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

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

The following discussion should be read in conjunction with our condensed consolidated financial statements and other financial information appearing elsewhere in this quarterly report. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking statements. You can identify these statements by forward-looking words such as "plan," "may," "will," "expect," "intend," "anticipate," believe," "estimate" and "continue" or similar words. Forward-looking statements include information concerning possible or assumed future business success or financial results. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under "Risk Factors" in our Annual Report on Form 10-K as of and for the year ended December 31, 2024 filed with the United States Securities and Exchange Commission ("SEC") on April 8, 2025, as well as under "Risk Factors" within this this Form 10-Q. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of us, please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in forward-looking statements, and you should not unduly rely on such statements.

Overview

We are a medical diagnostic company headquartered in Morristown, New Jersey, that was previously focused on the development of drug therapy for treatment of chronic liver diseases. Our cyclophilin inhibitor, rencofilstat (formerly CRV431), was being developed to offer benefits to address multiple complex pathologies related to the progression of liver disease.

We were developing rencofilstat as our lead molecule. Rencofilstat is a compound that binds and inhibits the function of a specific class of isomerase enzymes called cyclophilins that regulate protein folding, in addition to other activities. Many closely related isoforms of cyclophilins exist in humans. Cyclophilins A, B, and D are the best characterized cyclophilin isoforms. Inhibition of cyclophilins has been shown in scientific literature to have therapeutic effects in a variety of experimental models, including liver disease models.

On April 19, 2024, we announced that we have begun wind-down activities in our ASCEND- NASH clinical trial. We did not have access to sufficient funding to complete the study, as designed. The wind-down activities were implemented to halt further clinical activities other than those which would allow for an orderly and patient safety manner that would meet the minimum FDA requirements for safely closing a clinical trial. All clinical trial activities were completed and the trial was closed in August 2024.

On July 19, 2024, we along with Pharma Two B Ltd., a company organized under the laws of the State of Israel ("Parent"), and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, among other things, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into us (the "Merger"), pursuant to which we would survive the Merger as an indirect wholly owned subsidiary of Parent.

Concurrently with the Merger, on July 19, 2024, we entered into a Securities Purchase Agreement (the "SPA") with certain purchasers pursuant to which we sold an aggregate of $2.9 million in principal amount of our Original Issue Discount Senior Unsecured Nonconvertible Notes (the "Notes"). The Notes are due on the earlier of: (i) December 31, 2024, (ii) the date of the closing of the Merger, (iii) the date that the Merger is terminated pursuant to the terms of the Merger Agreement, or (iv) such earlier date as the Notes are required or permitted to be repaid as provided in the Note, as may be extended at the option of the holder of the Note as described in the Note.

On December 10, 2024, Parent informed us that Nasdaq would not exclude our historical losses from its burn rate calculation and as a result on December 10, 2024, we and Pharma Two B and Pearl entered into an agreement to terminate the Merger Agreement (the "Termination Agreement"). Pursuant to the Termination Agreement, the Merger Agreement was terminated.

On January 23, 2025, we consummated a best-efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846 shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with accrued interest.

On May 9, 2025, we entered into a license agreement (the "License Agreement") with New Day Diagnostics LLC ("New Day") pursuant to which we in-licensed certain diagnostic tests for celiac disease, respiratory multiplex (Covid/Influenza A/B and RSV), helicobacter pylori ("H. pylori") and hepatocellular carcinoma ("HCC"). The celiac, respiratory multiplex and H. pylori tests have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time.

Pursuant to the License Agreement, we paid $525,000 in cash to New Day along with $200,000 in shares of our common stock. In addition, we have agreed to pay New Day up to $17.15 million upon achievement of certain regulatory, sales and reimbursement milestones. In addition, we will pay New Day royalty rates in the upper single to low double digits based on net sales.

FINANCIAL OPERATIONS OVERVIEW

From inception through September 30, 2025, we have an accumulated deficit of $245.4 million, and we have not generated any revenue from operations.

CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

During the nine months ended September 30, 2025, there were no significant changes to our critical accounting estimates from those described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Annual Report on Form 10-K for the year ended December 31, 2024.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 3 of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements, in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2025 and 2024:

		Three Months Ended September 30,
		2025				2024				Change
Revenues		$	-			$	-			$	-
Costs and Expenses:
Research and development			-				2,762,709				(2,762,709	)
General and administrative			527,902				1,695,550				(1,167,648	)
Total operating expenses			527,902				4,458,259				(3,930,357	)
Loss from operations			(527,902	)			(4,458,259	)			3,930,357
Other income (expense):
Interest income (expense)			8,116				(474,570	)			482,686
Change in fair value of contingent consideration and derivative financial instruments			47,280				66,881				(19,601	)
Loss before income taxes			(472,506	)			(4,865,948	)			4,393,442
Income tax benefit: (See Note 3)			-				-				-
Net loss		$	(472,506	)		$	(4,865,948	)		$	4,393,442

We had no revenues during the three months ended September 30, 2025 and 2024, because we do not currently have any commercial products. However, with the assets related to the New Day licensing agreement, there are three products that have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and how much revenue will be generated from those products.

Research and development expenses for the three months ended September 30, 2025 and 2024 was $0 million and $2.8 million, respectively. The decrease of $2.8 million was primarily due to a $2.1 million decrease in clinical trial costs primarily for our phase 2b study, $0.4 million in consulting and outside services costs, $0.2 million in employee compensation costs due to reduced headcounts, and $0.1 million decrease in Chemistry, Manufacturing and Controls costs. The Company anticipates an increase in research and development expenses as it pursues the development of assets acquired from New Day.

General and administrative expenses for the three months ended September 30, 2025 and 2024 was $0.5 million and $1.7 million, respectively. The decrease of $1.2 million was primarily due to a $0.4 million in employee salaries due to reduced headcount, and $0.8 million in professional fees.

Comparison of the nine months ended September 30, 2025 and 2024:

		Nine Months Ended September 30,
		2025				2024				Change
Revenues		$	-			$	-			$	-
Costs and Expenses:
Research and development			445,512				12,438,956				(11,993,444	)
General and administrative			2,705,750				5,705,468				(2,999,718	)
Asset impairment loss			402,746				-				402,746
Total operating expenses			3,554,008				18,144,424				(14,590,416	)
Loss from operations			(3,554,008	)			(18,144,424	)			(14,590,416	)
Other income (expense):
Interest income (expense)			(11,829	)			(429,383	)			417,554
Change in fair value of contingent consideration and derivative financial instrument			(4,055,128	)			6,526,633				(10,581,761	)
Inducement expense			-				(2,567,044	)			2,567,044
Loss before income taxes			(7,620,965	)			(14,614,218	)			6,993,253
Income tax benefit: (See Note 3)			-				2,969,252				(2,969,252	)
Net loss		$	(7,620,965	)		$	(11,644,966	)		$	4,024,001

We had no revenues during the nine months ended September 30, 2025 and 2024, because we do not currently have any commercial products. However, with the assets related to the New Day licensing agreement, there are three products that have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and how much revenue will be generated from those products.

Research and development expenses for the nine months ended September 30, 2025 and 2024 was $0.4 million and $12.4 million, respectively. The decrease of $12.0 million was primarily due to a $7.7 million decrease in clinical trial costs primarily for our phase 2b study, a $3.3 million decrease of Chemistry, Manufacturing and Controls costs, a decrease of $0.8 million in employee compensation costs due to reduced headcounts, and a decrease of $0.7 million in consulting and outside services, partially offset by $0.4 million in expense related to purchased in-process research and development from the New Day asset acquisition.

General and administrative expenses for the nine months ended September 30, 2025 and 2024 was $2.2 million and $5.7 million, respectively. The decrease of $3.0 million was primarily due to a $1.5 million decrease in employee compensation due to reduced headcount, a $0.7 million decrease in employee stock compensation, $0.6 million decrease in professional and consulting fees and $0.1 million in insurance.

Asset impairment loss for the nine months ended September 30, 2025 and 2024 was $0.4 million and $0 million, respectively. The increase of $0.4 million was primarily impairment expense related to the asset acquired in the license agreement. We tested the asset for impairment during the reporting period, noting there were triggering events related to delayed timing to market resulting in an adverse effect on estimated cashflow over the next two years. Given that the license agreement requires both parties to agree to renewal after the initial two years, we projected the estimated cashflows for the first two years for the assets available for sales in eligible markets, noting the projected cashflow will not be enough to recover the allocated cost in the first two years of the license agreement, resulting in an impairment loss.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations through September 30, 2025 primarily through the issuance of convertible preferred stock, warrants, the issuance and sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market offerings.

On January 23, 2025, we consummated a best-efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846 shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with accrued interest.

Future Funding Requirements

We have no products approved for commercial sale in the United States. However, with the assets related to the New Day licensing agreement, there are three products that have CE marks and are eligible to be sold in the European Union ("EU") and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and how much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. As of September 30, 2025, we had an accumulated deficit of $245.4 million. We expect to continue to incur significant losses for the foreseeable future.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders' equity and working capital.

We will require additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our operations.

Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for our non-replicating and replicating technologies and our product candidates derived from these technologies. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of acquired assets in connection with our strategic alternatives strategy. In addition, other unanticipated costs may arise.

Our future capital requirements depend on many factors, including:

	●	the scope, progress, results and costs of researching and developing our current and future product candidate and programs, and of conducting preclinical studies and clinical trials;
	●	the number and development requirements of other product candidates that we may pursue, and other indications for our current product candidate that we may pursue;
	●	the stability, scale and yields during the manufacturing process as we scale-up production and formulation of our product candidate for later stages of development and commercialization;
	●	the timing of, and the costs involved in, obtaining regulatory and marketing approvals and developing our ability to establish sales and marketing capabilities, if any, for our current and future product candidates we develop if clinical trials are successful;
	●	our ability to establish and maintain collaborations, strategic licensing or other arrangements and the financial terms of such agreements;
	●	the cost of commercialization activities for our current and future product candidates that we may develop, whether alone or with a collaborator;
	●	the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
	●	the timing, receipt and amount of sales of, or royalties on, our future products, if any; and

A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.

The condensed consolidated financial statements as of September 30, 2025 have been prepared under the assumption that we will continue as a going concern within one year after the financial statements are issued. Due to our accumulated deficit and our recurring and expected continuing losses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern without additional capital becoming available to attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will be required to raise additional capital to continue to fund operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to (i) acquire new product candidates; or (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize on unfavorable terms.

Cash Flows

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

		Nine Months Ended September 30,
		2025				2024
Net cash provided by (used in):
Operating activities		$	(2,938,745	)		$	(17,063,429	)
Investing activities			(132,117	)			(600,000	)
Financing activities			4,985,532				4,349,707

As of September 30, 2025, we had working capital of $3.4 million compared to working capital deficit of $1.5 million as of December 31, 2024. The increase of $4.9 million in working capital is primarily due to $8.2 million in net proceeds received from equity issuance offset by the $2.9 million related to settlement of a note payable, and the Company's other operating costs for the nine months ended September 30, 2025.

Operating Activities:

As of September 30, 2025, we had $2.3 million in cash. Net cash used in operating activities was $2.9 million for the nine months ended September 30, 2025 consisting primarily of our net loss of $7.6 million, adjusted non-cash charges of $4.6 million, including $0.4 million for asset impairment, and $4.1 million in change in fair value of derivative warrants. Changes in working capital accounts had a positive impact of on cash primarily due to a decrease in accounts payable and accrued expenses.

As of September 30, 2024, we had $0.8 million in cash. Net cash used in operating activities was $17.1 million for the nine months ended September 30, 2024 consisting primarily of our net loss of $11.6 million, adjusted for an increase in non-cash charges of $3.8 million, primarily for stock-based compensation, amortization of debt discount, and warrant related inducement expense, partially offset by $6.5 million in change in fair value of contingent consideration and the change in fair value of derivative warrants. Changes in working capital accounts had a negative impact of $2.7 million on cash primarily due to an increase in accounts payable, accrued expenses and prepaid expenses.

Investing Activities:

Net cash used in investing activities was $0.1 million for the nine months ended September 30, 2025 related to the acquisition of licenses from New Day Diagnostics. Net cash used in investing activities was $600,000 for the nine months ended September 30, 2024. The $600,000 in 2024 was primarily due to the note receivable from Pharma Two B.

Financing Activities:

Net cash provided by financing activities was $5.0 million for the nine months ended September 30, 2025, due primarily to proceeds received from the exercise of the warrants and equity issuance offset by $3.2 million payment on notes payable.

Net cash provided by financing activities was $4.3 million for the nine months ended September 30, 2024, due primarily to proceeds received from the exercise of the warrants and equity issuance.