ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis is attributable to the operations of Adaptin Bio, Inc. for the years ended December 31, 2025 and 2024. This discussion and analysis should be read in conjunction with our consolidated financial statements for the years ended December 31, 2025 and 2024 and the related notes thereto, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Overview of our Business
We are a biopharmaceutical company pioneering a transformational approach to enhancing the transfer of therapeutics into the brain, facilitating the treatment of brain cancers and other unmet medical conditions. Our precision medicine technology, originally developed by researchers in the Department of Neurosurgery at Duke University, harnesses the human immune system’s ability to target, recognize, destroy or deliver therapeutics to specific cells, including cancer cells. Our mission is to be the global leader and pioneer of this new treatment paradigm, integrating recombinant technology, gene therapy and cell therapy to address the challenges of targeting and delivering effective therapies, including to the brain for cancer and other CNS indications.
We are closely working with the researchers at Duke University to translate preclinical proof of concept data of our proprietary platform technology, the BRiTE Platform, into human clinical trials. BRiTE is a translatable method to specifically target malignant glioma using a tumor-specific, fully human bispecific antibody that is designed to redirect the patients’ own T cells to recognize and destroy tumor cells. Our first application of BRiTE is APTN-101, a proprietary EGFRvIII x CD3 bispecific T cell engager may have the ability to eliminate malignant glioma tumors in a variety of aggressive preclinical orthotopic tumor models. We designed APTN-101 to specifically redirect T cells against tumors expressing a well-characterized, mutated form of EGFR on a number of tumor types, including glioblastoma, breast and lung cancer. APTN-101 has been recently accepted under an investigator-led IND to begin first-in-human studies in brain cancer. Our goal is to complete preclinical studies on additional product candidates and file multiple INDs.
Duke University Exclusive Licensing Agreement
Effective January 11, 2023, we entered into a patent license agreement (the “Duke License”) with Duke University, whereby Duke University granted us an exclusive license with a right to sublicense the precision medicine technology, which we intend to develop using our BRiTE Platform. As part of the consideration for the license, we issued Duke 75 shares of our common stock (that were then valued at $175.86 per share, or $13,189, representing 5% of our then issued and outstanding common stock on a fully diluted basis). As a result of the Merger and recapitalization and additional issuances of common stock, Duke University now holds 161,960 shares of our Common Stock, or approximately 1.2% of the outstanding shares of the Company on a fully diluted basis. We also agreed to make milestone payments and pay royalties to Duke University, as well as to reimburse Duke University for prior patent expenses, as set forth in more detail below.
Operations Overview
Since inception, we have devoted substantially all of our resources to supporting our product development efforts, raising capital to support and expand such activities, and providing general and administrative support for these operations. We operate our business using a significant outsourcing model. As such, our team is composed of a small group of employees who direct a significantly large number of team members, including vendors and consultants, to enable execution of our operational plans. We do not currently have any products approved for sale, and we will continue to incur significant research and development and general administrative expenses related to our operations.
Since inception, we have incurred significant operating losses. For the year ended December 31, 2025, we recorded a net loss of $5,167,569. As of December 31, 2025, we had an accumulated deficit of $9,291,801. We expect to continue to incur significant losses for the foreseeable future. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development activities required for applying for and obtaining regulatory approval for our product candidates and, subsequently, preparing for potential commercialization of our product candidates. As of December 31, 2025 and December 31, 2024, we had $459,174 and $34,085 in cash and cash equivalents, respectively.
We expect to continue to incur significant expenses and operating losses for at least the next several years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on other research and development activities. We expect our expenses will increase substantially over time as we:
continue our ongoing and planned development of APTN-101, including pre-clinical activity and our Phase 1 investigator-led trial for the treatment of GBM;
build a portfolio of product candidates through development, or the acquisition or in-license of drugs, product candidates or technologies;
initiate additional preclinical studies and clinical trials for APTN-101 for any additional indications we may pursue and for any additional product candidates that we may pursue in the future;
hire clinical, regulatory and scientific personnel;
add operational, financial and management information systems and personnel, including personnel to support our product development efforts; and
incur additional legal, accounting, insurance and other expenses associated with operating as a public company.
The Macroeconomic Climate
The recent economic trends and political changes, including the rapidly changing tariff structure, may materially adversely affect our business and corresponding financial position and cash flows. While inflationary factors have trended down and interest rates are beginning to trend down, they still may impact our overhead costs and may adversely affect our operating results. While interest rates have recently been trending down, they remain high and present a challenge impacting the United States and global economies. Recent volatility in the major stock indices could also present challenges in accessing additional capital. Such factors could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future on our operating costs, including our labor, due to supply chain constraints, consequences associated with pandemics or public health situations, the Russia-Ukraine war, and other U.S. geopolitical issues, such as recent U.S. military actions in Venezuela and Iran and the ongoing implementation of new tariff structures and subsequent changes thereto, affecting other territories and employee availability and wage increases, all of which may result in additional on our working capital resources.
Components of Results of Operations
Research and Development Expenses
Research and development expenses consist primarily of fees paid to third-party service providers and, in 2025, personnel costs and other personnel-related compensation expenses, including stock-based compensation costs. Research and development costs are expensed in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers.
To date, substantially all our research and development expenses have been related to the licensing and preclinical development of APTN-101. As we progress, we expect our research and development costs to increase for additional preclinical and clinical development of APTN-101 in GBM.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming and is subject to uncertainties and delays. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if at all.
General and Administrative Expenses
General and administrative expenses include expenses for executive compensation and related costs, stock-based compensation, outside professional services and other general administrative expenses, including costs associated with the Merger. Outside professional services consist of patent maintenance expenses, legal, accounting, insurance and audit services and other consulting fees.
We also expect to continue to incur expenses as a public company, including expenses related to compliance with SEC rules and regulations and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities, and other administrative and professional services.
Interest Expense
Interest expense primarily consists of contractual debt interest expense, the amortization of debt issuance costs and the amortization of discounts arising from bifurcated derivative liabilities, prior to extinguishment.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations and changes for the periods indicated:
For the Years Ended December 31,
$ Change
% Change
Operating Expenses:
Research and development
General and administrative
Total Operating Expenses
Loss from Operations
Other Expense:
Interest Expense
Loss on fair value of derivative liability
(Gain) loss on extinguishment of debt
Total Other Expenses
Net Loss
Research and Development Expenses
Research and development expenses decreased by $50,425, or 3%, for the year ended December 31, 2025 when compared to research and development expenses for the year ended December 31, 2024. During 2025, the decrease in research and development expenses is primarily attributable to the completion of our repeat-dose toxicology study of APTN-101 that began in late 2023 along with costs related to our assay development program as it nears completion that resulted in a decrease of approximately $1.5 million. Offsetting those decreases were increased costs related to our sponsored research agreements with Duke University of approximately $776,000, an increase in clinical trial packaging costs of approximately $198,000, the minimum annual royalty for 2025 of $25,000, increases in post-Merger compensation and related costs for research and development personnel of $95,000 and the stock-based compensation expense for stock options granted during the period of approximately $117,000. Costs incurred during the year ended December 31, 2024 consist primarily of costs for the ongoing assay development and repeat-dose toxicology studies with our third-party service providers.
General and Administrative Expenses
General and administrative expenses increased by approximately $2.9 million, or 389%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily related to increases in legal, accounting and consulting costs related to the Merger and filings with the SEC of approximately $665,000, increases in post-Merger compensation and related costs for our executive officers of approximately $960,000, stock-based compensation costs recorded in conjunction with options granted during the period of approximately $380,000 and increases in our directors fees, stock quotation fees, insurance costs, financial printing and transfer agent costs as a public company of approximately $500,000 in the aggregate. Additionally, we recorded $250,000 of expense related to the issuance of stock to a third-party vendor. Costs incurred during the year ended December 31, 2024 consisted primarily of legal fees, accounting fees and consulting fees.
Interest Expense
Interest expense decreased $268,389, or 79%, for the year ended December 31, 2025 when compared to the year ended December 31, 2024. The decrease in interest expense was related to the conversion of all outstanding debt in conjunction with the Merger and Offering in February 2025. For the year ended December 31, 2024, we recorded interest expense, debt issuance costs amortization, discounts related to derivative liability amortization and loss on derivative liabilities for our then outstanding debt.
Other Income and Expense
Prior to the Merger, we had recorded the accrued interest, debt issuance costs amortization, discounts related to derivative liability amortization and related costs of the 2024 Bridge Notes. Upon completion of the issuance of the 2024 Bridge Notes and based on the information then currently available, the recorded bifurcated derivative liability related to the embedded redemption feature of this debt was $333,333. In December 2024, we also recorded a bifurcated derivative liability related to the Exchange Notes executed by holders of the 2023 Bridge Notes of $194,537, that due to the deemed extinguishment of the 2023 Bridge Notes upon execution of the Exchange Notes, gave rise to a loss on extinguishment of $194,537 for the year ended December 31, 2024. At the date of the Merger, the carrying value of the derivative liability totaled $551,269. At the Initial Closing of the Offering, the $1,500,000 aggregate principal amount of Exchange Notes and 2024 Bridge Notes, plus accrued interest thereon, automatically converted into shares of our common stock. As a result of the conversion, we recorded a gain on debt extinguishment of $326,345.
Liquidity and Capital Resources
Bridge Financings
We raised bridge financing through the offer and sale (a) in 2023 of $500,000 principal amount of our 10% Secured Promissory Notes (the “2023 Bridge Notes”) (including warrants to purchase up to 56,815 shares of our Common Stock at an exercise price of $4.40 per share) and (b) in 2024 of $1,000,000 principal amount of its 10% Secured Subordinated Convertible Promissory Notes (the “2024 Bridge Notes”), which in each case were sold to a limited number of accredited investors pursuant to Regulation D under the Securities Act. In December 2024, the 2023 Bridge Notes were cancelled and exchanged for $500,000 principal amount of our 10% Secured Convertible Promissory Notes (the “Exchange Notes”). In connection with the note exchange, the holders of the 2023 Bridge Notes were also issued warrants to purchase up to 75,755 shares of our Common Stock at an exercise price of $3.30 per share. The Exchange Notes, collectively with the 2024 Bridge Notes, are referred to herein as the “Bridge Notes”.
Pre-Merger Warrants
As described above, prior to the Merger, we raised bridge financing through the offer and sale of the 2023 Bridge Notes. We agreed to issue common stock warrants (the “2023 Bridge Note Warrants”) to the purchasers of the 2023 Bridge Notes. The 2023 Bridge Note Warrants give the holders the right to purchase an aggregate of up to 56,815 shares of our Common Stock at an exercise price of $4.40 per share. In December 2024, the 2023 Bridge Notes were cancelled and exchanged for the Exchange Notes. In connection with this note exchange, the holders of the 2023 Bridge Notes were issued warrants (the “Exchange Warrants”) to purchase an aggregate of up to 75,755 shares of our Common Stock at an exercise price of $3.30 per share. The 2023 Bridge Note Warrants and the Exchange Warrants must be exercised on or prior to the close of business on February 11, 2030, which is the fifth anniversary of the initial closing of the Private Placement. We refer to the 2023 Bridge Note Warrants and the Exchange Warrants collectively as the “Pre-Merger Warrants.”
Private Placements
Concurrent with the closing of the Merger, we sold, in an initial closing (the “Initial Closing”) of a private placement offering (the “Offering”), 1,080,814 units (the “Units”) at a purchase price of $4.40 per Unit, each consisting of (i) one share of common stock, (ii) a one-year warrant to purchase one share of our Common Stock at an exercise price of $4.40 per share, and (iii) a five-year warrant to purchase one-half of a share of our Common Stock at an exercise price of $6.60 per share. On March 31, 2025, we sold in the final closing of our Offering, 319,529 Units for an aggregate purchase price of $1,405,923.
At the Initial Closing of the Offering in February 2025, the $1,500,000 aggregate principal amount of outstanding Bridge Notes, plus accrued interest thereon, converted automatically into shares of our Common Stock at a conversion price of $3.30 per share, or 501,140 shares of common stock in the aggregate, and the holders of the 2023 Bridge Notes were issued, pursuant to existing agreements, warrants to purchase up to 132,570 shares of our Common Stock at an exercise price of $3.30 or $4.40 per share and with a term of five years. Further, as set forth above, we raised gross proceeds in our Offering of $6,161,505 through the issuance of Units. Additionally, in December 2025, we raised gross proceeds of $1,000,000 through the sale of 200,000 shares of our common stock. In the aggregate, after factoring in offering costs, we recorded net proceeds in 2025 of $5,284,105.
In December 2025, we sold, in an initial closing of a private placement offering, 200,000 shares of our common stock at an aggregate purchase price of $1,000,000, or $5.00 per share. The offering period commenced on October 29, 2025 and was scheduled to continue until the later of (i) January 31, 2026, unless extended by the Company and the placement agent; (ii) the date on which the maximum offering amount of approximately $4.0 million (the “Maximum Offering”) was sold by the Company; or (iii) on a date mutually agreed upon in writing by the Company and the placement agent (the “Offering Period”). On December 30, 2025, the Company and the placement agent agreed to extend the offering period to February 27, 2026; on February 28, 2026 was extended until March 31, 2026, and; on March 31, 2026 was extended until April 30, 2026. As of the date of the Initial Closing, the Company recorded net proceeds of $582,961, net of costs of the transaction of $417,039 that had been incurred as of that date.
Accordingly, as of December 31, 2025, the Company had total assets equal to $619,159 comprised of cash and prepaid assets. The Company’s current liabilities as of December 31, 2025, totaled $2,108,555, and were comprised of accounts payable and accrued liabilities. Accordingly, as of December 31, 2025, we had cash and cash equivalents, working capital deficit and accumulated deficit of $459,174, $1,489,396 and $9,291,801, respectively.
Based on our current operating plan, we anticipate that our existing cash balance will not be sufficient to fund our operating activities for the next twelve months and, as such, substantial doubt exists about our ability to support our operations and fund our obligations for next twelve months from the date of issuance of these consolidated financial statements. We plan to continue to fund our losses from operations through cash on hand, as well as through future equity offerings and debt financings, or other third-party funding. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability to achieve our intended business objectives. Any of these actions could materially harm our business, results of operations and future prospects.
Cash Flows
The following is a summary of the Company’s cash flows provided by (used in) operating and financing activities during the years ended December 31, 2025 and 2024:
For the Years Ended December 31,
$ Change
% Change
Net cash (used in) provided by:
Operating activities
Financing activities
Net increase in cash during the periods
Net Cash Used in Operating Activities
For the years ended December 31, 2025 and 2024, we used cash for operating activities of $4,777,892 and $649,283, respectively. Our cash use for the year ended December 31, 2025 was primarily attributable to our net loss of $5,167,569, adjusted for net non-cash expenses in the aggregate amount of $480,553, less $90,876 of net cash used in changes in operating assets and liabilities. Our cash use for the year ended December 31, 2024 was primarily attributable to our net loss of $3,122,557, adjusted for net non-cash expenses in the aggregate amount of $451,413, and offset by $2,021,861 of cash provided by changes in of operating assets and liabilities.
Net Cash Provided by Financing Activities
During the year ended December 31, 2025, cash provided by financing activities was $5,202,981, of which, $7,161,504 was provided by offering proceeds related to the offerings, offset by $1,683,523 of payments of equity issuance costs and $275,000 of repayment of notes payable to a related party. During the year ended December 31, 2024, cash provided by financing activities was $678,614, of which $872,490 was related to net proceeds from the issuance of notes payable offset by $193,876 of equity issuance costs paid in advance of the February 2025 Offering.
Funding Requirements
We use our cash primarily to fund research and development expenditures and the administrative costs of operating a public company. We expect our research and development expenses to increase in 2026 as we move forward with our Phase 1 program in GBM for APTN-101 and incur additional pre-clinical expenses for any additional programs we may elect to pursue. We expect to incur a decrease in general and administrative expenses in 2026 primarily related the costs of the Merger and Offering in 2025 not recurring offset by continued support of our increasing research and development activities and costs associated with being a publicly held company, including professional fees, personnel, insurance and regulatory compliance related costs. We expect to incur operating losses for the foreseeable future as we continue the preclinical and clinical development of our product candidate. At this time, due to the inherently unpredictable nature of clinical development, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval, and commercialize APTN-101 or any future product candidates, if at all. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of , and development costs can differ materially from expectations.
The timing and amount of our operating expenditures will depend largely on:
the timing, progress and results of our ongoing and planned preclinical and clinical development activities for APTN-101 in GBM;
the scope, progress, results and costs of preclinical development, testing and clinical trials of APTN-101 for any additional indications;
the ability of our vendors and third-party service providers to accurately forecast expenses and deliver on expectations;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
the extent to which we acquire or in-license other product candidates and technologies.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that restrict our operations or our ability to incur additional indebtedness, among other items. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition and results of operations.
Contractual Obligations and Commitments
Duke License
In January 2023, we entered into the Duke License for an exclusive, world-wide, sub-licensable license to precision medicine technology. As a component of the Duke License, we agreed to make payments based on clinical and commercial milestones and continuing royalty payments on any sales made after approval by regulatory authorities. These milestones include initiation of Phase II or Phase III clinical trials, submission of applications for market approval in multiple jurisdictions including the United States, European Union and Japan and the initiation of post-approval commercial sales in the same jurisdictions. Based on an assumption that all milestones related to the current development program are met during the course of the Duke License, these milestone payments would total approximately $11.7 million. As of December 31, 2025, we had not met any milestones as defined in the agreement and, accordingly, have recorded no expense or liability related to such payments.
We also agreed to pay royalties equal to low- to mid- single digit percentages of annual net sales on a country-by-country and product-by-product basis subject to downward adjustment to low single digit percentages of our net annual sales in the event there is no valid claim of a patent for the product, with minimum annual royalty levels established. We also must pay Duke percentages in the low tens, twenties and thirties of sublicensing fees after initiation of the first Phase III study, after initiation of the first Phase II study but prior to initiation of the first Phase III study, and prior to initiation of the first Phase II study, respectively, as set forth in the Duke License. Based on the minimum annual royalty levels established in the Duke License, we accrued $25,000 for royalties due under the agreement as of December 31, 2025.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Significant estimates and assumptions reflected in the consolidated financial statements relate to and include, but are not limited to, the fair value of warrants, the fair value of stock issued in exchange for services, prepaid expenses and accrued liabilities that are measured based on progress toward completion of research and development projects, and the grant date fair value of stock options granted to employees, consultants and directors, and the resulting stock-based compensation expense, calculated using the Black-Scholes option-pricing model.
Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these consolidated financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates:
a) Research & Development Expenses — Accruals
Research and development costs are charged to expense in the period of expenditure. Our research and development costs consist primarily of compensation and related costs and fees paid to external, third-party service providers, such as Contract Research Organizations (“CRO”s) or Contract Manufacturing Organizations (“CMO”s).
Research and development expenses include direct costs associated with CROs for research activities and direct CMO costs for the manufacture, formulation and packaging of clinical trial material. Direct costs associated with our CROs and CMOs are generally payable on a time-and-materials basis, or when milestones are achieved. The invoicing from clinical trial sites can lag several months or can be in advance of the work to be completed. We record expenses for our clinical trial activities performed by third parties based upon estimates of the percentage of work completed of the total work over the life of the individual trial in accordance with agreements established with CMOs and CROs. We determine the estimates through discussions with internal clinical personnel, CROs and CMOs as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services based on facts and circumstances known to us as of each consolidated balance sheet date. The actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan. If the actual timing of the performance of services of the level of effort varies from the estimate, we will adjust the accrual accordingly.
b) Stock-Based Compensation
We recognize compensation costs related to share options granted to employees, consultants and directors based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black Scholes option pricing model. This Black Scholes option pricing model uses various inputs to measure fair value, including estimated fair value of our underlying common shares at the grant date, expected term, estimated volatility, risk-free interest rate and expected dividend yields of our common shares. The estimated volatility creates a critical estimate because we have not been a public company long enough and do not have sufficient trading history to demonstrate our own historical volatility. As such, we estimate volatility using an internally developed peer group of similar companies. The grant date fair value of the stock-based awards is recognized on a straight-line basis over the requisite service periods, which are generally the vesting period of the respective awards or based upon the terms of performance obligations, if any. Forfeitures are accounted for as they occur.
