UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, September 30, 2022

OR

For the transition period from ______________ to _______________

Commission file number: 000-56257

ACCUSTEM SCIENCES, INC.

(Exact name of registrant as specified in Its Charter)

Registrant’s telephone number, including area code: 00 44 2074952379

Securities registered pursuant to Section 12(b) of the Act: None

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

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.

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 ☒

As of May 20,November 8, 2022, there were 11,337,10211,346,535 shares of Common Stock, $0.001 par value outstanding.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or the negative thereof or other variations thereon or other comparable terminology. All statements other than statements of historical facts included in this Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding: expectations for revenues, cash flows and financial performance and the anticipated results of our ongoing development and business strategies.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, the following:

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

This report also contains or may contain estimates, projections and other information concerning our industry and our business, including data regarding the estimated size of our markets and their projected growth rates. 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, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

Unless otherwise stated or the context otherwise requires, the terms “AccuStem” “we,” “us,” “our” and the “Company” refer collectively to AccuStem and, where appropriate, its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the interim periods presented.

The results for the period ended March 31, 2022 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years December 31, 2021 and 2020 included in our annual report on Form 10-K filed with the US. Securities and Exchange Commission (the “SEC”) on April 18, 2022.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYOPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

For Three Months Ended September 30, 2022

For Three Months Ended September 30, 2021

For Nine Months Ended September 30, 2022

For Nine Months Ended September 30, 2021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. DESCRIPTIONNATURE OF BUSINESS

AccuStem Sciences, Inc. and its subsidiary (“the Company”) was incorporated on July 28, 2021, in Delaware, United States. The Company is an early-stage life sciences company committed to developing and commercializing novel products for the treatment and management of many cancers. The principal activities of the Company are that of a genomics-based personalized medicine business, particularly focused on breast and lung cancer patients.

The consolidated position of the Company is a result of the demerger of the legal entity StemPrintER Sciences Limited (“StemPrintER”) from Tiziana Life Sciences plc (“Tiziana”) by AccuStem Sciences Limited (“Limited”) on October 30, 2020. Limited was incorporated on June 5, 2020. On March 12, 2021 and further amended on May 7, 2021 and June 1, 2021, Limited filed a registration statement on Form 20-F with the US Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, to effect the demerger transaction. The registration statement was declared effective on July 1, 2021. The transaction is as detailed in the steps below:

In September 2020, Tiziana transferred all the ownership rights and intellectual property relating to StemPrintER along with a commitment to pay $1,353,373 in cash to its wholly owned subsidiary, StemPrintER in exchange for 3,070,000 shares of the subsidiary.

On October 5, 2020, Limited entered into an agreement with Tiziana to acquire the outstanding shares of StemPrintER, including the ownership rights and intellectual property relating to the StemPrintER project, the SPARE project and cash receivable of $1,353,373. In exchange for the transfer of ownership, Limited issued a total of 9,520,069 ordinary shares of $0.001 par value to Tiziana shareholders on a one for one basis based on the Tiziana ownership as at October 30, 2020. On October 30, 2020, a supplemental demerger agreement of StemprintER was executed and 479,063 of ordinary shares of $0.001 par value were issued for consideration (see Related Party Note 7) of $204,879 in relation to the associated option and warrant holders of Tiziana. The share composition noted are post share consolidation as further described below.

On November 1, 2021, Limited announced its intention to put in place a new parent company (formerly AccuStem Sciences Limited and subsidiary), being AccuStem Sciences, Inc., a Delaware-incorporated company, pursuant to a Scheme of Arrangement under United Kingdom “UK” law. Pursuant to Rule 12g-3(a) of the Securities Act of 1934, on December 1, 2021 (“Effective Date”), Limited completed the Company’s redomiciliation from the UK to Delaware, United States. In connection with the completion of the redomiciliation, the Company acquired all of the issued share capital of Limited in exchange for the issuance of the Company’s common stock and became the successor issuer to Limited. The Company and its subsidiary will conduct the same business and operations after the redomiciliation as Limited had been conducting prior to the redomiciliation and there are no expected changes to the day-to-day operation of the business of the Company or its strategy. Due to the entities being under common control, the acquisition was accounted for based on existing carrying amounts. The consolidated financial statements for periods prior to the redomiciliation are the consolidated statements of Limited as the predecessor to the Company for accounting and reporting purposes. On December 30, 2021, the Company and the Board approved for the dissolution of Limited, effective December 30, 2021. Limited’s wholly owned subsidiary, StemPrintER Sciences Limited, common shares was transferred to AccuStem Sciences, Inc.

On the effective date of the redomiciliation, the Company also completed a 20:1 share consolidation and the number of outstanding common shares was reduced from 199,988,724 to 9,999,132 of common stock (subject to adjustment as applicable due to the rounding of fractional shares). Therefore, (i) every 20 ordinary shares, £0.01 par value per share, of Limited (the “Limited Ordinary Shares”) were exchanged for one share of common stock, $0.001 par value per share, of the Company (the “Company Common Stock”) and (ii) every 10 AccuStem American Depository Shares (“ADS”) representing two Limited Ordinary Shares were exchanged for one share of the Company’s Common Stock, which resulted in the Company becoming the holding company of Limited. Also, every 20 options held by a Limited holder converted and received one option to purchase a common share of the Company as further described in Note 6.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

All share and per share amounts in these consolidated financial statements and related notes for periods prior to the redomiciliation have been retroactively adjusted to reflect the effect of the 20:1 exchange ratio.

Shares of Limited’s common stock issued in connection trade over-the-counter market under the ticker symbol “ACMSY”. On March 23, 2022 the Company’s common stock shares began trading within the OTC Markets under the ticker symbol “ACUT”.

Impact of the COVID-19 Pandemic

In early 2020, an outbreak of the novel strain of coronavirus (COVID-19) emerged globally. As a result, there have been mandates from federal, state and local authorities resulting in an overall decline in economic activity. There have been no material impacts from COVID-19 on the Company’s operations for the threenine months ended March 31,September 30, 2022 and 2021. However, it is possible that the pandemic will continue to significantly impact economies worldwide, which could result in adverse effects on the Company’s operations. The extent of the impact of COVID-19 on operations, liquidity, financial condition, and results of operations remain uncertain at this time.

Liquidity and Going Concern

The condensed consolidated financial statements have been prepared on the going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business.

The Company has financed its activities principally from support from a related party. The Company has incurred a net loss in every fiscal period since inception. For the threenine months ended March 31,September 30, 2022, the Company incurred a net loss of $790,5342,767,885. The Company has an accumulated deficit of $3,492,747as of March 31,2022 of $1,515,396.September 30, 2022. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of its technology and products, and expenses related to the commercialization of its products.

Management believes that the Company does not have sufficient cash and current assets to support its operations through at least 12 months from the issuance date of these condensed consolidated financial statements, and will require significant additional cash resources to continue its planned research and development activities.

The Company will need additional funds for promoting new products and working capital required to support research and development activities and generate sales from its products. There can be no assurance, however, that such financing will be available when needed, if at all, or on favorable terms and conditions. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the quality of product development efforts, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

In order to address its capital needs, including its planned research and development activities and other expenditures, the Company is actively pursuing additional equity financing in the form of a private placement.investment and public equity. The Company has been in ongoing discussions with institutional investors and other parties with respect to such possible offerings. Adequate financing opportunities might not be available to the Company, when and if needed, on acceptable terms or at all. If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms or if the Company fails to consummate the private placement or a public offering, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs and product portfolio expansion, which could adversely affect its operating results or business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding in terms acceptable to the Company to fund continuing operations, if at all. After considering the uncertainties, management determined it is appropriate to continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformityaccordance with accounting principles generally accepted in United States of AmericaU.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and areapplicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. dollars.GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on April 18, 2022. Unless otherwise indicated, all references to “$” are to U.S. dollars, and all references to “£” or “GBP” are to Great Britain Pounds. The Company’s reporting currency is U.S. dollars.

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of AccuStem Sciences Inc. as well as its wholly-owned subsidiary. The Company consolidates all entities over which the Company has the power to govern the financial and operating policies and therefore exercises control, and upon which the Company has a controlling financial interest. The existence and effect of both current voting rights and potential voting rights that are currently exercisable or convertible are considered when assessing whether control of an entity is exercised. The subsidiary is consolidated from the date at which the Company obtains control and are de-consolidated from the date at which control ceases.

Inter-company transactions and balances between companies are eliminated upon consolidation. Accounting policies of the subsidiary has been changed where necessary to ensure consistency with the policies adopted by the Company.

Prior to the redomiciliation, Limited reported its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”). Following the redomiciliation, the Company transitioned to GAAP and applied GAAP retrospectively for all prior periods presented. In the opinion of management, all necessary adjustments (consisting of normal recurring adjustments, intercompany adjustments, reclassifications and non-recurring adjustments) have been recorded to present fairly our financial position as of March 31, 2022 and December 31, 2021, and the results of operations, and cash flows for the periods ended March 31, 2022 and 2021. The Company and its wholly-owned subsidiary have historically been under common control. The redomiciliationafter elimination of intercompany transactions and related internal reorganization was accounted for consistent with a reorganization of entities under common control in accordance with ASC 805 - Business Combinations. Accordingly, the transfer of the assets and liabilities and exchange of shares was recorded in the new entity at their carrying amounts from the transferring entity at the date of transfer. The financial information for all periods in the financial statements presented prior to the reorganization are presented on a consolidated basis for all periods upon which the entities are under common control.balances.

Comprehensive (Loss) Income

Comprehensive income (loss) of all periods presented is comprised primarily of net loss and foreign currency translation adjustments.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Loss

Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments.

Risk and Uncertainties

The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including but not limited to, the success of its exploration to research and development activities, need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology.

Cash

The Company considers all highly liquid investments purchased with an original maturity date of three months or less at the date of purchase and money market accounts to be cash equivalents. At March 31,September 30, 2022 and December 31, 2021, the Company had 0no cash equivalents and all cash amounts consisted of cash on deposit.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant contribution of credit risk consist of cash. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits.

Equipment, net

Equipment is stated at cost, less accumulated depreciation. The Company depreciates its equipment for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. The Equipment consists of computer equipment, which has a useful life of 3 years. years. Maintenance and repairs are expensed when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings.

Share-based Compensation

Share-based Compensation

The Company may award stock options, performance-based options and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity-based instruments is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period on a straight-line basis over the vesting period except for performance-based options. Performance-based stock options vest based on the achievement of performance targets. Compensation costs associated with performance-based option awards are recognized over the requisite service period based on probability of achievement. Performance-based stock options require management to make assumptions regarding the likelihood of achieving performance targets.

The Company estimates the fair value of service based and performance-based stock option awards, including modifications of stock option awards, using the Black-Scholes option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield.

Recently Issued and AdoptedRecent Accounting Standards

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the condensed consolidated financial statements mayAdopted Accounting Standards

None

Standards not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.yet adopted

None

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. As described below, the Company has early adopted certain accounting pronouncements before the due date for emerging growth companies. The Company expects to use the extended transition period for any other new or revised accounting standards during the period for which the Company remains an emerging growth company.

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature (“CCF”) and (2) convertible instruments with a beneficial conversion feature (“BCF”). As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. ASU 2020-06 is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. As a result of Management’s evaluation, the adoption of ASU 2020-06 did not have a material impact on the condensed consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, “Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options” (“ASU 2021-04”), which introduces a new way for companies to account for warrants either as stock compensation or derivatives. Under the new guidance, if the modification does not change the instrument’s classification as equity, the Company accounts for the modification as an exchange of the original instrument for a new instrument. In general, if the fair value of the “new” instrument is greater than the fair value of the “original” instrument, the excess is recognized based on the substance of the transaction, as if the issuer has paid cash. The effective date of the standard is for interim and annual reporting periods beginning after December 15, 2021 for all entities, and early adoption is permitted. The Company adopted ASU 2021-04 on January 1, 2022. As a result of Management’s evaluation, the adoption of ASU 2021-04 did not have a material impact on the condensed consolidated financial statements.

3.ACQUISITION OF STEMPRINTER SCIENCES LIMITED AND EQUITY RAISE

The consolidated position of the Company is a result of the demerger of StemPrintER Sciences Limited (“StemPrintER”) from Tiziana Life Sciences plc (“Tiziana”) on October 30, 2020. The transaction is detailed in the steps below and described in Note 1.

On October 5, 2020, AccuStem Sciences Limited (“Limited”) entered into an agreement with Tiziana to acquire its subsidiary StemPrintER, including the ownership rights and intellectual property relating to the StemPrintER project, the SPARE project and cash receivable of $1,353,373 (£1,000,000 GBP) which(which was collected in January 2022.2022). In exchange for the transfer of ownership, Limited issued a total of9,999,192 9,520,069 ordinary shares of $0.001 par value to Tiziana shareholders on a one for one basis based on the Tiziana ownership at October 30, 2020. In addition, onOn October 30, 2021, a supplemental demerger agreement was executed and there were 479,063 of ordinary shares of $0.001 par value issued for consideration of $204,879 in relation to the associated option and warrant holders of Tiziana. The Company considered ASC 805 - Business Combinationsand ASC 730 - Research and Development in determining how to account for the transaction. As the transaction was between entities that were ultimately controlled by the same parties, the acquisition has been treated as a common control combination under ASC 805-50 - Business Combinations, therefore the carrying value of contributed assets remained unchanged and were recorded at historical costs. The share composition noted above are post share consolidation as noted in Note 1.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The transfer of all the ownership rights and intellectual property was treated as an asset transfer. The treatment as a separate asset acquisition at this stage reflected the fact that, immediately prior to transfer, Tiziana carried out only limited maintenance type activity on the StemPrintER project and the concentration of fair value was in the StemPrintER intellectual property asset.

In March 2022, per the terms of the supplemental agreement to the demerger agreement, Tiziana invested $2,765,940 (£2,000,000 GBP) in exchange for an additional 1,337,970 common shares of the Company. No offering costs were recorded with the additional contribution.

4.NOTE PAYABLE

On May 20, 2022, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $439,122. Under the terms of the agreement, the Company made a down payment of $88,000, with the remaining balance financed over the remaining term at an annual percentage rate of 3.95%. Beginning June 2022, the Company will make 10 monthly payments of $35,751, with the last payment expected to be made in March 2023. At the end of September 30, 2022, the outstanding balance on the note payable was $212,056.

5. EQUIPMENT

Equipment consists of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

There was no equipment as of December 31, 2021. Depreciation expense was approximately $677907 and $0, respectively, for the three months ended March 31,September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, respectively, depreciation expense was approximately $2,414 and $0, respectively.

Depreciation expense is included within General and Administrative expenses in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). There was no depreciation expense for the three months ended March 31, 2021.Loss.

5.6. LICENSE

On June 24, 2014, Tiziana entered into an exclusive license agreement with IEO/University of Milan, pursuant to which it obtained a worldwide, royalty-bearing, exclusive license under certain patents and a worldwide, royalty-bearing, non-exclusive license under certain know-how, respectively, of IEO/University of Milan to develop and commercialize licensed products in connection with a multi-gene prognostic tool. This license was assigned to the Company pursuant to the terms of the acquisition of StemprintER as noted in Note 3.

The license provides for full control and authority over the research, development and commercialization of licensed products and are required to use commercially reasonable efforts in connection with the development and commercialization of the licensed products.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the term of the license, the following milestone payments are required to be made (converted from EUROS to USD using exchange rate of €1:$1.10815)

Tiziana was also required, as licensee prior to the assignment to us of the License, to fund €50,000 ($55,408) per year for sponsored research for up to four years from the effective date of the license (2014-2018), subject to certain conditions. The license also requires payment for all ongoing patent prosecution and maintenance costs and for the royalty term (until the expiration of the last claim in an issued, unexpired patent within the licensed patents or a claim that has not been pending more than four years which covers the sale of such licensed product or service in such country) a royalty of 1.5% on net sales of licensed products and services (and a 15% royalty of sub-license revenues for each country for the term of the license). The license agreement may be terminated at any time on 30 days’ notice and either party may terminate the license by written notice for a material payment breach or any other material breach, subject to 45-day and 120-day periods, respectively. Absent early termination, the license will remain in effect, on a product by product and country by country basis, until the date on which the patents and patent applications expire. The license may also be terminated in the case of insolvency.

For the three and nine months ended March 31,September 30, 2022 and 2021, the Company did not recognize any expense related to this license agreement.

6.7. LOSS PER SHARE

Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options in the calculation of diluted net loss per common shares would have been antidilutive.

For the three and nine months ended March 31,September 30, 2022 and 2021, loss per share of the Company are as follows:

 SCHEDULE OF LOSS PER SHARE

The Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per common share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders for the three months and nine months ended March 31,September 30, 2022 and 2021 because including them would have had an anti-dilutive effect.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE

7.8. SHARE-BASED COMPENSATION

In August 2021, Limited adopted the 2021 Omnibus Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and Other Share-Based Awards to selected employees, directors, and independent contractors of the Company.

Each Award shall be exercisable at such time or times and subject to such terms and conditions set forth in the Incentive Plan, as shall be determined by the administrator in the applicable award agreement. Total shares authorized by the plan was 2,500,000. Awards under the Incentive Plan are exercisable for up to 10 years from the date of issuance. There are 1,092,756 remaining available shares to be issued under the Incentive Plan at March 31,September 30, 2022. The number of shares of Common Stock that are reserved and available for issuance under the Incentive Plan shall be subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date and ending with the last January 1 during the initial ten-year term of the Plan as defined in Section 4(a) of the Incentive Plan.

Options

On December 1, 2021 (the “Effective Date”), Limited completed the Company’s redomiciliation from the United Kingdom to Delaware (see Note 1). As of the Effective Date, the option instruments to purchase Limited Ordinary Shares granted by Limited (the “Old Options”) were exchanged automatically in consideration of the grant of new options by New AccuStem which, in the opinion of the board of directors of Limited, are equivalent to the Old Options, but relate to the New AccuStem Common Stock. As of the Effective Date, New AccuStem assumed Limited’s obligations under its 2021 Incentive Plan and other arrangements under which incentives in relation to Limited Ordinary Shares were agreed with before the effective date of the redomiciliation and the Company replaced all equity awards granted under the Limited Plan with equivalent equity awards for New AccuStem Common Stock. Also, as of the Effective Date, New AccuStem’s 2021 Equity Incentive Plan (the “2021 Plan”), became effective. Any employee, director or consultant of New AccuStem or any of its subsidiary is eligible to participate in the 2021 Plan.

As a result of the redomiciliation an aggregate of 100,005 options were issued during December 2021 in consideration for the share exchange. The issued options had an exercise price of $0.42 per share and all expire on the ten-year anniversary of the grant date. These options were fully vested on the grant date.

In addition, the Company issued 1,307,239 options during the first quarter of 2022 for employees, directors and non-employees under the Incentive Plan.

The options granted have an exercise price ranging from $1.06 to $2.13 and expire on the ten-year anniversary of the grant date.

There were 0no options granted or modified for the three months ended March 31,September 30, 2022. The Company granted 100,005 options for the three months ended September 30, 2021.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the threenine months ended March 31,September 30, 2022, stock option activity for time-based options of the Company are as follows:

 SCHEDULE OF STOCK OPTION ACTIVITY

For the threenine months ended March 31,September 30, 2022, stock option activity for performance-based options of the Company are as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

The aggregate intrinsic value is calculated as the difference between the estimated fair value of the underlying common stock as of March 31,September 30, 2022 and the option exercise price.

Total share-based compensation expense recognized duringwas approximately $38,001 and $21,260, respectively, for the three months ended March 31,September 30, 2022 for optionsand 2021, respectively. For the nine months ended September 30, 2022 and 2021, respectively, share-based compensation was approximately $17,04092,629 and $21,260, whichrespectively.

Total share-based compensation expense is included in General and Administrative expenses on the Condensed Consolidated Statement of Operations and Other Comprehensive Income. There was 0 share-based compensation expense recognized during the three months ended March 31, 2021 for stock options.

The weighted average grant date fair value for stock options granted during the three monthsnine-months ended March 31,September 30, 2022 is $0.76. The performance-based and time-based stock options are equity-classified. There were no stock option granted during the three months ended September 30, 2022.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the option awards withawards. The table below summarizes the following assumptionsresulting weighted average inputs used to calculate the estimated fair value of options awarded for the threenine months ended March 31, 2022:September 30, 2022.

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

SCHEDULE OF STOCK VALUATION ASSUMPTIONS

The risk-free interest rate assumption is determined using the yield currently available on U.S. Treasury zero- coupon issues with a remaining term commensurate with the expected term of the award. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Management has estimated expected volatility based on similar public companies. Expected life of the option represents the period of time options are expected to be outstanding. The estimate for dividend yield is 0% because the Company has not historically paid, and does not intend to pay, a dividend on common stock in the foreseeable future.

As March 31,of September 30, 2022, , there was $980,369904,780 unrecognized compensation expense related to options. $287,030 211,442of this cost is subject to time-based conditions, and is to be recognized over a period of approximately 3.8 3.3years. The remaining $693,338 of unrecognized compensation expense relates to performance-based conditions for unvested options. These costs are expected to be recognized over the required service period once the performance condition has occurred or becomes probable. Compensation costs related to the performance stock options are evaluated at each reporting period and subsequently adjusted for changes in the expected outcomes of the performance conditions.

Warrants

In March 2022, the Company issued 350,000common stock warrants to a non-employee under the Incentive Plan. The common stock warrants are subject to vesting and, grantees become fully vested and exercisable when certain performance requirements are met.

The common stock warrants granted have an exercise price of $1.06. The common stock warrants expire on the ten-year anniversary of the grant date. There were 0no warrants issued during the three months ended March 31, 2021September 30, 2022 and 2021.

A summary of the Company’s warrants to purchase common stock activity is as follows:

SCHEDULE OF WARRANTS OUTSTANDING

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The grant date fair value for these warrants of $0.66per warrant for a total fair value of $232,490. The grant date fair value was determined usingtable below summarizes the Black-Scholes option pricing model. The following assumptions wereresulting weighted average inputs used in estimatingto calculate the estimated fair value of the common stock warrants options awarded for the threenine months ended March 31, 2022:September 30, 2022.

SCHEDULE OF STOCK VALUATION ASSUMPTIONS

There was 0no share-based compensation expense recognized during the three and nine months ended March 31,September 30, 2022 and 2021 for warrants.

As of March 31,September 30, 2022, there was $232,490of total performance-based unrecognized compensation costs related to unvested common stock warrants. These costs are expected to be recognized once the performance condition has occurred or becomes probable.

8.9. RELATED PARTY TRANSACTIONS

Tiziana is a related party as it is under common control. The Company and Tiziana share some directors, officersan officer and significant shareholders. The Company has also been formed due to an acquisition of a subsidiary company from Tiziana, see Notes 1 and 3 for further details.Tiziana. As of March 31,September 30, 2022, Tiziana owns approximately 11.8% of the Company.

As of March 31,September 30, 2022 and December 31, 2021, $0 and $1,558,252respectively, was due from Tiziana in relation to the demerger and supplemental demerger of Limited and StemPrintER, as further discussed in Notes 1 and 3, which consists of the related party receivable and related party subscription receivable on the condensed consolidated balance sheet.

Effective with the demerger agreement, the Company entered into a shared services agreement, where the Company outsources certain limited management and administrative services. The Company notes that the fees consist of payroll costs associated with time spent providing services for the Company and are based on actual time spent and the allocated payroll costs. In addition, the Company is charged at cost, for utilization of certain office space. There was no mark-up associated with fees charged for these services. For the three months ended March 31,September 30, 2022 and 2021, the Company has incurred approximately $3,3184,708 and $4,4262,986, respectively. Total cost for the nine months ended September 30, 2022 and 2021 were $31,154 and $9,166, respectively.

As of March 31,September 30, 2022 and December 31, 2021, $57,199 59,306and $190,838respectively, was also due to Tiziana, as Tiziana had paid for expenses on behalf of the Company.

In January 2022, the Company and Gabriele Cerrone, who is the Chairman of the Board of Directors and the largest shareholder, entered into an agreement in which he will provide consulting services to the Company for a monthly fee of $5,500. As of March 31,September 30, 2022, $16,50049,500 was due to Gabriele CerroneCerrone..

ACCUSTEM SCIENCES INC. AND SUBSIDIARIES10. INCOME TAXES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.INCOME TAXES

The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2022. For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.

On March 27, 2020, Congress enacted the CARES Act to provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, and modification to the net interest deduction limitations. The CARES Act did not have a material impact on the Company’s consolidated financial statements for the threenine months ended March 31,September 30, 2022. The Company continues to monitor any effects on its financial statements that may result from the CARES Act.

The Company has no open tax audits with any taxing authority as of March 31,September 30, 2022.

10.11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved from time to time in various claims, proceedings, and litigation. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable, and the amount of loss can be reasonably estimated. Management has not identified any legal matters where it believes an unfavorable outcome is reasonably possible and/or for which an estimate of possible losses can be made.

11.SUBSEQUENT EVENTS

The Company was listed on the over-the-counter market exchange (“OTCQB”) on April 14, 2022.

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

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 18, 2022. In addition to our historical condensed consolidated financial information, the following contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or the negative thereof or other variations thereon or other comparable terminology. All statements other than statements of historical facts included in this Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding: expectations for revenues, cash flows and financial performance and the anticipated results of our ongoing development and business strategies.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, the following:

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

This report also contains or may contain estimates, projections and other information concerning our industry and our business, including data regarding the estimated size of our markets and their projected growth rates. 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, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

Unless otherwise stated or the context otherwise requires, the terms “AccuStem” “we,” “us,” “our” and the “Company” refer collectively to AccuStem and, where appropriate, its subsidiaries.

Overview

We operateare a clinical stage diagnostics company dedicated to improving quality of life sciences company focused on improvingand outcomes for patientsthe more than 18 million people worldwide who are diagnosed with cancer.cancer each year. Our plan is to develop and commercialize a varietysuite of products innovel genomic tests that support decision making along the diagnostics, pharmaceutical and medical device spaces that enable more informed treatment planning and more effective treatment options for patients.entire continuum of oncology care. Our initial approachfocus will be the commercialization of aour proprietary genomic test, StemPrintER, for patients with early-stage breast cancer, and we estimate this market opportunity represents more than $1.3 billion in annual revenue.

Our primary product candidate is StemPrintER, a 20-gene prognostic assay intended to predict the risk of distant recurrence (“DR”) in luminal (ER+/HER2-negative) breast cancer patients. The assay was developed to measure the “stemness” of tumors, or how much a tumor behaves like stem cells which could indicate how likely a cancer is to recur or be resistant to standard treatments, ultimately impacting how patients are managed by their multi-disciplinary care team. StemPrintER has been validated in several clinical cohorts and studies, the largest of which are a consecutive series of approximately 2,400 patients from the European Institute of Oncology (“IEO”) and approximately 800 patients from the TransATAC study. In the IEO cohort, StemPrintER High Risk patients (“SPRS High”) were 1.85 times more likely to have a distant recurrence compared to Low Risk (“SPRS Low”) patients (Figure 1) and in the TransATAC cohort, SPRS High patients were 4.27 times more likely to experience a distant recurrence compared to SPRS Low Risk patients (Figure 2). Together, these data confirm that StemPrintER is highly prognostic for outcomes in patients with breast cancer and indicate the potential utility of the test in the oncology clinic.

*SPRS- StemPrintER Recurrence Score; SPRS High- StemPrintER High Risk; SPRS Low- StemPrintER Low Risk

Beyond our initial plans for StemPrintER, we believe there is significant opportunity to expand our product portfolio. First, given the broad applicability of tumor “stemness”, which has been evaluated in a multitude of different cancers, we believe the StemPrint platform will have meaningful clinical utility beyond breast cancer. As such, we will seek to validate and commercialize StemPrint for recurrence risk stratificationa variety of different types of cancer. To augment this unique offeringtumor types. Each tumor type, where applicable, would also include ancillary testing to boost our value proposition to physicians and their patients. In addition, we also plan to provideoffer ancillary commodity testing (e.g., hereditary genetic testing, somatic mutation testing) to providethat augments our proprietary assays and provides additional information and value to our clients.

StemPrintER Sciences Limited “StemPrintER” was transferred topatients and physicians throughout the AccuStem Sciences Limited on October 30, 2020 pursuant to the demerger of the StemPrintER and SPARE projects from Tiziana. The objective of the demerger was to maximize value to the shareholders of Tiziana through the further commercialization of the StemPrintER project and its assets and intellectual property. The Demerger will allow us to continue its collaboration strategy to further develop, validate and commercialize the StemPrintER/SPARE platform as a separate listed company.

Since our inception, we have devoted substantially all of our resources to conducting research and development of our product candidate. Our revenue is expected to be derived from different sources including standard private third-party and government medical insurance coverage and reimbursement models.patient care continuum.

We expect our expensesplan to increase substantiallylaunch StemPrintER once we have achieved several key milestones. First, we plan to identify or build a laboratory that will be responsible for processing, testing and reporting StemPrintER results for all commercial samples. Further, we plan to transfer the StemPrintER assay from the laboratories in connection with our ongoing development activities relatedwhich they were developed to our preclinicalcommercial laboratory. Finally, upon establishing testing capabilities in our commercial laboratory, we will seek to obtain U.S. Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certification so that we are able to report results for clinical use and clinical programs.to seek reimbursement from the Centers for Medicare and Medicaid Services. We intendanticipate that it will take at least 18 months to conduct further validation and utility studies with the intention of filing for regulatory review under the CLIA system and, ultimately, for reimbursement review. We also may pursue a strategycomplete these milestones. Once those tasks are complete, we plan to achieve appropriate regulatory review with European and Asian regulatory agencies to expand the addressable market for its products.

We expect to incur additional costs associated with the expansion of our management team and operating as a public companyinitially launch StemPrintER in the United States. We expect that our expensesUS and capital requirements will increase substantially in the nearthen expand to mid-termother markets as we:we evaluate clinical need and revenue opportunity.