Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate depends on a variety of factors that may affect our business and operations. Certain of these factors are discussed in “Item 1A. Risk Factors.”
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto and other financial information appearing elsewhere in this report.
Overview
We are a development stage company and reported net income (losses) of approximately $2,380,000 and $(3,233,000) for the years ended December 31, 2025 and 2024, respectively. We had current assets of approximately $16,000 and current liabilities of approximately $2,157,000 as of December 31, 2025. As of December 31, 2024, our current assets and current liabilities were approximately $32,000 and $5,304,000, respectively. We have prepared our financial statements for the years ended December 31, 2025 and 2024 assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our shareholders as well as Yissum’s ability to successfully commercialize the License. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions, and short-term debt. During the current year, we entered into a bridge loan agreement with our Executive Chairman to obtain funding for current operating expenses.
Critical Accounting Policies
The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and my change in subsequent periods.
The following discussion of critical accounting policies represents our attempt to report on these accounting policies which we believe are critical to our financial statements and other financial disclosures. It is not intended to be a comprehensive list of all of our significant accounting policies, which are more fully described in Note 2 of the Notes to the Financial Statements included in this Annual Report.
We have identified our accounting policies for stock-based compensation and accounting for derivative liabilities as critical accounting policies.
We recognize stock-based compensation expense based on the fair value recognition provision of applicable accounting principles, using the Black-Scholes option valuation method. Accordingly, we are required to measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award and to recognize that cost over the period during which services are provided in exchange for the award. Under the Black-Scholes method, we make assumptions with respect to the expected lives of the options that have been granted and are outstanding, the expected volatility, the dividend yield percentage of our common stock and the risk-free interest rate at the respective dates of grant.
The Company did not grant any options during the year ended December 31, 2025. The expected volatility factor used to value stock options granted in 2024 was based on the historical volatility of the market price of our common stock over the period from our change to a biotechnology company, September 2018, through December 2024. For the expected term of the option, we used an estimate of the expected option life based on historical experience. The risk-free interest rate used is based upon U.S. Treasury yields for a period consistent with the expected term of the options. We assumed no quarterly dividend rate. Due to the numerous assumptions involved in calculating stock-based compensation expense, the expense recognized in our financial statements may differ significantly from the value realized by option holders on exercise of the share-based instruments. In accordance with the prescribed methodology, we do not adjust our recognized compensation expense to reflect these differences.
For the years ended December 31, 2025 and 2024, we incurred stock compensation expense with respect to options of approximately $8,800 and $40,000, respectively.
See Note 5 to the financial statements for the assumptions used to calculate the fair value of stock-based compensation.
In accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, we identify and, if applicable, bifurcate embedded derivatives in financial instruments. Those embedded features that are identified, bifurcated and accounted for separately are measured at fair value continuously at each financial statement reporting date. If the fair value of a financial liability (the derivative) exceeds the proceeds received for the issuance of a hybrid instrument in an arm’s length transaction with no rights or privileges that require separate accounting recognition as an asset identified, then we record the embedded derivative at fair value with the excess of fair value over proceeds recognized as a loss in earnings. Our only identified derivative was terminated as part of the amendment of a note payable to a shareholder during the year ended December 31, 2025.
Results of Operations
The selected statement of operations data for the years ended December 31, 2025 and 2024 and balance sheet data as of December 31, 2025 and 2024 have been derived from our audited financial statements included in this Annual Report.
This data should be read in conjunction with our financial statements and related notes included herein.
Selected Statement of Operations Data:
Years Ended December 31,
Change
Administrative fee income
Operating expenses:
G&A expenses
Litigation expenses (contra expenses)
Total operating expenses
Loss from operations
Other (income) expenses:
Loss on derivative instrument
Gain on disposal of equity method investment
Relief of indebtedness income
Interest expense
Total other (income) expenses
Net income (loss) before equity in net income (loss) of equity method investees
Equity in net income (loss) of equity method investees
Impairment loss on equity method investee
Net income (loss)
2025 Compared to 2024
We are a holding company whose primary asset currently is our right to the monetization of the former NewStem license now held by Yissum. We currently conduct no other business and as a result, we have no operating revenue or cost of revenue. We did charge annual administrative fees to an affiliated entity through the year ended December 31, 2024.
The Company incurs general and administrative (“G&A”) expenses primarily related to professional fees, insurance and stock-based compensation. We incurred G&A expenses of approximately $239,000 and $881,000 for the years ended December 31, 2025 and 2024, respectively. Our decrease in G&A expenses relates primarily to decreases in bad debt expense, stock-based compensation and professional fees incurred in the audit of our financial statements for the years ended December 31, 2025 and 2024, preparation of our quarterly reports for 2025 and 2024, and for documents and advice related to our attempt to purchase the remaining shares of NewStem in 2024.
Specifically, we wrote off as bad debt uncollected management fees of $9,500 during the year ended December 31, 2025 as compared to the net balance due from NewStem of $458,000 in the year ended December 31, 2024, and professional fees decreased by approximately $145,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024. Insurance costs decreased by approximately $17,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Total stock compensation expense, included in G&A expenses, decreased by approximately $31,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to the fact that no options were awarded during the current fiscal year.
The remaining decrease in G&A expenses of approximately $700 during the year ended December 31, 2025 consists primarily of decreases in expenses related to investor relations and information technology.
We incurred costs related to litigation and the related litigation funding agreement involving our former settled arbitration with our NetCo joint venture partner of approximately $59,000 during the year ended December 31, 2024.
The Company has recorded a loss on derivative instruments of $90,000, for the year ended December 31, 2024 related to a guarantee previously included in the note payable shareholder entered into in May 2023. The guarantee was removed in an amendment to the note payable during the year ended December 31, 2024, terminating the derivative.
The Company reported a gain on disposal of equity method investment of approximately $1,172,000 during the year ended December 31, 2025 related to the sale of our investment in NetCo. We also reported relief of indebtedness income of approximately $1,697,000 related to the cancellation of the remaining balance on the litigation funding agreement from the same transaction.
The Company recorded an impairment loss of approximately $1,629,000 during the year ended December 31, 2024 related to its investment in NewStem. This loss reduced our investment in NewStem to zero ($0.00) as of December 31, 2024. This adjustment was made in response to the fact that NewStem ceased operations and was in the process of liquidation. The technology and license held by NewStem reverted to the original licensee, Yissum, and the Company retains a right to a share of future licensing or monetization of the technology and license. The Company does expect to recover some value from the license, up to a total of $3,750,000, however, as of December 31, 2025 and 2024, the realization of this value is not certain, therefore has not been recorded by the Company. During the year ended December 31, 2025, the Company received approximately $5,000 from the liquidation of the remaining assets of NewStem which was reported as a partial recovery of the impairment loss.
Interest expense decreased by approximately $169,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease in interest expense is primarily related to the reduction of interest from the settlement of the litigation funding agreement offset by increased debt incurred for operations.
The Company has recorded no income tax expense as we have incurred operating losses and all deferred tax assets are fully offset by an income tax valuation allowance.
We reported net income and losses from equity method investees during the years ended December 31, 2025 and 2024. The net income reported for the year ended December 31, 2025 included net income of $640 from NetCo. Net losses reported for the year ended December 31, 2024 included net loss of approximately $5,000 from NetCo combined with net loss of approximately $156,000 from NewStem.
Liquidity and Capital Resources
We have not paid dividends on our common stock since our name change and business focus shift in 2018. Our present policy is to apply cash to investments in product development at NewStem, acquisitions or expansion; consequently, we do not expect to pay dividends on common stock in the foreseeable future.
The Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include fundraising until our interest in NewStem’s technology via monetization of the License is profitable. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient cash from financing on terms acceptable to the Company, or that NewStem’s technology will be monetized and become profitable.
During the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August 2024 providing for total borrowings of $750,000 and extending the maturity date to December 31, 2025. The agreements provide for interest at a rate of 10% per annum. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026.
During the year ended December 31, 2023, the Company entered into a note agreement with a shareholder to borrow $300,000 for continued working capital. This note bore interest at zero percent (0%) and matured on May 5, 2025. The note included a guarantee which has been identified as an embedded derivative with a fair value of a liability of $650,000 at December 31, 2024. This note was amended in May 2025 to provide for fixed interest, remove the guarantee and extend the maturity date to September 30, 2025. This note was amended for a second time in October 2025 to extend the maturity date to December 31, 2026.
In December 2023, the Company entered into two short term notes payable with unrelated parties for a total of $250,000 in borrowings utilized for the funding of NewStem. The notes bear interest at 12% per annum and matured December 21, 2025, at which time all principal and accrued interest were due and payable. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026. The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the transaction.
In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These agreements bear interest at 10% per annum and matured December 30, 2025. Prior to the filing of this Annual Report, the maturity dates have been extended to June 30, 2026.
During the year ended December 31, 2025, the Company borrowed $161,867 from the Executive Chairman in the form of an interim bridge loan until alternate funding sources can be found. The Company is accruing interest at 10% per annum for these advances. The agreement matured December 31, 2025. Prior to the filing of this Annual Report, the maturity date has been extended to June 30, 2026.
On May 9, 2025 the Company sold its interest in NetCo to its JV partner for $1,300,000 which was paid directly to Omni Bridgeway in full settlement of all liabilities related to the litigation funding agreement totaling $2,959,625.
Net Cash Used In Operating Activities.
For the year ended December 31, 2025, net cash used in operating activities was approximately $168,000, which consisted primarily of a net income of approximately $2,380,000 reduced by noncash gain of approximately $1,172,000 from the sale of our interest in NetCo and the related noncash relief of indebtedness income from the settlement of the litigation funding agreement with Omni Bridgeway of $1,697,000, stock-based compensation of approximately $9,000. Further offset by accretion of discount on notes payable of $60,000 and interest added to notes payable and convertible debt of approximately $194,000. Additionally, cash was used in operations related to an increase in current assets of approximately $10,000 and an increase in accrued liabilities and other payables of approximately $48,000.
For the year ended December 31, 2024, net cash used in operating activities was approximately $272,000, which consisted primarily of a net loss of approximately $3,233,000, offset by noncash equity in loss of equity method investees of approximately $161,000, impairment of equity method investees of approximately $1,629,000, bad debt expense of $500,000, and stock-based compensation of approximately $40,000. Further offset by loss on derivative instrument of $90,000, accretion of discount on notes payable of $178,000 and interest added to notes payable and convertible debt of approximately $215,000. Additionally, cash was used in operations related to an increase in current assets of approximately $8,000 and an increase in accrued liabilities and other payables of approximately $140,000.
Net Cash Used In Investing Activities.
During the year ended December 31, 2024, the Company loaned $250,000 to NewStem in anticipation of a purchase transaction. This transaction was not consummated and NewStem ceased operations and began liquidation proceedings in October 2024, resulting in the loan becoming uncollectible. As such, the Company determined the note was uncollectible and wrote the balance, including $250,000 loaned in 2023, off as a bad debt during the year ended December 31, 2024.
Net Cash Provided By Financing Activities.
For the year ended December 31, 2025, net cash provided by financing activities was $161,867, consisting of advances on the bridge loan payable to our Executive Chairman.
For the year ended December 31, 2024, net cash provided by financing activities was $475,000, consisting of long-term borrowings from two directors and a stockholder totaling $375,000 and borrowings from convertible debt with unrelated parties of $100,000.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions.
Contractual Obligations and Commercial Commitments
As of December 31, 2025, we had a contractual obligation related to our directors’ and officers’ insurance providing for 10 monthly installments of $5,109 payable through June 2026.
As of December 31, 2024, we had a contractual obligation related to our directors’ and officers’ insurance providing for 10 monthly installments of $5,127 payable through June 2025.
