Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 our unaudited condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report. This Quarterly Report contains forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions, and beliefs. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those discussed in these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" under Part II, Item 1A of this Quarterly Report and those discussed in our other disclosures and filings. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. All historical common share data and per-share amounts prior to the Merger (as defined below) have been retrospectively adjusted to reflect the exchange ratio of 0.2016 per one share, which was determined in accordance with the Merger Agreement (as defined below).

Overview

We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapeutics aimed at becoming the standard of care for prevalent retinal diseases for which there is a major unmet medical need.

We are developing TH103, a novel, clinical stage anti-vascular endothelial growth factor ("VEGF") drug, engineered to potentially provide longer lasting and increased anti-VEGF activity in patients with exudative and neovascular retinal diseases. TH103 is a fully humanized recombinant fusion protein, functioning as a "decoy receptor" (a VEGF trap), leveraging salient molecular properties of the human body's native, highest affinity VEGF receptor 1. In head-to-head preclinical studies, TH103 showed more anti-VEGF activity and longer duration of activity compared to aflibercept, the current global market-leading anti-VEGF agent, which also functions as a decoy receptor VEGF trap but differs from TH103 in key molecular elements.

We are enrolling an open label Phase 1a single ascending dose clinical trial of TH103 in patients with neovascular Age-related Macular Degeneration ("nAMD"), a leading cause of blindness in the United States and Europe that affected an estimated 1.6 million adults in the United States in 2023, and we expect to report initial clinical data, including safety, preliminary efficacy (e.g., visual acuity and lesion morphology), and pharmacokinetics, from the Phase 1a clinical trial by year end 2025. We are also enrolling a Phase 1b/2 multiple ascending dose clinical trial of TH103 in patients with nAMD, which is intended to build upon our ongoing Phase 1a clinical trial. The Phase 1b/2 dose-finding trial is designed to evaluate multiple dose levels of TH103 in up to 80 nAMD patients. In the trial, patients are expected to receive four initial monthly intravitreal injections of TH103 and assessments are expected to include safety and preliminary efficacy with a primary time point for analysis at one month following the last injection. Patients will then be followed in an extension phase of the study. The Phase 1b/2 clinical trial replaces a smaller Part 2 design originally planned to follow the ongoing Phase 1a clinical trial, and we expect to report initial clinical data from the Phase 1b/2 clinical trial in the second half of 2026. We also plan to expand the development of TH103 beyond nAMD into other prevalent VEGF-mediated retinal diseases, such as Diabetic Macular Edema ("DME"), diabetic retinopathy ("DR"), and Retinal Vein Occlusion ("RVO").

Since our inception in September 2019, we have devoted substantially all of our resources to organizing and staffing, business planning, raising capital, acquiring technology, establishing our intellectual property portfolio and performing research and development of our product candidate. We do not have any products approved for sale and have not generated any revenue from product sales or otherwise. We have incurred significant losses and negative cash flows from operations since our inception. Our net losses were $33.4 million and $47.1 million for the nine months ended September 30, 2025 and 2024, respectively. Our negative cash flows from operations were $31.3 million and $12.8 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $150.0 million. To date, we have funded our operations primarily from sales of our redeemable convertible preferred stock, issuances of convertible promissory notes and a simple agreement for future equity ("SAFE"), and from cash and cash equivalents of AlloVir, Inc. ("AlloVir") received in the Merger (as defined below). From inception through September 30, 2025, we have received gross proceeds of $67.5 million from sales of redeemable convertible preferred stock, issuances of convertible promissory notes and a SAFE, and we received cash and cash equivalents of AlloVir of approximately $102.1 million in the Merger.

As of September 30, 2025, we had $77.0 million in cash, cash equivalents and short-term investments. Based on our current operating plans, our management expects that our cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. However, management has based these estimates on assumptions that may prove to be wrong, and our operating plans may change as a result of many factors currently unknown to us. In addition, changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. As a result, we could deplete our capital resources sooner than we currently expect.

We expect to continue to incur substantial losses for the foreseeable future, including costs associated with operating as a public company. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for our product candidate. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidate, which may never occur. We may never achieve or maintain profitability. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

We anticipate that our expenses will increase substantially if and as we:

We do not currently own or operate any drug development or manufacturing facilities. We rely on Contract Development and Manufacturing Organizations ("CDMOs") to help develop and produce TH103 in accordance with the U.S. Food and Drug Administration's ("FDA") current Good Manufacturing Practices regulations for use in our clinical trials. We use external contract research organizations ("CROs") to conduct our preclinical studies and clinical trials.

Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for our product candidate, we also expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Because of the numerous risks and uncertainties associated with product development, our management is unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability, if at all. Even if we are able to generate revenue from the sale of our product candidate, we may not achieve or maintain profitability. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

Macroeconomic Trends

The disruption and volatility in the global and domestic capital markets resulting from heightened inflation, current and potential tariffs and other trade restrictions, interest rate and currency rate fluctuations, disruptions at government agencies under the new U.S. administration (such as workforce reductions or funding cuts), any potential economic slowdown or recession, including trade wars or civil or political unrest (such as the ongoing war between Ukraine and Russia, conflict in the Middle East, and tension between China and Taiwan) may increase the cost of capital and limit our ability to access capital. These and similar adverse market conditions may negatively impact our business, financial position and results of operations.

Additionally, this past spring, the U.S. administration initiated a series of tariff-related actions against U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. The U.S. has reached agreements with certain of these countries. On July 31, 2025, President Trump issued an Executive Order detailing new reciprocal tariff rates for individual countries that took effect on August 7, 2025. The new reciprocal rates, which are consistent with the rates reflected in the trade deals already announced, range from 10% to 41%. The new rates do not apply to Canada, China, Mexico and a few other countries. While we have not experienced, and do not currently expect to experience, any direct impact from these tariffs and retaliatory measures, the full extent of the future impact of these and other threatened measures remains uncertain. We continue to monitor these tariffs and retaliatory measures and their possible effects on our business.

Recent Financing

In October 2024, Kalaris Tx, Inc. (formerly, Kalaris Therapeutics, Inc), a Delaware corporation ("Legacy Kalaris") entered into a convertible note purchase agreement with Samsara BioCapital L.P. ("Samsara") to issue to Samsara and other investors who subsequently joined the agreement up to $25.0 million of convertible promissory notes with a maturity date of May 31, 2025 (the "Convertible Note Financing"). In October and November 2024, Legacy Kalaris received $10.0 million from the initial closings of the Convertible Note Financing. Under the Merger Agreement (as defined below), Legacy Kalaris was permitted to issue additional convertible promissory notes pursuant to the Convertible Note Financing or otherwise to fund its operations prior to the closing of the Merger (as defined below) in an amount not to exceed $15.0 million in the aggregate on a to be converted post-money basis, with up to $7.5 million to be provided by AlloVir and up to $7.5 million to be provided by existing Legacy Kalaris stockholders (the "Additional Permitted Bridge Financing"). In January 2025, as part of the first tranche of the Additional Permitted Bridge Financing, Legacy Kalaris issued a convertible promissory note in an aggregate principal amount of up to $7.5 million to AlloVir (the "AlloVir Note") under which AlloVir funded a principal amount of $3.75 million, and Legacy Kalaris issued convertible promissory notes in an aggregate principal amount of $3.75 million to existing Legacy Kalaris stockholders. No additional tranches of the convertible notes financing closed prior to the closing of the Merger. Immediately prior to the closing of the Merger, Legacy Kalaris' outstanding convertible promissory notes held by its existing stockholders were converted into shares of Legacy Kalaris' common stock or shares of Legacy Kalaris' Series B-2 redeemable convertible preferred stock ("Series B-2 Preferred Stock") that were then converted into shares of Legacy Kalaris' common stock, which, at the effective time of the Merger, were converted into the right to receive shares of AlloVir's common stock calculated in accordance with the Exchange Ratio (as defined below). Immediately prior to the closing of the Merger, Legacy Kalaris' outstanding convertible promissory note issued to AlloVir was cancelled.

Merger with AlloVir

On March 18, 2025 (the "Closing Date"), AlloVir consummated the previously announced merger (the "Merger") pursuant to the terms of the Agreement and Plan of Merger, dated as of November 7, 2024 (the "Merger Agreement"), by and among AlloVir, Aurora Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of AlloVir ("Merger Sub") and Legacy Kalaris.

In connection with the Merger, at the effective time of the Merger (the "Effective Time"), Merger Sub merged with and into Legacy Kalaris, with Legacy Kalaris continuing as a wholly-owned subsidiary of AlloVir and the surviving corporation of the Merger and, after giving effect to the Merger, Legacy Kalaris became a wholly-owned subsidiary of AlloVir, and immediately following the Effective Time, AlloVir changed its name to "Kalaris Therapeutics, Inc." At the Effective Time, our business became primarily the business conducted by Legacy Kalaris.

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, all issued and outstanding shares of Legacy Kalaris' common stock (including common stock issued upon conversion of Legacy Kalaris' preferred stock and outstanding convertible promissory notes) converted into the right to receive 0.2016 shares of AlloVir's common stock calculated in accordance with an exchange ratio equal to 1:0.2016 (the "Exchange Ratio"). Each award of restricted shares of Legacy Kalaris' common stock that was unvested and outstanding was converted into and exchanged for the right to receive a number of restricted shares of AlloVir common stock based on the Exchange Ratio. Each outstanding option to purchase shares of Legacy Kalaris' common stock under Legacy Kalaris' 2019 Equity Incentive Plan, whether or not vested, was converted into an option to acquire a number of shares of

AlloVir's common stock based on the Exchange Ratio. Exercise prices of assumed options were determined as the product of the exercise price immediately prior to the Effective Time multiplied by the reciprocal of the Exchange Ratio, and rounding up to the nearest whole cent. There were no changes to any other terms of such options or restricted share awards. Immediately following the Merger, stockholders of Legacy Kalaris owned approximately 74.47% of the outstanding common stock of the combined company on a fully diluted basis. The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States ("GAAP"). Under this method of accounting, Legacy Kalaris was deemed to be the accounting acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Kalaris issuing stock to acquire the net assets of AlloVir. As a result of the Merger, the net assets of AlloVir were recorded at their carrying value and our financial statements are consolidated after the Effective Time.

License Agreement with the University of California, San Diego

In April 2021, we entered into a license agreement with UCSD (as amended, the "UCSD Agreement") pursuant to which we obtained (i) an exclusive license under the patent rights to make, use, sell, offer for sale, and import licensed products and (ii) a non-exclusive license to use the technology with a right to sublicense, each (i) and (ii) related to new anti-VEGF agents and novel long-acting VEGF inhibitors for intraocular neovascularization for the treatment of patients with retinal pathologies. As partial consideration for the license, we agreed to pay UCSD $0.2 million and were obligated to issue shares of our common stock to UCSD equal to 5% of our fully diluted issued and outstanding securities until such time as an aggregate of $5.0 million in gross proceeds from the sale of equity securities had been raised by us. In June 2022, after the closing of the Series A financing, we issued 137,234 shares of our common stock to UCSD. We were also obligated to pay $0.1 million of patent costs incurred prior to the effective date and are required to reimburse future patent expenses incurred by UCSD during the term of the UCSD Agreement. Under the UCSD Agreement, we are required to make annual license maintenance payments of $10,000 during the first four anniversaries and $15,000 on the fifth and every subsequent anniversary of the effective date. We are obligated to pay an aggregate of up to $4.6 million upon the achievement of various development and regulatory milestones and low single-digit royalties on net sales of licensed products. The royalty is payable, on a licensed product-by-licensed product and country-by country basis, until expiration of the last-to-expire issued patent of the applicable licensed product in the country of sale or the manufacture. If we enter into a sublicensing agreement, we are required to pay UCSD a sublicense fee as a percentage of the fair market value of any sublicense fee received that is not earned royalties for each sublicense granted. The sublicense fee percentage ranges from 50% if the applicable sublicense agreement is entered into within one year from the UCSD Agreement effective date and decreases to 10% if the applicable sublicense agreement is entered into after the first dosing of a patient for a phase 2 clinical trial.

In case of a closing of a merger, or sale of at least 50% of our voting stock or the sale by us of all or substantially all of our assets (collectively referred to as "Liquidity Event"), we are obligated to make a one-time cash milestone payment to UCSD ranging from $0.1 million to $1.0 million based on the valuation of our outstanding shares at the Liquidity Event closing date. The Merger did not meet the definition of the Liquidity Event.

The UCSD Agreement is effective until the expiration date of the longest-lived patent rights or last to be abandoned patent or future patent of the licensed products, whichever is later. We can terminate the agreement upon 60 days written notice. UCSD can terminate the agreement in the event of an uncured material breach, such as a failure to make payments due, or to perform or a violation of any other material term of the UCSD Agreement, is not cured by us within 60 days after a breach written notice provided by UCSD.

The acquisition of the license under the UCSD Agreement, including patent rights and know-how, was accounted for as an asset acquisition. As the acquired technology did not have an alternative future use, we recognized the $0.2 million initial cash consideration, $0.1 million patent reimbursement costs incurred prior to the effective date and $0.2 million related to the obligation to issue shares of our common stock as research and development expenses. The obligation to issue shares of common stock included two components, the initial shares obligation and the additional shares obligation. The fair value of the initial shares obligation was estimated as $0.1 million based on the fair value of 55,440 shares of common stock, which represented 5% of the outstanding fully diluted equity at the effective date. As the initial share obligation was indexed to our own stock, it was recorded as additional paid-in capital. The additional shares obligation was accounted for when the next round of financing closed in March 2022. We estimated the fair value of an additional 81,794 shares of common stock as $0.2 million and recognized it as research and development expenses and additional paid-in capital in March 2022.

We recognized $0.1 million and $0.2 million in patent reimbursement costs for the three and nine months ended September 30, 2025, respectively. We recognized immaterial amounts in patent reimbursement costs for the three and nine months ended September 30, 2024. We made a payment of $0.1 million in connection with our achievement of the first development milestone related to the dosing of the first patient in our Phase 1a clinical trial in August 2024, which was recorded as research and development expense in the condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2024. No other milestones were achieved or probable through September 30, 2025. No milestone expense was recorded for the three and nine months ended September 30, 2025.

Royalty Agreement with Samsara - Related Party

In July 2024, we entered into a royalty agreement (the "Royalty Agreement") with Samsara. Under the Royalty Agreement, we redeemed 10,080 shares of our common stock issued to Samsara under a founder's restricted stock purchase agreement in exchange for our agreement to pay Samsara a low single digit percentage tiered royalty on net sales, if any, of our products developed using the technology licensed under the UCSD Agreement. Such royalties are payable on a product-by-product and country-by-country basis until the later of (i) ten years after the first commercial sale of such product in such country and (ii) the expiration of the last-to-expire issued claim of our patents for such product in such country.

We identified two elements in the Royalty Agreement: repurchased shares, and future royalty payments to Samsara. The repurchase of shares was accounted at an estimated fair value of $32,000 as a reduction of common stock and additional paid-in-capital in the consolidated balance sheet and the consolidated statement of redeemable convertible preferred stock and shareholders' deficit. We recorded $32.1 million as a long-term liability related to the obligation to make royalty payments to Samsara. The fair value of the royalty obligation was estimated using a risk-adjusted net present value model, based on the contractual royalty rates applied to the future net sales forecast, adjusted by the probability of success of product development and discounted to the effective date of the Royalty Agreement. The excess of the royalty liability over the fair value of the redeemed shares of $32.0 million was recorded as a research and development expense.

Once royalty payments to Samsara are deemed probable and estimable, and if such amounts exceed the initially recorded royalty obligation balance, we will impute interest to accrete the liability on a prospective basis based on such estimates. If and when we make royalty payments under the Royalty Agreement, the royalty obligation balance will be reduced. As of September 30, 2025, royalty payments were not probable and estimable and, therefore, for the three and nine months ended September 30, 2025, no interest expense was recognized for the royalty liability.

Financial Operations Overview

Operating Expenses

Our operating expenses consist of research and development expenses and general and administrative expenses.

Research and Development Expenses

The largest component of our total operating expenses since inception has been research and development activities, including preclinical development of our product candidate. Research and development costs are expensed as incurred.

External research and development costs include:

Internal research and development costs include:

Costs for certain development activities are recognized based on our management's evaluation of the progress to completion of specific tasks using information and data provided by our vendors and third-party service providers. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are

incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable. Research and development expenses incurred from inception relate to the development of our lead product candidate, TH103.

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate through clinical trials, pursue regulatory approval of our product candidate and expand the indications for our product candidate. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidate may be affected by a variety of factors, including the timing and progress of clinical development activities, our ability to successfully complete clinical trials with safety, potency and purity profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidate; our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidate is approved; the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; our ability to obtain and maintain patent, trade secret and other intellectual property protection and our ability to commercialize products, if and when approved, whether alone or in collaboration with others. We may never receive regulatory approval for our product candidate. As a result of the uncertainties discussed above, our management is unable to determine the duration and completion costs of our research and development activities or if, when and to what extent we will generate revenue from the commercialization and sale of our product candidate, if approved.

General and Administrative Expenses

General and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expense. General and administrative expenses also include professional fees for legal, consulting, accounting and tax services, as well as allocated overheads, including information technology costs, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including salaries, benefits and stock-based compensation expense. Additionally, we expect to incur significant additional expenses associated with being a public company, including expanded infrastructure and higher consulting, legal and accounting services, investor relations costs and director and officer insurance premiums.

Change in fair value of tranche liability

Change in fair value of tranche liability represents gains or losses from the remeasurement of tranche liability related to the investors' rights to receive additional convertible promissory notes in subsequent tranches of the Convertible Note Financing with a predetermined conversion price. The tranche liability was remeasured at fair value at the end of each reporting period until the tranche liability is exercised or expires. The tranche liability was cancelled in March 2025.

Change in fair value of derivative liabilities

Change in fair value of derivative liabilities represents gains or losses from the remeasurement of the derivative liabilities embedded in the convertible promissory notes issued to Samsara and other investors at the end of each reporting period until settlement or extinguishment. The derivative liabilities expired in connection with the closing of the Merger on the Closing Date.

Interest expense

Interest expense represents non-cash interest expense accrued on issued and previously outstanding convertible promissory notes and amortization of a debt discount on the advances under the convertible promissory note issued to Samsara in March 2024.

Loss on issuance of convertible promissory notes

Loss on issuance of convertible promissory notes represents loss upon the issuance of convertible promissory notes to Samsara and other investors accounted at fair value. All outstanding convertible promissory notes, other than the AlloVir Note, were converted into shares of redeemable convertible preferred stock or common stock of Legacy Kalaris immediately prior to the closing of the Merger on March 18, 2025.

Other income (expense), net

Other income (expense), net includes primarily interest income received from money market investments, U.S. government treasury securities, and bank deposits, the amortization of premiums and accretion of discounts on U.S. government treasury securities, and realized and unrealized foreign currency gains (losses).

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations (in thousands):

Research and Development Expenses

The following table summarizes our research and development expenses (in thousands):

Research and development expenses decreased by $26.9 million, from $36.0 million for the three months ended September 30, 2024, to $9.1 million for the three months ended September 30, 2025.

License fees, milestone payments and annual maintenance fees related to acquired technologies decreased by $32.1 million during the three months ended September 30, 2025 due to royalty obligation expense incurred in connection with the Royalty Agreement with Samsara that was recorded as research and development expense during the three months ended September 30, 2024.

CDMO, CRO and other third-party preclinical studies, clinical trials and consulting costs increased by $4.3 million to support the ongoing Phase 1a clinical trial of TH103 and the newly initiated Phase 1b/2 clinical trial in the third quarter of 2025. CRO and other clinical expenses increased by $0.7 million as we opened additional investigational sites and enrolled patients in our clinical program. CDMO and other third-party preclinical studies and consulting costs increased by $3.6 million due to the additional manufacturing process development activities and manufacturing of our clinical supplies to support our clinical trials.

Personnel related costs increased by $0.9 million, due to hiring in our research and development organization. This increase in personnel related costs included a $0.1 million increase in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased by $1.8 million from $1.8 million for the three months ended September 30, 2024 to $3.6 million for the three months ended September 30, 2025. The increase in general and administrative expenses was primarily attributable to an increase of $0.7 million in legal, accounting and other professional and outside services, an increase of $0.2 million related to directors' and officers' insurance recognized following the closing of the Merger, an increase of $0.5 million in personnel related expenses and an increase of $0.4 million in other expenses. General and administrative expenses increased as we invested in our corporate infrastructure and in connection with the closing of the Merger.

Change in fair value of derivative liabilities

We did not recognize any change in the fair value of derivative liabilities for the three months ended September 30, 2025. We recognized a $0.5 million gain for the three months ended September 30, 2024, related to the changes in the fair value of derivative liabilities embedded into convertible promissory notes issued to Samsara and other investors. We estimated the fair value of the derivative liabilities embedded in the convertible promissory notes using a with-and-without scenario analysis. Refer to Note 5, Fair Value Measurements, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details. All outstanding convertible promissory notes, other than the AlloVir Note, were converted into either shares of redeemable convertible preferred stock or common stock and the derivative liability expired in connection with the closing of the Merger on March 18, 2025.

Interest expense

We recognized no interest expense for the three months ended September 30, 2025. We recognized $0.8 million of interest expense for the three months ended September 30, 2024, which included the accrued interest and amortization of debt discount related to issued and outstanding convertible promissory notes issued to Samsara and other investors. Refer to Note 8, Convertible Promissory Notes, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details.

Other income, net

Other income, net of $0.8 million and an immaterial amount for the three months ended September 30, 2025 and 2024, respectively, primarily consisted of interest income received from money market investments and U.S. government treasury securities and foreign currency gains (losses).

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations (in thousands):

Research and Development Expenses

The following table summarizes our research and development expenses (in thousands):

Research and development expenses decreased by $17.6 million, from $41.2 million for the nine months ended September 30, 2024, to $23.6 million for the nine months ended September 30, 2025.

License fees, milestone payments and annual maintenance fees related to acquired technologies decreased by $32.2 million due to royalty obligation expense incurred in connection with the Royalty Agreement entered into with Samsara that was recorded as research and development expense during the nine months ended September 30, 2024.

CDMO, CRO and other third-party preclinical studies, clinical trials and consulting costs increased by $12.1 million as we initiated our Phase 1a clinical trial in TH103 in June 2024 and our Phase 1b/2 clinical trial in the third quarter of 2025. CRO and other clinical expenses increased by $1.7 million as we opened additional investigational sites and enrolled patients in our clinical program. CDMO and other third-party preclinical studies and consulting costs increased by $10.4 million due to the additional manufacturing process development activities and manufacturing of our clinical supplies to support our clinical trials.

Personnel related costs increased by $2.1 million due to hiring in our research and development organization. This increase in personnel related costs included a $0.2 million increase in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased by $8.4 million, from $3.4 million for the nine months ended September 30, 2024 to $11.8 million for the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily attributable to an increase of $3.9 million in legal, accounting and other professional and outside services, an increase of $1.9 million related to directors' and officers' insurance recognized following the closing of the Merger, an increase of $1.5 million in personnel related expenses and an increase of $1.1 million in other expenses. General and administrative expenses increased as we invested in our corporate infrastructure and in connection with the closing of the Merger.

Change in fair value of tranche liability

We recognized a $0.4 million gain for the nine months ended September 30, 2025, related to the changes in the fair value of tranche liability. We did not issue tranche liability for the nine months ended September 30, 2024. The convertible promissory notes issued in the Convertible Note Financing in October and November 2024 and amended in November 2024 included three subsequent tranches for the issuance of convertible promissory notes at the predetermined conversion price that were concluded to be liabilities and are accounted for at fair value until the tranches' expiration or settlement. The fair value of the tranche liability is estimated using a probability weighted scenario analysis discounted to the current period. Refer to Note 5, Fair Value Measurements, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details. In January 2025, as part of the first tranche of the Additional Permitted Bridge Financing, we issued additional convertible promissory notes for $3.75 million and one of three tranches was settled. In March 2025, we and other noteholders entered into an acknowledgment of conversion and termination agreement to cancel all unfunded tranches and the tranche liability expired unexercised.

Change in fair value of derivative liabilities

We recognized $1.2 million and $0.9 million gain for the nine months ended September 30, 2025 and 2024, respectively, related to the changes in the fair value of derivative liabilities embedded into convertible promissory notes issued to Samsara and other investors. We estimated the fair value of the derivative liabilities embedded in the convertible promissory notes using a with-and-without scenario analysis. Refer to Note 5, Fair Value Measurements, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details. All outstanding convertible promissory notes, other than the AlloVir Note, were converted into either shares of redeemable convertible preferred stock or common stock and the derivative liability expired in connection with the closing of the Merger on March 18, 2025.

Interest expense

We recognized $1.4 million for each of the nine months ended September 30, 2025 and 2024 of interest expense, which included the accrued interest and amortization of debt discount related to issued and outstanding convertible promissory notes issued to Samsara and other investors. Refer to Note 8, Convertible Promissory Notes, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details.

Loss on issuance of convertible promissory notes

We recognized $0.2 million and $2.1 million of loss on issuance of convertible promissory notes to Samsara and other investors for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $1.9 million in loss on issuance of convertible promissory notes was related to the lower amount of premium recognized at the issuance of the notes in January 2025 compared to the premium on the notes issued in March 2024 and May 2024. Refer to Note 8, Convertible Promissory Notes, in our condensed consolidated financial statements included elsewhere in this Quarterly Report, for additional details.

Other income, net

Other income, net of $1.9 million and $0.1 million for the nine months ended September 30, 2025 and 2024, respectively, primarily consisted of interest income received from money market investments and U.S. government treasury securities, and foreign currency gains (losses).

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. From inception, we have primarily funded our operations from sales of redeemable convertible preferred stock, issuances of convertible promissory notes and a SAFE, and from cash and cash equivalents of AlloVir received in the Merger. From inception through September 30, 2025, we have received gross proceeds of $67.5 million from sales of redeemable convertible preferred stock, issuances of convertible promissory notes and a SAFE, and we received cash and cash equivalents of AlloVir of approximately $102.1 million in the Merger. As of September 30, 2025, we had $77.0 million in cash, cash equivalents and short-term investments.

Funding Requirements

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to the development of our lead product candidate, TH103, and, to a lesser extent, general and administrative expenditures. We expect to continue to incur significant and increasing expenses for the foreseeable future as we continue to advance TH103, expand our corporate infrastructure, further our research and development initiatives and incur costs associated with the potential commercialization activities. Conducting preclinical testing and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, TH103, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product that we do not expect to be commercially available for several years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

We have incurred significant losses and negative cash flows from operations since our inception. As of September 30, 2025, we had an accumulated deficit of $150.0 million. Based on our current operating plans, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. However, we have based these estimates on assumptions that may prove to be wrong, and our operating plans may change as a result of many factors currently unknown to us. In addition, changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. As a result, we could deplete our capital resources sooner than we currently expect.

This forecast of cash resources and planned operations involves risks and uncertainties, and the actual amount of expenses could vary materially as a result of a number of factors. Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may enter into collaborations with third parties for the development of TH103 is unknown, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of TH103. Our future funding requirements will depend on many factors, including, but not limited to, the following:

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting

our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates, or we may have to grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed or on attractive terms, or at all, we may have to significantly delay, reduce or discontinue the development or future commercialization of TH103 or any future product candidate.

Cash Flows

The following table summarizes primary sources and uses of cash for the periods presented (in thousands):

Operating Activities

Net cash used in operating activities was $31.3 million and $12.8 million for the nine months ended September 30, 2025 and 2024, respectively.

Cash used in operating activities for the nine months ended September 30, 2025, was primarily due to a net loss of $33.4 million, offset by non-cash charges of $1.6 million and further offset by net changes of $0.6 million in net operating assets and liabilities. Non-cash charges primarily consist of $1.6 million in stock-based compensation expense and 1.4 million in non-cash interest expense, offset by a gain of $1.2 million related to the change in fair value of derivative liabilities and a gain of $0.4 million related to the change in fair value of tranche liability. The change in net operating assets and liabilities was primarily due to a decrease in prepaid expenses and other current assets of $1.5 million, offset by a decrease in accounts payable of $1.0 million.

Cash used in operating activities for the nine months ended September 30, 2024, was primarily due to a net loss of $47.1 million, offset by non-cash charges of $35.4 million and increased by net changes of $1.1 million in the net operating assets and liabilities. Non-cash changes primarily consist of a $32.0 million royalty obligation expense incurred in connection with the Royalty Agreement, a loss on issuance of convertible promissory notes of $2.1 million, a non-cash interest expense of $1.4 million, stock-based compensation expense of $0.6 million, and offset by $0.9 million gain related to the change in fair value of derivative liabilities. The change in net operating assets and liabilities was primarily due to a decrease in accounts payable of $0.1 million, an increase in prepaid expenses and other current assets of $0.1 million, an increase in other non-current assets of $0.3 million, and a decrease in accrued expenses and other current liabilities of $0.6 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $34.7 million, which consisted of $34.5 million from purchases of short-term investments and investments classified as cash equivalents and $0.2 million from purchases of property and equipment. There was no cash used in investing activities for the nine months ended September 30, 2024.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $107.3 million, which consisted of $102.1 million of cash and cash equivalents of AlloVir received in connection with the Merger, proceeds from the issuance of a convertible promissory note of $7.5 million, partially offset by payments of deferred transaction costs and issuance costs related to the Merger of $2.3 million.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $11.6 million, which consisted of $10.0 million net cash proceeds from the issuance of convertible promissory notes and $1.6 million from the issuance of redeemable convertible preferred stock to existing and new investors.

Contractual and Other Obligations

We enter into contracts in the normal course of business with CDMOs for clinical supply manufacturing, with CROs for clinical trials and with other vendors for preclinical studies, supplies and other products and services for operating purposes. These agreements generally provide for termination at the request of either party generally with less than one-year notice and, therefore, our management believes that non-cancellable obligations under these agreements are not material. We do not currently expect any of these agreements to be terminated and did not have any non-cancellable obligations under these agreements as of September 30, 2025 and December 31, 2024.

We are required to pay certain milestone payments contingent upon the achievement of specific development and regulatory events in accordance with the UCSD Agreement. Refer to Note 7, Significant Agreements,in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details. As of September 30, 2025 and December 31, 2024, we recognized $0.1 million and $0.2 million related to the UCSD Agreement in accrued expenses and other current liabilities in the condensed consolidated balance sheets, respectively. Through the nine months ended September 30, 2025, development milestones totaling $0.1 million have been achieved and incurred as research and development expenses. We did not achieve any development milestones and did not incur any related milestone expense during the three and nine months ended September 30, 2025. We are required to pay royalties on sales of products developed under the UCSD Agreement. Our product candidate was in development as of September 30, 2025 and December 31, 2024 and no such royalties were due.

We are obligated to pay royalties to Samsara under the Royalty Agreement. Refer to Note 7, Significant Agreements,in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional details. We recognized an initial royalty liability in the amount of $32.1 million, which was based on its estimated fair value at the effective date of the Royalty Agreement. Once royalty payments to Samsara are deemed probable and estimable, and if such amounts exceed the royalty liability balance, we will impute interest to accrete the royalty liability on a prospective basis based on such estimates. As of September 30, 2025 these royalties were not probable and estimable.

In February 2025, we entered into an operating lease agreement for office space in Berkeley Heights, New Jersey. The lease commenced in September 2025 and is expected to terminate in December 2031. We can extend the lease term twice for an additional three years and can terminate the lease after four years and four months after the lease commencement date with a termination penalty of $0.3 million. Total remaining undiscounted payments under this lease are approximately $2.2 million. In addition to the base rent, we will pay our share of operating expenses and taxes. The lessor provided a tenant improvement allowance of up to $0.4 million, which we fully utilized during the three months ended September 30, 2025.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact the financial position, results of operations or cash flows is disclosed in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

Critical Accounting Estimates

Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. On an ongoing basis, management evaluates these estimates and judgments, including, but not limited to, those related to the accrual of research and development expenses, the fair value of royalty obligation, the fair value of convertible promissory notes, the fair value of tranche liability, the fair value of derivative liabilities, the fair value of common stock and preferred stock, and stock-based compensation. These estimates and assumptions are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. Our management's estimates are based on our historical experience and on various other factors that management believes 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates from those described in "Kalaris' Management's Discussion and Analysis of Financial Conditions and Results of Operations" filed as Exhibit 99.4 to our Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the "SEC") on March 18, 2025.