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

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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the fiscal years ended December 31, 2024 and 2023 and highlight certain other information which, in the opinion of management, will enhance a reader's understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2024, as compared to the fiscal year ended December 31, 2023. This discussion should be read in conjunction with our consolidated financial statements for the fiscal years ended December 31, 2024 and 2023 and related notes included elsewhere in this 10-K. These historical financial statements may not be indicative of our future performance. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in "Item 1A. Risk Factors."

Throughout this report, the terms "our," "we," "us," and the "Company" refer to Klotho Neurosciences Inc. and its subsidiaries. Klotho Neurosciences, Inc. is incorporated in Delaware.

Forward Looking Statements

All statements other than statements of historical facts contained in this report, including statements regarding future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "expect," "objective," "plan," "potential," "seek," "grow," "target," "if," and similar expressions intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations, objectives, and financial needs.

Overview

Klotho Neurosciences, Inc. (the "Company" or "Klotho") develops essential medicines for the treatment of chronic diseases - cancer, cardiovascular, and neurodegenerative disorders. The Company currently has acquired two licensed platforms: a generic drug portfolio and a biosimilar biologics platform that uses biologic therapies to treat cancer, and a proprietary, patented gene therapy platform that uses a gene therapy approach to introduce a therapeutic protein called "Klotho" inside the body to treat neurodegenerative diseases.

On May 30, 2023, the Company, then known as Redwoods Acquisition Corp. entered into a business combination agreement (the "Business Combination Agreement") with ANEW Medical, Inc., a Wyoming corporation. On June 21, 2024, the Company completed the Business Combination with ANEW Medical, Inc., a Wyoming corporation becoming a wholly- owned subsidiary, through a reverse acquisition. Simultaneously, the Company changed its name to ANEW Medical, Inc. On September 17, 2024, the Company changed its name to Klotho Neurosciences, Inc.

Results of Operations

For accounting purposes, the Business Combination is treated as a reverse acquisition and, as such, the historical financial statements of the accounting acquirer, as of the date of acquisition, ANEW Medical, Inc., a Wyoming corporation, became the historical financial statements of publicly traded ANEW Medical, Inc., a Delaware corporation. The Results of Operations herein are those of the accounting acquirer, ANEW Medical, Inc., a Wyoming corporation. On September 17, 2024, ANEW Medical, Inc.'s name was changed to Klotho Neurosciences, Inc.

We have not generated any operating revenues to date. To date, our operations have consisted of acquiring our licensed platforms and patents, and consummation of the Business Combination. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as our expenses associated with planning our research and clinical testing operations.

Components of Our Results of Operations

We have been a research and development stage company, and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.

Results of Operations

Years Ended December 31, 2024 and 2023

Our financial results for the years ended December 31, 2024 and 2023 are summarized as follows:

Revenues

The Company had no revenue for the years ended December 31, 2024 and 2023.

Operating Expenses

Operating expenses are composed of consultant fees and professional fees.

Our operating expenses for the year ended December 31, 2024 were $5,540,236 compared to $631,322 for the year ended December 31, 2023, an increase of $4,908,914. The increase was primarily due to increased stock-based compensation expense as well as expenses associated with our business combination including increases in third party consulting fees and professional fees.

Net Loss

For the year ended December 31, 2024, we incurred a net loss of $6,150,372 compared to a net loss of $707,458 for the year ended December 31, 2023. The increase in net loss was primarily due to increased stock-based compensation expense as well as expenses associated with our business combination including increases in third party consulting fees and professional fees.

Working Capital

		As of December 31,
		2024				2023
Current assets		$	157,811			$	6,648
Current liabilities			1,247,534				1,620,989
Working capital		$	(1,089,723	)		$	(1,614,341	)

Working capital increased by $0.5 million from December 31, 2023 to December 31, 2024, primarily due to increase in accrued expenses of approximately $0.9 million and decrease in note payables of approximately $1.2 million from equity inducement on the Austria Capital promissory note of approximately $1.0 million for the funding obtained for operations during the year ended December 31, 2024.

Liquidity and Capital Resources

		Year Ended December 31,
		2024				2023
Net cash used in operating activities		$	(2,946,512	)		$	(446,916	)
Net cash (used in) provided by investing activities			(123,497	)			23,852
Net cash provided by financing activities			3,130,942				350,000
Net increase (decrease) in cash and cash equivalents		$	60,933			$	(73,064	)
Cash, beginning of year			2,808				75,872
Cash, end of year		$	63,741			$	2,808

Operating Activities

Net cash used in operating activities for the year ended December 31, 2024 was $2,946,512, compared to $446,916, for the year ended December 31, 2023, an increase of $2,499,596. The increase in cash used in operating activities is primarily attributable to increases in expenses related to the business combination and continued operating costs. We expect net cash used in operating activities to increase in the future, until our products are able to produce meaningful revenue.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 was $123,497, compared to net cash provided by investing activities of $23,582 for the year ended December 31, 2023, an increase in cash used of approximately $147,349, primarily attributable to acquisition of licenses in the period.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 was $3,130,942, which consisted of proceeds from the business combination, note issuances, sales of stocks and warrants, as well as proceeds from related parties. For the year ended December 31, 2023, net cash provided by financing activities was $350,000, from repayment of an advance to a shareholder and proceeds from stock subscription.

Liquidity & Capital Resources Outlook

As of December 31, 2024, the Company had cash of $63,741 and net working capital of ($1,089,723).

The Company has incurred and expects to continue to incur significant professional costs to remain as a publicly traded company and it has incurred significant transaction costs related to the consummation of the Business Combination.

The accompanying consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. As of December 31, 2024, the Company had cash of approximately $64,000 and an accumulated deficit of approximately $10.6 million. The Company has incurred recurring losses, experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations. Without additional funding, there is substantial doubt about the Company's ability to continue as a going concern for the twelve months from the date of these financial statements.

Contractual Obligations

See Note 10 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for a summary of our contractual obligations.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act.

Critical Accounting Estimates

The preparation of audited consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates; we have identified the following critical accounting policies:

Fair Value of Financial Instruments

FASB ASC Topic 820 "Fair Value Measurements and Disclosures" defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represents the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that a buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The fair value of the Company's certain assets and liabilities, which qualify as financial instruments under ASC Topic 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the consolidated balance sheet. The fair values of cash and cash equivalents, and other current assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of December 31, 2024 and 2023 due to the short maturities of such instruments. See Note 2 for the disclosure of the Company's assets and liabilities that were measured at fair value on a recurring basis.

Convertible Promissory Notes

The convertible promissory notes are accounted for in accordance with ASC 470. The Company has determined that the embedded conversion options in the convertible promissory notes are not required to be separately accounted for as a derivative under GAAP. The Company accounts for the convertible promissory notes as a single liability measured at amortized cost.

Warrants

The Company accounts for warrants (Public Warrants or Private Warrants) as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own common stock and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company has elected to account for its Public Warrants as equity and the Private Warrants as liabilities.

Net Income (Loss) Per Share

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any re-measurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.

New Accounting Standards

For discussion of new accounting standards, see Note 2 to the consolidated Financial Statements, "Summary of Significant Accounting Policies and New Accounting Standards," in Part II, Item 8, of this Annual Report on Form 10-K.