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 in conjunction with our financial statements and the related notes included elsewhere in this Quarterly Report, as well as the audited consolidated financial statements and the related notes thereto, and the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" included in our Annual Report on Form 10-K for the fiscal years ended December 31, 2025, 2024, and 2023 (the "2025 Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please see the sections "Special Note Regarding Forward-Looking Statements," "Summary Risk Factors," and Part II, Item 1A. "Risk Factors" herein.

Company Overview

We are a clinical-stage biopharmaceutical company developing novel, small-molecule product candidates designed to modulate the ribosome and promote readthrough of premature stop codons induced by nonsense mutations ("NMs") to enable the production of full-length proteins. Targeting ribosome subunits provides a therapeutic approach to addressing a number of genetic diseases. According to the Human Gene Mutation Database, NMs account for approximately 10% to 12% of patients with a given genetic disease. There are over 7,000 inherited genetic diseases that collectively affect 350 million people worldwide.

Our immediate focus is to advance the clinical development of our product candidate, exaluren, for the treatment of rare kidney diseases. We have also exclusively licensed our product candidate, ZKN-013, to Almirall, S.A. ("Almirall"), who is developing it for the treatment of rare skin diseases.

Between January 2023 and April 2024, we conducted a proof-of-concept Phase 2a open-label trial of exaluren in the United Kingdom in three patients with autosomal recessive Alport Syndrome ("AS") and a NM in the COL4A4 gene. The primary endpoint of this study was to assess the number of participants with adverse events associated with administration of exaluren. The secondary endpoints were change from baseline in proteinuria, measured by the urine protein-to-creatinine ratio ("UPCR") in a patient's urine samples, and hematuria, and change in baseline in Collagen IV expression. All three patients showed a reduction in podocyte foot process effacement ("FPE"), which is the flattening and loss of specialized kidney cell structures that form the filtration barrier and attach to the podocytes and glomerular basement membrane, in transmission electron microscopy ("TEM") images. FPE is a hallmark of kidney diseases including AS and the severity of FPE has historically been associated with time to kidney failure. TEM images of biopsy samples also showed an improvement in the GBM width in all treated patients. FPE was also measured as a 50% increase in the filtration slit density ("FSD").

These results were consistent with exaluren's proposed mechanism of functional full-length protein restoration as reflected by improvements in GBM architecture and FPE observed in kidney biopsies. At the end of treatment, UPCR had decreased for one patient and increased for two patients. We received clearance to proceed with a Phase 2b clinical trial for exaluren in NMAS patients (without kidney biopsies in U.S. pediatric patients) under an IND from the FDA and we plan to initiate this trial in the third quarter of 2026.

Our pipeline also includes a preclinical program evaluating exaluren for the treatment of autosomal dominant polycystic kidney disease ("ADPKD") in patients that have NMs ("nmADPKD"). ADPKD is the most common monogenic kidney disease based on genetic diagnosis, affecting approximately 160,000 to 200,000 patients in the United States. The PKD1 gene encodes polycystin-1 ("PC1") and the PKD2 gene encodes polycystin-2 ("PC2"), these are proteins that regulate cell growth and fluid secretion in kidney tubules. Loss of functional PC1 or PC2 protein leads to uncontrolled cyst formation. Approximately 26% of ADPKD patients have NMs in the PKD1 and PKD2 genes resulting in a prevalence of approximately 40,000 to 50,000 patients in the United States and over 90,000 in developed markets outside of the United States. Patients experience hypertension, kidney stones, urinary tract infections, heart valve abnormalities, hematuria and increased probability of aortic aneurysm. Formation of these cysts eventually leads to nephromegaly (kidney enlargement) and end-stage renal disease. The only approved therapy for ADPKD, tolvaptan, does not address the underlying genetic cause and carries significant tolerability limitations.

Preclinical organoid and cellular models have shown increased PC1 and PC2 gene expression following treatment with exaluren. We plan to initiate enrollment in a Phase 2 trial of exaluren for the treatment of nmADPKD in 2027 following protocol finalization and clearance of an investogational new drug application by the FDA. In July 2026, the European Commission granted orphan medicinal product designation in the European Union for exaluren for the treatment of autosomal dominant polycystic kidney disease (ADPKD) (EU/3/26/3273), in addition to the orphan drug designation previously granted to exaluren by the FDA for the treatment of AS.

We have also exclusively licensed ZKN-013, an oral ribosome modulating agent ("RMA") with structural similarity to azithromycin that induces PTC readthrough to Almirall. In March 2024, we entered into an exclusive global rights agreement with Almirall (the "Almirall License Agreement") for Almirall to develop and commercialize ZKN-013 for the use in all indications. Through the Almirall License Agreement, Almirall is developing ZKN-013 for the treatment of recessive dystrophic epidermolysis bullosa ("RDEB") and junctional epidermolysis bullosa ("JEB") with NMs. RDEB and JEB are rare skin diseases characterized by mutations in the Collagen VII (RDEB) and LAMB3 (JEB) proteins. Under the Almirall License Agreement, we received an upfront payment of $3 million and a development milestone payment of $3 million in 2024. Almirall is responsible for development and commercialization of ZKN-013 and we are eligible to receive up to approximately $470.0 million in additional development, regulatory and commercial milestone payments as well as tiered royalties based on global sales. The agreement may be terminated under specified circumstances, including for convenience by Almirall, in which case rights may revert to us.

In May 2026, we effected a one-for-eleven reverse stock split of our common stock. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the reverse stock split. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise would have been entitled to receive a fractional share received cash in lieu of such fractional share based on the fair market value of our common stock as specified in the reverse stock split provisions. A proportionate adjustment was also made to the maximum number of shares issuable under the 2018 Plan.

In May 2026, we reduced the number of shares authorized from 500,000,000 shares authorized of common stock, $0.01 par value, to 100,000,000 shares authorized of common stock, $0.01 par value.

In June 2026, we completed an uplisting to the Nasdaq Capital Market, alongside a public offering. Net proceeds from the public offering were $58.3 million. Our common stock was previously listed on the OTC Pink Limited Market.

Results of Operations

The following table summarizes our results of operations for the periods presented (in thousands):

Research and development expense

Research and development expenses were $2.8 million for the three months ended June 30, 2026, compared to $0.9 million for the same period in 2025, an increase of $1.9 million. The increase was primarily related to an increase of $1.6 million in clinical trial expenses, a $0.2 million increase in salaries and other personnel costs, and a $0.1 million increase in expenses related to subcontractors, advisors, and laboratory supplies in connection with preclinical research and development activities.

Research and development expenses were $4.5 million for the six months ended June 30, 2026, compared to $1.4 million for the same period in 2025, an increase of $3.1 million. The increase was primarily related to an increase of $2.4 million in clinical trial expenses, a $0.4 million increase in salaries and other personnel costs, and a $0.3 million increase in expenses related to subcontractors, advisors, and laboratory supplies in connection with preclinical research and development activities.

General and administrative expenses

General and administrative expenses were $1.6 million for the three months ended June 30, 2026, compared to $0.7 million for the same period in 2025, an increase of $0.9 million. The increase was primarily related to a $0.7 million increase in expenses attributable to professional and consulting fees, including legal costs and audit and tax fees, and a $0.2 million increase in salaries and other personnel costs.

General and administrative expenses were $3.7 million for the six months ended June 30, 2026, compared to $1.4 million for the same period in 2025, an increase of $2.3 million. The increase was primarily related to a $1.8 million increase in expenses attributable to professional and consulting fees, including legal costs and audit and tax fees, a $0.3 million

increase in facility and other general and administrative overhead costs, and a $0.2 million increase in salaries and other personnel costs.

Other (income) expense, net

Other expense, net, was less than $0.1 million for the three months ended June 30, 2026, compared to $0.3 million in other expense, net, for the same period in 2025, a decrease of $0.3 million. The change was primarily related to a decrease in interest expense of $0.2 million due to the majority of our outstanding debt being exchanged for pre-funded warrants in 2025 and the $0.1 million in imputed interest recorded during the three months ended June 30, 2025, partially offset by a change of $0.1 million in the fair value of warrant liabilities.

Other expense, net, was less than $0.1 million for the six months ended June 30, 2026, compared to $0.8 million in other expense, net, for the same period in 2025, a change of $0.8 million. The change was primarily related to a decrease in interest expense of $0.6 million due to the majority of our outstanding debt being exchanged for pre-funded warrants in 2025 and the $0.1 million in imputed interest recorded during the six months ended June 30, 2025, partially offset by a change of $0.1 million in the fair value of warrant liabilities.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. Our net losses were $4.5 million and $1.9 million for the three months ended June 30, 2026 and 2025, respectively, and $8.3 million and $3.6 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $308.8 million. To date, we have financed our operations primarily through the sale of equity, license and collaboration agreements, debt securities and, to a lesser extent, grants. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital to fund our operations. We have devoted substantially all of our financial resources and efforts to research and development. We expect that it may be several years, if ever, before we receive regulatory approval and have a product candidate ready for commercialization. We expect to continue to incur significant expenses and operating losses for the foreseeable future due to, among other things, costs related to research, development of our product candidates, conducting preclinical studies and clinical trials, and our administrative organization. A successful transition to profitable operations is dependent upon achieving a level of revenue adequate to support our cost structure. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses may increase if, and as, we:

We believe that our cash and cash equivalents of $62.0 million as of June 30, 2026, which includes the $58.3 million in net proceeds from the public offering described above, will be sufficient to maintain our current and planned operations for at least the next twelve months following the filing of this Quarterly Report on Form 10-Q. The unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Financing Activities for the Six Months Ended June 30, 2026 and 2025

On February 20, 2026, the securities purchase agreement (the "Coastlands Securities Purchase Agreement") we had entered into with Coastlands Capital Partners LP ("Coastlands") on August 20, 2025, as amended on September 25, 2025 and December 11, 2025, was amended, and, on February 26, 2026, we received $5.0 million from Coastlands in return for a pre-funded warrant to purchase up to 927,643 shares of our common stock at an exercise price of $0.11 per share, based on a purchase price of $5.39 per share of underlying common stock.

On February 26, 2026, SD MF 4, LLC, a Delaware limited liability company ("Domicilium") exchanged with us the remaining $1.0 million of our outstanding obligations under the Loan and Security Agreement with Hercules Capital, Inc. ("Hercules"), dated as of September 30, 2021 (the "Hercules Loan Agreement"), as amended, in connection with the Coastlands Third Tranche Closing, in return for a pre-funded warrant to purchase up to 185,527 shares of our common stock at an exercise price of $0.11 per share, based on a conversion price of $5.39 per share of underlying common stock. In addition, Domicilium agreed to waive any and all additional accrued and unpaid interest related to the remaining $1.0 million, which was less than $0.1 million as of February 26, 2026. As of February 26, 2026, we had no remaining outstanding debt obligations.

On March 12, 2026, we received $2.0 million from Domicilium, in return for a pre-funded warrant to purchase up to 371,057 shares of our common stock at an exercise price of $0.11 per share, based on a purchase price of $5.39 per share of underlying common stock.

In April 2026, we amended certain pre-funded warrants held by Coastlands and Domicilium to increase the beneficial ownership limitation to 19.99% and permit shares issued upon exercise to be converted back into pre-funded warrants at the holder's election. Following the amendments, Coastlands and Domicilium exercised a portion of their pre-funded warrants for 113,636 shares each, for a total of 227,272 shares of our common stock, at an exercise price of $0.11 per share, for proceeds of less than $0.1 million.

In May 2026, Coastlands and Domicilium each converted the 113,636 shares of common stock into pre-funded warrants pursuant to the terms of the pre-funded warrant for a total aggregate amount of 227,272 shares of common stock converted into pre-funded warrants, with no proceeds being exchanged.

In June 2026, in connection with our uplisting and public offering, we amended certain pre-funded warrants held by Domicilium to increase the beneficial ownership limitation to 19.99% and permit shares issued upon exercise to be converted back into pre-funded warrants at the holder's election. The amendments facilitated the issuance of additional shares of common stock in the offering to satisfy Nasdaq listing requirements. Following the amendments, Domicilium exercised a portion of their pre-funded warrants for 600,000 shares of our common stock, at an exercise price of $0.11 per share, for proceeds of approximately $0.1 million. We accounted for the amendments under ASC 815, "Derivatives and Hedging" as a modification of a freestanding equity-classified written call option that remained equity-classified after the modification. As the modification was directly attributable to the uplisting and public offering, we measured the incremental fair value using a Black-Scholes valuation model and determined the impact of the modification to be immaterial to the consolidated financial statements.

In June 2026, in conjunction with the uplisting, we offered 2,975,000 shares of common stock, $0.01 par value per share, at a public offering price of $11.00 per share. In addition, we offered, to certain investors, in lieu of common stock, pre-funded warrants to purchase up to 3,025,000 shares of our common stock at an offering price of $10.99 per underlying share, which was equal to the public offering price for the common stock in the offering, minus the $0.01 exercise price. Net proceeds from the public offering were $58.3 million. Each pre-funded warrant is exercisable for one share of our common stock and has an exercise price of $0.01 per share. The pre-funded warrants are exercisable at any time after the date of issuance, subject to ownership limitations, as described therein.

During the three and six months ended June 30, 2025, we entered into non-interest-bearing bridge loans with Domicilium for $2.4 million and $2.8 million, respectively, including a bridge loan for $0.5 million with Domicilium following Domicilium's repayment to Hercules of an end of term charge which was treated as a modification of a previous advance. We received $1.9 million and $2.3 million, respectively, in cash during the three and six months ended June 30, 2025 from these bridge loans. We recorded interest expense of less than $0.1 million and $0.1 million representing imputed interest for the non-interest-bearing bridge loans during the three and six months ended June 30, 2025, respectively. The imputed interest of 13.75% was calculated using the sum of 6.25% plus the prime rate, as published in The Wall Street Journal. In addition, during the six months ended June 30, 2025, we repaid $0.3 million for the bridge loans that had been entered into with Domicilium in December 2024, including accrued interest, repaid $0.5 million related to Development and Launch Milestone Payments, in accordance with the terms of the Royalty and Revenue Sharing Agreement, as amended on March 2, 2026 (the "Royalty Agreement") with Domicilium, and repaid $0.5 million in outstanding debt obligations to Hercules under the Hercules Loan Agreement.

Cash Flows

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

Cash flows from operating activities

Net cash used in operating activities was $10.2 million for the six months ended June 30 2026, compared to net cash used in operating activities of $0.5 million for the six months ended June 30, 2025. During the six months ended June 30, 2026, our net loss of $8.3 million and the change in working capital of $2.2 million was partially offset by non-cash charges of $0.1 million related to stock-based compensation expense and $0.1 million related to the change in the fair value of warrant liabilities. During the six months ended June 30, 2025, our net loss of $3.6 million was partially offset by the change in working capital of $2.6 million, and non-cash charges of $0.2 million related to debt discount amortization and $0.1 million related to imputed interest.

Cash flows from financing activities

Net cash provided by financing activities was $67.4 million for the six months ended June 30, 2026, compared to net cash provided by financing activities of $1.0 million for the six months ended June 30, 2025. For the six months ended June 30, 2026, net cash provided by financing activities consisted primarily of $60.3 million of net proceeds from the public offering, including $2.0 million of issuance costs included in accounts payable and accrued expenses as of June 30, 2026, and $7.0 million in net proceeds from the sale of pre-funded warrants under the Coastlands and Domicilium Securities Purchase Agreements transactions. For the six months ended June 30, 2025, net cash provided by financing activities consisted primarily of $2.3 million in proceeds from debt financing obligations, partially offset by repayments of outstanding debt obligations of $1.3 million.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of these interim unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with those described in our audited consolidated financial statements as of and for the years ended December 31, 2025, 2024, and 2023 and the notes thereto, in our 2025 Annual Report, except for the policy below.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC Topic 718, "Compensation-Stock Compensation" ("ASC 718"). We recognize compensation expenses for the value of our awards granted based on the straight-line method over the requisite service period of each of the awards or over the implicit service period when an award includes a performance condition, provided that achievement of the performance condition is considered probable of being achieved. We account for forfeitures as they occur.

We grant stock options, restricted stock units ("RSUs"), and restricted stock awards ("RSAs") to certain employees, consultants and directors as part of our long-term incentive compensation program. Options are measured at fair value on the grant date using an option-pricing model, the most significant input for which has been the fair value of our common stock. RSU's and RSAs are measured at fair value on the grant date, which is also determined based on the fair value of our

common stock.

The absence of an active market for our common stock has required the board of directors, the members of which we believe have extensive business, finance and venture capital experience, to determine the fair value of our common stock for purposes of granting stock-based awards and for calculating stock-based compensation expense for the periods presented. For equity-based grants made in 2024 and 2026, and during the time we had sufficient trading volume in our common stock, our board of directors determined the fair value of our common stock for purposes of stock-based compensation under ASC 718 using the trading price of our common stock on the applicable grant date. However, for equity-based grants made in 2025 and in the absence of an active market for our common stock, our board of directors determined the fair value of options, RSUs and RSAs granted with reference to contemporaneous third-party valuations prepared using the methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Because our common stock has had limited trading activity on the OTC Expert Market, for grants made during the year ended December 31, 2025 we used, among other things, input from a third-party valuation specialist to assist the board of directors in estimating the fair value of our common stock on a contemporaneous basis, and used that estimate to determine the grant-date fair value of equity awards.

We determined the market approach was the most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business or security. The valuation reflected a market approach that tied to our most recent arm's-length equity financing (the Coastlands Securities Purchase Agreement), this transaction represented an orderly market-based transaction with the purchase price in that financing used as an indicator of fair value (assuming consideration given to the implied call option embedded therein), as adjusted for discounts related to the lack of marketability and control associated with minority ownership.

The significant assumptions used in applying the market approach are the appropriate discount for lack of marketability and control for a minority interest in a company without a liquid trading market, as well as the assumptions in the Black-Scholes option-pricing model, including the expected volatility, estimated by reference to the historical volatility of a peer group of publicly traded companies in our industry group; the risk-free interest rate, based on the U.S. Treasury yield curve for periods approximating the expected term of the award; and an expected dividend yield of zero, as we have never paid, and do not currently intend to pay, cash dividends.

Changes in these assumptions, and changes in the underlying fair value of our common stock, could materially affect the fair value of future awards and the related compensation expense.

Off-Balance Sheet Arrangements

As of June 30, 2026 and December 31, 2025, we did not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.