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

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part I. "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Overview

We are a commercial stage biotechnology company focused on the research, development, and commercialization of innovative solutions for men's health and oncology. Through our acquisition of Proteomedix, which closed on December 15, 2023, we own Proclarix, an in vitro diagnostic test for prostate cancer originally developed by Proteomedix and approved for sale in the European Union under the In Vitro Diagnostic Regulation ("IVDR"), which we anticipate will be marketed in the U.S. as a lab developed test through our license agreement with LabCorp.

We also own ENTADFI, an FDA-approved, once daily pill that combines finasteride and tadalafil for the treatment of BPH, a disorder of the prostate. However, in light of (i) the time and resources needed to continue pursuing commercialization of ENTADFI, and (ii) the Company's cash runway and indebtedness, the Company abandoned commercialization of ENTADFI and no longer holds remaining inventory of the product as of December 31, 2025. In addition, as part of cost reduction efforts and in connection with our initial pause in commercializing ENTADFI, we terminated three employees involved with the ENTADFI program, effective April 30, 2024, with such individuals to continue assisting the Company on an as-needed, consulting basis. Based on the circumstances surrounding ENTADFI, at June 30, 2024, the ENTADFI assets were fully impaired.

We are currently focusing our efforts on commercializing Proclarix.

Proclarix is an easy-to-use next generation protein-based blood test that can be done with the same sample as a patient's regular Prostate-Specific Antigen ("PSA") test. The PSA test is a well-established prostate specific marker that measures the concentration of PSA molecules in a blood sample. A high level of PSA can be a sign of prostate cancer. However, PSA levels can also be elevated for many other reasons including infections, prostate stimulation, vigorous exercise or even certain medications. PSA results can be confusing for many patients and even physicians. It is estimated over 50% of biopsies with elevated PSA are negative or clinically insignificant resulting in an overdiagnosis and overtreatment that impacts the physician's routine, our healthcare system, and the quality of patients' lives. Approximately 10% of all men have elevated PSA levels., commonly referred to as the diagnostic "grey zone", of which only 20 - 40% present clinically with cancer. Proclarix is intended for use in diagnosing these patients where it is difficult to decide if a biopsy is necessary to verify a potential clinically significant cancer diagnosis. Proclarix helps doctors and patients with unclear PSA test results through the use of our proprietary Proclarix Risk Score which delivers clear and immediate diagnostic support for further treatment decisions. No additional intervention is required, and results are available quickly. Local diagnostic laboratories can integrate this multiparametric test into their current workflow because Proclarix assays use the enzyme-linked immunosorbent assay (ELISA) standard, which most diagnostic laboratories are already equipped to process.

Since our inception in October 2018 until April 2023, when we acquired ENTADFI, we devoted substantially all of our resources to performing research and development, undertaking preclinical studies and enabling manufacturing activities in support of our product development efforts, hiring personnel, acquiring and developing our technology and now halted vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities. During the third quarter of 2023, we halted our vaccine discovery and development programs, and accordingly, we now operate in one segment: commercial. The commercial segment was new in the second quarter of 2023 and is currently dedicated to the development and commercialization of Proclarix.

Proclarix is CE-marked and for sale in Europe. We continue our sales efforts and expect growing revenues from sales of Proclarix in 2026 and beyond. We anticipate these sales to offset some expenses relating to commercial scale up and development, but we expect our expenses also to increase in connection with our ongoing activities, as we:

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commercialize Proclarix

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hire additional personnel;

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operate as a public company; and

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obtain, maintain, expand, and protect our intellectual property portfolio.

We rely and will continue to rely on third parties for the manufacturing of Proclarix. We have no internal manufacturing capabilities, and we will continue to rely on third parties, of which the main suppliers are single-source suppliers, for commercial product.

We do not have any products approved for sale, aside from (i) Proclarix and (ii) ENTADFI, which has not generated any revenue from product sales; we have determined to abandon commercialization of ENTADFI and no longer holds inventory of the product, we have financed our operations primarily with proceeds from our sale of preferred securities to seed investors, the initial public offering ("IPO"), and subsequent offerings of debt and equity securities. We will continue to require significant additional capital to commercialize Proclarix, and to fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and to rely on third-party resources for marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches, to support our operations.

Some recent key developments affecting our business include the following:

Realbotix Corp. Share Exchange Agreement

On February 11, 2026, we entered into a Share Exchange Agreement (the "Share Exchange Agreement"), by and among (i) Onconetix, (ii) Realbotix Corp., a company existing under the laws of the Province of Ontario ("Parent"), (iii) Simulacra Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (the "Seller") and (iv) Realbotix, LLC, a Delaware limited liability company and wholly owned subsidiary of the Seller (the "Realbotix").

Pursuant to the Share Exchange Agreement, subject to the terms and conditions set forth therein, the Seller agreed to contribute and transfer to us, and we agreed to acquire and accept, all of the issued and outstanding equity interests of Realbotix (the "Realbotix Interests") in exchange for newly issued shares of Common Stock. (the "Share Exchange" and the other transactions contemplated by the Share Exchange Agreement, the "Realbotix Transactions").

For more information about the Realbotix Transaction, see "Realbotix Corp. Share Exchange Agreement" in Item 1.

February 2026 Special Meeting of Stockholders

On February 3, 2026, the Company held a special meeting of stockholders (the "Special Meeting"), whereby its stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to effect a reverse stock split of all of the outstanding shares of Common Stock at a ratio in the range of 1-for-2 to 1-for-50, at any time prior to the one-year anniversary date of the Special Meeting, with such ratio to be determined by the Board or without further approval or authorization of the Company's stockholders.

Series E PIPE Financing

On October 1, 2025, the Company entered into a securities purchase agreement (the "Series E Securities Purchase Agreement") with institutional investor(s) and sold to such institutional investors(s)(collectively, the "Series E PIPE Investors"), an aggregate of 7,813 shares of Series E convertible preferred stock, par value $0.00001 per share ("Series E Preferred Stock"), which are convertible into common stock of the Company, $0.00001 par value per share and warrants (the "Series E Warrants") to purchase 2,025,223 shares of Common Stock, for an aggregate purchase price of approximately $6.25 million, which was also equal to the net cash proceeds. The exercise price of the Series E Warrants is $3.8576, and the Series E Warrants are exercisable beginning on the issuance date and expire on the third anniversary of the issuance date.

Concurrently with entering into the Series E Securities Purchase Agreement, the Company also entered into a registration rights agreement with the Series E PIPE Investors, pursuant to which it has agreed to provide the Series E PIPE Investors with certain registration rights related to the shares of Common Stock underlying the shares of Series E Preferred Stock and Series E Warrants.

Termination of Ocuvex Business Combination Agreement:

On July 16, 2025, the Company entered into an Agreement and Plan of Merger with (i) Onconetix Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company, and (ii) Ocuvex Therapeutics, Inc., a Delaware corporation ("Ocuvex", and such agreement, the "Ocuvex Merger Agreement"). Pursuant to the Merger Agreement, Merger Sub will merge with and into Ocuvex, with Ocuvex surviving the merger as a direct, wholly owned subsidiary of the Company (the "Ocuvex Merger" and the other transactions contemplated by the Merger Agreement, the "Ocuvex Transactions").

Effective September 24, 2025, pursuant to Section 9.01(a) of the Ocuvex Merger Agreement, the Company and Ocuvex entered into a Termination and Release Agreement (the "Termination Agreement") pursuant to which they agreed to terminate the Merger Agreement and the transactions contemplated thereby. The Termination Agreement also terminates and makes void the ancillary documents entered into in connection with the Ocuvex Merger Agreement. The Termination Agreement also provides for a mutual release of claims among Company and Ocuvex and their affiliates and in consideration of the foregoing, the Company agreed to pay to Ocuvex, an amount equal to $302,343.55 (the "Termination Payment"), which represents all amounts payable by the Company to Ocuvex pursuant to Section 6.02(f) of the Ocuvex Merger Agreement.

As of September 24, 2025, Ocuvex confirmed receipt of the Termination Payment, and as a result the Merger Agreement is of no further force and effect.

Series D PIPE Financing

On September 22, 2025, the Company entered into a securities purchase agreement (the "Series D Securities Purchase Agreement") with eleven institutional investors, and sold or exchanged debt, to such investors (collectively, the "Series D PIPE Investors") an aggregate of 16,099 shares of Series D convertible preferred stock, par value $0.00001 per share ("Series D Preferred Stock"), which includes an issuance of 500 shares of Series D Preferred Stock to the lead investor in consideration for the Series D PIPE Investors' irrevocable commitment to purchase shares of the Series D Preferred Stock, and warrants (the "Series D Warrants") to purchase 4,362,827 shares of Common Stock, for an aggregate purchase price of approximately $12.9 million and net cash proceeds of $9.3 million. The exercise price of the Series D Warrants is $3.6896, and the Series D Warrants are exercisable beginning on the issuance date and expire on the third anniversary of the issuance date.

Concurrently with entering into the Series D Securities Purchase Agreement, the Company also entered into a registration rights agreement with the Series D PIPE Investors, pursuant to which it has agreed to provide the Series D PIPE Investors with certain registration rights related to the shares of Common Stock underlying the shares of Series D Preferred Stock and Series D Warrants.

Amendment to Series D and Series E Warrants

On December 23, 2025, the Company entered into Limited Waiver Agreements (the "Warrant Limited Waiver") with all holders of the Series D and Series E Warrants, effective as of October 1, 2025, pursuant to which such holders agreed to waive certain provisions of their Series D Warrants and Series E Warrants. Specifically, in the event the Company issues securities with a conversion price dependent on the price of the Common Stock (the "Variable Price"), the holders of Series D Warrants and Series E Warrants will no longer have the optional right to convert their applicable Series D Warrants and Series E Warrants at the Variable Price.

Additionally, the Warrant Limited Waiver waived the right of the Series D Warrants and the Series E Warrants to receive a guaranteed cash payment in connection with a "Fundamental Transaction" (as such term is defined in the Series D Warrants and Series E Warrants). Instead, in connection with a "Fundamental Transaction" that is not within the Company's control, the holders of Series D Warrants and Series E Warrants are entitled only to receive the same form and proportion of consideration (or deemed common stock of the successor entity, if no such consideration is paid) as is offered and paid to holders of Common Stock, the definition of "Fundamental Transaction" in Series D Warrants and the Series E Warrants was further amended by the Warrant Limited Waiver to replace each reference to "at least" 50% with "more than" 50% of the outstanding Common Stock.

Reverse Stock Split

On June 13, 2025, the Company effected a reverse stock split of all shares of its issued and outstanding Common Stock at a ratio of one-for-eighty-five (1:85). The Company accounted for the reverse stock split on a retrospective basis pursuant to Accounting Standards Codification ("ASC") 260, Earnings Per Share. All issued and outstanding common stock, common stock warrants, and share-based awards' exercise prices and per share data have been adjusted in these consolidated financial statements, on a retrospective basis, to reflect the reverse stock split for all periods presented. The number of authorized shares and par value of the preferred stock and common stock were not adjusted because of the reverse stock split.

Veru Settlement Agreement and Release

On April 19, 2023, the Company entered into an asset purchase agreement with Veru (the "Veru APA"). Pursuant to, and subject to the terms and conditions of, the Veru APA, the Company purchased substantially all of the assets related to Veru's ENTADFI business, in a transaction that closed in April 2023. Pursuant to the terms of the Veru APA, the Company agreed to provide Veru with initial consideration totaling $20.0 million, including (i) $4.0 million in the form of a non-interest bearing note payable due on September 30, 2023, and (iii) $10.0 million in the form of two equal (i.e. each for $5.0 million) non-interest bearing notes payable, each due on April 19, 2024 (the "April Veru Note") and September 30, 2024 (the "September Veru Note" and together with the April Veru Note, the "Veru Notes").

Subsequently, the Company and Veru modified and extended the payment terms under the Veru Notes on various occasions. On August 28, 2025, Veru and the Company agreed to amend and restate the September Veru Note (as amended and restated, the "Second A&R September Veru Note"). Pursuant to the Second A&R September Veru Note, the principal amount owed to Veru was increased by $100,000 to an aggregate principal amount of $5.2 million, and the maturity date was amended to September 19, 2025. All other terms of the September Veru Note remained the same. On August 28, 2025, Veru and the Company also entered into a waiver agreement (the "August 2025 Veru Waiver") pursuant to which Veru agreed to waive and extend the date for payment of the April Veru Note to September 19, 2025.

As of September 22, 2025, approximately $8.8 million was payable to Veru under the Veru Notes and related amendments. On September 22, 2025, the Company and Veru entered into a Settlement Agreement and Release (the "Veru Settlement Agreement"), pursuant to which Veru agreed to accept a cash payment of approximately $6.3 million (including interest accrued through receipt of the Settlement Amounts (as defined herein), 3,125 shares of Series D Preferred Stock and 846,975 Series D Warrants (such cash payment, shares of Series D Preferred Stock and Series D Warrants, collectively, the "Settlement Amounts") in full satisfaction of all amounts due under the Veru Notes, as amended by all preceding amendments, forbearance agreements, and waivers, and Veru agreed that such acceptance constituted complete discharge of all obligations thereunder. The Settlement Agreement contains customary release provisions that upon timely delivery of the Settlement Amounts, Veru shall release all claims or actions against the Company.

As of September 24, 2025, Veru confirmed receipt of all Settlement Amounts in satisfaction of all outstanding amounts, and all Veru Notes and related amendments were deemed cancelled and terminated, respectively, and of no further force or effect.

Keystone Notes Payable

During the year ended December 31, 2025, the Company issued six subordinated promissory notes to Keystone Capital Partners, LLC, each with an original issue discount and payable upon the earlier of (i) receipt of sufficient proceeds from the Company's Equity Line of Credit ("ELOC") with an institutional investor (the "ELOC Purchaser") or (ii) a specified maturity date. All notes are subordinated to the Company's existing debt obligations to Veru, do not initially bear interest, and are subject to a late charge of 15% per annum on any unpaid amounts past due.

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On February 12, 2025, the Company issued a note with an aggregate principal amount of $117,647, including an original issue discount of $17,647. The note matures on November 12, 2025, unless prepaid earlier upon receipt of sufficient capital from other securities offerings (the "February Keystone Note").

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On May 16, 2025, the Company issued a note with an aggregate principal amount of $294,118, including an original issue discount of $44,118. The note matures on February 16, 2026, subject to the same prepayment provisions (the "May Keystone Note").

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On June 5, 2025, the Company issued a note with an aggregate principal amount of $147,059, including an original issue discount of $22,059. The note matures on March 5, 2026, subject to the same prepayment provisions (the "June Keystone Note").

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On August 6, 2025, the Company issued a note with an aggregate principal amount of $117,647, including an original issue discount of $17,647. The note matures on March 6, 2026, subject to the same prepayment provisions (the "August 6 Keystone Note").

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On August 28, 2025, the Company issued two notes with an aggregate principal amount of $58,824 each, including an original issue discount of $8,824 each. The notes mature on May 28, 2026, subject to the same prepayment provisions (the "August 28 Keystone Notes").

On September 22 2025, Keystone Capital Partners, LLC and the Company agreed to exchange the principal owed under the May Keystone Note, the June Keystone Note, the August 6 Keystone Note and the August 28 Keystone Notes for Series D Preferred Stock of 1,660 shares and Warrants of 449,395 shares of common stock in connection with the Series D PIPE Financing. The February Keystone Note was paid in full on October 10, 2025.

During the year ended December 31, 2025, the Company recorded approximately $0.8 million of interest expense, respectively, which includes accrued interest and amortization of the debt discount. The unamortized debt discount as of December 31, 2025 and 2024 was $0 and $5,000, respectively. As of December 31, 2025 and 2024, the Company has recorded accrued interest of approximately $0 and $0.1 million, respectively, which is included in accrued expenses in the accompanying consolidated balance sheets.

Series C PIPE Financing and ELOC

On October 1, 2024, the Board authorized the Company to create a series of 10,000 shares of preferred stock designated as "Series C Preferred Stock", with a par value of $0.00001, pursuant to the certificate of designations. At any time after the initial issuance date of Series C Preferred Stock, each Series C Preferred Stock shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock. On October 2, 2024, the Company entered into, and sold, to six institutional investors (collectively, the "Series C PIPE Investors"), pursuant to the securities purchase agreement an aggregate of 3,499 shares of Series C Preferred Stock which includes an issuance of 840 shares of Series C Preferred Stock to the lead investor in consideration for the Series C PIPE Investors' irrevocable commitment to purchase shares of the Series C Preferred Stock, and warrants to purchase 6,963 shares of Common Stock ("Series C Warrants") for aggregate net cash proceeds to the Company of $1.9 million. The exercise price of the Series C Warrants is $372.30 on a post-reverse split basis, and the Series C Warrants are exercisable six months after the issuance date and expire on the third anniversary of their initial issuance.

On October 2, 2024, in connection with the ELOC, the Company also entered into the ELOC Purchase Agreement with the ELOC Purchaser, whereby the Company may offer and sell, from time to time at its sole discretion, and whereby the ELOC Purchaser has committed to purchase, up to $25.0 million of the Company's newly issued Common Stock, subject to the limitations described herein. Concurrently with entering into the ELOC Purchase Agreement, the Company also entered into a registration rights agreement with the ELOC Purchaser, pursuant to which it agreed to provide the ELOC Purchaser with certain registration rights related to the shares issued under the ELOC Purchase Agreement (the "ELOC Registration Rights Agreement").

On July 16, 2025, the Company exercised its voluntary Series C Preferred Stock adjustment right to lower the conversion price of the Series C Preferred Stock to $3.50, and holders of 1,920 Series C Preferred Stock shares agreed to convert their shares into shares of common stock.

As of December 31, 2025, 7 shares of Series C Preferred Stock were outstanding from the original issuance of 3,499 shares of Series C Preferred Stock to institutional investors, after the i) redemption of 1,369 shares of Series C Preferred Stock for aggregate consideration of $1.71 million, ii) the conversion of 1,920 shares of Series C Preferred Stock into shares of Common Stock, and iii) the exchange of 203 shares of Series C Preferred Stock into 244 shares of Series D Preferred Stock.

Certain Significant Relationships

We have entered into grant, license and collaboration arrangements with various third parties as summarized below. For further details regarding these and other agreements, see the section titled "Business - Intellectual Property" and Note 5 to our consolidated financial statements included elsewhere in this Report.

Laboratory Corporation of America

On March 23, 2023, Proteomedix entered into a license agreement with LabCorp ("LabCorp License Agreement") pursuant to which LabCorp has the exclusive right to develop and commercialize Proclarix and other products developed by LabCorp using Proteomedix's intellectual property covered by the license, in the United States ("Licensed Products"). In consideration for granting LabCorp an exclusive license, Proteomedix received an initial license fee in the mid-six figures upon signing of the LabCorp License Agreement. Additionally, Proteomedix is entitled to royalty payments between 5% and 10% on the net sales recognized by LabCorp of any Licensed Products plus milestone payments as follows:

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after the first sale of Proclarix as a laboratory developed test, LabCorp will pay an amount in the mid-six figures;

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after LabCorp achieves a certain amount in the low seven figures in net sales of the Licensed Products, LabCorp will pay Proteomedix an amount in the low seven figures; and

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after a certain amount in the mid-seven figures in net sales of Licensed Products, LabCorp will pay Proteomedix an amount in the low seven figures.

A total of $2.5 million in milestone payments are payable under the LabCorp License Agreement. An additional $0.5 million was paid to Proteomedix as an initial license fee in 2023.

LabCorp is wholly responsible for the cost, if any, of research, development and commercialization of Licensed Products in the United States but has the right to offset a portion of those costs against future royalty and milestone payments. Additionally, LabCorp may deduct royalties or other payments made to third parties related to the manufacture or sale of Licensed Products up to a maximum amount of any royalty payments due to Proteomedix.

The LabCorp License Agreement and related royalty payment provisions expire during 2038, which approximates the expiration of the last patent covered by the LabCorp License Agreement. LabCorp has the right to terminate the LabCorp License Agreement for any reason by providing 90 days written notice to Proteomedix. Either party may terminate the LabCorp License Agreement due to a material breach of the terms of the LabCorp License Agreement with 30 days' notice, provided such breach is not cured within the foregoing 30-day period. Finally, Proteomedix may terminate the LabCorp License Agreement with 60 days' notice in the event LabCorp fails to make any undisputed payment due, provided that LabCorp does not remit the payment within the foregoing 60-day period.

On December 6, 2025, Proteomedix and LabCorp entered into an amendment (the "LabCorp Amendment") of the LabCorp License Agreement. The Amendment provides for a new validation study to be conducted by LabCorp for Proclarix, titled Prostate Cancer Risk Identification in a Multi-Ethnic Cohort: A Prospective U.S.-Based Multi-Center Validation Study of Proclarix (the "PRIME Study"). Pursuant to the LabCorp Amendment, LabCorp will not be required to pay any royalties or milestone payments in connection with its use of the risk calculator for purposes of the PRIME Study. The Company will compensate LabCorp with specified milestone-based payments for conducting the PRIME Study of up to $300,000 in the aggregate and will bear all associated costs and expenses. Mid-five figure milestone payments will be made as subjects are enrolled, commencing on the effective date of the PRIME Study and to be paid for every additional batch of subjects enrolled. If the final milestone tier is not reached, the Company must pay Labcorp a fixed amount per subject enrolled beyond the last milestone tier that was paid. All payments are due within thirty (30) days of each invoice.

Pursuant to the LabCorp Amendment, LabCorp is also required to provide the Company with the results of each clinical study conducted by LabCorp upon completion; however, the Company may not use or disclose such results to any third party without LabCorp's prior consent.

Immunovia-Proteomedix Licensing Agreement

On September 17, 2025, Proteomedix entered into a licensing agreement (the "Immunovia Agreement") with Immunovia, Inc. ("Immunovia"), a pancreatic cancer diagnostics company based in Lund, Sweden. Under the Agreement, Proteomedix will provide Immunovia with master cell lines required to produce antibodies for three of the five biomarkers used in the PancreaSure test, as well as a license to key intellectual property related to the manufacturing of associated reagents.

In return, Immunovia will make total payments of $0.6 million over two payments of $0.3 million each to Proteomedix, due on September 30, 2025 ("Initial Up Front Payment"), and March 31, 2026 ("Second Up Front Payment"). Based on the terms of the agreement and the nature of the license, the Company determined that the performance obligations were satisfied upon the transfer of the licensed rights which occurred during 2025. Accordingly, the Company recognized $0.6 million as license revenue during the year ended December 31, 2025.

Additionally, Immunovia will make a $0.1 million payment for materials and pay a 3% royalty on net sales of PancreaSure and any other products incorporating the licensed intellectual property from January 1, 2026, through December 31, 2032.

Services Agreement

On July 21, 2023, the Company, entered into a Licensing and Services Master Agreement ("Master Services Agreement") and a related statement of work with IQVIA, pursuant to which IQVIA was to provide to the Company commercialization services for the Company's products, including recruiting, managing, supervising and evaluating sales personnel and providing sales-related services for such products, for fees totaling up to $29.1 million over the term of the statement of work. The statement of work had a term through September 6, 2026, unless earlier terminated in accordance with the Master Services Agreement and the statement of work. On July 29, 2023, a second statement of work was entered into with IQVIA for certain subscription services providing prescription market data access to the Company. The fees under the second statement of work totaled approximately $800,000, and the term was through July 14, 2025. On October 12, 2023, the Company terminated the Master Services Agreement and the statements of work. The Company recorded net credits of approximately $0.5 million related to this contract during the year ended December 31, 2024, which is included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss. The Company had approximately $0 and $1.1 million recorded in related accounts payable as of December 31, 2025 and 2024, respectively, which includes amounts due for early termination of the contract. See Note 5 to our consolidated financial statements included elsewhere in this Report.

On January 15, 2025, the Company and IQVIA entered into a Settlement Agreement (the "IQVIA Settlement Agreement") concerning potential termination payments under the Master Services Agreement and statements of work. Pursuant to the IQVIA Settlement Agreement, the Company agreed to pay to IQVIA an aggregate of $150,000 in exchange for a mutual release of all claims in connection with the Master Services Agreement. As of December 31, 2025, the Company paid IQVIA the agreed upon amount of $150,000 and recorded a gain of approximately $(0.9) million on settlement of accounts payable.

Components of Results of Operations

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of commercialization activities, payroll, and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, information technology costs, costs incurred with respect to acquisitions and potential acquisitions, and other general operating expenses.

We anticipate that our selling, general and administrative expenses related to Proteomedix will decrease when compared to historical levels due to cost reduction efforts, including headcount reductions, and the termination of Proteomedix's pension plan.

Research and Development Expenses

Historically, substantially all of our research and development expenses consisted of expenses incurred in connection with the development of our product candidates. These expenses historically have included fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll, and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees. We expense both internal and external research and development expenses as they are incurred.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses, laboratory supplies, and external costs, such as fees paid to third parties to conduct research and development activities on our behalf, that are not tracked by product candidate.

As discussed above, we have terminated the vaccine programs that substantially all of our research and development historically related to. We do not anticipate incurring significant research and development expenses in the near future, unless we are able to resume such activities. Predicting the timing or cost to complete our clinical programs for future product candidates, or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control, such as regulatory approvals. Furthermore, we are unable to predict when or if our future product candidates will receive regulatory approval with any certainty.

Other Income (Expense)

Other income (expense) is comprised of interest expense on notes payable, loss on extinguishment of notes payable, loss on issuance of preferred stock and warrants, loss on extinguishment of preferred stock, gain on forgiveness of accounts payable, the change in fair value of financial instruments that are recorded as liabilities, which includes the related party subscription agreement liability, the contingent warrant liability, derivative and warrant liabilities for share of Series D and E preferred stock, and other income.

Results of Operations

Comparison of the Years Ended December 31, 2025 and 2024

The following table summarizes our statements of operations and comprehensive loss for the periods indicated:

		Year Ended December 31, 2025				Year Ended December 31, 2024				$ Change				% Change
Revenue		$	815,371			$	2,524,116			$	(1,708,745	)			(67.7	)%
Cost of revenue			182,458				1,469,018				(1,286,560	)			(87.6	)%
Gross profit (loss)			632,913				1,055,098				(422,185	)			(40.0	)%
Operating expenses
Selling, general and administrative		$	7,043,902			$	11,231,982				(4,188,080	)			(37.3	)%
Research and development			(66,133	)			154,359				(220,492	)			(142.8	)%
Impairment of ENTADFI assets			-				3,530,716				(3,530,716	)			(100.0	)%
Impairment of Goodwill			11,512,000				32,347,000				(20,835,000	)			(64.4	)%
Impairment of Intangibles			-				10,279,796				(10,279,796	)			(100.0	)%
Total operating expenses			18,489,769				57,543,853				(39,054,084	)			(67.9	)%
Loss from operations			(17,856,856	)			(56,488,755	)			38,631,899				(68.4	)%
Other income (expense)
Loss on extinguishment of note payable			(5,384,719	)			-				(5,384,719	)			100.0	%
Loss on issuance of preferred stock and warrants			(3,674,329	)			-				(3,674,329	)			100.0	%
Loss on extinguishment of preferred stock			(196,244	)			-				(196,244	)			100.0	%
Interest expense - related party			-				(534,245	)			534,245				(100.0	)%
Interest expense			(751,005	)			(873,433	)			122,428				(14.0	)%
Interest Income			2				18				(16	)			(88.9	)%
Change in fair value of subscription agreement liability			3,127,962				(3,259,000	)			6,386,962				196.0	%
Change in fair value of contingent warrant liabilities			16,499				1,250,466				(1,233,967	)			(98.7	)%
Change in fair value of Series D Warrant Liability			10,377,638				-				10,377,638				100.0	%
Change in fair value of Series D Derivative Liability			(3,809,333	)			-				(3,809,333	)			100.0	%
Change in fair value of Series E Warrant Liability			4,486,847				-				4,486,847				100.0	%
Change in fair value of Series E Derivative Liability			(1,539,014	)			-				(1,539,014	)			100.0	%
Gain on forgiveness of accounts payable			944,694				-				944,694				100.0	%
Other income			226,041				168,746				57,295				34.0	%
Total other income (expense)			3,825,039				(3,247,448	)			7,072,487				217.8	%
Loss before income taxes			(14,031,817	)			(59,736,203	)			45,704,386				(76.5	)%
Income tax (expense) benefit			(525	)			1,045,180				(1,045,705	)			(100.1	)%
Net loss		$	(14,032,342	)		$	(58,691,023	)			44,658,681				(76.1	)%
Deemed dividend Series C preferred stock			(1,498,595	)			(206,404	)			(1,292,191	)			626.0	%
Net loss applicable to common stockholders'		$	(15,530,937	)		$	(58,897,427	)			43,366,490				(73.6	)%

Revenue, Cost of Revenue, and Gross Margin

For the year ended December 31, 2025, revenue decreased by approximately $1.7 million to $0.8 million from $2.5 million for the year ended December 31, 2024. Revenues in both periods were generated entirely by the Company's Proteomedix subsidiary. The decrease was primarily attributable to a $2.3 million reduction in development services revenue reflecting the completion of a service contract with Immunovia in 2024 which did not recur in 2025. The decline was partially offset by the increase in other revenue of $0.6 million, attributable to a license agreement entered with Immunovia in 2025 that grants rights to use certain intellectual property and proprietary materials developed by Proteomedix. Product sales remained relatively consistent at approximately $0.2 million in both 2025 and 2024.

For the year ended December 31, 2025, cost of revenue decreased by approximately $1.3 million to $0.2 million, compared to $1.5 million in 2024. This decrease was primarily attributable to the absence of costs associated with the non-recurring development services project completed in 2024. Overall, gross margins were positive in both periods, and cost of revenue in 2025 primarily relates to product costs. Cost of revenue in 2024 primarily consisted of amortization of the product rights intangible asset of approximately $0.5 million as well as standard production and sales costs of approximately $1.0 million.

Selling, General and Administrative Expenses

For the year ended December 31, 2025, selling, general and administrative expenses decreased by approximately $4.2 million to $7.0 million compared to $11.2 million in 2024. This decrease was primarily driven by a $1.5 million reduction in payroll-related expenses due to headcount reductions, $1.0 million reduction in net periodic benefit cost due to the settlement of the defined benefit plan, $0.6 million reduction of professional services, $0.3 million reduction of amortization expense as the intangibles were fully impaired or amortized in 2024, $0.2 million reduction of stock based compensation, $0.2 million reduction of insurance expense, $0.2 million reduction of regulatory expenses, and $0.2 million reduction of miscellaneous business expenses including travel and recruitment fees.

Research and Development Expenses

For the year ended December 31, 2025, there was a gain of approximately $0.1 million in research and development expenses, compared to an expense of approximately $0.2 million in the year ended December 31, 2024. The gain in 2025 resulted from the write-off of previously accrued R&D expenses that were related to terminated contracts and had no outstanding amounts payable as of December 31, 2025. There has been no substantial R&D expense since the Company decided to halt its vaccine programs, clinical studies, and other research activities in late 2023.

Impairments

During the year ended December 31, 2025, the Company recorded an impairment of goodwill related to the PMX acquisition totaling $11.5 million, of which $11.0 million was recognized at March 31, 2025 and the remainder at June 30, 2025. No additional goodwill impairment was recorded after June 30, 2025, primarily due to Series D and Series E PIPE financings that closed during the second half of 2025, which increased the Company's market capitalization and valuation for the remaining goodwill balance.

During the year ended December 31, 2024, the Company recorded impairments of goodwill and intangibles related to the PMX acquisition of $32.3 million and $10.3 million, respectively. In addition, the Company recorded an impairment charge of the ENTADFI asset of $3.5 million.

Other Income (Expense)

For the year ended December 31, 2025, other income (expense) increased by approximately $7.1 million to $3.8 million, compared to $(3.2) million in 2024. The increase was driven primarily by net fair value gains of $14.9 million associated with the Company's Series D and Series E warrant liabilities as well as lower interest expense of $0.7 million and a gain on the forgiveness of accounts payable related to the settlement of IQVIA balances of $0.9 million. In addition, there was an increase of $6.4 million in net fair value gains from the subscription agreement liability-related party arising from a lower valuation in the current year resulting from the expiration of the term and increased stock price volatility through settlement in 2025. These favorable items were partially offset by losses on debt extinguishment of $5.4 million, losses on issuance of the Series D and E preferred stock and warrants of $3.7 million, fair value losses of $5.3 million on the embedded derivative liabilities fair value losses of $1.2 million on the contingent warrants, and $0.2 million loss on extinguishment of preferred stock with most of the volatility stemming from changes in the Company's stock price and financing-related fair value remeasurements (See Note 8).

Income Tax (Expense) Benefit

For the years ended December 31, 2025 and 2024, the Company recorded income tax (expense) benefit of approximately $(525) and $1.0 million, respectively. The 2024 income tax benefit is related to foreign deferred income taxes recorded in connection with the acquisition accounting for the Proteomedix transaction.

Liquidity and Capital Resources

The Company's operating activities to date have been primarily devoted to seeking licenses, engaging in research and development activities, potential asset and business acquisitions, and expenditures associated with the now halted commercial launch of ENTADFI and the commercialization of Proclarix.

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future. As of December 31, 2025, the Company had cash of approximately $5.2 million, a working capital deficit of approximately $3.1 million and an accumulated deficit of approximately $131.2 million. During the year ended December 31, 2025, the Company used approximately $9.7 million in cash for operating activities. In addition, as of March 11, 2026, the Company's cash balance was approximately $3.6 million.

During 2025, the Company closed a Series D Preferred Stock financing in September 2025 and a Series E Preferred Stock financing in October 2025. These financings provided the Company with additional cash flow to support near-term operations. While these capital raises may enable the Company to sustain current operations and meet existing obligations, the Company continues to generate recurring net operating losses and has not yet established sustained positive cash flows to support its strategic growth initiatives, which includes the commercialization of Proclarix, and the development and commercialization of the Company's future product candidates. These factors raise substantial doubt about the Company's ability to continue as a going concern for one year from the date of issuance of the consolidated financial statements for the year ended December 31, 2025.

Management's plans for funding the Company's operations include generating product revenue from sales of Proclarix, which is still subject to further successful development and commercialization activities within certain jurisdictions. Management also intends to pursue additional equity or debt financing to support operations and strategic initiatives. However, there are currently no committed sources of financing, and there is no assurance that additional funding will be available on favorable terms, if at all. This uncertainty raises significant concern about the Company's ability to sustain operations and execute its strategic initiatives. If additional capital is not secured, the Company may need to curtail clinical trials, development, and commercialization efforts, and take further measures to reduce expenses to conserve cash.

Because of historical and expected operating losses, net operating cash flow deficits, and debts due within one year, there is substantial doubt about the Company's ability to continue as a going concern for one year from the issuance of the consolidated financial statements, which is not alleviated by management's plans. The consolidated financial statements have been prepared assuming the Company will continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

Future Funding Requirements

We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to commercialize Proclarix.

We will require significant amounts of additional capital in the short-term, to continue to fund our continuing operations, satisfy existing and future obligations and liabilities contracts entered into in support of the Company's commercialization plans, in addition to funds needed to support our working capital needs and business activities, including the development and commercialization of Proclarix, and the development and commercialization of our future product candidates. Until we can generate a sufficient amount of revenue from sales of Proclarix if at all, we expect to finance our future cash needs through public or private equity or debt financings, third-party funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

While the Company closed the Series D and E Preferred Stock financings in 2025, there are currently no other commitments in place for further financing nor is there any assurance that such financing will be available to the Company on favorable terms, if at all. This creates significant uncertainty whether the Company will have the funds available to be able to sustain its operations and expand commercialization of Proclarix. If the Company is unable to secure additional capital, it may be required to curtail any future clinical trials, development and/or commercialization of future product candidates, and it may take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations, or, if it's required to, file for bankruptcy.

Our future capital requirements will depend on many factors, including:

	●	the costs of future development and commercialization activities, including product manufacturing, marketing, sales, royalties, and distribution, for Proclarix, and other products for which we may receive marketing approval;
	●	our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
	●	any product liability or other lawsuits related to our product;
	●	the expenses needed to attract, hire and retain skilled personnel;
	●	the revenue, if any, received from commercial sales of Proclarix, or other products for which we may have received or will receive marketing approval;
	●	the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing our patents or other intellectual property rights; and
	●	the costs of operating as a public company.

A change in the outcome of any of these or other variables could significantly change the costs and timing associated with our business activities. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

Cash Flows

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

		Year Ended December 31, 2025				Year Ended December 31, 2024
Net cash used in operating activities		$	(9,678,390	)		$	(10,495,816	)
Net cash used in investing activities			-				(28,471	)
Net cash provided by financing activities			14,452,686				6,743,110
Effect of exchange rate changes on cash			(200,142	)			(126,658	)
Net increase (decrease) in cash		$	4,574,154			$	(3,907,835	)

Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2025, was approximately $9.7 million, which primarily resulted from a net loss of approximately $14.0 million, a non-cash change in fair value of subscription liability of approximately $3.1 million, a non-cash gain on forgiveness of accounts payable of approximately $0.9 million, a non-cash change in fair value of Series D warrant liability of approximately $10.4 million, a non-cash change in fair value of Series E warrant liability of approximately $4.5 million, and net changes in our operating assets and liabilities of $2.4 million. These items were offset by several non-cash items, which primarily include impairment of goodwill of approximately $11.5 million, loss on extinguishment of notes payable of approximately $5.4 million, loss on issuance of Series D preferred stock of approximately $2.5 million, loss on issuance of Series E preferred stock of approximately $1.1 million, change in fair value of Series D derivative liability of approximately $3.8 million, and change in fair value of Series E derivative liability of approximately $1.5 million.

Net cash used in operating activities for the year ended December 31, 2024 was approximately $10.5 million, which primarily resulted from the net loss of $58.7 million. This was offset by impairment losses of goodwill of $32.3 million related to the acquisition of Proteomedix, loss on impairment of ENTADFI assets of $3.5 million, impairment of cash the fair value of the subscription liability agreement of $3.3 million, impairment of intangibles related to the acquisition of Proteomedix of $10.3 million, depreciation and amortization of $0.7 million noncash stock-based compensation expense $0.4 million, change in the fair value of contingent warrant liability of $1.3 million, and a net change in our operating assets and liabilities of $1.5 million.

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2025 was $0.

Net cash used in investing activities for the year ended December 31, 2024 was approximately $30,000, of which all was due to the purchase of property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2025 was approximately $14.5 million, and resulted primarily from proceeds of approximately $9.3 million from the issuance of Series D preferred stock and warrants, proceeds of approximately $6.3 million from the issuance proceeds of Series E preferred stock and warrants, $6.4 million from the sale of common stock in connection with the ELOC and $1.3 million from the issuance of notes payable. These proceeds were offset by payments on notes payable of approximately $7.1 million and a payment of approximately $1.7 million related to redemption of the Series C Preferred Stock.

Net cash provided by financing activities for the year ended December 31, 2024 was approximately $6.7 million, which resulted from proceeds from issuance of notes payable for related parties of $5.0 million, net proceeds from the exercise of preferred investment options of $0.9 million, proceeds from the issuance of series C preferred stock of $1.9 million, and proceeds from sale of common stock of $0.7 million. These proceeds from investing activities was offset by payments in deferred financing costs and payments of note payable totaling $1.7 million.

Legal Contingencies

From time to time, we may become involved in legal proceedings arising from the ordinary course of business. We record a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated.

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Recent Accounting Pronouncements Not Yet Adopted

See Note 3 to our consolidated financial statements included elsewhere in this Report for more information.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 3 to our consolidated financial statements included elsewhere in this Report, we believe the following accounting policies and estimates to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Accounting for Series D and Series E PIPE Securities including Warrant and Derivative Liabilities

In connection with the Series D and Series E PIPE Financings, we issued Series D Preferred Stock and Series D Warrants to certain institutional investors on September 22, 2025, and Series E Preferred Stock and Series E Warrants to certain institutional investors on October 1, 2025. The accounting determinations in connection with the Series D and Series E PIPE Securities have a significant effect on our reported financial position and results of operations.

We determine the accounting classification of the instruments by first assessing each instrument under ASC 480, Distinguishing Liabilities from Equity, then assessing each instrument under ASC 815, Derivatives and Hedging Activities. Under ASC 480, instruments are considered liability classified if they are mandatorily redeemable, obligate us to settle the warrants or the underlying shares by paying cash or other assets, and instruments that must or may require settlement by issuing variable number of shares. If instruments do not meet the liability classification under ASC 480-10, we assess the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the financial instruments do not require liability classification under ASC 815-40, in order to conclude equity classification, we also assess whether the instruments are indexed to our Common Stock and whether the instruments are classified as equity under ASC 815-40 or other GAAP. After all such assessments, we conclude whether the instruments are classified as liability or equity.

In addition, ASC 815 requires companies to bifurcate certain features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. We evaluate our financial instruments to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the consolidated statements of operations each period. Bifurcated embedded derivatives are classified with the related host contract in our consolidated balance sheets. 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.

Liability classified instruments require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the consolidated statements of operations.

The Company concluded the Series D Preferred Stock and Series E Preferred Stock were more akin to an equity-like host than a debt-like host and were classified as permanent equity as they were not redeemable in any manner that would require classification outside of permanent equity pursuant to ASC 480-10-S99. The Series D Warrants, Series E Warrants, and certain embedded share-settled redemption features of the Series D Preferred Stock and Series E Preferred Stock issued were determined to be liability-classified instruments pursuant to ASC 480 and ASC 815. The embedded features of the Series D Preferred Stock and Series E Preferred Stock were bifurcated and accounted for separately as derivative liabilities.

Fair Value Measurements for Series D and E Warrant Amendment Reclassification

On December 23, 2025, the Company executed a Limited Waiver Agreement (effective October 1, 2025) that amended the September and October 2025 Series D and E warrants (the "Amended Warrants"), including removal of the issuer-specific cash settlement upon certain Fundamental Transactions and a change to treat holders pari passu with common shareholders. Management concluded the Amended Warrants no longer embody an obligation to transfer assets under ASC 480 and, after evaluating exercise/settlement terms (including anti-dilution, buy-in, authorized-share-failure, and beneficial-ownership caps), determined they are indexed to the Company's stock and meet equity-classification conditions under ASC 815-40. Accordingly, the Series D and Series E warrants were remeasured at fair value and reclassified to additional paid-in capital on December 23, 2025 (See Note 8).

Fair Value Measurements for Series D and E Warrant and Derivative Liabilities

The Company measured its Series D and E bifurcated embedded derivatives as of December 31, 2025, at fair value on a recurring basis using level 3 inputs. Prior to the Series D and E warrant amendments and reclassification to equity, the warrant liabilities were also measured at fair value on a recurring basis using level 3 inputs. These financial instruments are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. The derivative and warrant liabilities were both measured using Monte Carlo valuation models. Valuations based on unobservable inputs are highly subjective and require significant judgments. The key inputs used for the valuation include expected term, volatility, risk-free interest rate, dividend yield, and stock price. Changes in such judgments could have a material impact on fair value estimates.

Goodwill

Goodwill represents the excess of the cost of a business combination over the fair value of the net assets acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to impairment tests on an annual basis, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is allocated to the reporting unit from which it was created. A reporting unit is an operating segment or sub-segment to which goodwill is assigned when initially recorded. The Company tests indefinite lived intangible assets for impairment, on an annual basis in the fourth quarter, or more frequently if an event occurs or circumstances indicate that the indefinite lived assets may be impaired. The Company may perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the Company determines this is the case, the Company then performs further quantitative analysis to identify and measure the amount of goodwill impairment loss to be recognized, if any. To perform its quantitative test, the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of its net assets, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than the carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit. Based on its evaluation, the Company identified and recognized partial impairment charges of goodwill during the years ended December 31, 2025 and 2024.

Intangible assets with finite lives are reported at cost, less accumulated amortization, and are amortized over their estimated useful lives, starting when sales for the related product begin. Amortization is calculated using the straight-line method, and recorded within selling, general, and administrative expenses, or cost of revenue, depending on the nature and use of the asset.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

JOBS Act

Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period.

For as long as we remain an "emerging growth company" under the recently enacted JOBS Act, we will, among other things:

●

be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

●

be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act and instead provide a reduced level of disclosure concerning executive compensation; and

●

be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report on the financial statements.

We currently intend to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company," including the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company and the market price of our common stock may be materially and adversely affected.