10-Q: Coeptis Q2: Biotech Spin-Out & AI Revenue Growth

Coeptis Therapeutics reports increased cash and new revenue from its technology segment, alongside a planned biotech spin-out and ongoing significant losses.

Summary

• Cash increased significantly to $1,996,726 as of June 30, 2025, up from $532,885 at December 31, 2024.
• Total assets grew to $12,191,479 by June 30, 2025, from $8,908,660 at December 31, 2024.
• The company reported sales of $263,555 for the six months ended June 30, 2025, compared to $0 in the prior year period, primarily from its new Technology segment.
• Net loss for the six months ended June 30, 2025, increased to $(7,755,527) from $(6,036,733) in the same period last year.
• Loss per share for the six months ended June 30, 2025, was $(2.29), compared to $(0.17) in the prior year, impacted by a 20-1 reverse stock split.
• Net cash used in operating activities increased to $(4,762,909) for the six months ended June 30, 2025, from $(3,320,121) in the prior year.
• The company successfully closed the remaining $5.7 million of its Series A preferred stock offering, completing a total $10.0 million financing round.
• An Agreement and Plan of Merger with Z Squared, Inc. was entered into on April 25, 2025, which includes a spin-out of Coeptis's biotechnology operations.
• The company licensed exclusive worldwide development and commercialization rights to the GEAR Cell Therapy Platform from Vy-Gen-Bio, Inc. in March 2025.
• Internal control over financial reporting weaknesses identified in 2023 have been remediated, and disclosure controls and procedures were deemed effective as of June 30, 2025.

Sentiment

Score: 4

Explanation: The company shows some positive strategic developments (new licenses, new revenue stream, merger plans) and has successfully raised capital, which is critical given its 'going concern' status. However, the financial performance continues to deteriorate with increasing net losses and cash burn, indicating a challenging path to profitability. The high dilution from financing activities and the inherent risks of early-stage biotech development temper optimism.

Positives

• Cash position significantly improved to $1,996,726, indicating successful capital raising efforts.
• New revenue stream generated $263,555 from the Technology segment (NexGenAI Affiliates Network platform) for the six months ended June 30, 2025, demonstrating initial commercialization success in this new area.
• Secured exclusive worldwide development and commercialization rights to the GEAR Cell Therapy Platform, a first-in-class approach for cancer treatment, enhancing the biotechnology pipeline.
• Successfully completed a $10.0 million Series A preferred stock offering, providing crucial funding for operations.
• FDA designated the CD38-Diagnostic as a Class II type device, providing clarity for future development activities.
• Remediation of previously identified material weaknesses in internal control over financial reporting and effective disclosure controls as of June 30, 2025, indicate improved financial governance.

Negatives

• Net loss increased to $(7,755,527) for the six months ended June 30, 2025, compared to $(6,036,733) in the prior year, indicating continued unprofitability.
• Cash used in operating activities increased to $(4,762,909) for the six months ended June 30, 2025, from $(3,320,121), reflecting a higher cash burn rate.
• Accumulated deficit grew to $(105,989,201) as of June 30, 2025, highlighting significant historical losses.
• Professional services expense increased substantially to $5,301,187 for the six months ended June 30, 2025, from $2,045,087, driven by merger-related consulting and legal fees.
• The company's convertible note with an unrelated third party was in default as of June 30, 2025, with an outstanding balance of $100,000 (though later paid in Q1 2025).
• Significant dilution occurred due to the conversion of convertible notes into common stock and the exercise of warrants.

Risks

• The company's accumulated deficit of $105,989,201 and net loss of $7,755,527 for the six months ended June 30, 2025, raise substantial doubt about its ability to continue as a going concern.
• There is no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.
• Risks include the failure to successfully develop a profitable business, delays in identifying customers, and the inability to retain a significant number of customers.
• Warrants may expire worthless if the Business Combination is not completed within the Combination Period.
• The Standby Equity Purchase Agreement (SEPA) with Yorkville is subject to an Exchange Cap (19.99% of outstanding common stock) unless stockholder approval is obtained, which could limit future capital raises through this mechanism.
• Amortization events for convertible notes can be triggered if the daily Volume Weighted Average Price (VWAP) falls below a specified floor price or if the Exchange Cap is reached, potentially forcing accelerated repayments or conversions.

Future Outlook

Management does not expect to generate significant revenue from the Biotechnology segment for at least the next two years, as drug development continues towards commercialization. The company plans to raise additional capital through equity or debt to pursue business plans and sustain operations until profitability is achieved. The merger with Z Squared, Inc. and the spin-out of biotechnology operations are expected to close in 2025, which will involve a name change for Coeptis.

Management Comments

• Management believes that additional financing as necessary will result in improved operations and cash flow, though there can be no assurance of success in obtaining funding or attaining profitable operations.
• Management does not expect the company to generate any significant revenue for at least the next two years, during which time drug development will continue toward the goal of commercializing, through a partnership or otherwise, one or more of the company's target products or technologies.
• The company will continue to pursue drug development toward the goal of commercializing, through a partnership or otherwise, one or more of the company's target products or technologies.

Industry Context

Coeptis is navigating the high-risk, high-reward landscape of biopharmaceutical and technology development. Its strategic shift to two distinct segments (Biotechnology and Technology) reflects a diversification effort. The acquisition of NexGenAI positions it in the growing AI-powered marketing automation space, while its continued focus on cell therapy platforms (GEAR, SNAP-CAR) aligns with cutting-edge oncology and autoimmune research. The licensing of exclusive worldwide rights to the GEAR platform is a significant step in the competitive cell therapy market, aiming to optimize cancer treatments. The planned spin-out of the biotechnology operations suggests a strategic move to potentially unlock value or streamline focus, a common trend in diversified companies with distinct high-growth, capital-intensive segments.

Comparison to Industry Standards

• The company's accumulated deficit of over $105 million and continued net losses are typical for early-stage biopharmaceutical companies, which require substantial R&D investment before commercialization. For example, many pre-revenue biotech firms like Editas Medicine or CRISPR Therapeutics also report significant losses during their clinical development phases.
• The increased cash burn from operating activities is consistent with a company actively investing in product development and expanding its operational capabilities, similar to other small-cap biotech firms that rely heavily on financing rounds.
• The successful $10.0 million Series A preferred stock offering demonstrates an ability to attract capital, which is crucial for a 'going concern' company. This is comparable to early-stage funding rounds seen in other emerging biotech or tech ventures, though the terms (e.g., dilution) would need deeper analysis for a direct comparison.
• The licensing of exclusive worldwide rights to the GEAR Cell Therapy Platform from Vy-Gen-Bio, Inc. is a strategic move to acquire promising intellectual property, a common practice in the biotech industry. This mirrors licensing deals by larger pharmaceutical companies seeking to expand their pipelines, such as Gilead Sciences' acquisitions of cell therapy assets.
• The entry into the AI-powered marketing software space with NexGenAI is a diversification strategy. While not directly comparable to its biotech peers, this move aligns with broader industry trends of technology integration across sectors, potentially offering a near-term revenue stream that many pure-play biotechs lack.

Management Changes

Corporate Governance

Related Party Transactions

• In September 2023, the company entered into a transaction with AG Bio Life Capital I LP (AG), where an employee of the company is the general partner. A promissory note of $600,000 (AG Note) was satisfied on August 12, 2024, by AG transferring $522,667 in shares of common stock in a privately held company to Coeptis.
• As of June 30, 2025, the company holds investments in certain privately held companies with a carrying value of $6,941,083, in which the company's Chief Executive Officer and Chief Financial Officer each hold ownership interests.

Stakeholder Impact

• **Shareholders**: Significant dilution from recent and ongoing capital raises (Series A preferred stock, convertible notes, SEPA, new private placement) and the 20-1 reverse stock split. The planned spin-out of the biotechnology segment and merger with Z Squared, Inc. will fundamentally change the company's structure and potentially its share price dynamics.
• **Employees**: Resignation of a key executive (Chief Scientific and Medical Officer) may impact R&D leadership. The company is hiring additional resources to strengthen internal controls.
• **Customers**: The new Technology segment (NexGenAI) is generating revenue from customers for marketing and webinar services, indicating new service offerings and potential for growth in this area.
• **Creditors**: A convertible note was in default as of June 30, 2025, though it was subsequently paid. The company continues to rely on debt and equity financing to manage its liquidity and operations.
• **Regulatory Authorities**: The FDA's Class II designation for CD38-Diagnostic provides a clearer regulatory pathway for this product.

Next Steps

• Continue drug development efforts towards commercialization of target products or technologies, potentially through partnerships.
• Close the merger transaction with Z Squared, Inc. and effect the spin-out of biotechnology operations in 2025.
• Change the company's name upon the closing of the merger with Z Squared, Inc.
• Make future performance-based license fees, milestone, and royalty payments for the GEAR Cell Therapy Platform.
• Continue pre-clinical and clinical development under the grant agreement with Alici Lab at Karolinska Institutet, with quarterly payments of $105,000.
• Assess investments in privately held companies for impairment on an annual basis.
• Continue to pursue additional financing through sales of equity or debt securities to sustain operations and achieve profitability.

Key Dates

Recommendation

Coeptis Therapeutics is in a highly speculative phase, marked by significant strategic developments (new licenses, merger, spin-out) and the successful securing of substantial financing. These actions are crucial for its continued operation, especially given the explicit 'going concern' warning. However, the company's financial performance shows increasing net losses and cash burn, indicating a long and uncertain path to profitability. The high dilution from recent capital raises and debt conversions is a major concern for existing shareholders. For a seasoned investor, this stock represents a high-risk, high-reward proposition. While the strategic moves offer potential long-term upside, the immediate financial challenges and inherent risks of early-stage biotech and technology development warrant caution. Therefore, a 'hold' recommendation is appropriate for existing investors who are willing to tolerate high risk and believe in the long-term vision, but it is not a 'buy' for new investors due to the significant downside potential and lack of clear near-term catalysts for sustained profitability.

Keywords

Biotechnology, Cell Therapy, Oncology, AI Marketing, SEC Filing, 10-Q, Financial Results, Merger, Spin-Out, Capital Raise, Going Concern, GEAR Cell Therapy, SNAP-CAR, CD38-Diagnostic, NexGenAI