SEC Form 10-Q filed by Entero Therapeutics Inc.

5/15/25 1:20:54 PM ET

$ENTO

Biotechnology: Pharmaceutical Preparations

Health Care

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Entero Therapeutics, Inc._March 31, 2025

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐	TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

From the transition period from to

Commission File Number 001-37853

ENTERO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

46-4993860

(State or other jurisdiction of

incorporation or organization)

(I.R.S Employer

Identification No.)

777 Yamato Road, Suite 502
Boca Raton, Florida		33431
(Address of principal executive offices)		(Zip Code)

(561) 589-7020

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.0001 per share	ENTO	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 4,765,729 shares of the registrant’s common stock, par value $0.0001 per share (the “Common Stock”), outstanding as of May 15, 2025.

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Quarterly Report other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “target”, “potential”, “will”, “would”, “could”, “should”, “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

●

our ability to maintain compliance with the applicable listing requirements of The Nasdaq Capital Market;

●

our ability to satisfy our existing payment obligations and other payment obligations as they become due, including those related to the acquisition of First Wave Bio, Inc.

●

statements regarding the impact of geopolitical events, including the war in Ukraine and the Middle East, and their effects on our operations, access to capital, research and development and clinical trials and potential disruption in the operations and business of third-party vendors, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”), other service providers, and collaborators with whom we conduct business;

●

the availability of capital to satisfy our working capital requirements;

●

our current and future capital requirements and our ability to raise additional funds to satisfy our capital needs;

●

our ability to consummate our disposal of our IMGX subsidiary and related liabilities;

●

the accuracy of our estimates regarding expense, future revenue and capital requirements;

●

our ability to continue operating as a going concern;

●

our plans to develop and commercialize our product candidates, including Adrulipase,

●

our ability to initiate and complete our clinical trials and to advance our principal product candidates into additional clinical trials, including pivotal clinical trials, and successfully complete such clinical trials;

●

regulatory developments in the U.S. and foreign countries;

●

the performance of our third-party vendor(s), CROs, CDMOs and other third-party non-clinical and clinical development collaborators and regulatory service providers;

●

our ability to obtain and maintain intellectual property protection for our core assets;

●

the size of the potential markets for our product candidates and our ability to serve those markets;

●

the rate and degree of market acceptance of our product candidates for any indication once approved;

●

the success of competing products and product candidates in development by others that are or become available for the indications that we are pursuing;

●

the loss of key scientific, clinical and nonclinical development, and/or management personnel, internally or from one of our third-party collaborators; and

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●

other risks and uncertainties, including those listed under Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K.

Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not rely on these forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for certain drugs and consumer products, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources and we have not independently verified the data from third party sources. In some cases, we do not expressly refer to the sources from which these data are derived.

In this Quarterly Report on Form 10-Q, unless otherwise stated or as the context otherwise requires, references to “Entero,” the “Company,” “we,” “us,” “our” and similar references are to Entero Therapeutics, Inc. and its subsidiaries on a consolidated basis. References to “FWB” refer to First Wave Bio, Inc., Entero’s wholly-owned subsidiary, and references to “IMGX” refer to ImmunogenX, LLC (formerly ImmunogenX, Inc.), which has been Entero’s wholly-owned subsidiary since March 13, 2024.

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PART I

FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have consolidated such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited condensed consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the unaudited condensed consolidated financial statements were issued by filing with the SEC.

These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2024, included in our Annual Report filed on Form 10 – K/A, filed with the SEC on April 9, 2025.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2025.

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ENTERO THERAPEUTICS, INC.

Consolidated Balance Sheets (unaudited)


	March 31,
	2025		December 31,
	(unaudited)		2024
ASSETS

Current Assets:
Cash and cash equivalents	$	59,352	$	163,476
Prepaid expenses		233,869		145,319
Assets of disposal group held-for-sale		83,170,009		83,170,009
Total Current Assets		83,463,230		83,478,804

Other Assets:
Restricted cash		7,005		21,516
Goodwill		1,684,182		1,684,182
Operating lease right-of-use assets		—		126,753
Deposits		49,122		98,251
Total Other Assets		1,740,309		1,930,702
Total Assets	$	85,203,539	$	85,409,506

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:
Accounts payable	$	2,849,928	$	2,959,248
Accrued expenses		303,880		252,048
Accrued dividend payable		1,391,844		1,310,581
Line of credit		700,000		—
Operating lease liabilities - current		135,609		81,510
Liabilities held-for-sale		23,223,137		22,941,497
Other current liabilities		135,659		1,236
Total Current Liabilities		28,740,057		27,546,120

Operating lease liabilities – non-current		—		59,024
Total Liabilities		28,740,057		27,605,144

Mezzanine Equity:
Series G preferred stock- Par value $0.0001 per share; 13,000 shares designated; 0 and 12,373.226 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.		61,681,100		61,681,100
Stockholders’ Equity (Deficit):
Series B preferred stock- Par value $0.0001 per share; 5,194.81 shares authorized; 0 and 475.56 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.		—		—
Series C preferred stock- Par value $0.0001 per share; 75,000 shares authorized; 0 shares issued and outstanding at March 31, 2025 and December 31, 2024.		—		—
Series D preferred stock- Par value $0.0001 per share; 150 shares designated; 0 shares issued and outstanding at March 31, 2025 and December 31, 2024.		—		—
Series E preferred stock- Par value $0.0001 per share; 150 shares designated; 0 shares issued and outstanding at March 31, 2025 and December 31, 2024.		—		—
Series F preferred stock- Par value $0.0001 per share; 7,000 shares designated; 0 shares issued and outstanding at March 31, 2025 and December 31, 2024.		—		—
Common stock - Par value $0.0001 per share; 100,000,000 shares authorized; 4,765,729 and 4,754,038 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.		477		475
Additional paid-in capital		198,429,533		198,510,795
Accumulated deficit		(203,647,628)		(202,388,008)
Total Stockholders’ Equity (Deficit)		(5,217,618)		(3,876,738)
Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit)	$	85,203,539	$	85,409,506

See accompanying notes to unaudited condensed consolidated financial statements

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ENTERO THERAPEUTICS, INC.

Consolidated Statements of Operations (unaudited)


	Three Months Ended March 31,
	2025		2024
Operating expenses:
Research and development expenses	$	15,827	$	554,662
General and administrative expenses		805,559		8,544,386
Total operating expenses		821,386		9,099,048

Loss from operations		(821,386)		(9,099,048)

Other (expenses) income:
Interest expense		(17,902)		—
Interest income		—		228
Other expense		(108,817)		(653)
Total other expenses		(126,719)		(425)

Loss from continued operations		(948,105)		(9,099,473)

Income tax benefit		—		14,859,887

Loss from discontinued operations net of tax		(311,515)		(192,808)
Net income (loss)	$	(1,259,620)	$	5,567,606

Preferred stock dividends		(81,262)		(66,144)
Net income (loss) applicable to common shareholders	$	(1,340,882)	$	5,501,462

Basic weighted average shares outstanding		4,765,004		1,761,953
Diluted weighted average shares outstanding		—		14,511,461
Income (loss) per share - basic	$	(0.28)	$	3.12
Income (loss) per share - diluted	$	(0.28)	$	0.38

See accompanying notes to unaudited condensed consolidated financial statements

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ENTERO THERAPEUTICS, INC.

Consolidated Statements of Mezzanine Equity and Changes in Stockholders’ Equity (Deficit) (unaudited)


	Series G Convertible			Series B Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Common Stock			Paid In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance, January 1, 2025	12,373.23	$	61,681,100	476	$	—	4,754,038	$	475	$	198,510,795	$	(202,388,008)	$	(3,876,738)
Deemed dividend of Series B preferred stock	—		—	—		—	—		—		(81,263)		—		(81,263)
Issuance of common stock from RSU vest	—		—	—		—	11,691		2		—		—		2
Net loss	—		—	—		—	—		—		—		(1,259,620)		(1,259,620)
Balance, March 31, 2025	12,373	$	61,681,100	476	$	—	4,765,729	$	477	$	198,429,532	$	(203,647,628)	$	(52,176,189)


	Series G Convertible			Series B Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Common Stock			Paid In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance, January 1, 2024	—	$	—	515	$	—	1,560,998	$	156	$	187,931,445	$	(184,328,672)	$	3,602,929
Issuance of common stock, pre-funded warrants and warrants in registered direct offering, net of issuance costs	—		—	—		—	173,100		17		3,604,919		—		3,604,936
Issuance of Series G convertible preferred stock upon acquisition of IMGX	11,777		57,790,474	—		—	—		—		—		—		—
Issuance of common stock upon acquisition of IMGX	—		—	—		—	36,830		4		2,300,496		—		2,300,500
Issuance of Series G convertible preferred stock to financial advisors	596		3,890,626	—		—	—		—		—		—		—
Issuance of common stock to financial advisors	—		—	—		—	18,475		2		120,646		—		120,648
Exercise of pre-funded warrants into common stock	—		—	—		—	83,525		9		—		—		9
Deemed dividend of Series B preferred stock	—		—	—		—	—		—		(66,144)		—		(66,144)
Conversion of Series B preferred shares into common stock	—		—	(10)		—	9		—		—		—		—
Common stock issued to consultants	—		—	—		—	100,000		10		780,990		—		781,000
Issuance of common stock from RSU vest	—		—	—		—	52,271		5		(5)		—		—
Stock-based compensation	—		—	—		—	—		—		271,360		—		271,360
Net income	—		—	—		—	—		—		—		5,567,606		5,567,606
Balance, March 31, 2024	12,373	$	61,681,100	505	$	—	2,025,208	$	203	$	194,943,707	$	(178,761,066)	$	16,182,844

See accompanying notes to unaudited condensed consolidated financial statements

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ENTERO THERAPEUTICS, INC.

Consolidated Statements of Cash Flows (unaudited)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net income (loss)	$	(1,259,620)	$	5,567,606
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		—		12,293
Change in right-of-use assets		17,994		18,251
Impairment of right-of-use assets		108,759		—
Stock-based compensation		—		271,360
Common stock granted to consultants		—		781,000
Common stock issued to financial advisors at acquisition		—		120,648
Series G convertible preferred stock issued to financial advisors at acquisition		—		3,890,626
Deferred taxes		—		(14,859,887)
Changes in assets and liabilities:
Other receivables		—		—
Prepaid expenses		(88,550)		318,342
Lease liabilities		(4,925)		(18,863)
Deposits		49,129		—
Accounts payable		(109,320)		526,033
Accrued expenses		51,832		(398,672)
Other liabilities		416,066		24,307
Net cash used in operating activities		(818,635)		(3,746,956)

Cash flows from investing activities:
Cash acquired in acquisition of IMGX		—		88,169
Net cash provided by investing activities		—		88,169

Cash flows from financing activities:
Proceeds from issuance of common stock, prefunded warrants and warrants, net		—		3,604,936
Proceeds from exercise of warrants		—		9
Repayments of note payable		—		(226,015)
Proceeds from note payable		700,000		—
Net cash provided by financing activities		700,000		3,378,930

Net (decrease) in cash, cash equivalents and restricted cash		(118,635)		(279,857)

Cash, cash equivalents and restricted cash, beginning balance		184,992		3,733,292
Cash, cash equivalents and restricted cash, ending balance	$	66,357	$	3,453,435

Supplemental disclosures of cash flow information:
Cash paid for interest	$	—	$	21,969

Non-cash investing and financing activities:
Fair value of common shares issued in the IMGX acquisition, net of cash	$	—	$	152,331
Fair value of the Series G preferred stock issued in the IMGX acquisition	$	—	$	57,790,474
Fair value of options assumed in the IMGX acquisition	$	—	$	1,271,000
Fair value of warrants assumed in the IMGX acquisition	$	—	$	789,000
Accrued dividends on preferred stock	$	(81,262)	$	(66,144)

See accompanying notes to unaudited condensed consolidated financial statements

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ENTERO THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

Note 1 - The Company and Basis of Presentation

The Company

Entero Therapeutics, Inc. (“Entero”) and its wholly-owned subsidiaries, First Wave Bio, Inc. (“FWB”) and ImmunogenX, LLC (“IMGX”), are collectively referred to as the “Company”. The Company is engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.

In May 2024, the Company changed its name from First Wave Biopharma, Inc. to Entero Therapeutics, Inc.

The Company’s development pipeline consists of gut-restricted GI clinical drug candidates, including the biologic Adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients. The Company plans to continue development of its Adrulipase program in 2025.

In March 2024, the Company acquired ImmunogenX, Inc. (“ImmunogenX”) (the Company’s acquisition of ImmunogenX, the “Merger”), a private, clinical-stage biopharmaceutical company founded in 2013, which was developing the biologic, Latiglutenase, for celiac disease. ImmunogenX was also developing CypCel, a metabolic marker compound that can measure the state of small-intestinal recovery of celiac patients undergoing gluten-free diets (“GFDs”). The Company is seeking avenues to dispose of certain assets and liabilities of IMGX, including Latiglutenase and CypCel. As of December 31, 2024, these were classified as assets and liabilities held for sale and due to the short period of time since the close of the Merger are reported at their fair value less cost to sell. The Company determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on the Company’s operations and financial statements. See Note 3 for additional details regarding the Merger and see Note 4 for additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations.

The Company has given notice to terminate its license agreement with Sanofi for its Capeserod program, a selective 5-HT4 receptor partial agonist. The Company is also exploring strategic alternatives for its Niclosamide program, an oral small molecule with anti-viral and anti-inflammatory properties.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund clinical trials and operations.

Worldwide supply chain constraints and economic and capital markets uncertainty arising out of conflicts between Russia and Ukraine and conflicts in the Middle East triggered by attacks on Israel in October of 2023 have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.

In addition, the Company is subject to other challenges and risks specific to its business, its ability to maintain compliance with the continued listing requirements of The Nasdaq Capital Market and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the biotechnology and pharmaceutical industries with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its drug candidates; delays or problems in the manufacture and supply of its drug candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or drug candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements.

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Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of Entero and its wholly owned subsidiaries, FWB and IMGX. Intercompany transactions and balances have been eliminated upon consolidation.

In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2024, has been derived from audited financial statements of that date. The unaudited interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report Form 10-K for the year ended December 31, 2024, filed with the SEC on April 1, 2025.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying unaudited interim condensed consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. On March 31, 2025, the Company had cash and cash equivalents of approximately $66,000 and an accumulated deficit of approximately $203.6 million. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations.

The Company has been, and is expected to continue, exploring various potential strategies available including but not limited to raising capital, restructuring its indebtedness and identifying and evaluating potential strategic alternatives but there can be no assurance that these efforts will be successful, that the Company will be able to raise necessary capital on acceptable terms, reach agreement with lenders, or that the strategic review process will result in the Company pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. The Company is evaluating all potential strategic options, including a merger, reverse merger, sale, wind-down, liquidation and dissolution or other strategic transaction. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stakeholder value or that it will make any cash distributions to stockholders. Any failure in these efforts could force the Company to delay, limit or terminate operations, make reductions in its workforce, discontinue research and development programs, liquidate all or a portion of assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

Without adequate working capital, the Company may not be able to meet its obligations and continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these financial statements are issued. If the Company is not able to obtain necessary capital, it may be required to terminate operations, liquidate all or a portion of assets and/or seek bankruptcy protection. As a result, the Company concluded that its plans at this stage do not alleviate substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of Entero and its wholly owned subsidiaries, FWB and IMGX. Intercompany transactions and balances have been eliminated upon consolidation.

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Note 2 - Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP and include certain 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 (including goodwill), and the reported amounts of revenue and expense during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.

Segment Information

The Company operates as one operating segment with a focus on research and development. The Chief Executive Officer (“CEO”), as the Company’s chief operating decision maker, manages and allocates resources to the operations of the Company on an aggregated basis. This enables the CEO to assess the Company’s overall level of available resources and determine how best to deploy these resources across functions, product and service lines, and strategic opportunities in line with the long-term Company-wide strategic goals.

Reverse Stock Split

On December 18, 2023, the Company effected a reverse stock split, whereby every twenty shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On January 18, 2023, the Company effected a reverse stock split, whereby every seven shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

All share and per share amounts have been retroactively restated to reflect the reverse stock splits referenced above.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. As of March 31, 2025 and December 31, 2024, the Company has classified approximately $7,000 and $22,000 respectively as restricted cash.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash. The Company primarily maintains its cash balances with financial institutions in federally insured accounts in the U.S. The Company may from time to time have cash in banks in excess of FDIC insurance limits. The Company has not experienced any losses to date resulting from this practice. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high quality financial institutions.

Equity-Based Payments to Non-Employees

Equity-based payments to non-employees are measured at fair value on the grant date per ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting.

Fair Value Measurements

The Company follows Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurements and Disclosures (“ASC 820”), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

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As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

The Company recognizes transfers between levels as if the transfers occurred on the last day of the reporting period.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of the acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or circumstances indicate impairment may be present. Any excess in carrying value over the estimated fair value is charged to results of operations. The Company has not recognized any impairment charges through March 31, 2025 related to goodwill.

Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment (“ASC 360”). Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment charges through March 31, 2025.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. At March 31, 2025 and December 31, 2024, the Company does not have any significant uncertain tax positions.

Leases

Leases are recorded on the balance sheet as right of use assets and lease obligations. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a term of 12 months or less at inception are expensed monthly over the lease term. The lease term is determined by assuming the exercise of renewal options that are reasonably certain. The implicit interest rate or the incremental borrowing rate is used in determining the present value of future payments.

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Income (Loss) Per Share

Basic income (loss) per share (“EPS”) is computed by dividing the loss attributable to common shareholders by the weighted average number of shares of Common Stock outstanding. Diluted EPS reflects the potential dilution that could occur from shares of Common Stock issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of options is excluded from diluted EPS if the effect of such inclusion would be anti-dilutive.

The dilutive effect of stock options is determined using the treasury stock method. Stock options to purchase shares of Common Stock of the Company during 2024 and for the three months ended March 31, 2025 were not included in the computation of diluted EPS because the Company has incurred a loss for the three months ended March 31, 2025 and year ended December 31, 2024 and the effect would be anti-dilutive.

Research and Development

Research and development costs are charged to operations when incurred and are included in operating expenses, except for goodwill related to patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, expenses with clinical research organizations (“CROs”), investigative sites, consultants and contractors that conduct or provide other services relating to clinical trials, costs to acquire drug product, drug supply and clinical trial materials from contract development and manufacturing organization (“CDMOs”) and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s licenses and research and development costs related to Adrulipase, Capeserod and Niclosamide. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.

Research and Development – Intellectual Property Acquired

The Company records intellectual property acquired in business acquisitions that has not reached technological feasibility and which has no alternative future use, as In-Process R&D (“IPR&D”) at the acquisition date. On March 13, 2024, the Company entered into an acquisition agreement with IMGX which included the intellectual property and patents for Latiglutenase and CypCel, which was accounted for as a business acquisition (see Note 3 and Note 4).

Intangible assets related to IPR&D are considered indefinite-lived intangible assets and are assessed for impairment annually or more frequently if impairment indicators exist. If the associated research and development effort is abandoned, the related assets will be written-off, and the Company will record a noncash impairment loss on its Consolidated Statements of Operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. The impairment test for indefinite-lived intangible assets is a one-step test that compares the fair value of the intangible asset to its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The Company has not recognized any impairment charges through March 31, 2025 related to IPR&D.

For tax purposes, intangible assets related to IPR&D are considered indefinite-lived intangible assets.

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Stock-Based Compensation

The Company’s board of directors (the “Board”) and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) which took effect on May 12, 2014, and the 2020 Omnibus Equity Incentive Plan, which took effect on September 11, 2020 (the “2020 Plan”). From the effective date of the 2020 Plan, no new awards have been or will be made under the 2014 Plan. On March 13, 2024, in connection with the IMGX acquisition, the Company assumed IMGX’s 2021 Stock Option Plan (the “IMGX Plan”), including all IMGX stock options immediately outstanding prior to the IMGX acquisition, with each becoming an option to purchase Common Stock, subject to adjustment. The IMGX Plan was adopted and approved by the board of directors and stockholders of IMGX in 2021. Following the assumption of the IMGX Plan by the Company, no new awards have been or will be made under the IMGX Plan. The Company accounts for its stock-based compensation awards to employees, consultants, and Board members in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, consultants, and Board members, including grants of employee stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.

For awards with performance conditions that affect their vesting, such as the occurrence of certain transactions or the achievement of certain operating or financial milestones, recognition of fair value of the award occurs when vesting becomes probable.

The Company estimates the grant date fair value of stock option awards using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.

Assets Held for Sale and Discontinued Operations

Assets and liabilities are classified as held for sale when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the assets; (2) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (3) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (4) the sale of the assets is probable and is expected to be completed within one year; (5) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. When all of these criteria have been met, the assets and liabilities are classified as held for sale in the condensed consolidated balance sheet. A newly acquired business in a business combination that has met the held for sale criteria should be measured at fair value less costs to sell. This is because the business has been recently acquired and its carrying value has been adjusted to its fair value. Depreciation and amortization of assets cease upon designation as held for sale.

Discontinued operations comprise activities that were disposed of, discontinued or held for sale at the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting purposes, and represent a strategic business shift having a major effect on the Company’s operations and financial results according to ASC Topic 205, Presentation of Financial Statements.

Additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations are included in Note 4.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 on January 1, 2025 and the adoption did not have a material effect on the Company’s financial statement disclosures.

The Company has evaluated other recently issued accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

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Note 3 – Business Acquisition

On March 13, 2024, the Company acquired ImmunogenX, Inc., a Delaware corporation, in accordance with the terms of an Agreement and Plan of Merger, dated March 13, 2024 (the “Merger Agreement”), by and among the Company, IMMUNO Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), IMMUNO Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”), and ImmunogenX. Pursuant to the Merger Agreement, First Merger Sub merged with and into ImmunogenX, pursuant to which ImmunogenX was the surviving corporation (the “First Merger”). Immediately following the First Merger, IMGX merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity and a wholly owned subsidiary of the Company (the “Second Merger” and, together with the First Merger, the “IMGX Merger”). Second Merger Sub subsequently changed its name to ImmunogenX, LLC. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Under the terms of the Merger Agreement, following the consummation of the Merger (the “Closing”), in exchange for the outstanding shares of capital stock of ImmunogenX immediately prior to the effective time of the First Merger, the Company issued to the stockholders of ImmunogenX an aggregate of (A) 36,830 shares of Common Stock, and (B) 11,777.418 shares of Series G Preferred Stock, each share of which is convertible into 1,000 shares of Common Stock, upon shareholder approval. Following the closing of the acquisition, the Company had 2,303,135 shares of common stock issued and outstanding.

The Company incurred transaction costs of $5,456,038 which are included in the Company’s condensed consolidated statement of operations.

In addition, the Company assumed (i) all ImmunogenX stock options immediately outstanding prior to the First Merger, each becoming an option to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Options”) and (ii) all ImmunogenX warrants immediately outstanding prior to the First Merger, each becoming a warrant to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Warrants”). The Assumed Options are exercisable for an aggregate of 200,652 shares of Common Stock, have an exercise price of $0.81 and expire between February 1, 2031 and June 6, 2033. The Assumed Warrants are exercisable for an aggregate of 127,680 shares of Common Stock, have exercise prices ranging from $3.03 to $3.92 and expire between September 30, 2032 and September 6, 2033.

Tungsten Partners LLC (“Tungsten”) acted as financial advisor to the Company in connection with the Merger. As partial compensation for services rendered by Tungsten, the Company issued to Tungsten or its affiliates or designees an aggregate of 18,475 shares of Common Stock and 595.808 shares of Series G Preferred Stock. The fair value of the advisory fees was approximately $4.0 million which are included in the approximately $5.5 million of transaction costs noted above.

The Merger was accounted for as a business combination under the acquisition method of accounting with First Wave as the accounting acquirer. Under the acquisition method, the total purchase price of the acquisition is allocated to the net identifiable tangible and intangible assets acquired and liabilities assumed based on the fair values as of the date of such acquisition. The fair value of the consideration totaled approximately $60.1 million, summarized as follows:


	Amount
Common stock issued to ImmunogenX stockholders	$	240,500
Replacement options		1,271,000
Replacement warrants		789,000
Preferred stock issued to ImmunogenX stockholders		57,790,474
Total consideration paid	$	60,090,974

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The Company has made an allocation of the purchase price of the Merger to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocations relating to the Merger:


Assets acquired:
Cash and cash equivalents	$	88,169
Prepaid expenses and other current assets		3,131,929
Property and equipment, net		18,963
Intangibles		63,370,000
Operating lease right-of-use assets		4,232
Total assets	$	66,613,293
Liabilities assumed:
Accounts payable		916,209
Accrued expenses and other current liabilities		2,131,439
Long term debt		6,397,889
Deferred tax liability		15,431,108
Total liabilities	$	24,876,645
Goodwill recorded:
Goodwill	$	18,354,326
Net assets acquired	$	60,090,974

The fair value of IPR&D was capitalized as of the IMGX Merger date and accounted for as indefinite-lived intangible assets until completion or disposition of the assets or abandonment of the associated research and development efforts. Upon successful completion of the development efforts, the useful lives of the IPR&D assets will be determined based on the anticipated period of regulatory exclusivity and will be amortized within operating expenses. Until that time, the IPR&D assets will be subject to impairment testing and will not be amortized. The goodwill recorded related to the IMGX Merger is the excess of the fair value of the consideration transferred by the acquirer over the fair value of the net identifiable assets acquired and liabilities assumed at the date of such acquisition. The goodwill recorded is not deductible for tax purposes.

All intangible assets acquired are subject to amortization and their associated estimated acquisition date fair values are as follows:


	Estimated	Acquisition Date
Intangible Asset	Useful Life	Fair Value
Patents	2 years	$	140,000
Trade names and trademarks	6 years		230,000
IPR&D – Latiglutenase	Indefinite		54,000,000
IPR&D - CypCel	Indefinite	$	9,000,000

Net loss in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2025 includes net losses of IMGX from the date of acquisition to March 31, 2025 of approximately $0.3 million, which is classified as discontinued operations.

The Merger is classified as held for sale as of March 31, 2025. Refer to Note 4 for further information.

Pro forma disclosure for the IMGX acquisition

The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the Acquisition had taken place on January 1, 2024. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date:


	Three Months		Twelve Months Ended
	Ended March 31, 2025		December 31, 2024
Operating expenses	$	—	$	15,621,274
Loss before income tax benefit		—		(15,619,022)
Loss from discontinued operations		(311,515)		(2,440,315)
Net loss applicable to common shareholders		(311,515)		(18,300,301)

Basic and diluted weighted average shares outstanding		4,765,004		1,761,953
Loss per share - basic and diluted	$	(0.07)	$	(10.38)

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Note 4 – Discontinued Operations and Assets and Liabilities Held for Sale

The Company has initiated a plan to dispose of certain assets and liabilities of IMGX within 12 months of the date of the Merger with IMGX. These are classified as assets and liabilities held for sale and, due to the short period of time since the close of the Merger, are reported at their fair value less cost to sell. The Company determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on the Company’s operations and financial statements.

The following table summarizes the Company’s loss from discontinued operations for the three month ended March 31, 2025 and year ended 2024.


	Three Months Ended
	March 31,		December 31,
	2025		2024
Operating expenses:
Research and development expenses	$	—	$	1,238,786
General and administrative expenses		—		157,379
Total operating expenses		—		1,396,165
Interest expense		(311,515)		(979,002)
Other (expense) income		—		(65,148)
Loss from discontinued operations	$	(311,515)	$	(2,440,315)

The assets and liabilities associated with discontinued operations consist of the following as of March 31, 2025:


Assets held for sale:
Prepaid expenses and other current assets	$	3,131,929
Property and equipment, net		16,180
Goodwill and intangible assets		80,021,900
Total assets held for sale	$	83,170,009
Liabilities held for sale:
Accounts payable	$	141,906
Accrued expenses and other current liabilities		2,804,810
Debt		6,403,737
Deferred tax liability		13,872,684
Total liabilities held for sale	$	23,223,137

Total assets and liabilities classified as held for sale are presented as current assets and liabilities, respectively, as they are anticipated to be sold within 12 months.

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Note 5 - Fair Value Disclosures

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The fair value of the Company’s financial instruments are as follows:


			Fair Value Measured at Reporting Date
			Using
	Carrying
	Amount		Level 1		Level 2		Level 3		Fair Value
March 31, 2025 (unaudited):
Money market funds	$	18	$	18	$	—	$	—	$	18
Note Payable	$	700,000		—	$	700,000		—	$	700,000

December 31, 2024:
Money market funds	$	12,723	$	12,723	$	—	$	—	$	12,723

At March 31, 2025 and December 31, 2024, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.

Depreciation expense for the three months ended March 31, 2025 and March 31, 2024 $0 and $7,779.

Note 6 –Goodwill

Goodwill is as follows:


	Goodwill
Balance on January 1, 2023	$	1,684,182
Balance on December 31, 2023		1,684,182
Goodwill associated with IMGX acquisition		18,354,326
Goodwill reclassified as held for sale	$	(18,354,326)
Balance on March 31, 2025 (unaudited)	$	1,684,182

Note 7 – Intangible Assets and In-Process R&D

Intangible assets consist of IPR&D, patents, tradenames and trademarks acquired from ImmunogenX. As of March 31, 2025, Intangible assets have been reclassified as held for sale. Intangible assets and IPR&D activity is as follows:


	Estimated	March 31,
	Useful Life	2025
Patents	2 years	$	140,000
Trademarks and trade names	6 years		230,000
Less: accumulated amortization			(31,598)
Intangible assets, net			338,402
In-process R&D			63,000,000
Intangible assets and in-process R&D reclassified as held for sale			(63,338,402)
Total intangible assets and in-process R&D, net		$	—

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Note 8 - Accrued Expenses

Accrued expenses consisted of the following:


	March 31,
	2025		December 31,
	(unaudited)		2024
Professional fees		129,316		186,173
Consulting fees		57,612		65,875
Total accrued expenses	$	186,478	$	252,048

Note 9 – Capital Stock

Our certificate of incorporation, as amended and restated (the “Charter”) authorized the issuance of up to 100,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

All share and per share amounts have been retroactively restated to reflect the reverse stock splits referenced above.

Common Stock

The Company had 4,765,729 and 4,754,038 shares of its Common Stock issued and outstanding at March 31, 2025 and December 31, 2024, respectively.

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of the stockholders. The Company’s Charter and Amended and Restated Bylaws (the “Bylaws”) do not provide for cumulative voting rights.

In addition, the holders of the Company’s Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds; however, the current policy of the Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Company’s Common Stock will be entitled to share ratably in all assets that are legally available for distribution.

Holders of the Company’s Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that it may designate and issue in the future.

Preferred Stock

The Board is authorized to divide the preferred stock into any number of series, fix the designation and number of each such series, and determine or change the designation, relative rights, preferences, and limitations of any series of preferred stock. The Board of may increase or decrease the number of shares initially fixed for any series, but no decrease may reduce the number below the shares then outstanding and duly reserved for issuance.

On July 16, 2020, the Company designated approximately 5,194.81 shares as Series B Preferred Stock. As of March 31, 2025 and December 31, 2024, 475.56 shares of Series B Preferred Stock were issued and outstanding, respectively. Approximately 2,282.23 shares of Series B Preferred Stock remain authorized but undesignated and unissued.

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On January 5, 2021, the Company designated 75,000 shares as Series C Preferred Stock. Shares of Series C Preferred Stock converted into Common Stock (or Prefunded Warrants, as applicable) or redeemed shall be canceled and shall not be reissued. As of March 31, 2025 and December 31, 2024, 0 shares of Series C Preferred Stock were issued and outstanding, with approximately 41,903 shares of Series C Preferred Stock remaining authorized but unissued.

On July 15, 2022, the Company designated 150 shares as Series D Preferred Stock and had 0 shares of Series D Preferred Stock issued and outstanding on as of March 31, 2025 and December 31, 2024.

On July 15, 2022, the Company designated 150 shares as Series E Preferred Stock and had 0 shares of Series E Preferred Stock issued and outstanding on March 31, 2025 and December 31, 2024.

On November 28, 2022, the Company designated 7,000 shares as Series F Preferred Stock and had 0 shares of Series F Preferred Stock issued and outstanding on March 31, 2025 and December 31, 2024.

Most Favored Nations Exchange Right and Waiver Agreements

In the event the Company effects any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof (a “Subsequent Financing”), each holder of the Series B Preferred Stock used to have the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value of each share of Series B Preferred Stock, or $7,700.00, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock (the “Exchange Amount”)) for any securities or units issued in a Subsequent Financing on dollar-for-dollar basis (the “Series B Exchange Right”). Effective May 12, 2022, the holders of 81.3% of the outstanding shares of the Series B Preferred Stock permanently waived for themselves and all other holders of the Series B Preferred Stock the Series B Exchange Right with respect to any Subsequent Financing occurring on or after January 1, 2022 (the “Permanent Waiver”). Holders of Series B Preferred Stock as of the April 27, 2022 record date were entitled to notice of and to consent to the Permanent Waiver.

As of December 31, 2024, (i) holders of approximately 1,839.76 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $14.4 million had previously elected to exercise their Series B Exchange Rights into Series C Preferred Stock, convertible into an aggregate of 395 shares of Common Stock (which conversion the Company has elected to make in full), and additional Investor Warrants exercisable for up to an aggregate of 395 shares of Common Stock, (ii) holders of approximately 169.57 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $1.6 million had previously elected to exercise their Series B Exchange Rights into 136 shares of Common Stock with no warrants, and (iii) holders of approximately 30.91 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $265,000 had previously elected to exercise their Series B Exchange Rights into 44 shares of Common Stock, and additional Series C Warrants exercisable for up to an aggregate of 44 shares of Common Stock.

Mezzanine Equity

Series G Preferred Stock

The Company had 12,373.226 and 0 shares of Series G stock issued and outstanding on March 31, 2025 and December 31, 2024, respectively.

On March 13, 2024, the Company issued 12,373.226 shares of Series G Preferred stock in connection with the IMGX Merger. The following is a summary of the principal terms of the Series G Preferred Stock as set forth in the Certificate of Designation of the Series G Preferred Stock:

General; Transferability. Share of Series G Preferred Stock will be uncertificated and issued in book-entry form. Shares of Series G Preferred Stock may be transferred by the holders thereof without the consent of the Company, provided that such transfer is in compliance with applicable securities laws.

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Conversion. Following stockholder approval of the conversion of the Series G Preferred Stock into Common Stock in accordance with the listing rules of the Nasdaq Stock Market (the “Conversion”), each share of Series G Preferred Stock will automatically convert into 1,000 shares of Common Stock, subject to certain limitations, including that a holder of Series G Preferred Stock is prohibited from converting shares of Series G Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.9% and 19.9%) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion.

The Series G Preferred Stock is redeemable for cash at the option of the holder thereof at any time following the date that is six months after the initial issuance of the Series G Preferred Stock (without regard to the lack of obtaining the requisite stockholder approval to convert the Series G Preferred Stock into Common Stock), at a price per share equal to the then-current fair value of the Series G Preferred Stock, which shall be the last reported closing sale price of the Company’s Common Stock as reported on the Nasdaq Stock Market as of the trading day immediately prior to the conversion event. As such, Series G Preferred Stock is classified as Mezzanine Equity on the balance sheet.

Voting Rights. Except as otherwise required by law, the Series G Preferred Stock does not have voting rights. However, as long as any shares of Series G Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series G Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Charter or bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, in each case if any such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series G Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series G Preferred Stock, (iii) prior to the earlier of stockholder approval of the Conversion or the six-month anniversary of issuance, consummate either: (A) any Fundamental Transaction (as in the Certificate of Designation) or (B) any stock sale to, or any merger, consolidation or other business combination of the Company with or into, another entity in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.

Liquidation Preference. The Series G Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

Dividend Rights. Holders of Series G Preferred Stock are entitled to receive dividends on shares of Series G Preferred Stock equal to, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of the Common Stock.

Redemption. The shares of Series G Preferred Stock shall not be redeemable at the option of the Company or the holder thereof.

Trading Market. There is no established trading market for any of the Series G Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series G Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series G Preferred Stock will be limited.

At The Market Agreement with H.C. Wainwright

On May 26, 2021, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may issue and sell, from time to time, through Wainwright, shares of its Common Stock, and pursuant to which Wainwright may sell its Common Stock by any method permitted by law deemed to be an “at the market offering” as defined by Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of Common Stock. As of May 24, 2022, the Company was authorized to offer and sell up to $8.0 million of its Common Stock pursuant to the ATM Agreement. The Company did not utilize the ATM Agreement during the three months ended March 31, 2025 or the year ended December 31, 2024.

July 2024 Inducement Offering

On July 10, 2024, the Company entered into a warrant exercise inducement offer letter (the “Inducement Letter”) with a holder (the “Holder”) of warrants to purchase shares of the Company’s common stock (the “Existing Warrants”) pursuant to which the Holder agreed to exercise for cash their Existing Warrants to purchase 1,762,674 shares of the Company’s common stock (the “Existing Warrant Shares”), in the aggregate, at a reduced exercised price of $1.09 per share, in exchange for the Company’s agreement to issue new

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warrants (the “Inducement Warrants”) on substantially the same terms as the Existing Warrants as described below, to purchase up to 3,525,348 shares of the Company’s common stock (the “Inducement Warrant Shares”). The Inducement Warrants will be exercisable upon the receipt of stockholder approval and may be exercised until the fifth anniversary of the date on which such stockholder approval is obtained. The Company received aggregate gross proceeds of approximately $1.9 million from the exercise of the Existing Warrants by the Holder and the sale of the Inducement Warrants. The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its financial advisor in connection with the transactions summarized above and paid Roth approximately $0.1 million for its services, in addition to reimbursement for certain expenses.

May 2024 Registered Direct Offering

On May 14, 2024, the Company completed a Registered Direct Offering (the “May 2024 Offering”) priced at market under Nasdaq rules, for an aggregate of (i) 275,000 shares of Common Stock, (ii) pre-funded warrants (the “May 2024 Pre-Funded Warrants”) to purchase up to an aggregate of 91,000 shares of Common Stock and (iii) common warrants (the “May 2024 Warrants”) to purchase up to an aggregate of 732,000 shares of Common Stock. The public offering price for each share of Common Stock and accompanying May 2024 Warrant to purchase one share of Common Stock was $2.95 per share. The May 2024 Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately and will expire when exercised in full. The May 2024 Warrants have an exercise price of $2.70 per share, are exercisable immediately and will expire six years from the initial exercise date.

The Company received gross proceeds of approximately $1.1 million less placement agent’s fees and other offering expenses of approximately $0.2 million.

March 2024 Registered Direct Offering

On March 6, 2024, the Company completed a Registered Direct Offering (the “March 2024 Offering”) priced at market under Nasdaq rules, for an aggregate of (i) 173,100 shares of Common Stock, (ii) pre-funded warrants (the “March 2024 Pre-Funded Warrants”) to purchase up to an aggregate of 352,525 shares of Common Stock and (iii) common warrants (the “March 2024 Warrants”) to purchase up to an aggregate of 525,625 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2024 Warrant to purchase one share of Common Stock was $7.61 per share. The March 2024 Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately and will expire when exercised in full. The March 2024 Warrants have an exercise price of $7.48 per share, are exercisable immediately and will expire five years from the initial exercise date. The Company received gross proceeds of approximately $4.0 million less placement agent’s fees and other offering expenses of approximately $0.4 million.

Common Stock Issuances

Issuances for the Three Months Ended March 31, 2025

During the three months ended March 31, 2025, the Company issued an aggregate of 11,691 shares of Common Stock upon the vesting of RSUs (See Note 11).

Issuances for the Three Months Ended March 31, 2024

During the three months ended March 31, 2024, the Company issued 173,100 shares of Common Stock under the March 2024 Offering for which the Company received net proceeds of approximately $3.6 million.

During the three months ended March 31, 2024, the Company issued an aggregate of 36,830 shares of Common Stock with a value of $2.3 million in connection with the IMGX acquisition.

During the three months ended March 31, 2024, the Company issued an aggregate of 18,475 shares of Common Stock with a value of $0.1 million to its financial advisors in connection with the IMGX acquisition.

During the three months ended March 31, 2024, the Company issued an aggregate of 83,525 shares of Common Stock upon the conversion of pre-funded warrants issued at a par value of $0.0001 (See Note 10).

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During the three months ended March 31, 2024, the Company issued an aggregate of 9 shares of Common Stock upon the exchange of an aggregate of 10.15 shares of Series B Preferred Stock with a stated value of approximately $78,125 plus accrued dividends of approximately $22,770.

During the three months ended March 31, 2024, the Company issued an aggregate of 100,000 shares of its Common Stock to consultants with a grant date fair value of approximately $781,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

During the three months ended March 31, 2024, the Company issued an aggregate of 52,271 shares of Common Stock upon the vesting of RSUs (See Note 11).

Note 10 – Warrants

Warrant activity for the three months ended March 31, 2025 and March 31, 2024 was as follows:


		Weighted		Weighted
		Average		Average
	Number of	Exercise Price		Remaining
	Warrants	Per Share		Term in Years
Warrants outstanding and exercisable on January 1, 2025	4,927,714	$	6.98	4.71
Issued during the period	—		—	—
Expired during the period	(23)		50,107.83	—
Exercised during the period	—		—	—
Warrants outstanding and exercisable on March 31, 2025	4,927,691	$	6.75	4.46

Warrants outstanding and exercisable on January 1, 2024	1,779,780	$	19.29	4.99
Issued during the period	878,150		4.48	4.93
Assumed from IMGX	127,680		3.48	8.97
Exercised during the period	(83,525)		—	4.93
Warrants outstanding and exercisable on March 31, 2024	2,702,085	$	14.32	5.00

As of March 31, 2025, the outstanding warrants expire from 2025 through 2033.

Note 11 – Equity Incentive Plan

The Company’s Board and stockholders adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which took effect on May 12, 2014. The Company’s Board and stockholders adopted and approved the 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), which took effect on September 11, 2020. From the adoption and approval of the 2020 Plan, no new awards have been or will be made under the 2014 Plan.

The 2020 Plan allows for the issuance of securities, including stock options to employees, Board members and consultants. The initial number of shares of Common Stock available for issuance under the 2020 Plan was 238 shares, which will, on January 1 of each calendar year, unless the Board decides otherwise, automatically increase to equal ten percent (10)% of the total number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year, calculated on an As Converted Basis. As Converted Shares include all outstanding shares of Common Stock and all shares of Common Stock issuable upon the conversion of outstanding preferred stock, warrants and other convertible securities, but will not include any shares of Common Stock issuable upon the exercise of options and other convertible securities issued pursuant to either the 2014 Plan, the 2020 Plan, or the IMGX Plan. The number of shares permitted to be issued as “incentive stock options” (“ISOs”) is 357 under the 2020 Plan.

On March 13, 2024, in connection with the IMGX acquisition, the Company assumed the IMGX Plan, including all 200,652 IMGX stock options immediately outstanding prior to the IMGX acquisition, with each becoming an option to purchase Common Stock, subject to adjustment. Such stock options were the only awards that had been made under the IMGX Plan as of the closing of the IMGX acquisition. The IMGX Plan was adopted and approved by the board of directors and stockholders of IMGX in 2021. Following the assumption of the IMGX Plan by the Company, no new awards have been or will be made under the IMGX Plan.

As of March 31, 2025, there were an aggregate of 73 total shares available (but un-issuable) under the 2014 Plan, of which 9 are issued and outstanding, and 4 shares are reserved subject to issuance of restricted stock and RSUs.

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As of March 31, 2025, 969,356 total shares were authorized under the 2020 Plan, of which 150,823 were issued and outstanding and 818,533 shares were available for potential issuances.

As of January 1, 2025, the number of shares of Common Stock available for issuance under the 2020 Plan automatically increased to 969,356 under the 2020 Plan’s evergreen provision.

During the three months ended March 31, 2025 and 2024, stock option activity under the 2014 Plan, 2020 Plan, and IMGX 2021 Plan was as follows:


		Average		Remaining
	Number	Exercise		Contract	Intrinsic
	of Shares	Price		Life (Years)	Value
Outstanding at January 1, 2025	89,849	$	2,727.22	—	$	—
Expired	(81,572)		74.60	—		—
Assumed from IMGX	—		—	—		—
Outstanding at March 31, 2025	8,277	$	12,625.07	5.67	$	—
Exercisable at March 31, 2025	8,277	$	12,625.07	5.67	$	—

Outstanding at January 1, 2024	426	$	6,103.81	8.53	$	—
Assumed from IMGX	200,652		0.81	7.56		716,328
Outstanding at March 31, 2024	201,078	$	13.74	7.56	$	716,350
Exercisable at March 31, 2024	201,054	$	11.99	7.56	$	716,341

There were no grant of options during the three months ended March 31, 2025 by the Company. During the three months ended March 31, 2024, the Company assumed fully vested options to purchase 200,652 shares of the Company’s Common Stock issued under the IMGX 2021 Plan.

For the three months ended March 31, 2025 and 2024, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:


	2025		2024
Contractual term (in years)	—		7.6
Expected Volatility	—	%	110.35	%
Risk-free interest rate	—	%	4.20	%
Expected Dividend yield	—	%	0	%

Using the Black-Scholes Option Pricing Model, the estimated weighted average fair value of an option to purchase one share of common stock assumed during the three months ended March 31, 2024 was $6.32.

Restricted Stock and Restricted Stock Units

Restricted stock refers to shares of Common Stock subject to vesting based on certain service, performance, and market conditions. Restricted stock units (“RSUs”) refer to an award which constitutes a promise to grant shares of Common Stock at the end of a specified restriction period.

As of each March 31, 2025 and March 31, 2024, under the 2014 Plan, the Company had 1 share of restricted stock outstanding and an aggregate unrecognized restricted Common Stock expense of approximately $157,500, which will be recognized when vesting of certain milestones become probable.

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During the three months ended March 31, 2025 and 2024, RSU activity under the 2020 Plan was as follows:


		Weighted-Average		Weighted-Average
	Number	Grant Date		Remaining Recognition
	of Shares	Fair Value		Period (Years)
Non-vested Outstanding at January 1, 2025	5,000	$	3.96	2.24
Awarded	—		—	—
Vested	—		—	—
Cancelled	(5,000)		3.96	—
Non-vested Outstanding at March 31, 2025	—	$	—	—

Non-vested Outstanding at January 1, 2024	52,271	$	4.31	9.96
Awarded	120,532		3.80	—
Vested	(52,271)		4.31	—
Non-vested Outstanding at March 31, 2024	120,532	$	3.82	9.76

During the three months ended March 31, 2025 and March 31, 2024, the Board approved the grant of 0 and 120,532 RSUs, respectively. All grants of RSUs were pursuant to the 2020 Plan and vest quarterly over a one-year period.

Stock - based Compensation Expense

The total stock-based compensation expense for employees and non-employees is included in the accompanying condensed consolidated statements of operations and as follows:


	Three Months Ended March 31,
	2025		2024
Research and development	$	—	$	42,378
General and administrative		—		228,982
Total stock-based compensation expense	$	—	$	271,360

As of March 31, 2024, the Company had unrecognized stock-based compensation expense related to stock options and RSUs of approximately $0.6 million. Approximately $0.5 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock awards of 0.76 years. Approximately $0.1 million of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones. The Company will recognize the expense related to these milestones when the milestones become probable.

Note 12 – Agreements

License Agreement with Sanofi

On September 13, 2023, the Company entered into a License Agreement with Sanofi, pursuant to which the Company received a license to obtain certain exclusive worldwide rights to develop and commercialize Capeserod, a selective 5-HT4 receptor partial agonist which the Company intended to repurpose and develop for gastrointestinal indications.

The Company paid Sanofi an upfront payment of $500,000 in October 2023 and Sanofi was eligible to receive up to $46.0 million in potential development and regulatory milestone payments and up to $235.0 million in potential commercial milestone payments. Sanofi was also eligible to receive mid-to-high single-digit royalties on net sales, as well as a percentage of sublicense and transfer revenues with respect to Capeserod. Sanofi also had a right of first refusal with respect to Capeserod out-licensing transactions.

The upfront payment of $500,000 was recorded as research and development expense in the year ended December 31, 2023. Depending on the status of development at the time a contingent payment is recognized, the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.

The License Agreement was to expire on a country-by-country basis upon the later of: (i) the expiration of the last to expire valid claim of an applicable patent in such country covering such licensed product, (ii) the expiration of the regulatory exclusivity for such licensed

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product in the applicable country and (iii) the tenth anniversary of the date of first commercial sale of a licensed product in such country. Each party may terminate the License Agreement if the other party materially breaches its obligations under the License Agreement and fails to cure such material breach within 60 days from the date of such notice of breach, except in the case of payment breach, as to which the breaching party will have only a ten-day cure period. Sanofi may terminate the License Agreement upon any bankruptcy proceedings by the Company. The Company may terminate the License Agreement by providing Sanofi with at least 60 days prior written notice; provided, however, that Sanofi shall be entitled to any and all payments due and owed to Sanofi prior to the effective date of termination. On February 26, 2025, the Company provided notice to Sanofi to terminate the License Agreement. No payments are due to Sanofi and the Company terminated it’s lease effective in April 2025.

Note 13 – Leases

On March 20, 2025, the Company received notice that it’s lease for the office space of 3,472 square feet in Boca Raton, Florida that was used for its corporate headquarters with a term through August 31, 2026, was in default. The Company no longer has rights to the premises. Lease expenses amounted to approximately $35,000 for the three months ended March 31, 2024

The weighted-average remaining lease term and weighted-average discount rate under operating leases are:


	March 31,		March 31,
	2025		2024
Lease term and discount rate
Weighted-average remaining lease term (years)	1.2		2.4
Weighted-average discount rate	7.00	%	7.00	%

As a result of the default, the Company fully impaired the related the Right-of-Use (ROU) asset. The carrying amounts of lease liability, which was moved to current as of March 31, 2025 were as follows:


Lease Liability			135,609

The impairment of the right of use asset was $108,759, which is included in the income statement under “Other Expenses.” Additionally, an accrual of $100,902 has been made to cover outstanding payments and penalties.

The default was accounted for in accordance with ASC 842, resulting in the following impact on the financial statements:


Impairment of ROU Asset	$	108,759
Increase in general and administrative expenses		100,902

Note 14 – Debt

Debt consists of the following:


			Related				Directors
			party				and Officer’s
	Revolving		promissory				Liability
	line of credit		notes		EIDL loan		Insurance		Total
Principal balance as of January 1, 2025	$	—	$	—	$	—	$	—	$	—
Additions		700,000		—		—		—		700,000
Payments		—		—		—		—		—
Debt discount		—		—		—		—		—
Reclassification to liabilities held for sale		—		—		—		—		—
Total debt as of March 31, 2025	$	700,000	$	—	$	—	$	—	$	700,000

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Revolving line of credit

In connection with the IMGX acquisition, the Company assumed a revolving line of credit. In October 2022, ImmunogenX entered into a credit agreement, which allowed for a revolving line of credit (the “Revolver”) for borrowings up to $6.0 million, initially maturing on October 1, 2024, and bearing interest per annum of the prime rate plus 4.5%. The credit agreement was amended in September 2023 (the “First Amendment”) to increase the maximum borrowings of the Revolver to $7.5 million. The credit agreement was amended and restated on March 13, 2024 (the “Second Amendment”). Terms under the Second Amendment include an extended maturity date of September 13, 2025, interest per annum of the prime rate plus 6.0%, and no further draws on the line of credit after March 13, 2024. As of March 31, 2025, the Revolver and accrued interest has been reclassified to liabilities of disposal group held for sale (see Note 4).

Promissory notes

In connection with the IMGX acquisition, the Company assumed two promissory notes, one of which is with a related party. The notes are each in the amount of $0.5 million, accrue interest at a rate of the prime rate plus 4.5% per annum, and have a maturity date of September 30, 2025. As of March 31, 2025, the promissory notes and all accrued interest has been reclassified to liabilities of disposal group held for sale.

EIDL loan

In connection with the IMGX acquisition, the Company assumed an Economic Injury Disaster Loan (“EIDL”) loan with a principal balance of $0.5 million bearing interest of 3.75% per annum, with interest payable monthly in arrears. The Company determined the loan has a fair value as of the assumption date of March 13, 2024 of $38,000, resulting in a discount of $462,000 which is amortized over the remaining life of the loan. All unpaid principal and interest are due at maturity on June 30, 2050. As of March 31, 2025, the EIDL loan and all accrued interest has been reclassified to liabilities of disposal group held for sale.

Directors and Officer’s Liability Insurance

On February 5, 2025, the Company entered into 10-month financing agreements for its directors and officer’s liability insurance, as well as other corporate insurances, in the amount of approximately $0.1 million that bears interest at an annual rate of 10.75%. Monthly payments going forward, including principal and interest, are approximately $15,000 per month. The balance due under these financing agreements was $0.1 million at March 31, 2025 and $0 at December 31, 2024.

Note 15 – Net (Loss) Income per Common Share

Basic net loss per share is computed by dividing net loss available to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive.

For the three months ended March 31, 2025 stock options in the amount of 201,063 and warrants in the amount of 4,927,691 were excluded from the calculation of diluted net loss per share as they did not have a dilutive effect.

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All shares of Common Stock that may potentially be issued in the future are as follows:


	March 31, 2025	March 31, 2024
	(unaudited)	(unaudited)
Series G convertible preferred stock	12,373,226	12,373,226
Common stock warrants	4,927,691	2,702,085
Stock options	8,277	201,078
RSUs not yet issued	1	120,537
Series B convertible preferred stock (1)	138	139
Restricted stock not yet issued	4	4
Total shares of common stock issuable	17,309,337	15,397,069

(1)	Series B convertible preferred stock is assumed to be converted at the rate of $32,340 per common share, which is the conversion price as of March 31, 2025.

Note 16 - Employee Benefit Plans

401(k) Plan

Since 2015, the Company has sponsored a multiple employer defined contribution benefit plan, which complies with Section 401(k) of the Internal Revenue Code covering substantially all employees of the Company. All employees are eligible to participate in the plan. Employees may contribute from 1% to 100% of their compensation and the Company matches an amount equal to 100% on the first 6% of the employee contribution and may also make discretionary profit-sharing contributions.

Employer contributions under this 401(k) plan amounted to approximately $1,000 and $37,000 for the three months ended March 31, 2025 and 2024, respectively, and approximately $95,000 for year ended December 31, 2024.

Note 17 - Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Although the Company believes that it has adequately reserved for uncertain tax positions (including interest and penalties), it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company makes adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and operating results. Carryforward attributes that were generated in tax years prior to those that remain open for examination may still be adjusted by relevant tax authorities upon examination if they either have been, or will be, used in a future period.

In applying the estimated annual effective tax rate approach prescribed under ASC 740 - 270 and based on present evidence and conclusions around the realizability of deferred tax assets, the Company determined that any deferred tax benefits related to the forecasted tax rate and pretax activity during the first quarter of 2025 and 2024 are neither more likely than not to be realized in the current year nor realizable as a deferred tax asset at the end of the year. Therefore, the appropriate amount of income tax benefit to recognize related to deferred tax assets generated during the three months ended March 31, 2025 and 2024 is zero.

The Company’s effective income tax rate was approximately 0% and 160% for the three months ended March 31, 2025 and 2024, respectively. The income tax provision for interim periods is determined using an estimate of the annual effective tax rate adjusted for

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discrete items. The Company’s effective tax rate for the three months ended March 31, 2025 differs from the applicable statutory tax rate primarily due to the impact of the accounting for the IMGX Merger during the period, which resulted in the release of a portion of the valuation allowance that had previously been recorded against the deferred tax assets of the Company, resulting in a $14.9 million income tax benefit for the three months ended March 31, 2024. The change in valuation allowance was determined based on the weight of available evidence as of the present reporting period and accounted for by the Company pursuant to ASC 805 - 740 - 30 - 3 in the Statement of Operations. The Company’s effective tax rate for the three months ended March 31, 2024 differs from the applicable statutory tax rate primarily due to the full valuation allowance recorded against its deferred tax assets during the year ended December 31, 2024.

Note 18 - Contingencies

On December 31, 2024, Mattress Liquidators, Inc. filed a Complaint in the District Court, Boulder County, State of Colorado against Defendants IMGX, Jack A. Syage and Elizabeth T. Syage Revocable Trust, Case No. 2024CV31070.

Succinctly, Plaintiff complains that it entered into a Credit Agreement on October 3, 2022 with IMGX for a loan in the principal amount of $6,000,000. Jack Syage and Elizabeth T. Syage Revocable Trust executed a Guaranty of Payment that same day. The Credit Agreement was modified on September 6, 2023, which increased the principal amount of the loan to $7,500,000. Once more, on March 13, 2024, the Credit Agreement was modified to increase the principal amount of the loan to $8,212,345.17. Plaintiff alleges that in the summer of 2024, Defendants were not repaying the loan so on August 2, 2024, a Notice of Default was sent, which demanded immediately payment of the entire balance. After being provided with additional information, on August 29, 2024, Plaintiff suspended the Notice of Default and demanded Defendants provide certain financial reporting information under Section 7.5 of the Credit Agreement. On October 11, 2024, November 7, 2024, and November 14, 2024, Plaintiff sent Defendants letters of non-compliance regarding their financial reporting obligations. Thereafter, on November 21, 2024, Plaintiff sent Defendants a Notice of Default and Demand for Payment, which accelerated the Loan obligations, demanded that Defendants cure the financial reporting defaults, and demanded that Defendants pay all loan obligations no later than December 5, 2024.

Plaintiff claims that as of December 31, 2024, the total amount due and owing is $7,575,568.91, which consists of $7,460,245.47 in principal, $115,323.44 in accrued contract interest, and $47,069 in authorized attorneys’ fees and costs. Plaintiff asserts three causes of action. The first is against IMGX for alleged breach of the Credit Agreement. The other two causes of action asserted are alleged breaches of the Guaranty’s by Jack Syage, and the Elizabeth T. Syage Revocable Trust.

After receiving an extension, IMGX timely filed its Answer on February 28, 2025. The case is now at issue. A required meet and confer with counsel to discuss drafting the (proposed) case management order and to discuss procedural matters was held on March 14, 2025. Our Initial Disclosures are due on April 4, 2025.

Under the terms of the Rescission Agreement entered into in March 2025, by and among the Company, IIMGX, and each of the individuals or entities who are the former shareholders of IMGX, upon consummation of the transactions contemplated in Recission Agreement, the Company shall have no further duties, liabilities or obligations in connection with this complaint.

On May 8, 2025 the Company’s subsidiary ImmunogenX, LLC entered into a settlement agreement effective April 9, 2025 with Mattress Liquidators Inc. (the “Plaintiff”), Jack A. Syage and The Jack A. Syage and Elizabeth T. Syage Revocable Trust (the “Trust”, and Trust collectively with Jack, the “Guarantors”) (such agreement, the “Settlement Agreement”). Under the Settlement Agreement, the Guarantors agreed to pay the Plaintiff (a) $5,500,000.00 to be applied to the obligations amounting to approximately $7.9 million owed to the Plaintiff (which amount was paid to the Plaintiff on April 9, 2025) with the Guarantors being solely responsible for payment of all obligations due to be paid to the Plaintiff. In addition, ImmunogenX, LLC agreed to pay all of Plaintiff’s attorneys’ fees and costs incurred to date amounting to approximately $62,000.

The parties to the Settlement Agreement also agreed to enter into amended and restated loan documents dated April 9, 2025 which provide for, among others, a revolving loan of $2,436,338.30 (the “Commitment”) to ImmunogenX, LLC, to be repaid and the principal amount thereof reborrowed before the earliest of: (i) April 9, 2028; (ii) the date ImmunogenX, LLC prepays the revolving loan in full in accordance with amended and restated credit agreement; or (iii) the date on which the Commitment is terminated in whole pursuant to amended and restated credit agreement. Under amended and restated guarantees, the Guarantors unconditionally guaranteed the prompt payment of all monies owed by ImmunogenX, LLC to Plaintiff under the terms and conditions as stated herein. Under the Settlement Agreement, the Plaintiff agreed to release its security interest in ImmunogenX, LLC, and the parties agreed to execute a Stipulation of Dismissal with Prejudice to be filed in the action before the District Court, Boulder County, State of Colorado.

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On March 17, 2025, Ellenoff Grossman & Schole LLP (“EGS”) initiated an action against the Company by filing a summons and complaint in the Supreme Court of the State of New York, New York County. The complaint alleges that the Company owes to EGS $749,301.00 in fees for legal services EGS allegedly provided to the Company between September 2023 to January 2025, a period of time prior to the appointment of certain new directors to the Board and of Mr. Paolone as Interim Chief Executive Officer. EGS’s lawsuit alleges breach of contract, account stated, and quantum meruit claims. The Company is in the process of investigating the allegations of the complaint and plans to defend the action.

Note 19 - Subsequent Events

The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements except for the items noted below.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. As discussed in the section titled “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS,” The following discussion and analysis contains forward-looking statements including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” included in this Report and in our Annual Report filed on Form 10-K/A for the year ended December 31, 2024 filed with the SEC on April 9, 2025.

Overview

We are engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.

We are currently focused on developing the biologic Adrulipase, a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients in cystic fibrosis and chronic pancreatitis patients with exocrine pancreatic insufficiency. Our other programs consisted of Latiglutenase, a targeted oral biotherapeutic for celiac disease designed to breakdown gluten into non-immunogenic peptides; Capeserod, a selective 5-HT4 receptor partial agonist which was being developed as a gastroparesis therapeutic; and Niclosamide, an oral small molecule with anti-inflammatory properties for patients with inflammatory bowel diseases such as ulcerative colitis and Crohn’s disease. We have determined to discontinue the Latiglutenase, Capeserod and Niclosamide programs.

In March 2024, we announced the closing of a merger with ImmunogenX, Inc. (“IMGX”) (the Company’s acquisition of IMGX, the “Merger”), a private, clinical-stage biopharmaceutical company founded in 2013, which is developing the biologic Latiglutenase for the treatment of celiac disease. IMGX is also developing CypCel, a metabolic marker compound that can measure the state of small-intestinal recovery of celiac patients undergoing gluten-free diets (“GFDs”). We have initiated a plan to dispose of certain assets and liabilities of IMGX, including Latiglutenase and CypCel, within 12 months of the date of the Merger with IMGX. As of December 31, 2024, these were classified as assets and liabilities held for sale and due to the short period of time since the close of the Merger, are reported at their fair value less cost to sell. We determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on our operations and financial statements.

In March 2025, we announced that we entered into a rescission agreement (the “Rescission Agreement”), by and among the Company, IMGX and the former shareholders of IMGX (the “IMGX Shareholders”). Under the terms of the Rescission Agreement, the parties have amicably determined that it is in their collective best interest to: (i) rescind the issuances of the shares of Common Stock and Series G Preferred Stock that the Company has issued to the IMGX Shareholders as part of the Merger, (ii) convey to the IMGX Shareholders all of the issued and outstanding membership interests (the “Membership Interests”) of IMGX currently held by the Company, (iii) cancel the Assumed Options and Assumed Warrants, and (iv) provide for such additional agreements as are set forth in the Rescission Agreement. Also as set forth in the Rescission Agreement, following the closing, the Company will retain up to approximately $695,000 of IMGX’s accounts payable, and IMGX will remain responsible for approximately $9,278,400 of IMGX’s secured debt. The Company expects that the closing of the Rescission Agreement will occur on or prior to June 30, 2025, subject to satisfaction of all conditions for closing, including obtaining shareholder approval by the Company for the transfer of the Membership Interests to the Shareholders. After the transactions contemplated by the Rescission Agreement have been consummated, IMGX will no longer be a subsidiary of the Company, and the Company will no longer be holding any interest in IMGX.

On February 26, 2025, we gave notice to terminate our license agreement with Sanofi for the development of Capeserod, a selective 5 - HT4 receptor partial agonist. We anticipate that this termination will be effective in April 2025. We may terminate the license agreement by providing Sanofi with at least 60 days prior written notice; provided, however, that Sanofi shall be entitled to any and all payments due and owed to Sanofi prior to the effective date of termination. No payments are due to Sanofi.

In November 2024, we announced a binding term sheet, subject to several closing conditions, for a reverse merger transaction with Journey Therapeutics, Inc. We do not anticipate that this transaction will move forward.

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In September 2024, we announced a binding letter of intent with Data Vault Holdings, Inc. (“Data Vault”), a privately held technology holding company, to exclusively license two technology product suites owned by Data Vault. We do not anticipate that this transaction will move forward.

In December 2023, we announced that we have entered into a non-binding term sheet to sell our Niclosamide program. This transaction is not expected to move forward.

Our Product Candidates

Our Adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). Our goal is to provide CF and CP patients with a safe and effective therapy to control EPI that is non-animal derived and offers the potential to dramatically reduce their daily pill burden. In July 2023, we announced topline results from our Phase 2b monotherapy bridging study using a new enteric microgranule formulation of Adrulipase. Although the primary efficacy endpoint was not achieved, data from the study indicated that the enhanced Adrulipase formulation was safe, well tolerated and demonstrated an improvement over prior formulations of Adrulipase. We are planning to move this program forward in 2025.

Our Latiglutenase program was focused on the development of an orally administered, minimally-absorbed, biologic for improving multiple gluten-induced symptoms and consequent quality of life (“QOL”) due to inadvertent gluten consumption in patients with celiac disease (“CeD”) by breaking down the gluten into non-immunogenic peptides. We are no longer working on this program and have initiated a plan for its disposition.

Our Capeserod program was in-licensed from Sanofi in September 2023. Sanofi conducted Phase 1 and Phase 2 Central Nervous System (“CNS”) trials with over 600 patients. In Sanofi’s CNS trials, Capeserod appeared safe and well-tolerated. Research on Capeserod and subsequent artificial intelligence (“AI”) empowered analyses suggest that the drug possesses a unique mechanism of action that is applicable to several GI indications underserved by currently available therapeutics. We are no longer working on this program and on February 26, 2025, notified Sanofi of our intent to terminate the license agreement. We anticipate this termination will be effective in April 2025.

Our Niclosamide programs leveraged proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel diseases (“IBD”) indications. In 2022 we advanced four separate Phase 2 clinical programs of our Niclosamide formulations, including FW-COV for Severe Acute Respiratory Syndrome Coronavirus 2 (“COVID-19”) GI infections, FW-UP for ulcerative proctitis (“UP”) and ulcerative proctosigmoiditis (“UPS”), FW ICI AC for Immune Checkpoint Inhibitor associated colitis (“ICI AC”), and FW CD for Crohn’s disease. We are no longer actively pursuing these programs.

Nasdaq Listing Requirements

We received a letter on September 6, 2024 from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of our Common Stock for the last 30 consecutive business days, the Company was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided 180 days, or until March 5, 2025, to regain compliance with the minimum bid price requirement.

On March 6, 2025, we received a letter from Nasdaq advising that we had been granted a 180-day extension, or until September 1, 2025, to regain compliance with the minimum bid price requirement, in accordance with Nasdaq Listing Rule 5810(c)(3)(A). If at any time prior to September 1, 2025, the bid price of our Common Stock closes at $1.00 per share or more for a minimum of 10 consecutive trading days, we will regain compliance with the minimum bid price requirement.

The extension notice has no immediate effect on the listing of our Common Stock on The Nasdaq Capital Market and does not affect our reporting requirements with the Securities and Exchange Commission. If we do not regain compliance with the minimum bid price requirement during the additional 180-day extension, Nasdaq will provide written notification that our Common Stock will be delisted. At that time, we may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company does appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful. There can be no assurance that we will regain compliance with the minimum bid price requirement during the additional 180-day compliance period ending September 1, 2025 or maintain compliance with any other

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Nasdaq listing requirement. We intend to monitor the closing bid price of our Common Stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price requirement.

On January 7, 2025, we received a written notice from the Listing Qualifications department of Nasdaq indicating that were not in compliance with Nasdaq Listing Rule 5620(a), due to us not holding an annual meeting of stockholders in 2024 within one year of our 2023 fiscal year end. On February 21, 2025, we submitted a plan to regain compliance. On March 3, 2025, Nasdaq informed us that it has determined to grant us an extension until June 30, 2025 to regain compliance for continued listing.

Revolving Loan Agreement

Effective January 31, 2025, we entered into a Revolving Loan Agreement dated January 27, 2025 (the “Revolving Loan Agreement”), with a Lender pursuant to which the Lender agreed to make loans to us. Pursuant to and under the terms of the Revolving Loan Agreement, we issued to the Lender a revolving note dated January 27, 2025 in the principal amount of $2,000,000 (the “Revolving Note” and such amount, the “Total Outstanding Amount”). This transaction is referred to as the “Financing”. We shall use the proceeds from the Financing for general corporate purposes, including but not limited to finance the expense of a Qualified Public Equity Offering (as defined below) and payment of certain items. Out of the Total Outstanding Amount, the Lender disbursed an initial loan amount of $700,000. The Revolving Note bears interest at the rate of 18% per annum interest accumulated as of March 31, 2025 was approximately $17,000.The Revolving Loan Agreement provides that it is a condition of the closing of the Financing that not less than three of the current members of our Board of Directors resign and that three nominees designated by the Lender (“Lender Board Member Candidates”) be appointed to the Board of Directors by the remaining members of the Board of Directors. The Revolving Loan Agreement also provides that we will use our reasonable best efforts to consummate an underwritten or “best efforts” public offering of not less than $5,000,000 by us of our Common Stock and/or any convertible security or warrant, option or other right to subscribe for or purchase any additional shares of our Common Stock (“Qualified Public Equity Offering”) as soon as practicable, and the Lender shall cooperate with us in connection therewith. If, despite the reasonable best efforts of the Borrower, (x) a registration statement with respect to securities to be offered in a Qualified Public Equity Offering (the “QPEO S-1”) is not filed within 45 days following the initial Closing Date, or (y) a Qualified Public Equity Offering is not consummated within the earlier of (A) 120 days from the initial filing of the QPEO S-1 and (B) 30 days of a QPEO S-1 being declared effective by the SEC, then the Lender Board Member Candidates shall, upon the written request of the remaining members of the Board of Directors, resign from all of their respective positions on the Board of Directors.

Rescission Agreement with ImmunogenX

In March 2024, we announced the closing of a merger with IMGX. As a result of the Merger, IMGX became a limited liability company and our wholly owned subsidiary. As consideration for the Merger we issued the former shareholders of IMGX (A) 36,830 shares of Common Stock of the Company and (B) 11,777.418 shares of Series G Preferred Stock. In addition, we assumed (i) all ImmunogenX stock options immediately outstanding prior to the Merger, each becoming an option to purchase Common Stock subject to adjustment pursuant to the terms of the merger agreement (the “Assumed Options”) and (ii) all ImmunogenX warrants immediately outstanding prior to the Merger, each becoming a warrant to purchase Common Stock subject to adjustment pursuant to the terms of the merger agreement (the “Assumed Warrants”). The Assumed Options are exercisable for an aggregate of 200,652 shares of Common Stock, have an exercise price of $0.81 and expire between February 1, 2031 and June 6, 2033. The Assumed Warrants are exercisable for an aggregate of 127,682 shares of Common Stock, have exercise prices ranging from $3.02 to $3.92 and expire between September 30, 2032 and September 6, 2033.

Under the terms of the Rescission Agreement, the parties have amicably determined that it is in their collective best interest to: (i) rescind the issuances of the of the shares of Common Stock and Series G Preferred Stock that the Company has issued to the IMGX Shareholders as part of the Merger, (ii) convey to the IMGX Shareholders all of the issued and outstanding Membership Interests of IMGX currently held by the Company, (iii) cancel the Assumed Options and Assumed Warrants; and (iv) provide for such additional agreements as are set forth therein.

Pursuant to the terms of the Rescission Agreement (i) each Shareholder agreed to cancel, waive, relinquish and disclaim in all respects any and all claims and/or rights to record or beneficial ownership in and to the shares of Common Stock and Series G Preferred Stock that the Company has issued to the IMGX Shareholders as part of the Merger, as set forth in the Rescission Agreement, (ii) each Shareholder agreed to cancel, waive, relinquish and disclaim in all respects any and all claims and/or rights to record or beneficial

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ownership in and to the Assumed Options and Assumed Warrants as set forth in the Rescission Agreement, including any Common Stock into which such Assumed Options and Assumed Warrants are not or ever have been converted or are convertible, (iii) the Company agreed to cancel, waive, relinquish and disclaim in all respects any and all claims and/or rights to record or beneficial ownership in and to the Membership Interests of IMGX, and (iv) the Company will retain up to approximately $695,000 of IMGX’s accounts payable, and IMGX will remain responsible for approximately $9,278,400 of IMGX’s secured debt.

In addition, under the terms of the Rescission Agreement, the Company shall have no obligation and will released from any and all obligations with respect to the assets or business of IMGX incurred after the Closing Date, as defined in the Rescission Agreement, or prior to the Closing Date, except as provided in the Rescission Agreement, unless approved in writing by the Company.

The obligations of each party to the Rescission Agreement to consummate the transactions contemplated by the Rescission Agreement are subject to the fulfillment, at or prior to the Closing, as defined in the Rescission Agreement, of each of the conditions set forth in the Rescission Agreement, and among others, that (i) the Company shall have obtained approval of its shareholders for the transfer of the Membership Interests to the Shareholders, and the other consents, authorizations or approvals from the parties as set forth in the Rescission Agreement to consummate the transactions contemplated by this Agreement, (ii) the Shareholders shall have delivered a mutually satisfactory voting agreement agreeing to, including other things, vote the Shares held by them in favor of the transactions contemplated by the Rescission Agreement, and (iii) the Company shall have received a resignation letter from Jack Syage resigning from all positions with the Company.

The Rescission Agreement may be terminated and the transactions contemplated thereby may be abandoned by the Company or the Shareholder Representative, as defined in the Rescission Agreement, if the transactions contemplated thereby shall not have been consummated by June 30, 2025, unless the Company and Shareholder Representative shall have consented to a subsequent date.

Liquidity and Capital Resources

To date, we have not generated any revenues and have experienced net losses and negative cash flows from our activities.

As of March 31, 2025, we had cash and cash equivalents of approximately $66,000, and had sustained cumulative losses attributable to common stockholders of approximately $1.2 million. We have closed on a revolving loan agreement in the principal amount of $2.0 million. We have not yet achieved profitability and anticipate that we will continue to incur net losses for the foreseeable future. We expect that our expenses will continue to grow and, as a result, we will need to generate significant product revenues to achieve profitability. We may never achieve profitability. As such, we are dependent on obtaining, and are continuing to pursue, the necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue our operations. Without adequate funding, we may not be able to meet our obligations. We believe these conditions may raise substantial doubt about our ability to continue as a going concern.

Our primary sources of liquidity come from capital raises through additional equity and/or debt financings. This may be impacted by geopolitical events, including war in Ukraine and in the Middle East, which are evolving and could negatively impact our ability to raise additional capital in the future.

We have funded our operations to date primarily through the issuance of debt, convertible debt securities, preferred stock, as well as the issuance of Common Stock in various public offerings and private placement transactions. We expect to incur substantial expenditures in the foreseeable future for the development of Adrulipase. We will require additional financing to develop our product candidate, run clinical trials, prepare regulatory filings and obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing, sales and marketing capabilities. Our current financial condition raises substantial doubt about our ability to continue as a going concern. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies. We will seek funds through additional equity and/or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.

Although we are primarily focused on the development of our product candidate, Adrulipase, we are also opportunistically focused on expanding our product pipeline of clinical assets through collaborations, and also through acquisitions of products and companies. We are continually evaluating potential asset acquisitions business combinations, and other partnership opportunities. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.

Our ability to issue securities is subject to market conditions. Each issuance under the shelf registration statements will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued.

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Debt Obligations

Revolving line of credit

In connection with the IMGX acquisition, we assumed a revolving line of credit. In October 2022, IMGX entered into a credit agreement, which allowed for a revolving line of credit (the “Revolver”) for borrowings up to $6.0 million, maturing on October 1, 2024, and bearing interest per annum of the prime rate plus 4.5%. The credit agreement was amended in September 2023 (the “First Amendment”) to increase the maximum borrowings of the Revolver to $7.5 million. The credit agreement was amended and restated on March 13, 2024 (the “Second Amendment”). Terms under the Second Amendment include a maturity date of September 13, 2025, interest per annum of the prime rate plus 6.0%, and no further draws on the line of credit after March 13, 2024. As of September 30, 2024, the Revolver and accrued interest has been reclassified to liabilities of the disposal group held for sale.

Promissory notes

In connection with the IMGX acquisition, we assumed two promissory notes, one of which is with a related party. The notes are each in the amount of $0.5 million, accrue interest at a rate of the prime rate plus 4.5% per annum, and have a maturity date of September 30, 2025. As of September 30, 2024, the promissory notes and all accrued interest has been reclassified to liabilities of the disposal group held for sale.

EIDL loan

In connection with the IMGX acquisition, we assumed an EIDL loan with a principal balance of $0.5 million bearing interest of 3.75% per annum, with interest payable monthly in arrears. All unpaid principal and interest are due at maturity on June 30, 2050. As of September 30, 2024, the EIDL loan and all accrued interest has been reclassified to liabilities of the disposal group held for sale.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from the sale of our product candidates or otherwise. In the future, we expect that we will seek to generate revenue primarily from product sales, but we may also generate non-product revenue from sources including, but not limited to, research funding, development and milestone payments, and royalties on future product sales in connection with any out-license or other strategic relationships and/or government grants we may establish. Our product candidates are at an early stage of development and may never be successfully developed or commercialized.

Research and Development Expense

Conducting research and development is central to our business. Historically, the majority of our research and development expenses have been focused on the development of Adrulipase, Niclosamide, Capeserod and Latiglutenase. Research and development expenses consist primarily of internal and external costs incurred for our development activities, which include, among other things:

●

personnel-related costs, which include salaries, benefits, and stock-based compensation expense;

●

fees paid to third parties for services directly related to our drug development and regulatory efforts;

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Expenses incurred under agreements with clinical research organizations (“CROs”), investigative sites and consultants and contractors that conduct or provide other services relating to our clinical trials and research activities;

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the cost of acquiring drug product, drug supply and clinical trial materials from contract development and manufacturing organization (“CDMOs”) and third-party contractors;

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costs associated with preclinical and non-clinical activities;

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payments and other costs in connection with the acquisition our product candidates under licensing agreements; and

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amortization of intangible assets, including patents, in-process research and development and license agreements.

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Costs incurred in connection with research and development activities are expensed as incurred.

We expect our research and development expenses to increase for the foreseeable future as we focus our efforts on the clinical development of our product candidates, including Adrulipase, through late-stage clinical trials, as well as chemistry, manufacturing and controls (“CMC”) efforts. The process of conducting non-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any non-clinical study or clinical trial that we may conduct. In addition, if our product development efforts are successful, we expect to incur substantial costs to prepare for potential commercialization of any late-stage product candidates and, in the event any of our product candidates receives regulatory approval, to potentially fund the launch and sales and marketing efforts of the product.

The probability of success for any of our current or future product candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.

We do not record or maintain information regarding costs incurred in research and development on a program or project specific basis. Our research and development staff, outside consultants, contractors, CROs, and CDMOs are deployed across several programs and/or indications. Additionally, many of our costs are not attributable to individual programs and/or indications. Therefore, we believe that allocating costs on the basis of time incurred by our personnel does not accurately reflect the actual costs of a project.

General and Administrative Expense

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation, related to our executive, finance, business development and support functions, legal fees relating to both intellectual property and corporate matters, insurance, costs associated with operating as a public company, including corporate communications and investor relations expense, information technology, professional fees for accounting, auditing and other professional services, and facility-related costs.

We anticipate our general and administrative expenses to increase for the foreseeable future to support of our expanded research and development activities, intellectual property, patent and corporate legal expense, insurance, and costs associated with operating as a public company, including corporate communications and investor relations expense. Additional increases in general and administrative expenses are expected in connection with increased business development efforts, including potential partnership and/or collaboration agreements and financing activities, expanding infrastructure, including information technology administration, and the hiring of additional personnel and consultants, among other expenses.

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Consolidated Results of Operations for the Three Months Ended March 31, 2025 and 2024

The following table summarizes our consolidated results of operations for the periods indicated:


	Three Months Ended
	March 31,				Increase
	2025		2024		(Decrease)
Operating expenses:
Research and development expenses	$	15,827	$	554,662	$	(538,835)
General and administrative expenses		805,559		8,544,386		(7,738,827)
Total operating expenses		821,386		9,099,048		(8,277,662)
Other expenses		(126,719)		(425)		(126,294)
Loss from continued operations	$	(948,105)	$	(9,099,473)	$	8,151,368
Loss from discontinued operations		(311,515)		(192,808)		(118,707)
Income tax benefit		—		14,859,887		(14,859,887)
Net income (loss)	$	(1,259,620)	$	5,567,606	$	(6,827,226)

Revenues

We have not yet achieved revenue-generating status from any of our product candidates. Since inception, we have devoted substantially all of our time and efforts to acquiring and developing our product candidates, including Adrulipase, Niclosamide, Capeserod and Latiglutenase. As a result, we did not have any revenue during the three months ended March 31, 2025 and 2024, respectively.

Research and Development Expense

Research and development expenses for the three months ended March 31, 2025 totaled approximately $16,000, a decrease of approximately $0.6 million, or 97%, over the approximately $0.6 million recorded for the three months ended March 31, 2025.

General and Administrative Expense

General and administrative expenses for the three months ended March 31, 2025 totaled approximately $0.8 million, a decrease of approximately $7.7 million, or 91% over the approximately $8.7 million recorded for the three months ended March 31, 2024.

The decrease of approximately $7.7 million in total general and administrative expenses was primarily attributable to a decrease of $4.2 million of non-cash expense recorded for the Tungsten financial advisor fees related to IMGX merger, decrease of legal fees of $1M, $0.8 million in share-based compensation for consultants and $0.2 million decrease for employees, and $0.6 million in public company fees, $0.5 million in personnel related costs and $0.2 million in professional fees and reduction in D&O coverage $0.1 million.

Other Expenses

Other expenses for the three months ended March 31, 2025 related to the write down of the right of use asset see note 13 and the interest expense on the revolving loan of $16,500.

Loss from discontinued operations

Loss from discontinued operations for the three months ended March 31, 2025 of $0.3million and $0.2 million for March 31, 2024 represents expenses related to the disposal group that was classified as held for sale.

Income Tax Benefit

There was no income tax benefit for the three months ended March 31, 2025.

As of March 31, 2024 a tax benefit of approximately $14.9 million was recorded due to the release of a portion of our valuation allowance that had previously been recorded against our deferred tax assets in connection with the IMGX Merger. The income tax benefit was reversed on December 31, 2024.

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Net income (loss)

As a result of the factors above, our net loss for the three months ended March 31, 2025 totaled approximately $1 million, a decrease of approximately $6.8 million, or 122%, over the income of approximately $5.6 million recorded for the three months ended March 31, 2024.

Cash Flows for the three months Ended March 31, 2025 and 2024

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


	Three Months Ended
	March 31,
	2025		2024
Net cash (used in) provided by:
Operating activities	$	(818,638)	$	(3,746,956)
Investing activities		—		88,169
Financing activities		700,000		3,378,930
Net (decrease) in cash, cash equivalents and restricted cash	$	(118,636)	$	(279,857)

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2025 was approximately $0.8 million, primarily attributable to our net loss of approximately $1.3 million. This was partially offset by a net increase in other assets and liabilities of approximately $0.4 million and the impairment of right-of-use assets of $0.1 million. These offsets were partially reduced by a decrease in accounts payable of approximately $0.1 million, and an increase in prepaid expenses of approximately $0.1 million.

Net cash used in operating activities during the three months ended March 31, 2024 of approximately $3.7 million was primarily attributable to our non-cash change in deferred tax valuation allowance of $14.9 million, partially offset by net income of $5.6 million and other non-cash expenses totaling approximately $5.5 million. Other non-cash expenses include stock issued to our financial advisors in connection with the IMGX acquisition of $4.0 million, common stock granted to consultants of $0.8 million, and stock-based compensation of $0.3 million; a decrease in prepaid expenses of $0.3 million and a net decrease in accounts payable and accrued expenses of $0.1 million.

Investing Activities

There was no cash provided by investing activities during the three months ended March 31, 2025 and approximately $0.1 million was due to the net cash acquired in the acquisition of IMGX.

Financing Activities

Net cash provided by financing activities of approximately $0.7 million for the three months ended March 31, 2025 was due to net proceeds of approximately $0.7million from the draw from the revolver loan.

Net cash provided by financing activities of approximately $3.4 million for the three months ended March 31, 2024 was primarily due to net proceeds of approximately $3.6 million from the March 2024 registered direct offering, partially offset by approximately $0.2 million of cash repayments of the note payable financing for corporate insurances.

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Critical Accounting Policies and Estimates

Our accounting policies are essential to understanding and interpreting the financial results reported on the consolidated financial statements. The significant accounting policies used in the preparation of our consolidated financial statements are summarized in Note 2 to the consolidated financial statements and notes thereto found in our Annual Report on Form 10-K/A for the year ended December 31, 2024. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.

During the three months ended March 31, 2025, there were no material changes to matters discussed under the heading “Critical Accounting Policies and Significant Judgments and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2024.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a - 15(b) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10 - Q, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act. Based on that evaluation, our CEO and our CFO each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a - 15(d) or 15d - 15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10 - Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 31, 2024, Mattress Liquidators, Inc. filed a Complaint in the District Court, Boulder County, State of Colorado against Defendants IMGX, Jack A. Syage andElizabeth T. Syage Revocable Trust, Case No. 2024CV31070.

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ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. For a detailed discussion of the risks and uncertainties related to our business, please refer to the section titled “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2024. There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K/A for the year ended December 31, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

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Table of Contents

ITEM 6. EXHIBITS

(b)

Exhibits

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 21, 2024).
3.2		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2022).
31.1*		Certification of the Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of the Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)

*filed herewith

**furnished, not filed, herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENTERO THERAPEUTICS, INC.

	By	/s/ Richard Paolone
		Richard Paolone
		Interim Chief Executive Officer and Chairman
		(Principal Executive Officer)

	By	/s/ Anna Skowron
		Anna Skowron
		Interim Chief Financial Officer
Date: May 15, 2025		(Principal Financial and Accounting Officer)

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