Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected Financial Data" and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section entitled "Risk Factors" and in other parts of this Annual Report on Form 10-K. Please also see the section entitled "Special Note Regarding Forward-Looking Statements."

Overview

We are a biotechnology innovator developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. Our primary goal is to advance EQ504, our novel aryl hydrocarbon receptor, or AhR, modulator, into and through clinical development.

As of December 31, 2025, we had $30.3 million in cash and cash equivalents, excluding the gross proceeds of approximately $35.0 million from the closing of the March Private Placement (defined below). From inception through December 31, 2025, substantially all of our efforts have been focused on research, development and the advancement of our clinical and preclinical product candidates. We have not yet generated product sales and as a result have incurred significant operating losses and negative cash flows from operations. As a result, we had an accumulated deficit of $216.2 million as of December 31, 2025. We expect to incur additional losses in the future to conduct research and development for which we will need to raise additional capital to implement.

On August 10, 2025, we entered into a Securities Purchase Agreement, the Purchase Agreement, with certain institutional and accredited investors, the Investors, pursuant to which we agreed to sell and issue shares of our common stock, par value $0.0001 per share, and pre-funded warrants to purchase shares of common stock, in up to two closings in a private placement transaction, the Private Placement. The initial closing of the Private Placement occurred on August 12, 2025. At the Initial Closing, we issued and sold 21,814,874 shares of common stock at a purchase price of $0.57 per share and pre-funded warrants to purchase up to 30,816,705 shares of common stock at a purchase price of $0.5699 per warrant share, the Warrant Price, to the Investors for gross proceeds to us of approximately $30.0 million. The Purchase Agreement also provides for a potential second closing for up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof. For additional information, see Note 9 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

On March 11, 2026, we entered into a Securities Purchase Agreement, the March Purchase Agreement, with a certain institutional and accredited investor, the March Investor, pursuant to which we agreed to sell and issue shares of our common stock and a pre-funded warrant to purchase shares of common stock, the March Private Placement. The initial closing of the March Private Placement occurred on March 13, 2026. At the Closing, we issued and sold 1,179,508 shares of common stock at a purchase price of $1.854 per share and a pre-funded warrant to purchase up to 17,698,593 shares at a purchase price of $1.8539 per warrant share to the March Investor for gross proceeds to us of approximately $35.0 million.

We intend to use the net proceeds from the Private Placement and the March Private Placement to fund the further development of EQ504, working capital and general corporate purposes.

We intend to commence a Phase 1 proof-of-mechanism study for EQ504, a preclinical stage, novel AhR modulator, in mid-2026, with data expected to follow approximately six months thereafter; provided, however, we cannot provide any assurances that we will be able to obtain data within those time frames or that the data which may be obtained will be favorable to the further clinical development of EQ504. Modulation of AhR, in multiple translational models, has been shown to have a therapeutically beneficial impact inducing anti-inflammatory cells and cytokines while reducing proinflammatory cells and cytokines and improving intestinal barrier function and repair. We initially intend to develop EQ504 for the treatment of ulcerative colitis, or UC, and other gastrointestinal, or GI, diseases with potential indication expansion opportunities for the treatment of inflammatory lung diseases. We acquired the exclusive worldwide rights to EQ504 through the acquisition of Ariagen, Inc., or Ariagen, in October 2024.

We acquired the exclusive worldwide rights to EQ302 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates, such as EQ302, through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. That product discovery platform can be leveraged to design novel peptides to target and inhibit multiple cytokines that are involved in validated biological and disease pathways.

EQ302 is a preclinical-stage, first-in-class, selective, bi-specific inhibitor of IL-15 and IL-21 formulated for oral delivery. Inhibiting IL-15 and IL-21 is believed to be an effective treatment approach for certain GI indications, including celiac disease. Preclinical and translational data has shown that EQ302 is a potent inhibitor of those two cytokines and is stable and permeable in the gut. Based on the unique mechanism of action of EQ302 and its product profile, including the advantage of oral delivery, we believe that EQ302 has the potential to be an attractive therapeutic option for GI diseases, such as celiac disease. We are evaluating further advancement of EQ302, including product manufacturing and toxicology studies capable of supporting a potential IND filing and a first-in-human clinical study.

On September 30, 2025, the Termination Date, we entered into a termination agreement with Biocon Limited, Biocon and the agreement, the Termination Agreement, pursuant to which we terminated that certain (i) collaboration and license agreement with Biocon, dated May 22, 2017, as amended September 28, 2018, April 22, 2019, December 10, 2019, and April 14, 2021 (the Biocon License), (ii) the Memorandum of Understanding dated April 7, 2022, the MoU, and (iii) certain other corresponding agreements, collectively with the Biocon License and MoU, the Biocon Agreements, with all licenses granted by Biocon to us under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. As consideration for certain technical services that we were obligated to provide to Biocon following the Termination Date, Biocon agreed to pay us a technical service fee of $0.4 million. In lieu of Biocon paying the technical service fee to us, Biocon agreed to set off amounts which we owed to Biocon under or in connection with the Biocon Agreements through the Termination Date, with the amount of such set-off to equal such technical service fee, plus any other amount that have been or may be invoiced by us to Biocon for work performed by us with respect to itolizumab through the Termination Date, and to be limited to the aggregate amounts that have been or may be invoiced by Biocon to us, or are or may be otherwise owed to Biocon, under or in connection with the Biocon Agreements through the Termination Date. We completed our performance obligations under the Termination Agreement in the fourth quarter of 2025, resulting in the set off of amounts owed by us to Biocon totaling $0.4 million which was recorded as a reduction of research and development expense in our consolidated statement of operations in the year ended December 31, 2025.

Since our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing product rights, conducting preclinical development, filing INDs, conducting clinical development, conducting CMC and formulation development activities, conducting business development activities and the general and administrative activities associated with operating a public biotech company focused on advancing novel therapeutics. We have generated revenue from our Asset Purchase Agreement with Ono, related to a one-time, upfront payment from Ono in exchange for an exclusive option to acquire our rights to itolizumab (EQ001), or the Option, as well as from itolizumab (EQ001) development funding from Ono. Ono made a strategic business decision to allow its Option to expire on October 30, 2024 and, as a result, the Asset Purchase Agreement automatically terminated on that date pursuant to its terms. We have not generated any revenue from product sales, milestone payments or royalties. Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the Asset Purchase Agreement.

We have incurred losses since our inception. For the years ended December 31, 2025 and 2024, our net losses were $22.4 million and $8.1 million, respectively. As of December 31, 2025, we had an accumulated deficit of $216.2 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, preclinical and clinical activities and general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and operating losses into the foreseeable future. We anticipate our expenses will increase substantially as we advance our research and development activities for EQ504, potentially pursue any future development of EQ302, potentially expand the indications for which we conduct clinical development of our product candidates, potentially acquire or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property, and incur general corporate costs. We expect that our existing cash and cash equivalents as of December 31, 2025 plus the gross proceeds from the March Private Placement will enable us to fund our operations into 2029.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for EQ504, EQ302, or any future product candidate, which is unlikely to happen within the next 12 months, if ever. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. However, we may not be able to secure additional financing or enter into such other arrangements in a timely manner or on favorable terms, if at all. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses by

government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including from diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, reduce or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Financial Overview

Revenue

To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. In 2022, 2023 and 2024, our revenues were derived from an upfront payment under the Asset Purchase Agreement as well as from development funding from Ono. In the future, we may generate revenue from collaboration or license agreements we may enter into with respect to our product candidates, as well as product sales from any approved product, which approval is unlikely to happen within the next 12 months, if ever. Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ504 and any future product candidates. If we fail to complete the development of EQ504, or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.

On December 5, 2022, we entered into the Asset Purchase Agreement pursuant to which we granted Ono the Option in exchange for a one-time, upfront payment of an amount equal to JPY 3.5 billion, or $26.4 million. These rights included all therapeutic indications and the rights to commercialize itolizumab in the United States, Canada, Australia, and New Zealand.

We were responsible for conducting all research and development of itolizumab, which was funded by Ono on a quarterly basis from July 1, 2022, through October 30, 2024, the end of the option period. On October 30, 2024, the option period expired and the Asset Purchase Agreement automatically terminated pursuant to its terms.

As of December 31, 2024, there was no further deferred revenue related to the Asset Purchase Agreement.

Research and Development Expenses

Research and development expenses primarily consist of costs associated with our nonclinical research and clinical development of our product candidates. Our research and development expenses include:

We expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

Our direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our nonclinical research and clinical development.

Equillium Australia Pty Ltd, or Equillium Australia, a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program, or the Tax Incentive, to obtain a cash refund from the Australian Taxation Office, or ATO, for eligible research and development expenditures. The cash refund is received by Equillium Australia, upon filing of a claim in connection with Equillium Australia's annual income tax return. The Tax Incentive is a self-assessed program whereby Equillium Australia must assess its eligibility each year to determine (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures. The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.

We plan to continue to incur substantial research and development expenses for the foreseeable future as we advance the development of EQ504, and potentially EQ302, potentially expand the number of indications for which we are developing those product candidates, and potentially acquire or develop new product candidates. The successful development of EQ504 and EQ302 is highly uncertain. At this time, due to the inherently unpredictable nature of preclinical and clinical development, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our product candidates or the period, if any, in which material net cash inflows from the sales from our product candidates may commence. Clinical development timelines, the probability of success, and development costs can differ materially from expectations.

Completion of planned of future clinical studies may take several years or more, and the length of time generally varies according to the type, complexity, novelty, and intended use of a product candidate. The cost of clinical studies may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation and benefits, and consulting fees for executive, human resources, investor relations, finance, and accounting functions. Other significant costs include legal fees relating to patent and corporate matters, insurance, travel, board expenses, facility costs and taxes.

We anticipate that our general and administrative expenses will increase in future periods, reflecting an expanding infrastructure, increased legal, audit, tax and other professional fees associated with being a public company and maintaining compliance with stock exchange listing and SEC requirements, director and officer insurance premiums associated with being a public company, and accounting and investor relations costs. In addition, if we obtain regulatory approval for any product candidate, we expect to incur expenses associated with building the infrastructure and capabilities to commercialize such product. However, the timing of any such approval is highly uncertain, and it may be several years, if ever, that we receive any such regulatory approval.

Interest Income

Interest income consists primarily of interest income earned on cash, cash equivalents and short-term investments, and is recognized when earned.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency transaction gains and losses related to our Australian subsidiary.

Income Tax Expense

Income tax expense consists of federal and state income tax expense.

Results of Operations

Comparison of the Years Ended December 31, 2025 and 2024

The following table sets forth our results of operations for the years ended December 31, 2025 and 2024 (in thousands):

Revenue

During the year ended December 31, 2025, there was no revenue recognized under our Asset Purchase Agreement with Ono. During the year ended December 31, 2024, we recognized revenue of $41.1 million under our Asset Purchase Agreement with Ono. For the year ended December 31, 2024, development funding represented $28.3 million and amortization of the upfront payment represented $12.8 million.

Research and Development Expenses

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We separate our research and development costs into two broad categories: direct and indirect. Additionally, with respect to direct research and development expenses, we further divide expenses into the following product candidate categories: Itolizumab (EQ001), EQ101, EQ102, EQ504 and EQ302. Itolizumab (EQ001) includes sub-categories for the clinical studies associated with itolizumab (EQ001) including our EQUATOR, EQUALISE and UC study with Biocon. For direct research and development expenses, we track specific project research and development expenses that are directly attributable to our preclinical and clinical development product candidates that have been selected for further development. Such direct research and development expenses include nonclinical and clinical trial activities, external expenses related to CMC and supply of drug product and consulting expenses.

All remaining research and development expenses are categorized as indirect research and development expenses. Such indirect research and development expenses include employee compensation and benefits (including stock-based compensation expenses) and general overhead costs such as costs associated with our facilities and lab supplies. These expenses are not directly tied to any individual product candidate or clinical study and are generally deployed across multiple studies. As such, we do not maintain information regarding those costs incurred on an individual product candidate or clinical study basis.

Research and development expenses were $12.8 million for the year ended December 31, 2025, compared to $37.4 million for the year ended December 31, 2024.

Research and development expenses decreased by $24.6 million for the year ended December 31, 2025. Direct external expenses decreased significantly for the year ended December 31, 2025 compared to the same period in 2024 due to the wind down of our clinical studies in 2025 including lower clinical development expenses, lower CMC activities with Biocon and lower consulting expenses primarily related to the wind down of our EQUATOR study. In addition, we negotiated discounts with our clinical vendors on outstanding accounts payable which were recorded as a reduction to research and development expense during the year ended December 31, 2025. Indirect expenses decreased for the year ended December 31, 2025 compared to the same period in 2024 driven by lower employee compensation and benefits due to lower headcount caused by the wind down of our clinical studies.

We expect research and development expenses in future periods to increase primarily due to the advancement of EQ504, our novel AhR modulator, into and through clinical development.

General and Administrative Expenses

General and administrative expenses were $10.8 million for the year ended December 31, 2025, compared to $11.9 million for the year ended December 31, 2024.

The decrease of $1.1 million in general and administrative expenses for the year ended December 31, 2025, compared to the same period in 2024, was primarily related to decreases of (i) $0.6 million in overhead primarily due to lower franchise taxes, directors and officers insurance costs and travel and (ii) $0.5 million in legal expenses.

Interest Income

Interest income was $0.8 million for the year ended December 31, 2025, compared to $1.4 million for the year ended December 31, 2024. The decrease in interest income was primarily due to lower average cash, cash equivalents and short-term investment balances in 2025 compared to 2024.

Other Income (Expense), Net

Other income (expense), net was other income of $0.4 million for the year ended December 31, 2025, compared to other expense of $0.8 million for the year ended December 31, 2024. The change in other income (expense), net for the year ended December 31, 2025, compared to the same period in 2024, was primarily due to fluctuations in net foreign currency transaction unrealized gains and losses.

Income Tax Expense

There was no income tax expense for the year ended December 31, 2025. Income tax expense was $0.4 million for the year ended December 31, 2024. Our 2024 income tax expense was primarily attributable to domestic cash tax expense resulting from differences between book and tax treatment of certain items. We do not record a deferred tax provision as there is a full valuation allowance offsetting our deferred tax assets.

Liquidity and Capital Resources

From inception through December 31, 2025, we have financed our operations primarily through the sale of equity and debt securities and income generated from our Asset Purchase Agreement with Ono as described in more detail in the Sources of Liquidity section below. As of December 31, 2025, we had an accumulated deficit of $216.2 million and anticipate that we will continue to incur net losses for the foreseeable future. As of December 31, 2025, we had $30.3 million in cash and cash equivalents, excluding the gross proceeds of approximately $35.0 million from the Company's equity financing in March 2026.

Sources of Liquidity

August Securities Purchase Agreement

On August 10, 2025, we entered into the Purchase Agreement with the Investors, pursuant to which we agreed to sell and issue shares of our common stock, par value $0.0001, and pre-funded warrants to purchase shares of common stock, in up to two closings in the Private Placement.

The Initial Closing of the Private Placement occurred on August 12, 2025. At the Initial Closing, we issued and sold 21,814,874 shares of common stock at a purchase price of $0.57 per share and pre-funded warrants to purchase up to 30,816,705 shares of common stock at a purchase price of $0.5699 per warrant share, the Warrant Price, to the Investors for gross proceeds to us of approximately $30.0 million. Net proceeds from the Private Placement were $27.9 million, after deducting placement agent fees and offering expenses totaling $2.1 million.

The Purchase Agreement also provides for a potential second closing for up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof. There can be no assurance that the specified milestones will be met or that the investors will purchase additional shares of common stock or pre-funded warrants in a second closing. For additional information, see Note 9 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

2023 ATM Facility

In October 2023, we entered into an at-the-market facility with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $21.95 million from time to time through Jefferies acting as our sales agent, or the 2023 ATM Facility. There were no shares sold under the 2023 ATM Facility from October

2023 through December 31, 2024. In March 2025, there were 109,410 shares sold under the 2023 ATM Facility for gross proceeds of $55,000. Issuance costs related to the 2023 ATM Facility totaled $0.5 million through March 31, 2025.

On August 3, 2025, we entered into Amendment No. 1 to the 2023 ATM Facility pursuant to which Jefferies was replaced by LifeSci Capital LLC as the sales agent under the 2023 ATM Facility. During the year ended December 31, 2025, there were 1,610,075 shares of common stock sold under the 2023 ATM Facility, as amended, for gross proceeds of approximately $0.9 million. During the year ended December 31, 2025, issuance costs related to the 2023 ATM Facility, as amended, totaled $0.2 million.

On September 19, 2025, we filed a prospectus supplement with the SEC under which we may offer and sell shares of our common stock having an aggregate offering price of up to $75.0 million, pursuant to the 2023 ATM Facility, as amended.

As of December 31, 2025 and through the date of the filing of this Annual Report on Form 10-K, there were no additional shares of common stock sold under the 2023 ATM Facility, as amended.

March Securities Purchase Agreement

On March 11, 2026, we entered into the March Purchase Agreement with the March Investor, pursuant to which we agreed to sell and issue shares of our common stock, par value $0.0001, and a pre-funded warrant to purchase shares of common stock. The closing of the March Private Placement occurred on March 13, 2026. At the closing, we issued and sold 1,179,508 shares at a purchase price of $1.854 per share and a pre-funded warrant to purchase up to 17,698,593 shares at a purchase price of $1.8539 per warrant share to the March Investor for gross proceeds to us of approximately $35.0 million.

Funding Requirements

We expect our expenses to increase substantially as we advance our research and development activities, including resuming development of our preclinical asset, EQ504 and potentially resuming development of EQ302. We expect that our primary uses of capital will be for nonclinical research, clinical development, CMC activities, formulation development, product supply, potential acquisition of new products, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.

We believe that our cash and cash equivalents as of December 31, 2025 plus with proceeds from the March Private Placement can fund operations into 2029. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Furthermore, our operating plans may change, and we may need additional funds sooner than planned. Additionally, the process of testing product candidates in clinical studies is costly, and the timing of progress in these studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ504 and EQ302, or any of our other product candidates or whether, or when, we may achieve profitability.

Our future capital requirements will depend on many factors, including:

Until such time as we can generate product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. The sale of additional equity or convertible debt could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we raise additional funds through collaboration or license agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or other operations. Any of these actions could have a material effect on our business, financial condition and results of operations. We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $216.2 million as of December 31, 2025. We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ504, EQ302 and any of our other product candidates.

Material Cash Requirements

Our expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Note 6 and 10 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments upon the achievement by us of regulatory and commercial milestones that we may be required to make under the terms of the merger agreement pursuant to which we acquired Bioniz or potential contingent payments upon the achievement by us of regulatory milestones that we may be required to make under the terms of our stock purchase agreement with Ariagen, nor do they include potential contingent payments upon the achievement by us of regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we may enter into with various entities.

Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods set forth below (in thousands):

Operating Activities

During the year ended December 31, 2025, cash used in operating activities was $22.7 million compared to $19.0 million during the year ended December 31, 2024. Cash used in operating activities during the year ended December 31, 2025 primarily related to our net loss of $22.4 million, adjusted for non-cash items of $2.0 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in other operating assets and liabilities of $2.3 million. Cash used in operating activities during the year ended December 31, 2024 primarily related to our net loss of $8.1 million, adjusted for non-cash items of $3.9 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $14.9 million.

Investing Activities

Net cash provided by investing activities was $4.5 million during the year ended December 31, 2025 and primarily consisted of maturities of our short-term investments.

Net cash provided by investing activities was $13.8 million during the year ended December 31, 2024. Maturities of our short-term investments totaled $31.5 million, which was offset by purchases of short-term investments totaling $17.6 million during the period. Purchases of property and equipment for the year ended December 31, 2024 totaled $0.1 million.

Financing Activities

Net cash provided by financing activities totaled $30.4 million during the year ended December 31, 2025 and primarily consisted of net proceeds from the sale of shares under the Private Placement transaction totaling $27.9 million, proceeds totaling $1.8 million from the exercise of stock options and net proceeds from the sale of shares under our 2023 ATM Facility totaling approximately $0.7 million.

Net cash provided by financing activities totaled $0.2 million during the year ended December 31, 2024 and was primarily attributed to cash received from employee stock purchases related to our Employee Stock Purchase Plan.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, and similarly did not and do not have any holdings in variable interest entities. We do have certain contingent consideration liabilities in the form of potential milestone payments that are included in our merger agreement with Bioniz and our stock purchase agreement with Ariagen which are not reflected in our balance sheet. However, based on our current operating plans and our assessment of the probability and potential timing of such payments, we believe those payments, if any, are remote and highly unlikely to come due within the next 12 months.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. We evaluate these estimates on an ongoing basis. We base our estimates on historical experience, known trends and events, financial models and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Accrued Research and Development Expense

We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants and contract research organizations, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. We reflect research and development expenses in our consolidated financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the nonclinical study or clinical study as measured by the timing of various aspects of the study or related activities. We determine accrual estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and other key personnel as to the progress of studies, or other services being conducted. During the course of a study or clinical study, we adjust our rate of expense recognition if actual results differ from our estimates.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-based Compensation Expense

We measure employee and non-employee stock-based awards, including stock options and stock purchase rights, at grant-date fair value and record compensation expense on a straight-line basis over the vesting period of the award. We use the Black-Scholes option pricing model to value our stock option awards. Estimating the fair value of stock option awards requires management to apply judgment and make estimates of certain assumptions, including the volatility of our common stock, the expected term of our stock options and the expected dividend yield on the measurement date. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

Recent Accounting Pronouncements

See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information concerning recent accounting pronouncements.