PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited Q1 2025 financial statements reveal no revenue, significant operating losses, a $92.4 million stockholders' deficit, and substantial 'going concern' uncertainties [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, the company reported $1.6 million in assets, $94.0 million in liabilities, and a $92.4 million stockholders' deficit, with no cash Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $0 | $0 | | Total current assets | $1,492 | $812 | | **Total Assets** | **$1,582** | **$902** | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $26,568 | $33,889 | | Backstop put option liability | $61,411 | $59,056 | | **Total Liabilities** | **$93,981** | **$98,518** | | **Total stockholders' deficit** | **($92,399)** | **($97,616)** | - The number of common stock shares issued and outstanding increased significantly from **34.9 million** at the end of 2024 to **166.0 million** as of March 31, 2025, primarily due to the conversion of debt[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 saw no revenue, an operating loss of $0.96 million, and a net loss of $8.24 million, a significant decline from Q1 2024's $13.0 million net income Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total operating expenses | $958 | $595 | | **Operating Loss** | **($958)** | **($595)** | | Total other (expense) income | ($7,282) | $13,594 | | **Net (Loss) Income** | **($8,240)** | **$12,999** | | Net (loss) income per share | ($0.09) | $0.48 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 cash flows show $0.36 million used in operations, $0.91 million provided by financing, and a period-end restricted cash balance of $0.78 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($356) | ($485) | | Net cash provided by financing activities | $909 | $0 | | **Total change in cash and restricted cash** | **$553** | **($485)** | | Cash and restricted cash at end of period | $777 | $519 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes reveal 'going concern' doubt from recurring losses and a $25.1 million working capital deficiency, reliance on future financing, and ongoing legal and delisting risks - The company has **substantial doubt** about its ability to continue as a going concern due to its lack of cash inflows, working capital deficiency of **$25.1 million**, and continued operating losses[32](index=32&type=chunk) - In January 2025, the company issued **125.9 million shares** to convert approximately **$7.8 million** of its 2024 Convertible Notes, plus interest and a **$1.7 million** redemption premium, and an investor also exercised warrants for **1.3 million shares**[122](index=122&type=chunk) - The company is involved in several legal proceedings, including claims from a former employee (Heller), a financing provider (IPFS), a finder's fee dispute (Entoro), and a dispute over the Backstop Agreement (Meteora), with a probable loss of **$0.5 million** recorded for the Heller case[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - As a subsequent event, on **April 22, 2025**, Nasdaq determined that the company's stock will be **delisted**, which the company is appealing[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the pre-revenue company's $8.2 million Q1 2025 net loss, critical 'going concern' risk, and reliance on external financing, with funds projected only into Q3 2025 [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Q1 2025 operating loss widened to $1.0 million, while 'Other (loss) income' swung from a $13.6 million gain to a $7.3 million loss, primarily due to fair value changes Comparison of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Operating loss | ($958) | ($595) | ($363) | | Other (loss) income | ($7,282) | $13,594 | ($20,876) | | **Net (loss) income** | **($8,240)** | **$12,999** | **($21,239)** | - General and administrative expenses increased by **$0.4 million** in Q1 2025 compared to Q1 2024, mainly due to costs associated with the year-end audit and Form 10-K filing[230](index=230&type=chunk) - The **$20.9 million** increase in other expense was primarily driven by an **$18.1 million** decrease in fair value gains on financial instruments, a **$2.7 million** increase in transaction costs, and a **$1.7 million** redemption premium on debt conversions[231](index=231&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces critical liquidity issues with no cash, a $23.1 million working capital deficiency, and funds only sufficient into Q3 2025, necessitating significant additional financing - The company has **no cash** and a working capital deficiency of **$23.1 million** as of March 31, 2025[232](index=232&type=chunk) - Management expects current funding is only sufficient to support operations into the **third quarter of 2025**, and the company's ability to continue is dependent on raising additional capital[233](index=233&type=chunk)[236](index=236&type=chunk) - The company has contingent compensation and bonuses of **$16.9 million** for senior management and **$1.0 million** in vendor payments, payable only upon a cumulative capital raise of at least **$50 million**[246](index=246&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Ocean Biomedical, Inc. is exempt from providing market risk disclosures - The company is **exempt** from providing disclosures about market risk because it qualifies as a **smaller reporting company**[260](index=260&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses in accounting staff and valuation controls, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of **March 31, 2025**[261](index=261&type=chunk) - Material weaknesses identified include: **inadequate accounting staff** and lack of processes for timely financial reporting, and **deficient internal controls** for reviewing third-party valuations of convertible debt and warrant liabilities[270](index=270&type=chunk) - Remediation plans include **hiring additional accounting personnel** (such as the new CFO), **engaging consultants**, and **developing formal policies and procedures**[265](index=265&type=chunk)[266](index=266&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to its Form 10-K and Note 8 of this 10-Q for details on material legal proceedings - The company refers to its **Form 10-K** and the **notes to its financial statements** for details on material legal matters, with **Note 8** of this 10-Q describing ongoing litigation[272](index=272&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) Key risks include high indebtedness ($10.5 million), limited cash, and significant dilution potential from convertible notes and warrants, impacting the company's ability to fund operations - The company's significant level of indebtedness (**$10.5 million** principal as of March 31, 2025) and **limited cash resources** pose a **major risk** to its financial condition and ability to fund operations[275](index=275&type=chunk) - The ability to meet debt obligations is dependent on **future cash generation** or **external financing**, neither of which is **assured**[276](index=276&type=chunk)[280](index=280&type=chunk) - Holders of common stock face **significant potential dilution** due to the large number of shares issuable upon conversion of outstanding notes and warrants[281](index=281&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued a substantial number of unregistered equity securities in Q1 2025 and subsequently, totaling 192.3 million shares from debt conversions and warrant exercises Unregistered Equity Issuances (Q1 2025 and Subsequent) | Period | Shares Issued | Reason | | :--- | :--- | :--- | | Jan 2025 | 3,844,466 | Ayrton Convertible Note Financing amendment | | Jan 2025 | 1,332,806 | Exercise of warrant B | | Q1 2025 | 125,964,905 | Conversion of 2024 Convertible Notes | | Apr-May 2025 | 66,354,338 | Conversion of 2024 Convertible Notes | [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the 10-Q, including corporate governance documents and Sarbanes-Oxley Act certifications - The report includes certifications from the Principal Executive Officer and Principal Accounting Officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act**[289](index=289&type=chunk)

Core Insights - Ocean Biomedical, Inc. is strategically diversifying into power infrastructure and cryptocurrencies to enhance long-term value creation for shareholders [1][2] - The company aims to leverage its leadership team's experience and strategic partnerships to pursue growth opportunities in the power and digital asset sectors [2][3] Strategic Rationale for Expansion - The company identified power generation and digital assets as synergistic verticals where existing expertise can be mobilized quickly [4] - Ocean Biomedical plans to develop and operate power assets focusing on data center-grade infrastructure and grid-interactive generation [5] - A digital treasury model will be adopted, allocating cash reserves into established cryptocurrencies like Bitcoin and Solana [5] Forward-Looking Growth Objectives - The company intends to release additional details regarding the scale, location, and technology profile of its initial power projects in the coming months [4][5] - A defined framework for cryptocurrency holdings will be established, including governance, custody, and rebalancing mechanisms [5]

Financial Performance and Capital Requirements - The company has incurred significant net losses since inception and is expected to continue incurring substantial net losses for the foreseeable future[21] - The company requires substantial additional capital to finance operations, and failure to raise such capital may force delays or reductions in research and drug development programs[21] - The company may face increased regulatory costs and compliance requirements in drug development, impacting financial performance[17] - The company is subject to ongoing regulatory obligations and continued review, which may result in significant additional expenses[22] Operational Risks - The company relies on third-party manufacturing and supply vendors, which may lead to limitations or interruptions in the supply of development materials[21] - The market opportunities for the company's product candidates may be relatively small, targeting patients ineligible for or who have failed prior treatments[21] - The company has identified material weaknesses in internal control over financial reporting, which could affect the accuracy of financial condition reporting[22] - The company has entered into agreements that may impose obligations, and failure to comply could result in loss of important rights[21] Stock and Securities - The company is classified as an "emerging growth company," which may make its securities less attractive to investors[22] - The company may experience volatility in stock price and warrants, posing risks to investors[22] - Each new non-employee director is granted a one-time stock option to purchase 75,000 shares at a strike price of $10.00 per share[884] - The estimated fair value of the stock options on the grant date was $3.73 per share, resulting in stock-based compensation expenses of $0.7 million for fiscal year 2024 and $0.6 million for fiscal year 2023[885] - The Backstop Put Option Liability has an estimated future stock price range of $0.17 to $0.55, with an expected volatility of 147.5% and a risk-free rate of 4.17%[890] - The 2024 Convertible Note has an estimated volatility of 55%, a risk-free rate of 4.37%, and a probability range of 0% to 65%[892] - The SPA Warrants have an estimated volatility of 115%, a risk-free rate of 4.29%, and a probability range of 0% to 65%[892] - The fair value of the Ayrton Note Purchase Option was determined to be zero as of December 31, 2024, and 2023[893] Company Structure and Reporting - The company operates as one reportable segment focused on discovering and developing therapeutic products in oncology, fibrosis, infectious diseases, and inflammation[895] - The company has no off-balance sheet arrangements during the periods presented[896] - The company adopted ASU 2020-06 effective January 1, 2023, which simplifies accounting for convertible instruments[897] - The company is classified as a "smaller reporting company" with an expected market value of stock held by non-affiliates less than $700 million and annual revenue below $100 million[901]

Core Insights - Ocean Biomedical, Inc. has received a patent grant from the China National Intellectual Property Administration (CNIPA) for its bispecific antibodies targeting CHI3L1 and PD1, aimed at enhancing T cell-mediated cytotoxic effects on tumor cells [1][2]. Intellectual Property and Market Position - The newly issued patent strengthens Ocean Biomedical's intellectual property portfolio and provides protection in one of the largest pharmaceutical markets globally [2][5]. - The granted claims cover the novel design and therapeutic applications of bispecific antibodies that inhibit CHI3L1 and PD1, which are crucial in immune evasion by tumor cells [2][3]. Technological Innovation - Ocean Biomedical's bispecific antibody technology represents a potential paradigm shift in cancer immunotherapy by targeting both CHI3L1 and PD1, which may enhance the immune system's ability to combat tumors more effectively than existing treatments [3][4]. - This dual-targeting approach could lead to more durable responses and better patient outcomes by blocking two key pathways that tumors use to suppress the immune response [4]. Strategic Vision - The patent grant is viewed as a significant milestone in the company's global expansion strategy, highlighting the novelty and therapeutic potential of its bispecific antibody platform [4]. - Ocean Biomedical is committed to leveraging its robust patent estate to drive the development and commercialization of novel immunotherapies [5][6]. Collaboration and Development - The company plans to continue collaborating with leading researchers, biopharma partners, and regulatory agencies to accelerate the translation of its discoveries into transformative therapies [6].

Core Viewpoint - Ocean Biomedical, Inc. has received a patent grant from the China National Intellectual Property Administration for its bispecific antibodies targeting CHI3L1 and PD1, which are designed to enhance T cell-mediated cytotoxic effects on tumor cells [1][2]. Group 1: Patent and Intellectual Property - The newly issued patent strengthens Ocean Biomedical's intellectual property portfolio and provides protection in one of the largest pharmaceutical markets globally [2]. - The granted claims cover the novel design and therapeutic applications of bispecific antibodies that inhibit CHI3L1 and PD1, which are key targets in immune evasion by tumor cells [2][3]. - This patent follows the company's success in securing intellectual property protection in key markets, including the United States and Europe [5]. Group 2: Technology and Innovation - Ocean Biomedical's bispecific antibody technology represents a potential paradigm shift in cancer immunotherapy by targeting both CHI3L1 and PD1, which could enhance the immune system's ability to combat tumors more effectively [3]. - By blocking both pathways, these antibodies may lead to more durable responses and better patient outcomes compared to existing treatments [3][4]. - The technology aims to address limitations of current immunotherapies, which are often hindered by tumor resistance and immune evasion mechanisms [4]. Group 3: Strategic Goals and Collaborations - The patent grant is viewed as a significant milestone in the company's global expansion strategy, highlighting the novelty and therapeutic potential of its bispecific antibody platform [4]. - The company plans to continue collaborating with leading researchers, biopharma partners, and regulatory agencies to accelerate the translation of its discoveries into transformative therapies [6].

Company Overview - Ocean Biomedical has announced research findings showing its cancer immunotherapy candidates can synergize with tyrosine kinase inhibitors (TKIs) like osimertinib, which are used for treating non-small cell lung cancer (NSCLC) [1][2] - The proprietary candidates have demonstrated the ability to restore treatment sensitivity after resistance to osimertinib develops, indicating a potential shift in treatment paradigms for EGFR-mutant NSCLC [1][2] Research and Development - The research, led by Dr. Jack A. Elias in collaboration with Yale and Brown University, highlights the role of chitinase 3-like-1 (CHi3L1) in EGFR-mutant cancers and the ability of Ocean's antibody to suppress CHi3L1 activity, resulting in significant tumor reduction [2] - Ocean Biomedical is initiating preclinical studies to advance its immunotherapy program and plans to engage with the FDA to establish a regulatory pathway for first-in-human trials [3][10] Industry Context - The oncology field is increasingly focusing on bispecific antibodies, which target multiple cancer mechanisms simultaneously, with significant investments from leading biotech and pharmaceutical companies [4][5] - Merck's acquisition of LaNova's LM-299 for $588 million, a PD-1/VEGF bispecific antibody, underscores the high-value potential of this technology, suggesting a significant opportunity for Ocean Biomedical [5] Product Development - Ocean has developed bispecific antibodies that combine its anti-CHI3L1 antibody with anti-PD-1 or anti-CTLA4, showing impressive efficacy in preclinical models for NSCLC, malignant melanoma, and glioblastoma [6] - The company's lead oncology program is positioned for multiple therapeutic applications, including as a standalone therapy for EGFR-mutant NSCLC, in combination with existing TKIs, and as a salvage therapy for resistant tumors [9] Strategic Positioning - Ocean Biomedical's Board Chair, Dr. Chirinjeev Kathuria, emphasized the company's strategic positioning to capitalize on the shift towards next-generation bispecific antibodies, which could drive significant value for patients and investors [7]

Core Insights - Ocean Biomedical has received significant funding from the NIH to advance malaria vaccine research led by Dr. Jonathan Kurtis [1][6] - The FDA's new guidance on lipid-encapsulated vaccines may expedite the development of Ocean Biomedical's innovative malaria vaccine approach [1][5] Company Overview - Ocean Biomedical is a biopharma company based in Providence, Rhode Island, focused on developing and commercializing scientifically compelling assets from research institutions [9][10] - The company is currently working on five promising discoveries, including treatments for malaria, lung cancer, and brain cancer [10] Research and Development - Dr. Kurtis and his team have identified a unique protein, GARP, on malaria-infected red blood cells, which is linked to natural resistance in children [3][4] - The research team is testing three vaccine candidates in non-human primates, supported by a $4.6 million grant [4] - An additional $3.5 million NIH grant was secured to further identify vaccine targets against severe malaria in children [6] Market Context - Malaria is a significant global health issue, causing over 500,000 child deaths annually in sub-Saharan Africa [2][8] - The FDA's guidance on lipid-encapsulated mRNA vaccines could facilitate a faster transition to human trials, with potential trials starting as early as Q4 2025 [5]

Financial Performance - Net loss for the three months ended September 30, 2024 was $5,528,000 compared to a net loss of $14,087,000 for the same period in 2023, representing a 60.8% improvement[19]. - For the nine months ended September 30, 2024, the company reported a net loss of $9.763 million, a significant improvement compared to a net loss of $97.610 million for the same period in 2023[30]. - The net loss per share for the three months ended September 30, 2024 was $0.20, compared to $0.53 for the same period in 2023, indicating a 62.3% improvement[19]. - For the nine months ended September 30, 2024, the net loss was $9.8 million, compared to $97.6 million for the same period in 2023, with a basic and diluted net loss per share of $0.36 and $3.76, respectively[212]. Assets and Liabilities - Total current assets decreased from $2,109,000 in December 31, 2023 to $1,042,000 as of September 30, 2024, a decline of approximately 50.6%[17]. - Total liabilities increased from $96,264,000 in December 31, 2023 to $99,217,000 as of September 30, 2024, an increase of about 2%[17]. - The accumulated deficit increased from $196,055,000 as of December 31, 2023 to $205,818,000 as of September 30, 2024, reflecting a worsening of about 4.3%[17]. - Total stockholders' deficit increased from $90,763,000 in December 31, 2023 to $98,085,000 as of September 30, 2024, an increase of about 8.5%[17]. - The company has a working capital deficiency of $32.6 million as of September 30, 2024, raising substantial doubt about its ability to continue as a going concern[39]. Operating Expenses - Operating expenses for the three months ended September 30, 2024 were $768,000, down from $2,655,000 in the same period of 2023, a reduction of approximately 71%[19]. - General and administrative expenses decreased from $2,350,000 in Q3 2023 to $768,000 in Q3 2024, a reduction of approximately 67.3%[19]. - Research and development expenses were $26,000 for the three months ended September 30, 2024, a significant decrease from $305,000 in the same period of 2023[19]. Cash Flow and Financing - The company had cash and restricted cash of $0.240 million at the end of the period, down from $1.031 million at the end of September 2023[30]. - The company reported net cash used in operating activities of $1.660 million for the nine months ended September 30, 2024, compared to $8.563 million for the same period in 2023[30]. - The company expects to utilize proceeds from the Backstop Agreement and future debt and equity financings to fund operations and advance research and development programs[40]. - The Company entered into a securities purchase agreement for the sale of up to $27.0 million in Senior Secured Convertible Notes, with an initial Note of $7.6 million issued[64]. Stock and Warrants - The weighted average shares outstanding increased from 26,605,147 in Q3 2023 to 27,487,283 in Q3 2024, an increase of approximately 3.3%[19]. - The Company has 13,935,001 warrants outstanding as of September 30, 2024, with various exercise prices ranging from $1.50 to $11.50[189]. - The Company issued a total of eight warrants exercisable to purchase an aggregate of 1,039,054 shares of common stock to Second Street Capital, recognizing $1.5 million in other expense for the nine months ended September 30, 2023[200]. Compliance and Regulatory Issues - As of September 30, 2024, the Company is in default of obligations related to Ayrton LLC due to delinquent SEC filings[75]. - The Company received notices from Nasdaq regarding non-compliance with filing requirements, but submitted a revised plan to regain compliance[165]. - The Company is currently in a compliance period to regain compliance with Nasdaq's minimum bid price requirement of $1 per share, expiring on June 2, 2025[167]. Research and Development - The company incurred research and development expenses primarily related to stock-based compensation and licensing agreements, with no revenue generated since inception[52]. - For the three months ended September 30, 2024, Virion incurred a net loss of approximately $1.0 million, with the Company recording its share of this loss as approximately $0.5 million[170]. Agreements and Contracts - The Company entered into a Contribution Agreement with Virion Therapeutics, acquiring a 50% membership interest for an initial contribution of $4.1 million in cash or 750,000 shares of common stock[169]. - The latest amendment on November 13, 2023, requires the Company to raise at least $10.0 million in equity financing by May 1, 2024, or Elkurt can terminate the agreements[214]. - The Company entered into four Exclusive License Agreements with Elkurt, Inc., which were amended in 2021 and 2022[213]. Stock-Based Compensation - The Company recorded stock-based compensation expenses of $0.2 million and $0.6 million for the three and six months ended September 30, 2024, respectively[178]. - As of September 30, 2024, the total unrecognized compensation related to unvested stock option awards was $1.1 million, expected to be recognized over approximately 1.4 years[179].

Financial Performance - The company reported a net loss of $72.1 million for the three months ended March 31, 2023, but reflected a net income of $13.0 million for the three months ended March 31, 2024, primarily due to a gain from the Backstop Put Option Liability[46]. - The net loss for the three months ended March 31, 2024, was $12.999 million, compared to a net loss of $72.092 million for the same period in 2023[94]. - The net income for Q1 2024 was $12,999, compared to a net loss of $72,092 in Q1 2023, representing a significant turnaround[73]. - Total operating expenses for Q1 2024 were $595, a decrease of 88% from $5,387 in Q1 2023[73]. - Research and development expenses for Q1 2024 were $26, a significant reduction from $393 in Q1 2023[73]. - General and administrative expenses decreased by $4.425 million to $569 thousand for the three months ended March 31, 2024, primarily due to reductions in professional service fees, stock-based compensation, and insurance costs[138][141]. Cash and Liabilities - As of March 31, 2024, the company had a stockholders' deficit of $75.8 million, down from $90.8 million as of December 31, 2023[46]. - Current liabilities were reported at $30.1 million as of March 31, 2024, compared to $30.0 million as of December 31, 2023[46]. - Cash and restricted cash at the end of Q1 2024 was $1,004,519, compared to $34,306 at the end of Q1 2023[77]. - Total liabilities decreased to $78,729 from $96,264 year-over-year[70]. - As of March 31, 2024, the company had cash of $19 thousand, restricted cash of $0.5 million, and a working capital deficiency of $28.3 million[120]. - The company has outstanding accounts payable and accrued expenses of $16.9 million as of March 31, 2024, which will be paid off utilizing future proceeds from current and future financings[201]. Revenue Generation - The company has not generated any revenue from product sales since its inception in 2019[45]. - The Company has not generated any revenue to date and does not expect to generate revenue from product sales in the foreseeable future[90]. - The company has not generated any revenue to date, with cash flows resulting from financing activities[201]. Research and Development - The company anticipates moving certain preclinical product candidates in oncology, fibrosis, and/or infectious disease programs into the clinic within the next 12 to 24 months[44]. - The company expects research and development expenses to increase substantially over the next several years due to ongoing clinical trials and regulatory compliance[107]. - Research and development expenses for the three months ended March 31, 2024, include costs for stock-based compensation and licensing agreements[174]. Financing and Capital - The company paid a prepayment of $51.6 million to the Backstop Parties on February 15, 2023, utilizing funds from AHAC's trust account[69]. - The company expects to utilize net proceeds from the Backstop Agreement and future debt and equity financings to fund operations into the third quarter of 2024, having received $1.4 million in cumulative proceeds from the Backstop Agreement as of March 31, 2024[144]. - The company borrowed $13.5 million in the first half of 2023, with $12.6 million remaining in short-term loans as of March 31, 2024[146]. - The company has a common stock purchase agreement allowing it to sell up to $75.0 million in newly issued shares to White Lion Capital LLC[169]. - The company entered into a Securities Purchase Agreement for the sale of up to three Senior Secured Convertible Notes with an aggregate principal amount of up to $27.0 million[187]. Risks and Concerns - The company is subject to risks common to early-stage biotechnology companies, including the need for significant additional capital for research and development efforts[49]. - The company faces substantial doubt about its ability to continue as a going concern due to its reliance on external capital and lack of revenue-generating ability at this stage[120][149]. - The company is subject to various risks, including the successful development and commercialization of product candidates, fluctuations in operating results, and competition in the biopharmaceutical industry[118]. Internal Controls and Governance - The company identified a material weakness in internal control over financial reporting due to inadequate staffing in its accounting department[221]. - The company plans to hire additional accounting personnel, including a new Chief Financial Officer, to address the identified material weakness[222]. - The company is subject to potential investigations by Nasdaq, the SEC, or other regulatory authorities due to its internal control weaknesses[223]. - The company is working on implementing remediation steps to improve its disclosure controls and procedures[222].

Financial Performance and Capital Requirements - The company has incurred significant net losses since inception and is expected to continue incurring substantial net losses for the foreseeable future[22] - The company requires substantial additional capital to finance operations, and failure to raise such capital may delay or reduce research and drug development programs[22] - The company may face increased regulatory costs and compliance requirements in connection with drug development, impacting financial performance[17] Regulatory and Compliance Issues - The company is subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses[26] - The company has identified a material weakness in internal control over financial reporting, which may affect the accuracy of financial condition reporting[24] - The company could be subject to investigations by Nasdaq, the SEC, or other regulatory authorities due to control deficiencies[1031] Internal Control and Governance - The company identified a material weakness in internal control over financial reporting due to inadequate staffing in the accounting department[28] - The company plans to hire additional accounting personnel and implement new controls to remediate the identified material weakness[29] - Current and future controls may become inadequate due to changes in business conditions, leading to undiscovered material weaknesses[1030] - Difficulties in developing or maintaining effective controls may negatively impact operating results and reporting obligations[1031] Ownership and Control - The company's principal stockholders and management own a significant percentage of common stock, exerting substantial control over shareholder matters[27] - The company qualifies as an "emerging growth company," which may make its securities less attractive to investors[31] Stock-Based Compensation and Valuation - The company recorded stock-based compensation expense of $0.6 million for the fiscal year ended December 31, 2023, primarily within general and administrative expenses[11] - The estimated fair value of stock options granted to non-employee directors was $3.73 per share, with a strike price of $10.00 per share[11] - The company utilized a Monte-Carlo simulation to value the Backstop Put Option Liability, with an estimated volatility of 100% and a risk-free rate of 4.4%[16] - The fair value of the 2023 Convertible Note was estimated using a Monte-Carlo simulation, with an estimated volatility of 50% and a risk-free rate of 5.3%[17] Segment and Reporting Structure - The company operates as a single reportable segment focused on developing therapeutic products in oncology, fibrosis, infectious diseases, and inflammation[19] - The company early adopted ASU 2020-06, simplifying the accounting for convertible instruments, effective January 1, 2023[21] - The company is evaluating the impact of ASU 2023-07 on its consolidated financial statements, which expands segment disclosures[22] Risks of Financial Reporting - The company may face material weaknesses in internal control over financial reporting, potentially affecting the accuracy and timing of financial reporting[1030] - Failure to remediate existing or future material weaknesses could result in loss of investor confidence and a decline in share price[1030] - A restatement of financial statements for prior periods could occur, potentially causing a decline in the price of common stock and warrants[1031] - The market opportunities for the company's product candidates may be relatively small, targeting patients ineligible for or who have failed prior treatments[22]