NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Oncotelic Therapeutics, Inc. (“Oncotelic” or the “Company”) was originally incorporated in the State of New York in 1988 as OXiGENE, Inc. The Company reincorporated in the State of Delaware in 1992, changed its name to Mateon Therapeutics, Inc. (“Mateon”) in 2016, and subsequently changed its name to Oncotelic Therapeutics, Inc. in November 2020. The Company conducts business through Oncotelic and its wholly owned subsidiaries, including Oncotelic, Inc., PointR Data, Inc. (“PointR”), Pet2DAO, Inc. (“Pet2DAO”), and EdgePoint AI, Inc. (“EdgePoint”), a consolidated subsidiary with non-controlling interests. (Collectively, “Oncotelic,” “we,” “our,” or “the Company”). Further detail on prior mergers and corporate history is provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on April 15, 2026.

The Company is principally focused on the development of immuno-oncology therapeutics, including OT-101, a transforming growth factor-beta (“TGF-β”) inhibitor being advanced for difficult-to-treat cancers and viral respiratory diseases. OT-101 is being developed through our joint venture (“JV”) with Dragon Overseas Capital Limited (“Dragon”) and GMP Biotechnology Limited (“GMP Bio”), affiliates of Golden Mountain Partners (“GMP”).

The Company entered into a JV with Dragon to form GMP Bio in March 2022. The Company’s ownership interest in GMP Bio is 45%, while that of Dragon is 55%. GMP Bio and the Company will focus to further expand the development of OT-101 for various oncology indications like pancreatic cancer, melanomas, gliomas etc. as also for viral infections like COVID-19. This path is being evaluated as a monotherapy, as well as combination therapies in conjunction with other drugs like checkpoint inhibitors. The JV is also developing five other nanoparticles for various cancer therapies. The pharmaceutical development of OT-101, our nano-particle platform and other artificial intelligence (“AI”) development is being advanced through our JV. In addition, the JV has also set up a FDA certified cGMP development and manufacturing facility in San Diego, California which is capable of drug development and manufacture of Phase 1 clinical trial materials.

During the year ended December 31, 2025, GMP Bio completed an independent third-party valuation by an offshore independent valuation firm, which preliminarily estimated the potential value of the drug pipeline under development at approximately $2.3 billion. This valuation was non-binding, forward-looking, and based upon a number of assumptions including the successful achievement of clinical, regulatory, and commercial milestones. That valuation was interpreted not to be a current measure of fair value under the United States Generally Accepted Accounting Principles (“U.S. GAAP”).

Oncotelic conducted an assessment of the change in fair value and hired the services of a separate, ASC-compliant valuation firm to perform a valuation of GMP Bio under U.S. GAAP standards. The results of this valuation that indicated a change in the value of the Company’s holdings in GMP Bio have been incorporated into this, consistent with the Company’s fair value reporting under U.S. GAAP. The valuation conducted by the independent valuation firm conducted a fair value of GMP Bio based on various methods compliant with US GAAP to derive the fair value. The Company then utilized the fair value of GMP Bio as assessed by the valuation firm, attributed the ownership of the Company in GMP Bio to ascertain the Company’s interest in GMP Bio, and recorded the resulting gain to the investment in GMP Bio at fair value. The Company relied on the inputs by the JV valuation, however, certain parameters like lack of marketability, lack of control discounts and other standard discounts, specific to the Company, have been applied to the independent valuation done by the Company to derive the ASC-compliant valuation. As the circumstances related to the JV have not materially changed since December 31, 2025 till the date of this filing, the Company qualitatively assessed and determined that no additional fair value adjustment was required and hence, the Company has not recorded a change in value of the Company’s interest in the JV. In the future, the Company will appropriately adjust the fair value of the Company’s interest in the JV, at the end of reporting periods, and when key value inflection points are met or the Company observes conditions that require the fair value of the Company’s interest in the JV to be adjusted.

The JV continues preparing for planned Phase 2 and Phase 3 trials for OT-101 in high-grade glioma, pancreatic cancer, and other indications. The JV is also sponsoring investigator-initiated clinical studies in additional oncology applications. In addition, the JV is developing five additional therapeutic candidates, which, if successfully developed and approved, are anticipated to contribute significant revenues, income and meaningful long-term value to both the JV and the Company.

In addition to the development of OT-101 (also referred to as Sapu-002), the JV is advancing the development of five additional therapies:

Each of these therapies, and the various cancers they address, have shown they are increasing in terms of incidences and that opens up the avenue to be able to generate revenues ranging from several millions of dollars to several hundreds of millions of dollars, if successfully developed and commercialized.

Although no assurances can be given, GMP Bio currently intends to conduct an initial public offering of the JV, at a future date, on either the Hong Kong Exchange or other stock exchange. For more information on the JV, refer to Note 6 of the unaudited Notes to the Condensed Consolidated Financial Statements.

The Company’s core scientific focus is the development of its proprietary self-immunization protocol (“SIP™”), designed to stimulate a patient’s immune system to recognize and target tumors without requiring tumor extraction or antigen identification. The SIP™ platform is supported by more than three decades of RNA-based research and is being applied initially to oncology, with potential expansion to Duchenne Muscular Dystrophy (“DMD”) and other diseases driven by TGF-β overexpression.

Separately from the JV, the Company plans to develop OT-101 for select animal-health indications and is evaluating the use of digital assets and blockchain-based technologies to support that platform. The Company acquired apomorphine for potential uses in Parkinson’s disease, erectile dysfunction, and female sexual dysfunction. The Company continues to evaluate advancement opportunities for OXi4503 (for acute myeloid leukemia and myelodysplastic syndromes) and CA4P (in combination with checkpoint inhibitors for metastatic melanoma). The development of all these products will be subject to the availability of resources to develop them.

In April 2026, the Company announced that it had entered into a strategic partnership with TechForce Robotics, Inc. (“TechForce”) to advance the commercialization of its PDAOAI-enabled, GMP-compliant robotics platform. This milestone reflects the culmination of several years of research and development efforts, resulting in an integrated platform designed to combine Oncotelic’s proprietary PDAOAI capabilities with TechForce’s robotics hardware and manufacturing expertise. The system under development is designed to operate within GMP-regulated environments and is intended to enable automated material handling, real-time monitoring, and PDAOAI-enhanced compliance workflows across pharmaceutical manufacturing and related applications. For more information on the partnership with TechForce, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on April 15, 2026.

Agreement and Plan of Merger with Lunai Bioworks Inc.

In April 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Lunai Bioworks, Inc. (“Lunai”), a Delaware corporation, Lunai Bioworks IP, Inc., a Delaware corporation and a wholly owned subsidiary of Lunai (“Merger Sub”), Neurobridge IP Holdings Incorporated, a Delaware corporation (“Holdings”). In connection with the Merger Agreement, the Company entered into an IP Assignment Agreement with Holdings, pursuant to which it agreed to contribute and assign certain assets relating to the intellectual property of the Company (collectively, the “Intellectual Property Assets”) to Holdings. For more discussion on the transactions with Lunai, refer to Note 9 of these Notes to Condensed Consolidated Financial Statements.

Fundraising

Pacific Pier June 2026 Note

On June 23, 2026, the Company entered into a Securities Purchase Agreement (the “2026 Pacific Pier SPA”), with Pacific Pier Capital II, LP (“Pacific Pier”), pursuant to which Company issued a convertible promissory note in the aggregate gross principal amount of $178,410 (the “2026 Pacific Pier Note”). The 2026 Pacific Pier Note is convertible into shares of the Company’s common stock par value $0.01 per share (“Common Stock”).

For more information on the Pacific Pier financing of the Company, refer to Note 5 of the Notes to the Condensed Consolidated Financial Statements.

Mast Hill January 2026 Note

In January 2026, the Company entered into a Securities Purchase Agreement with Mast Hill Fund, L.P. (“Mast Hill”), pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $398,333 that is convertible into shares of the Company’s Common Stock. Proceeds from this note are to be utilized for corporate expenses. This note, the May 2022 Note and the July 2025 Note are securitized against all the assets of the Company, excluding the 45% ownership of the Company in the JV.

For more information on the debt financing of the Company, refer to Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements.

Mast Hill July 2025 Note

In July 2025, the Company entered into a Securities Purchase Agreement with Mast Hill, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of approximately $0.6 million, which is convertible into shares of the Company’s Common Stock. This note was utilized for corporate expenses. This note, and the May 2022 Note were securitized against all the assets of the Company, excluding the 45% ownership of the Company in the JV.

For more information on the debt financing of the Company, refer to Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements.

Mast Hill Equity Purchase Agreement

In August, 2025, the Company entered into an Equity Purchase Agreement (the “Mast EPA”) and a Registration Rights Agreement (the “Mast Registration Rights Agreement”) with Mast, pursuant to which the Company shall have the right, but not the obligation, to direct Mast, to purchase up to $25 million (the “Maximum Commitment Amount”) in shares of the Company’s Common Stock in multiple tranches. The Company instructed Mast Hill in June 2026 to purchase approximately 138,000 shares of Common Stock for cash proceeds of approximately $6,600 and incurred a cost of approximately $1,500 against the sale of the Common Stock. The Company plans to file a post-effective amendment to the registration statement with the SEC at the earliest.

For more information on the Mast EPA, refer to Note 10 of the Notes to the unaudited Condensed Consolidated Financial Statements.

Jefferson Capital Ventures, LLC and Valor Nation, Inc Independent Contractor Agreements

In August 2025, the Company entered into independent contractor agreements (“ICA”) with Jefferson Capital Ventures, LLC (“Jefferson”) and Valor Nation, Inc. (“Valor”) for providing certain consulting and advisory services. The ICAs call for Jefferson and Valor to provide consulting and advisory services including strategic planning meetings, coordination non-legal support for SEC compliance, balance sheet and income statement optimization strategies, shareholder and investor communication planning, liaison with investment bankers, analysts, and institutional investors, operational efficiency and cost-saving recommendations and ancillary strategic services not requiring a license, corporate planning, operations and capital markets advisory services not requiring licenses. For more information on the Jefferson and Valor ICAs, refer to our Current Report on Form 8-K filed with the SEC on August 12, 2025. Further on December 31, 2025 the Company reported modifying the threshold of the first milestone contained within the ICA with Jefferson, to earn certain RSAs of shares the Company’s Common Stock upon the achievement of certain corporate milestones. The amendment modified the Company’s market capitalization exceeded $100 million requirement on any single trading day’s close to $45 million on any single trading day’s close. This amendment was to enable the Company to be able to continue to build on its progress to date including making effective it’s equity line with Mast Hills, engagement of AGP for future financing, and engaging Sichenzia, Ross and Ferrell (“SRF”) for uplisting the Corporation’s stock to a nationally recognized stock exchange and to achieve its corporate goals contained within the said ICA. For more information on the modification, refer to our Current Report on Form 8-K filed with the SEC on January 6, 2026. In connection with the engagement with SRF, the Company filed an initial application with Nasdaq on July 28, 2026.

Private Placement 3 & JH Darbie Financing

In December 2025, the Company completed the conversion of the debt of forty-seven (47) accredited investors from the JH Darbie Financing from our prior private placement (“PPM-2”) into the new subscription agreements under the new financing (“PPM-3”) in three tranches, which resulted in conversion of approximately $2.2 million. JH Darbie and the Company are parties to a May 2024 placement agent agreement (“Placement Agreement”), pursuant to which JH Darbie had the right to sell/convert a minimum of 10 Units and a maximum of 200 Units on a best-efforts basis. Two of the investors did not participate in PPM-3 and their 7 units for a total of approximately $0.2 million were converted into short term loan to the Company, of which one investor was paid off during the six months ended June 30, 2026. For more information on the PPM-3 Financing, refer to Note 8 of these Notes to the Condensed Consolidated Financial Statements.

May 2022 Note

In May 2022, the Company entered into a Securities Purchase Agreement with Mast Hill, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of approximately $0.7 million, which note is convertible into shares of the Company’s Common Stock. The May 2022 Note was extended till December 2026. In June 2026, Mast Hill converted the balance of the May 2022 Note, including accrued interest and penalty, of approximately $847,000 into approximately 11.9 million shares of the Company’s Common Stock. As of June 30, 2026, this note is fully converted.

For more information on the debt financing of the Company, refer to Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements.

Forever Prosperity (previously GMP) Note purchase agreements and unsecured notes

Between June 2020 and January 2022, the Company entered into various purchase agreements and promissory notes with GMP, cumulatively totaling $4.5 million. Such notes were assigned to Forever Prosperity, LLC, an affiliated entity of GMP. For more information on the GMP debt financing, refer to Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements.

Mosaic ImmunoEngineering, Inc. Term Sheet

In April 2024, the Company entered into a binding term sheet (the “Term Sheet”) with Mosaic Immuno Engineering, Inc. (“Mosaic”). For more information on the Term Sheet, refer to the Current Report on Form 8-K filed with the SEC on April 29, 2024. In August 2024, Mosaic and the Company mutually agreed to extend the date of the Term Sheet to expire at the earlier of (1) the signing of definitive agreements or (2) December 31, 2024. In December 2024, the Company and Mosaic further extended the term of the term-sheet to expire at the earlier of (1) the signing of definitive agreements or (2) June 30, 2025. Both Mosaic and the Company are in discussions as to the future of this Term Sheet and how to proceed on this front.

Joint Development, Manufacturing and Licensing Agreement with TechForce Robotics

In March 2026, the Company entered into a Joint Development, Manufacturing, and Licensing Agreement (the “TechForce Agreement”) with TechForce Robotics, Inc. (“TechForce”), a Nevada corporation. The TechForce Agreement establishes a framework for the joint development, and manufacturing of AI-enabled, GMP-compliant robotic systems for use in pharmaceutical and related manufacturing environments. The integrated product to be developed (the “Product”) combines TechForce’s robotic hardware with the Company’s proprietary PDAOAI Platform.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Oncotelic, its wholly owned subsidiaries, Oncotelic Inc. PointR, and EdgePoint our consolidated non-controlled interest entity. Intercompany accounts and transactions have been eliminated in consolidation. The Company’s investment in GMP Bio is recorded and reported as a minority investment in equity securities.

The Company also holds an equity investment in Lunai. The Company has determined that it does not have a controlling financial interest in Lunai and does not exercise significant influence over its operating or financial policies. Accordingly, the investment is not consolidated and is not accounted for under the equity method. The investment is accounted for in accordance with the applicable guidance for equity securities in ASC 321 and is included in “Investment in equity securities” in the accompanying unaudited condensed consolidated balance sheet.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements as of June 30, 2026 and for the three and six months ended June 30, 2026, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission including Form 10-Q and Article 8 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2025 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on April 15, 2026. In management’s opinion, all normal, and recurring adjustments necessary for a fair statement, have been included. The results for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026.

Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Prior to December 31, 2024, the Company incurred net losses of approximately $38.0 million. During the year ended December 31, 2025, the Company recorded a net profit of approximately $249.3 million, primarily due to an increase in fair value of the Company’s ownership in GMP Bio of approximately $365.4 million, reduced by deferred taxes of approximately $111.6 million. During the six months ended June 30, 2026, the Company incurred a loss of approximately $1.9 million. The Company has a negative working capital of approximately $16.4 million at June 30, 2026, of which approximately $2.6 million contingent liability of issuance of common shares of the Company to PointR shareholders upon achievement of certain milestones in accordance with the PointR Merger Agreement. The Company has negative cash flows from operations for the six months ended June 30, 2026 of approximately $0.4 million. In the past few years, barring the funding raised during the six months ended June 30, 2026 through Mast Hill and Pacific Pier, and short-term funding from related parties, the Company has not been able to raise any substantial funding during the past few years from other third parties. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. Management expects to incur lower costs and losses in the foreseeable future, as a majority of the costs related with the development of OT-101 will be incurred by the JV, but the Company also recognizes the need to raise capital to remain viable. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company’s long-term plans include continued development of its current pipeline of products, in addition to continue the development of OT-101 which is exclusively out-licensed to the JV and the JV will be responsible for the funding required to support the development in entirety, to generate sufficient revenues, through either technology transfer or product sales, or raise additional financing to cover its anticipated expenses. Until the Company is able to generate sufficient revenues from its current pipeline, the Company plans on funding its operations through the sale of equity and/or the issuance of debt, combined with or without warrants or other equity instruments. During the six months ended June 30, 2026, the Company raised an aggregate amount of $0.5 million from the issuance of convertible debt instruments.

Although no assurances can be given as to the Company’s ability to deliver on its revenue plans, or that unforeseen expenses may arise, management believes that the potential equity and debt financing or other potential financing will provide the necessary funding for the Company to continue as a going concern. Also, management cannot guarantee any potential debt or equity financing will be available on favorable terms or at all. As such, management does not believe the Company has sufficient cash for twelve months from the date of this report. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations or cease operations completely.