, these assumptions consist of estimates of future market conditions, which are inherently uncertain and subject to our judgment, and therefore any changes in assumptions could significantly impact the future grant date fair value of share-based awards.

Total share-based compensation expense for each of the years ended December 31, 2025 and 2024 was approximately $2.0 million and $2.4 million, respectively. Share-based compensation is further described in Note 15 to our Consolidated Financial Statements included in Item 15 of this Annual Report on Form 10-K.

Results of Operations

The following table summarizes the results of our operations for the years ended December 31, 2025 and 2024 ($ in thousands):

		Year Ended December 31,								Change 2025 vs. 2024
		2025				2024				$ Change				%
Product revenue		$	704			$	430			$	274				64	%
Operating expenses
Cost of sales			646				270				376				139	%
Research and development			2,653				2,310				343				15	%
Sales and marketing			67				554				(487	)			(88	)%
General and administrative			4,253				5,022				(769	)			(15	)%
Total operating expenses			7,619				8,156				(537	)			(7	)%
Other income (expense), net:
Interest income			37				32				5				16	%
Interest expense			(8	)			(38	)			30				79	%
Other income			17				-				17				100	%
Total other income (expense), net			46				(6	)			52				(867	)%
Net loss		$	(6,869	)		$	(7,732	)		$	863				(11	)%

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Product Revenue

Product revenue was $704,000 and $430,000 for the year ended December 31, 2025 and 2024, respectively. The $274,000 increase, representing a 64% growth, was driven by expanded distribution and new product launches within our Consumer Health segment, including CoQ-10 and sleep aid gummies, alongside continued strong performance from our existing offerings such as Liver Guard.

Cost of Sales

Cost of sales was $646,000 and $270,000 for the year ended December 31, 2025 and 2024, respectively. Cost of sales consists of the purchase price of consumer products, taxes, inbound and outbound shipping costs. The gross profit margin on our products decreased in 2025 primarily due to a change from direct sales to consumers to direct sales with our distributor.

Research and Development Expense

Research and development expense increased approximately $0.3 million, or 15%, to approximately $2.7 million for the year ended December 31, 2025 as compared to approximately $2.3 million for the year ended December 31, 2024. This increase was primarily reflecting higher clinical trial activity in China and the USA.

Sales and Marketing Expense

Selling and marketing expense was $0.07 million for the year ended December 31, 2025 as compared to $0.6 million for the comparable period. The reduction primarily reflects a strategic shift from direct in-house sales to a distributor-based model, which significantly lowered advertising and promotional costs, as well as a headcount reduction within the sales team implemented in the fourth quarter of 2024.

General and Administrative Expense

General and administrative expense decreased approximately $0.8 million, or 15%, to approximately $4.3 million for the year ended December 31, 2025 as compared to approximately $5.0 million for the year ended December 31, 2024. This decrease was primarily due to the recognition in the prior period of one-time offering costs totaling $0.5 million related to an anticipated offering that was not completed.

Interest income

During the year ended December 31, 2025, we recorded interest income of approximately $37,000 earned from our money market account. During the year ended December 31, 2024, we recorded interest income of approximately $32,000 earned from our money market account.

Interest expense

During the year ended December 31, 2025, we recorded interest expense of approximately $8,000 on insurance installment payments. During the year ended December 31, 2024, we recorded interest expense of approximately $23,000 on convertible debt and approximately $15,000 on insurance installment payments.

Liquidity and Capital Resources

Sources of Liquidity. We have incurred operating losses since inception and as of December 31, 2025, despite the Company's revenue from our consumer health products, we had an accumulated deficit of approximately $106.6 million. We are currently investing significant resources in the development and commercialization of our product candidates for use by clinicians and researchers in the field of regenerative medicine. As a result, we expect to incur operating losses and negative operating cash flows for the foreseeable future.

Operating Activities. Net cash used in operating activities of approximately $3.8 million for the year ended December 31, 2025 was due primarily to our net loss of approximately $6.9 million offset by adjustments for non-cash items of approximately $2.1 million due to non-cash expenses for share-based compensation, depreciation and amortization, and an approximately $0.9 million increase to cash from changes in working capital due to the timing of payments for accounts receivable, inventory, prepaid expenses, long-term prepaid contracts, accounts payable, deferred revenue and accrued expenses.

Net cash used in operating activities of approximately $4.9 million for the year ended December 31, 2024 was due primarily to our net loss of approximately $7.7 million offset by adjustments for non-cash items of approximately $2.6 million due to non-cash expenses for share-based compensation, depreciation and amortization, and an approximately $0.3 million increase to cash from changes in working capital due to the timing of payments for accounts receivable, inventory, prepaid expenses, deferred financing costs, long-term prepaid contracts, accounts payable and accrued expenses.

Financing Activities. Net cash generated from financing activities was approximately $2.7 million during the year ended December 31, 2025 and consisted of net proceeds from private placement transactions, which resulted in the issuance of 1,250,000 shares of our Common Stock to a group of investors. Net cash generated from financing activities was approximately $6.9 million during the year ended December 31, 2024 and included net proceeds of $0.5 million from debt financing, $0.4 million from stock warrant exercises, and $6.5 million from private placement transactions, which resulted in the issuance of 1,756,655 shares of our Common Stock to a group of investors. The $0.5 million in debt was repaid in August 2024.

We continue to pursue our esophageal program, including advancing to operate as a clinical stage company. Given our current limited cash resources, we intend to closely monitor our cash expenses as such cash resources are expected to only allow us to meet our operating needs into the second quarter of 2026.

We have incurred substantial operating losses since our inception, and as of December 31, 2025 had an accumulated deficit of approximately $106.6 million and will require additional financing to fund future operations. We expect that our operating cash on-hand as of December 31, 2025 of approximately $1.4 million will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2026. We expect to continue to incur operating losses and negative cash flows from operations in future years. Therefore, as disclosed in Note 1 to our Consolidated Financial Statements, these conditions raise substantial doubt about our ability to continue as a going concern.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.