Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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

The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"), as well as our audited financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (our "Annual Report"). This discussion contains 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 set forth under Part II, Item 1A "Risk Factors" or in other parts of this Quarterly Report, as well as those identified in the "Risk Factors" section of our Annual Report, which Risk Factors are incorporated in this Quarterly Report by reference. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See "Forward-Looking Statements."

Overview

Valion Bio, Inc. (the "Company" or "Valion"), formerly known as Tivic Health Systems, Inc. is a late-stage biopharmaceutical company whose lead program is Entolimod. Entolimod is a recombinant biologic with Toll-like Receptor 5 ("TLR5") agonist activity. Entolimod has an extensive preclinical and clinical data package supporting development as a medical countermeasure for Acute Radiation Syndrome (ARS) and it subsyndromes, as well as for adjunct therapy for oncology indications, such as neutropenia.

The cornerstone of Valion's portfolio is its TLR5 program, led by Entolimod, a late-stage recombinant biological agonist designed to mitigate or treat ARS and mitigate or treat the systemic toxicities associated with medical radiation and chemotherapy. Entolimod is a versatile therapeutic with both prophylactic and mitigative capabilities, effectively preventing or treating the cellular damage caused by genotoxic treatments. The clinical significance of Entolimod has been recognized by the U.S. Food and Drug Administration ("FDA"), which has granted the candidate both Fast Track and Orphan Drug designations for the treatment of ARS. Furthermore, the Company holds Investigational New Drug ("IND") applications for Entolimod in both ARS and advanced oncology, with plans to advance Entolimod and its optimized variant, Entolasta™, into Phase 2 clinical studies for neutropenia and other oncology-related indications.

In December 2025, Valion strategically vertically integrated its operations through the acquisition of Scorpius Holdings' assets via its wholly owned subsidiary, Velocity Bioworks. Based in San Antonio, Texas, Velocity operates as a full-service Contract Development and Manufacturing Organization ("CDMO") in San Antonio, TX. This acquisition included the integration of approximately 40 specialized technical personnel, providing the Company with direct oversight of the Entolimod manufacturing lifecycle. This strategic move is expected to significantly accelerate our commercialization timeline by ensuring supply chain control and operational agility. Additionally, Velocity functions as a commercial CDMO, with the ability to provide specialized biomanufacturing services to external clients to drive independent profitability and diversify the Company's revenue streams.

Appointment of Michael K. Handley as Chief Executive Officer

In March 2026, Michael K. Handley was appointed as Chief Executive Officer and director. Mr. Handley succeeds Jennifer Ernst as Chief Executive Officer. Prior to being appointed as Chief Executive Officer, Mr. Handley was Chief Operating Officer and President of our biopharma division since joining the Company in February 2025. Mr. Handley previously was the Chief Executive Officer of Statera Biopharma, Inc. from July 2021 to February 2025 and brings over two decades of cross-functional experience in drug/device commercialization, regulatory/clinical affairs, operations, strategic transactions, market development and partnering/licensing.

Equity Line of Credit

On February 6, 2026, we entered into a Common Stock Purchase Agreement (the "Purchase Agreement") with Tumim Stone Capital, LLC, ("Tumim") pursuant to which we will have the right, but not the obligation, to sell to the Tumim up to the lesser of: (a) $50,000,000 of newly issued shares of our common stock, par value $0.0001 per share, and (b) the Exchange Cap (as defined below), from time to time, at our sole discretion (each such sale, a "VWAP Purchase") by delivering an irrevocable written notice to Tumim(each such notice, a "VWAP Purchase Notice"). We shall be permitted to deliver a VWAP Purchase Notice to Tumim during the period commencing on the Commencement Date (as defined in the Purchase Agreement) and the date that is the first day of the month following the 24-month anniversary of the date on which the initial Registration Statement (as defined below) has been declared effective by the U.S. Securities and Exchange Commission (the "SEC"), subject to the terms and conditions set forth therein, and unless the Purchase Agreement is earlier terminated in accordance with its terms.

The shares of Common Stock purchased pursuant to a VWAP Purchase (the "Shares") will be purchased at the VWAP Purchase Price, which will be determined pursuant to a formula set forth in the Purchase Agreement. If we elect to use a one-trading-day valuation period in the VWAP Purchase Notice (the "One-Day Valuation Period"), the VWAP Purchase Price under the Purchase Agreement will be equal to 97% of the volume-weighted average price ("VWAP") of our Common Stock on the one trading day during such One-Day Valuation Period, subject to adjustment as provided in the Purchase Agreement, following receipt of the Shares by Tumim. If we elect to use a One-Day Valuation Period to determine the VWAP Purchase Price in the VWAP Purchase Notice, such VWAP Purchase Notice shall direct Tumim to purchase Shares in an amount not to exceed the lesser of (i) 15% of the daily trading volume of the Common Stock on the VWAP Purchase Exercise Date (as defined in the Purchase Agreement), or (ii) the quotient (rounded to the nearest whole number) obtained by dividing (x) $1,000,000 by (y) the VWAP on the VWAP Purchase Exercise Date (in each case to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction during the applicable period).

If we elect to use a three-trading-day valuation period in the VWAP Purchase Notice (the "Three-Day Valuation Period"), the VWAP Purchase Price under the Purchase Agreement will be equal to 95% of the lowest daily VWAP of our Common Stock on any trading day during such Three-Day Valuation Period, subject to adjustment as provided in the Purchase Agreement, following receipt of the Shares by Tumim. If we elect to use a Three-Day Valuation Period to determine the VWAP Purchase Price in the VWAP Purchase Notice, such VWAP Purchase Notice shall direct Tumim to purchase Shares in an amount not to exceed the lesser of (i) 40% of the daily trading volume of the Common Stock on the VWAP Purchase Exercise Date, or (ii) the quotient (rounded to the nearest whole number) obtained by dividing (x) $2,500,000 by (y) the VWAP on the VWAP Purchase Exercise Date (in each case to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction during the applicable period.

Tumim's purchases of shares of Common Stock under the Purchase Agreement, if any, will be subject to certain limitations, including that Tumim may not purchase shares that would result in it (together with its affiliates) owning more than 4.99% (or, at the election of the Tumim, 9.99%) of the then-issued and outstanding shares of Common Stock. In addition, unless stockholder approval of a waiver of the Exchange Cap is obtained, we shall not issue or sell any shares of Common Stock pursuant to the Purchase Agreement, if, after giving effect thereto, the aggregate number of shares of Common Stock that would be issued pursuant to the Purchase Agreement and the transactions contemplated thereby would exceed 506,848 (representing 19.99% of the number of shares of Common Stock issued and outstanding immediately prior to the execution of the Purchase Agreement) (such maximum number of shares, the "Exchange Cap"). However, the Exchange Cap shall not be applicable for any purposes of the Purchase Agreement and the transactions contemplated thereby, to the extent that (and only for so long as) the average price of all applicable sales of Common Stock under the Purchase Agreement equals or exceeds $1.02, which is the Minimum Price (as defined in the Purchase Agreement). The Company is under no obligation to seek stockholder approval of a waiver of the Exchange Cap.

In the second quarter of 2026, the Company delivered a VWAP Purchase Notice for 129,000 shares which resulted in proceeds of $69 thousand. As of June 30, 2026, a total of $49.9 million remains available under the Purchase Agreement.

As consideration for the Tumim's commitment to purchase shares of Common Stock, the Company issued a pre-funded warrant to purchase 437,012 shares of Common Stock (the "Pre-Funded Warrants"), to the Tumim as a commitment fee (the "Commitment Fee"). In the second quarter of 2026, Tumim exercised the warrants in full.

Pre-Funded Warrants

The Pre-Funded Warrants issued to Tumim as the Commitment Fee are exercisable immediately upon issuance and will not expire until exercised in full. The exercise price of the Pre-Funded Warrants is $0.0001 per share (nominal), as the exercise price was pre-funded to the Company in connection with the payment of the Commitment Fee. The Pre-Funded Warrants may be exercised on a cashless basis. The Pre-Funded Warrants contain a beneficial ownership limitation that prevents the Tumim from exercising the warrants to the extent that such exercise would result in Tumim (together with its affiliates) beneficially owning more than 4.99% (or, at the election of the Tumim, 9.99%) of the outstanding shares of Common Stock. The Pre-Funded Warrants are subject to customary adjustment provisions in the event of stock dividends, stock splits, combinations, reclassifications, or similar events. In the event of a Fundamental Transaction (as defined in the Pre-Funded Warrants), the holder will be entitled to receive, upon exercise, the same kind and amount of consideration that a holder of Common Stock would have received in connection with such transaction. The shares of Common Stock issuable upon exercise of the Pre-Funded Warrants will be registered for resale under the Registration Statement.

Registration Rights Agreement

In connection with the transactions contemplated by, and concurrently with the execution of, the Purchase Agreement, the Company and Tumim also entered into a Registration Rights Agreement, dated as of February 6, 2026 (the "Registration Rights Agreement"), pursuant to which the Company agreed to file with the SEC one or more registration statements (a "Registration Statement"), to register under the Securities Act of 1933,as amended (the "Securities Act"), the offer and resale by Tumim of all of the shares that may be issued by the Company to the Tumim from time to time under the Purchase Agreement, including shares of Common Stock issuable upon exercise of the Pre-Funded Warrant. Tumim's obligation to purchase shares of Common Stock pursuant to the Purchase Agreement is subject to such a Registration Statement being filed with the SEC and declared effective.

Exclusive License Agreement - Statera BioPharma

On February 11, 2025, we entered into the License Agreement with Statera, whereby we acquired (i) an exclusive worldwide license to the proprietary TLR5 agonist program of Statera known as Entolimod (the "Licensed Molecules") as it relates to the ARS indication (the "Initial Indication") and (ii) an exclusive option (the "Exclusive Option") to acquire the exclusive worldwide license to additional indications, including Lymphocyte Exhaustion, Immunosenescence, Neutropenia and/or Vaccine Adjuvant (the "Subsequent Indications") and to the TLR5 agonist program of Statera known as Entolasta, in each case as described in more detail below. The License Agreement transaction was consummated concurrently therewith on February 11, 2025 (the "Closing Date"). On February 11, 2025, in connection with, and as consideration for the License Agreement, the Company also entered into a Securities Purchase Agreement with Statera, pursuant to which the Company issued and sold to Statera an aggregate of (i) 55,635 shares of Company common stock and (ii) approximately 360 shares of Series A Preferred Stock for an aggregate price of approximately $1.2 million.

Under the terms of the License Agreement, Statera has granted the Company an exclusive worldwide license, with the right to grant and authorize sublicenses, under Statera's patents and know-how to develop, test, make and use Entolimod to develop, test, make, have made, use, sell, offer for sale, import and otherwise exploit the product as it relates to the Initial Indication during the termof the License Agreement.

The License Agreement obligates us to develop and commercialize the licensed products, at our own cost and expense, inclusive of licensed products with respect to any Subsequent Indications obtained upon exercise of an Exclusive Option. In the development and commercialization process, we are obligated to meet certain milestones, and must provide Statera with certain milestone payments, payable in either the form of cash or Company stock (at our sole discretion), upon accomplishing each milestone as outlined below, none of which have been met this quarter.

Event		Payment
Validation of current inventory of Materials for distribution and sales		$	750,000
Filing of BLA with FDA for Acute Radiation Syndrome			1,000,000
Total Acute Radiation Syndrome Development Milestones		$	1,750,000

Upon exercise of an Exclusive Option with respect to one or more Subsequent Indications, the following corresponding applicable milestones and milestone payments, payable in in either the cash or Company stock (at our sole discretion), become obligations of the Company as well:

Event		Payment
File IND and Initiate Phase 2 Clinical Study for Neutropenia		$	500,000
Phase III Completion - successfully meets endpoint required to secure FDA approval for treatment of Neutropenia			750,000
File BLA with FDA and achieve FDA Approval for Neutropenia			1,500,000
File IND and Initiate Phase 2 study of Lymphocyte Exhaustion			500,000
Phase III Completion - successfully meets endpoint required by FDA for treatment of Lymphocyte Exhaustion			750,000
File BLA with FDA and achieve FDA Approval for Lymphocyte Exhaustion			1,500,000
IND approval and initiation of Phase 3 study as a Vaccine Adjuvant			500,000
File US BLA with FDA and achieve FDA Approval for use as a Vaccine Adjuvant			500,000
Total Potential Development Milestones for additional Indications (as applicable)		$	6,500,000

In conjunction with the License Agreement, Statera may nominate one individual to sit on Board. Statera's nominee must have the relevant industry experience in biopharmaceuticals, meet all requirements for service as an Independent Board Member, as defined by Nasdaq listing requirements. Approval of such Statera nominee shall be at the sole reasonable discretion of the Board.

On March 28, 2025, the Company notified Statera of its election to exercise its Exclusive Option to acquire the exclusive worldwide license to the neutropenia indication for Entolimod under the License Agreement (the "Neutropenia Option") and to accelerate the first milestone payment of $500 thousand related to the neutropenia indication (the "Neutropenia Milestone Payment"), payable by the Company in connection with the filing of an IND and initiation of a Phase 2 clinical study for neutropenia. The Company paid the $500 thousand Neutropenia Milestone Payment paid in Company stock and was capitalized as licensed technology.

As a result of the Company's exercise of the Neutropenia Option, the Company is obligated to develop and commercialize the expanded licensed products related to the neutropenia indication, at its own cost and expense, including to meet those milestones discussed above, and is obligated to pay the milestone payments, other than the Neutropenia Option, upon accomplishing each such milestone.

On June 18, 2025, the Company entered into an Amended and Restated Exclusive License Agreement (the "A&R License Agreement") with Statera, which amended certain terms of the License Agreement to, amongst other things, (i) provide that the payment of royalties pursuant to the A&R License Agreement, if any, may be made by the Company in either cash or securities of the Company, at the discretion of the Company; (ii) increase the approximate amount of the lien held by Avenue Venture Opportunities Fund, L.P. ("Avenue") to up to $5.6 Million (the "Pay off Amount"); and (iii) provide that, other than the original license fee paid by the Company to Statera in connection with the closing of the license transaction in February 2025 and payment of the Neutropenia Milestone Payment, until such date that the Payoff Amount has been paid in full to Avenue, all subsequent payments due to Statera under the A&R License Agreement shall be paid by the Company as follows: 20% of any such payments shall be paid to Statera and 80% of any such payments shall be paid directly to Avenue on behalf of Statera.

In the first quarter of 2026, the Company validated the current inventory of materials for distribution and sales. As a result, the Company capitalized $750 thousand of inventory costs and recorded a liability of $750 thousand which is included in accrued expenses on the balance sheet as of June 30, 2026. In July, 2026, the Company issued an aggregate of 1,288 shares of Series A Convertible Preferred Stock to Avenue and Statera in partial settlement of the milestone obligation.

Business Updates

Appointment of Melinda Lackey as General Counsel and SVP of Legal Affairs

On May 4, 2026, Melinda Lackey was appointed as General Counsel and Senior Vice President of Legal Affairs. Ms. Lackey brings over 18 years of legal and corporate experience, and has served in executive and legal leadership roles at biotechnology companies and international law firms. Prior to joining Valion, Ms. Lackey served as Senior Vice President, Legal & Administration of Alaunos Therapeutics, Inc. (NASDAQ: TCRT). Previous roles include Of Counsel at Hogan Lovells and General Counsel of Kuur Therapeutics, Inc. (f/k/a Cell Medica, Inc.), a clinical-stage biotechnology company focused on CAR-NKT cellular therapies that was later acquired by a global biopharmaceutical public company. Ms. Lackey previously practiced law at Winston & Strawn LLP from March 2008 to June 2018, where she focused on intellectual property strategy and patent litigation. Ms. Lackey earned a Bachelor of Science in microbiology from Texas Tech University in 1998. Ms. Lackey also earned a Master of Science in medical microbiology and immunology from Texas Tech University Health Sciences Center and a Doctor of Jurisprudence from University of Houston Law Center in 2007.

Series A Issuances

On July 31, 2026, the Company issued an aggregate of 1,287.8685 shares of Series A Preferred Stock, as consideration for the Milestone Payment in the amount of $750,000, relating to the validation of current inventory of materials for distribution and sales, to Statera Biopharma, Inc. ("Statera") and Avenue Venture Opportunities Fund, L.P. ("Avenue").

On July 31, 2026, in connection with the milestone payment, the Company entered into a securities purchase agreement with Avenue, pursuant to which the Company issued certain shares of Series A Preferred Stock as partial consideration for the milestone payment.

The securities purchase agreement provides certain registration rights related to the securities subject thereto. Specifically, the Company is required to prepare and file a resale registration statement with the SEC within 60 calendar days following the closing date, with respect to the resale of all of the shares of common stock of the Company underlying the Series A Preferred Stock issued thereunder.

Neither the shares of Series A Preferred Stock or the shares of common stock issuable upon conversion of the Series A Preferred Stock, are currently registered under the Securities Act of 1933, as amended (the "Securities Act") and none of such shares may be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. The shares of Series A Preferred Stock are subject to certain limitations of conversion, as further described in the Certificate of Designation of Series A Non-Voting Convertible Preferred Stock, including that a holder of Series A Preferred Stock is prohibited from converting shares of Series A Preferred Stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.9% and 19.9%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion.

Nasdaq Compliance

On March 19, 2026, the Company received a notification letter from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that, because the closing bid price for the Company's common stock was below $1.00 per share for at least 30 consecutive business days, the Company is not currently in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement").

The notification has no immediate effect on the listing of the Company's common stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from March 19, 2026, or until September 15, 2026, to regain compliance with the Minimum Bid Price Requirement. If at any time before September 15, 2026, the closing bid price of the Company's common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending on September 15, 2026, then Nasdaq may grant the Company a second 180 calendar day grace period to regain compliance, provided the Company (i) meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and (ii) the Company notifies Nasdaq of its intent to cure the deficiency.

The Company intends to continue actively monitoring the closing bid price for the Company's common stock between now and September 15, 2026, and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement, including by effecting a reverse stock split, a proposal for which will be voted upon by the Company's shareholders at its Special Meeting of Shareholders to be held on August 14, 2026. If the Company does not regain compliance within the allotted compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company's common stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will be successful is effecting a reverse stock split, regain compliance with the Minimum Bid Price Requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance, or maintain compliance with the other Nasdaq listing requirements.

Operational Updates

First Half of 2026 and subsequent periods

In the first half of 2026, we continued to develop our TLR5 program and invested in our CDMO operations in San Antonio, TX. Other updates include:

●

In March 2026, Michael K. Handley was appointed Chief Executive Officer and director. Mr. Handley succeeds Jennifer Ernst as Chief Executive Officer. Prior to being appointed as Chief Executive Officer, Mr. Handley was Chief Operating Officer and President of our Biopharma division.

●

We executed a critical milestone pursuant to our license agreement with Statera related to the validation of materials for distribution and sale..

●

We demonstrated a 200-fold (200x) manufacturing scale-up for Entolimod at 50-liter fermentation volume, meeting all drug release specifications for purity and potency.

●

We participated in active engagement with BARDA, DoW/DTRA, FDA, NIH, and NIAID via TechWatch process; a follow-up meeting took place on March 10, 2026, to advance discussions on federal funding of future testing and potential path to a Strategic National Stockpile purchase. We continue to advance discussions with these government agencies.

	●	On April 28, we rebranded as Valion Bio to reflect the Company's transformation into a late-stage biopharmaceutical company and changed our ticker symbol to VBIO.
	●	On May 1, Melinda Lackey was appointed General Counsel and Senior Vice President, Legal Affairs. Prior to being appointed General Counsel, Ms. Lackey was general counsel for Alaunos Therapeutics, Inc.
	●	We secured the exclusive commercial license to LarmorBio's BioScan-NMR Platform. Our CDMO, Velocity Bioworks plans to host the first commercial deployment of the BioScan-NMR platform. Installation and commissioning is now targeted for second half of 2026.
	●	Through collaboration with NIAID and AFRRI, we completed the protocol design to evaluate Entolimod as the first and only treatment for GI-ARS in a proprietary government animal model.
	●	We announced the independent validation of Entolimod to be performed by Sheba Medical Center, a world-premier cancer center who has indicated will conduct a study on Entolimod. This study should expand Entolimod beyond Acute Radiation Syndrome into radiation-induced neutropenia and supportive oncology care, potentially representing a substantially larger commercial market.

We have expanded our headcount to support our growth and reduce reliance on third-party service providers in areas where the benefits outweigh the costs. We have relied, and continue to rely, heavily on third-party service providers, including software-as-a-service platforms, finance and accounting support, and legal support to carry out our operations.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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

		Three Months Ended June 30,												For the Six Months Ended
Statement of operations data:		2026				2025				Change				2026				2025				Change
OPERATING EXPENSES
Research and development		$	2,704			$	655			$	2,049			$	4,558			$	990			$	3,568
Selling, general and administrative			3,720				1,023				2,697				7,500				2,065				5,435
Total operating expenses			6,424				1,678				4,746				12,058				3,055				9,003
Loss from operations			(6,424	)			(1,678	)			(4,746	)			(12,058	)			(3,055	)			(9,003	)
OTHER (EXPENSE) INCOME
Change in fair value of derivative liability			47				-				47				80				-				80
Interest income			11				3				8				35				7				28
Interest expense			(691	)			-				(691	)			(1,339	)			-				(1,339	)
Net other (expense) income			(633	)			3				(636	)			(1,224	)			7				(1,231	)
Net loss from operations before discontinued operations			(7,057	)			(1,675	)			(5,382	)			(13,282	)			(3,048	)			(10,234	)
Income (loss) from discontinued operations			(46	)			(256	)			210				(23	)			(385	)			362
Net loss		$	(7,103	)		$	(1,931	)		$	(5,172	)		$	(13,305	)		$	(3,433	)		$	(9,872	)

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred to conduct research, including the discovery, development and validation of product candidates. Research and development expenses include personnel costs, including stock-based compensation expense, third-party contractor services, including cell line verification of Entolimod, development and testing of drug product, drug substance, and prototype devices, and maintenance of limited in-house research facilities. We expense research and development costs as they are incurred. We expect research and development expenses to increase as product candidates are advanced towards commercialization and with the discovery and validation of new product candidates.

For the three months ended June 30, 2026, research and development expenses increased by $2.0 million compared to the same period in 2025. For the six months ended June 30, 2026, research and development expenses increased by $3.6 million compared to the same period in 2025The increases were primarily due to the addition of our CDMO operations, which increased expenses for the second quarter by $1.2 million, and by $2.2 million for the year-to-date period. Increased expenses during the second quarter of 2026 included $0.6 million related to the exclusive commercial development and license agreement with Larmor Bio and $0.2 million related to research surrounding an oral formulation for Entolimod. Other increases related to headcount changes and consultants used for the validation of Entolimod.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include personnel costs, consulting expenses related to business development, D&O insurance, outside professional services and other expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation expense. Outside professional services consist of legal, finance, accounting and audit services, and other consulting fees. Beginning in the second quarter of 2025, we began to incur costs associated with business development and government relations efforts related to Entolimod. We expect selling, general and administrative expenses to vary as we expand our business development efforts related to Entolimod.

Selling, general and administrative expenses increased to $3.7 million for the three months ended June 30, 2026, compared to $1.0 million for the three months ended June 30, 2025. The increase was primarily due to the addition of our CDMO operations, which increased expenses for the second quarter by $2.3 million. The CDMO expenses for the second quarter include $1.2 million of facility costs and equipment rentals, headcount related expenses of $0.4 million, property tax accruals of $0.2 million, professional fees of $0.1 million and depreciation expense of $0.4 million. Additional increases related to legal and professional fees, including accounting and investor relations.

For the six months ended June 30, 2026, selling, general and administrative expenses increased to $7.5 million compared to $2.1 million for the same period in 2025. The increase was primarily due to the addition of our CDMO operations, which increased expenses for the first half of the year by $4.0 million. The CDMO expenses for the first half of the year include $2.2 million of facility costs and equipment rentals, headcount related expenses of $0.8 million, property tax accruals of $0.2 million, professional fees of $0.4 million and depreciation expense of $0.4 million. Additional increases related to legal and professional fees, including accounting and investor relations. During the first quarter of 2026, we recorded $0.4 million of severance costs related to the departure of our CEO in March 2026.

Other (Expense) Income, net

Other (expense) income, net, includes the change in fair value of derivative associated with the senior secured convertible note payable issued in December 2025, interest income from our money market account, interest expense on our senior convertible note payable, and amortization of the debt discount and debt issuance costs associated with the senior convertible note payable.

Other (expense) income, net, increased by $0.6 million and $1.2 million for the three and six months ended June 30, 2026, respectively compared to the same periods in 2025. The increases were primarily related to interest expense and amortization of the debt discount and issuance costs associated with the senior convertible note payable. The note was not outstanding during the three or six months ended June 30, 2025.

From Discontinued Operations

Net income (loss) from discontinued operations represents income and expenses related to the consumer device market which we exited in 2025. During the six months ended June 30, 2026 we continued to complete wind down of our ClearUp operations. The net loss during the first half of 2026 represent the net costs associated with wind down operations.

Liquidity and Capital Resources

Sources of Liquidity

Since our formation in September 2016 and until early 2025, we have devoted substantially all of our efforts to research and development, to regulatory clearance and to early market development and testing for our first product, released September 2019 in the United States. Since early 2025, we have focused our efforts on entry into biologic therapeutics with our TLR5 program and the development of our lead product candidate, Entolimod. Since December 2025 we have also focused on operating the CDMO business we began after acquiring certain assets from Scorpius. We are not profitable and have incurred net losses and negative cash flows from our operations in each year since our inception. As of June 30, 2026, we had cash and cash equivalents of $2.1 million, working capital of $336 thousand and an accumulated deficit of $66.5 million.

We have financed our operations to date primarily through the sale of our securities and, prior to our IPO, convertible notes payable, the full balance of which converted into shares of our common stock in connection with our IPO.

On February 6, 2026, we entered into a Common Stock Purchase Agreement with Tumim Stone Capital, LLC (the "Common Stock Purchase Agreement") whereby we have the right, but not the obligation to sell to the investor the lesser of: (a) $50,000,000 of newly issued shares of the Company's common stock, par value $0.0001 per share (the "Common Stock"),and (b) the Exchange Cap (as defined below), from time to time, at the Company's sole discretion (each such sale, a "VWAP Purchase") by delivering an irrevocable written notice to the Investor (each such notice, a "VWAP Purchase Notice"). The Company shall be permitted to deliver a VWAP Purchase Notice to Investor during the period commencing on the Commencement Date (as defined in the Purchase Agreement)and the date that is the first day of the month following the 24-month anniversary of the date on which the initial Registration Statement (as defined below) has been declared effective by the SEC, subject to the terms and conditions set forth therein, and unless the Purchase Agreement is earlier terminated in accordance with its terms. As of June 30, 2026, we have a total of $49.9 million remaining available under the Common Stock Purchase Agreement.

Although we continuously monitor operating expenses, we expect that our operating expenses may increase significantly as we discover, acquire, validate and develop our current product candidates and new product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products, including near-term investments in validation of our biologic manufacturing process, preparation of regulatory submissions to domestic and international bodies, and further activities supporting sales and commercialization of Entolimod and, in the future, Entolasta; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Our expenses have increased as a result of the asset acquisition that took place in December 2025 and our entry into the CDMO market. We will incur significant costs associated with the CDMO business until and unless such time as we can attract customers and derive revenues to offset such expenses. Furthermore, we have incurred and will continue to incur additional costs associated with operating as a public company. Management expects to incur substantial additional operating losses for the foreseeable future to conduct pre-clinical and clinical trials, complete development or acquisition of new product lines, obtain regulatory approvals, launch and commercialize our products and continue research and development programs. Based on the Company's current cash levels and burn rate, amongst other things, the Company believes its cash and financial resources may be insufficient to meet the Company's anticipated needs for the twelve months following the date of issuance of the financial statements for the six months ended June 30, 2026, included elsewhere in this Report, which raises substantial doubt about the Company's ability to continue as a going concern within one year from the issuance date of the financial statements.

Plan of Operation and Future Funding Requirements

We have used our capital resources primarily, to date, to fund marketing and advertising for ClearUP, development of both our trigeminal and our vagus nerve platforms and product candidates, our entry into biologic therapeutics through our License Agreement with Statera, evaluating and conducting diligence on potential licensing and acquisition candidates, and the support of public company operating infrastructure and general operations. Although we have taken measures to manage our operating expenses, including the wind down of ClearUP, we expect that our operating expenses may increase as we advance product candidates, seek regulatory approval and, if approved, proceed to commercialization of new products, obtain, maintain, protect and enforce our intellectual property portfolio, hire additional personnel; maintain compliance with material government (in addition to environmental) regulations, and operate the CDMO business. We may increase our research and development investments in clinical studies to advance additional indications for our licensed TLR5 agonists, Entolimod and Entolasta, in 2026. We also plan to increase investments in manufacturing and regulatory processes for these product candidates as we prepare to seek a Biologics License, via a BLA, from the FDA.

Furthermore, we have incurred, and will continue to incur, significant costs associated with operating as a public company. We expect to continue to incur losses for the foreseeable future. At this time, due to the inherently unpredictable nature of research and new product adoption, the regulatory approval process, as well as other macroeconomic factors, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize future product candidates, if at all. We expect to dedicate our capital resources to the advancement of our TLR5 agonist programs. We do not expect revenues until such time, if ever, that we obtain regulatory approval and are able to commercialize and derive revenue from the sale of our product candidates. We do not expect significant revenues from our CDMO business in the near term as we are still in the process of qualifying the facilities and equipment so we will be able to develop and manufacture recombinant biological drugs for other companies.

Manufacturing of biological drugs is inherently unpredictable due to cell variability. As a result, costs and timelines associated with development of the manufacturing processes may vary materially from our expectations. Additionally, clinical and preclinical development timelines, the probability of success, and costs can differ materially from expectations. We cannot forecast which product candidates may be best developed and/or monetized through future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

In addition to the foregoing, we may, from time to time, consider opportunities for strategic acquisitions, licensing or business combinations that we believe will align with our growth plan, complement our product offerings and be in the best interest of the Company and our shareholders. If any such strategic transactions are identified and pursued, a substantial portion of our cash reserves may be required to complete such transactions. If we identify an attractive opportunity that would require more cash to complete than we are willing or able to use from our cash reserves, we will consider financing options to complete the acquisition, including through equity and/or debt financings.

We have generated operating losses in each period since inception. We have incurred an accumulated deficit of $66.5 million through June 30, 2026. We expect to incur additional losses in the future as we expand our research and development activities. Based on our current cash levels and burn rate, amongst other things, we believe our cash and financial resources may be insufficient to meet our anticipated needs for the next twelve months. As a result, we expect that we will need to raise additional capital to continue operating our business and fund our planned operations, including research and development, clinical trials and, if regulatory approval is obtained, commercialization of future product candidates.

Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate, foundation or government funding sources, or through other sources of financing. We do not know whether additional financing will be available on commercially acceptable terms, or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or limited, which could materially adversely affect our business, financial conditions or results of operations, and we may have to significantly delay, scale back or discontinue the development and commercialization of our products and/or future product candidates.

The timing and amount of our operating expenditures will depend largely on:

●

our ability to raise additional capital if and when necessary and on terms favorable to the Company;

	●	the timing and progress of preclinical and clinical development activities;

●

the number and scope of preclinical and clinical programs we decide to pursue;

	●	the timing and amount of milestone payments we may receive or be required to pay under any future collaboration agreements;

●

whether we close potential future strategic opportunities, and if we do, our ability to successfully integrate acquired assets and/or businesses with our own;

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our ability to source new business opportunities through licenses and research and development programs and to establish new collaboration arrangements;

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the costs involved in prosecuting and enforcing patent and other intellectual property claims;

●

the cost and timing of additional regulatory approvals beyond those currently held by us;

	●	our efforts to enhance operational systems and hire additional personnel to support finance, sales, marketing, operations and development of our product candidates and satisfy our obligations as a public company; and
	●	our efforts to maintain compliance with material government (including environmental) regulations.

Until such time, if ever, as we can generate substantial revenue from product sales and/or development and manufacturing contracts, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also consider entering into collaboration arrangements or selectively partnering with third parties for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, 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. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations and prospects.

Cash Flows

The following table summarizes our cash flows for the period indicated (in thousands):

		Six Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
Cash used in operating activities		$	(10,292	)		$	(2,716	)
Cash used in investing activities			(64	)			(546	)
Cash (used in) provided by financing activities			187				2,444
Net decrease in cash and cash equivalents		$	(10,169	)		$	(818	)

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 was $10.3 million, which consisted primarily of a net loss of $13.3 million, decreased by non-cash charges of $2.4 million and a net decrease of $0.6 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $0.9 million of amortization of debt discount and debt issuance costs, $0.3 million of stock-based compensation, $0.4 million of non-cash interest expense, $0.4 million of amortization of the right-of-use assets associated with our facility leases and $0.4 million of depreciation expense. The change in our net operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $1.8 million, offset by a decrease of $0.2 million related to lease liabilities and increases in inventory of $0.8 million and prepaid expenses and other current assets of $0.2 million.

Net cash used in operating activities for the six months ended June 30, 2025 was $2.7 million, which consisted primarily of a net loss of $3.4 million, decreased by non-cash charges of $0.3 million and a net increase of $0.4 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $0.3 million of stock-based compensation. The change in our net operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $0.5 million and an increase in prepaid expenses and other assets of $0.1 million.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2026 was $64 thousand for the acquisition of property and equipment. Net cash used in investing activities for the six months ended June 30, 2025 was $546 thousand, which consisted primarily of $300 thousand of cash paid for the Statera License Agreement and transactions costs of $243 thousand.

Financing Activities

Cash provided by financing activities during six months ended June 30, 2026 was $187 thousand and consisted of approximately $241 thousand of net proceeds from the closing of the Fifth Tranche of our Securities Purchase Agreement for Series B Preferred Stock and $69 thousand of proceeds from the sale of common stock to Tumim pursuant to our Equity Line of Credit, offset by $120 thousand of offering costs paid in advance of sales of common stock.

Cash provided by financing activities during the six months ended June 30, 2025 was $2.4 million and consisted of approximately $109 thousand from the exercise of Series A warrants, net proceeds of approximately $1.6 million related to the sale of common stock pursuant to our Equity Distribution Agreement with Maxim, the sale of common stock to Mast Hill pursuant to the equity line of credit for net proceeds of $311 thousand and the sale of 700 shares of Series B Preferred Stock and warrants to purchase shares of our common stock, for net proceeds of $585 thousand. Cash provided was offset by $158 thousand of offering costs paid in advance of sales of common stock.

Known Trends or Uncertainties

As discussed elsewhere in this Quarterly Report, our business is subject to risks, including the ongoing conflict between Russia and Ukraine and the more recent conflict among the U.S., Israel, Hamas and Iran, economic uncertainty in human capital management ("HCM") and certain other macroeconomic and geopolitical factors. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Effects of recent economic volatility have negatively impacted our business in various ways, including as a result of global supply chain constraints. We will continue to monitor material impacts on our HCM strategies, including the potential of employee attrition, amongst other things.

Although we currently do not anticipate supply shortages, they will continue to pose a material risk for the Company in the near term and, as a matter of business, we evaluate alternative and secondary source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. Global supply chain shortages (especially when coupled with inflation, tariffs, and other economic factors) could result in an increase in the cost of the components and other materials used in our products and product candidates, which could result in a decrease of our gross margins or in us having to increase the price at which we sell our products until supply chain constraints are resolved. Additionally, in the event that the price of our components or other materials increases significantly or we are unable to source sufficient components and materials from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production and our business operations and financial condition may be materially harmed and we may need to alter our plan of operation.

Recently, the current administration has implemented, and continues to implement, significant budget cuts, eliminated grant programs and terminated a significant number of employees throughout many different sectors of the federal government. There is still significant uncertainty regarding the ultimate effects these actions may have on the industries in which we operate or our business. Disruptions at the FDA and other agencies may slow the time necessary for new devices and drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

Under the current administration, the United States' tariff policy has become increasingly aggressive, leading to the implementation or threat to implement tariffs on certain imported goods, including on certain items imported from China, Canada and other countries. In addition, China, Canada and other countries have imposed, or threatened to impose, tariffs on a wide range of American products and placed restrictions on the export of certain items in retaliation for these American tariffs. As a result, there is a concern that the imposition of tariffs by the United States could result in the adoption of retaliatory tariffs or other restrictions by other countries. Although the validity of the tariffs has been challenged, and some tariffs struck down by the Supreme Court, this has recently led to significant volatility in the capital markets and increased economic uncertainty. Additionally, any resulting trade war could negatively impact our business. The imposition of tariffs on items imported by us from China, Canada or other countries could increase our costs and could result in lowering our gross margin on products sold.

Additionally, although our business has not been materially impacted by the ongoing military conflict between Russia and Ukraine or the conflict between Hamas and Israel to date, it is impossible to predict the extent to which our operations, including the newly in-licensed TLR5 assets, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.

As a result of these global issues and other macroeconomic factors, it has been difficult to accurately forecast our revenues or financial results. In addition, while the potential impact and duration of these issues on the economy and our business may be difficult to assess or predict, these world events have resulted in, and may continue to result in, significant disruption of global financial markets, and may reduce our ability to access additional capital, which could negatively affect our liquidity in the future. Our results of operations could be materially below our forecasts as well, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline. Furthermore, a decrease in orders in a given period could negatively affect our revenues in future periods.

These global issues and events may also have the effect of heightening many risks associated with our customers and supply chain. We may take further actions that alter our operations as may be required by federal, state, or local authorities from time to time, or which we determine are in our best interests. In addition, we may decide to postpone or abandon planned investments in our business in response to changes in our business, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business.

Inflation

Although inflation experienced a slight decline in the month of June 2026; it has remained relatively high and future rates are unknown. Inflationary factors, such as increases in the cost of our products, interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with the ongoing geopolitical conflicts between Russia and Ukraine, employee availability and wage increases, trade tariffs imposed on certain products from China and increased component and services pricing.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Contractual Obligations and Commitments

Office Leases

Effective March 16, 2026, the Company entered into a one-year lease for corporate office space in San Antonio, TX. The lease calls for monthly base rent of $1,188 and will automatically renew for successive one-year terms unless terminated by either party.

In March 2026, we entered into three facility leases in connection with our subsidiary's operations in San Antonio, TX. At the same time, we relocated our corporate headquarters to San Antonio, TX. The corporate headquarters are located within the Velocity Bioworks, Inc. administrative offices.

On March 13, 2026, we entered into a lease for an 8,042 square foot facility that will serve as Velocity's microbial facility. The initial term of the lease is eight years, unless earlier terminated by the parties pursuant to the lease terms. We have (i) a one-time option to extend the lease term for an additional period of five years and (ii) the exclusive option to purchase the building from the landlord at any time during the first 24 months of the initial term for $12.5 million. Initial monthly base rent is approximately $22,605 for the first twelve months, or a total of $271,260, with annual dollar increases in later years of the lease term. The aggregate base rent over the eight-year lease term is approximately $5.34 million. Pursuant to the lease, we are also obligated to pay additional expenses related to our share of operating expenses, taxes and utilities related to the premises.

On March 9, 2026, we entered into a lease for a 20,144 square foot facility that will serve as Velocity's mammalian facility. The lease term is 102 months, effective January 1, 2026, unless earlier terminated by the parties pursuant to the lease terms. Initial monthly base rent is approximately $55,030 for the first twelve months, or a total of $660,357, with annual increases of approximately 3%. The aggregate base rent over the lease term is approximately $6.29 million. Pursuant to the lease, we are also obligated to pay additional expenses related to our share of operating expenses, taxes and utilities related to the premises.

On March 13, 2026, we entered into a sublease for approximately 8,122 square feet of office space that will serve as Velocity's administrative offices. The lease term is 102 months, effective January 1, 2026, unless earlier terminated by the parties pursuant to the lease terms. Initial monthly base rent is approximately $30,436 with annual increases of approximately 3%. The aggregate base rent over the lease term is approximately $3.9 million. Pursuant to the lease, we are also obliged to pay additional expenses related to our share of operating expenses, taxes and utilities related to the premises.

On February 23, 2026, we entered into a lease for approximately 22,262 square feet of warehouse space in San Antonio, TX to be used to support our subsidiary's business. Initial base rent is approximately $21,069 for the first ten months with escalations annually thereafter. The aggregate base rent over the lease term is approximately $0.8 million. Pursuant to the lease, we are also obliged to pay additional expenses related to our share of operating expenses, taxes and utilities related to the premises.

For the three and six months ended June 30, 2026 total lease costs were $0.5 million and $0.9 million, respectively. There were no lease costs recorded for the three and six months ended June 30, 2025 as there were no leases in effect at that time. Short-term rental costs for the three months ended June 30, 2026 and 2025 were $10 thousand and $11 thousand, respectively. Short-term rental costs for the six months ended June 30, 2026 and 2025 were $104 thousand and $15 thousand, respectively.

Purchase Commitments

Shear Kershman

In April 2026, the Company entered into a Product Development Agreement and Option to License Product and Intellectual Property (the "SKL Agreement") with Shear Kershman Labs, a Missouri corporation ("SKL"), pursuant to which the Company engaged SKL to develop a heat-stable oral transmucosal delivery formulation of Entolimod utilizing proprietary formulation systems, with the objective of demonstrating systemic absorption via oral transmucosal delivery. Under the SKL Agreement, the Company has an option, subject to an option period and other specified terms and conditions, to license the products and intellectual property developed under the agreement. In connection with the SKL Agreement, the Company is obligated to pay SKL a fixed fee of $0.5 million upon project commencement and may be required to make additional payments of up to $7.2 million upon the achievement of specified development and regulatory milestones. The Company may also be obligated to pay up to an additional $12.5 million in sales-based milestone payments, as well as royalties on net sales of commercialized licensed products. As of June 30, 2026, the Company had recorded a liability of $0.2 million related to the SKL Agreement, which is included in accounts payable in the accompanying condensed consolidated balance sheets.

LarmorBio

In April 2026, Velocity Bioworks, Inc., the Company's wholly-owned subsidiary, entered into a Purchase, Collaboration, and Strategic Partnership Agreement (the "Larmor Agreement") with LarmorBio, Inc., a Delaware corporation ("Larmor"), pursuant to which Velocity engaged Larmor to design, develop, and install a prototype real-time cell monitoring and analytics system tailored to Velocity's bioreactor specifications. Under the terms of the Larmor Agreement, Velocity has exclusive use of the system and associated technology within the CDMO sector for a specified period of time. Velocity was also granted a non-exclusive license to all future iterations and next-generation updates of the technology developed by Larmor during the term of the agreement. In addition, the Company was granted observer representation on Larmor's board of directors, as well as a right to invest in Larmor's equity, the terms of which remain subject to negotiation of a separate definitive agreement. Under the Larmor Agreement, Velocity has potential developmental and investment achievement milestone payment obligations of up to $1.4 million. As of June 30, 2026, the Company had recorded a liability of $0.6 million related to the Larmor Agreement, which is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

Other

We enter into contracts in the normal course of business with our contract manufacturer and other vendors to assist in the manufacturing of our products and performance of our research and development activities and other services for operating purposes. These contracts generally provide for termination for convenience after expiration of an advance notice period ranging from 0-to-60 days and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. The methods, estimates, and judgments used by us in applying these critical accounting policies have a significant impact on the results we report in our condensed consolidated financial statements. Our significant accounting policies and estimates are included in our Annual Report, filed with the SEC on March 30, 2026.

Information regarding our significant accounting policies and estimates can also be found in Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until December 31, 2026. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

●

reduced disclosure about our executive compensation arrangements;

●

no non-binding stockholder advisory votes on executive compensation or golden parachute arrangements; and

●

exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We have taken advantage of reduced reporting requirements in this Report and may continue to do so until such time that we are no longer an emerging growth company. We will remain an "emerging growth company" until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In addition, we are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0million measured on the last business day of our second fiscal quarter.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Note 2 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report.