Item 7. 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 related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results, levels of activity, performance or achievements could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A and under “Special Note Regarding Forward-Looking Statements” or in other parts of this Annual Report on Form 10-K. All share amounts presented in this Item 7 give effect to the 1-for-15 reverse stock split and the 1-for-10 second reverse stock split of our outstanding shares of common stock that occurred on January 31, 2024 and July 17, 2024, respectively.
Overview
We have not generated any product revenue and have incurred significant net losses in each year since our inception. For the year ended December 31, 2025, we had a net loss of $4.1 million, and as of December 31, 2025, we have incurred approximately $924.6 million of accumulated deficit since our inception in 2003. We expect to continue to incur significant operating expenditures and net losses for the foreseeable futureas we advance our internally developed preclinical small-molecule oral Obesity and Metabolic Disorders Program.
On October 10, 2024, we announced continued progress on this program, which is focused on developing an oral small-molecule therapeutic with a differentiated, non-hormonal profile relative to currently marketed and in-development GLP-1-based and other hormonal treatments. Our primary focus is advancing this preclinical program through additional animal studies, formulation optimization, manufacturing scale-up, and IND-enabling work, subject to favorable data and the availability of additional capital.
Historically, we operated as a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy. On August 14, 2023, we announced a strategic reprioritization that included the wind-down of our TCR-T Library Phase 1/2 Trial. In connection with the reprioritization, we reduced our workforce during the third and fourth quarters of 2023 (approximately 95% overall) and continued to implement cost-saving measures to extend our cash runway. We terminated our engagement with Cantor Fitzgerald & Co. as strategic advisor effective January 8, 2026. Efforts to consummate a sale or out-license transaction of this intellectual property portfolio have been unsuccessful to date. We are no longer actively pursuing broad strategic alternatives such as acquisitions, mergers, reverse mergers, or sales of the Company.
2025 Developments
Small Molecule Oral Obesity and Metabolic Disorders Program
The Company is advancing an internally developed, preclinical small molecule program for the treatment of obesity and related metabolic disorders. This program is focused on the discovery and development of novel, orally administered therapeutics with the potential to provide a differentiated and complementary profile relative to currently available therapies. While other pipeline therapies for obesity are exploring alternative hormonal pathways, including amylin and dual GIP/GLP-1 receptor agonism, the Company’s approach is focused on a non-hormonal mechanism of action. The program is intended to identify an oral therapeutic candidate that may address certain limitations associated with existing hormonal therapies, including improved tolerability.
In the second half of 2025, the Company conducted two separate non-GLP (Good Laboratory Practice) pharmacology studies using a standard diet-induced obesity (DIO) mouse model in male C57BL/6 mice maintained on a high-fat diet (60% of calories from fat). On January 8, 2026, the Company announced it had identified a lead compound for continued preclinical evaluation and had established proof-of-concept in the diet induced obesity (DIO) mouse model from these two studies, noting observations from the studies conducted were encouraging and consistent with statistically significant dose-related reductions in body weight, statistically significant improvements in body composition, specifically percentage fat and relative preservation of percentage lean, alongside favorable changes in metabolic parameters.
On March 2, 2026, we announced additional details regarding this positive preclinical proof-of-concept data for ALN1003 from the two separate DIO studies conducted. Highlights from these studies include dose-dependent body weight loss with favorable body composition changes, reductions in liver weight, improvement in liver function biomarkers, and improvement in metabolic biomarkers. Collectively, these findings suggest encouraging metabolic effects of ALN1003 in the DIO model.
Key findings from two separate DIO studies (non-GLP) are summarized below (nominal reported p-values are unadjusted for multiple comparisons):
DIO Study 1
The purpose of the first study was to evaluate the pharmacokinetics (PK) and tolerability of ALN1003 and to assess early proof-of-concept anti-obesity efficacy including changes in weight, metabolic biomarkers, and adipose remodeling. Mice received low, controlled oral doses of ALN1003, split into two doses each day. Measurements included daily body weight, food and water consumption at the cage level, and metabolic
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markers (blood collection after a 4-6 hour fast at end of study). All animals were observed prior to and after each dose administration. There were 12 mice in each group, with mice housed 3 per cage.
Relative to DIO controls, mean percent change in body weight for ALN1003-treated mice peaked at -12.9% (p<0.0001) on Day 34 and was
-10.3% (p<0.0001) after 48 days of treatment. Peak reductions in absolute weight loss were observed by Day 13 and remained lower than DIO controls through Day 48 (p<0.0001 at selected timepoints).
Food and water consumption: ALN1003 reduced cumulative food consumption versus DIO control (347.5 g/cage vs 425.0 g/cage; nominal p<0.05). ALN1003 reduced water consumption (445.8 mL/cage vs 494.5 mL/cage; not statistically significant).
Liver and Fat Tissue:In this study, ALN1003 reduced liver weight compared to untreated mice by 43% (p<0.0001) and by 39% when expressed as a percentage of body weight (p<0.0001). Long-term administration of ALN1003 was associated with lower ALT (alanine aminotransferase; p<0.0001), AST (aspartate aminotransferase; nominal p<0.0001) and ALP (alkaline phosphatase; p<0.0001), with a trend toward lower total bilirubin (nominal p=0.058) compared to untreated mice.
An unblinded macroscopic visual review of organ morphology was conducted comparing the liver and adipose tissues of the DIO control to the ALN1003 treatment group. Relative to DIO controls, ALN1003-treated animals exhibited smaller, deep reddish-brown livers; reduced epididymal white adipose tissue (eWAT) and inguinal white adipose tissue (iWAT) depots consistent with decreased adiposity; and darker interscapular BAT with appearance consistent with reduced “whitening” of BAT.
Tolerability: ALN1003 was generally well tolerated throughout the study. Mild, short-term, reversible hypolocomotion was observed after dosing in approximately one-half of dose administrations. There were no similar observations in DIO control animals.
DIO Study 2
The second study conducted was a pilot study to evaluate palatability, tolerability, anti-obesity effects, body composition and PK of ALN1003 administered orally in drinking water at three dose levels in DIO mice. The study comprised a treatment period of 14 days and a PK period of 4 days. ALN1003 was administered at three dose levels: low, medium and high. The middle and highest planned doses were 3 and 9 times higher than the low dose, respectively. Measurements included daily body weight, food and water consumption at the cage level, and metabolic parameters (blood collection after a 4-6 hour fast at end of study). All animals were observed each day. There were 6 mice in each group (2 mice per cage).
Food and water consumption: ALN1003 reduced cumulative food intake in a dose-dependent manner over the 14-day treatment period. Cumulative food consumption in grams per cage was 84.5g, 80.8g, 76.7g and 56.7g (nominal p<0.05) for the DIO control, low, medium and high doses, respectively. Cumulative food consumption when normalized to body weight per cage was 87.9g, 85.6g, 86.7g and 73.6g for the DIO control, low, medium and high doses, respectively. ALN1003 reduced water intake significantly over the 14-day treatment period. Cumulative water consumption in milliliters per cage was 112.8 mL, 80.1 mL (nominal p<0.05), 71.1 mL (p<0.0001) and 63.5 mL (p<0.0001) for the DIO control, low, medium and high doses, respectively. Cumulative water consumption when normalized to body weight per cage was 116.9 mL, 84.9 mL, 80.5 mL and 80.3 mL for the DIO control, low, medium and high doses, respectively. Actual dose consumed is dependent on how much water mice drink. Actual doses consumed during the 14-day treatment period were consistent with planned doses, with variances to planned doses of +7.3%, -0.3% and -6.9% in the low, medium and high dose groups, respectively.
Body composition was assessed using a Bruker MinispecTMLF90II Body Composition Analyzer (Bruker BioSpin, Billerica, MA, USA) and demonstrated dose-related changes that were driven primarily by fat loss but also included the loss of lean and fluid mass. The table below summarizes the mean percentage change from baseline through Day 17 in fat, lean and fluid as a % of body weight (BW) and mass in grams:
Mean % Change: Control Low Medium High
Significance of comparison to Control group: a: nominal p<0.05; b: nominal p<0.001; c: p<0.0001
Liver and Fat Tissue: At end of study Day 18, including the 14-day treatment period plus the PK period, dose-related reductions in liver weights compared to DIO control were -6.8%, -20.5% and -55.0% (nominal p<0.01) in the low, medium and high dose groups, respectively. Reductions in liver weights expressed as a percentage of body weight relative to DIO control were -2.6%, -12.0% and -32.6% (nominal p<0.05). Liver
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enzymes showed no statistically significant change after 18 days; gross liver appearance suggested reduced fat accumulation. Histological analyses of liver and adipose tissues are planned.
An unblinded macroscopic visual review of organ morphology was conducted comparing the liver and adipose tissues of the DIO control to the high dose group. This analysis showed reductions in white fat depots (such as epididymal white adipose tissue, or eWAT, and inguinal white adipose tissue, or iWAT) and an interscapular BAT appearance consistent with reduced “whitening” in the ALN1003 tissues vs DIO control. Review of liver images suggested less visible fat accumulation and smaller, deep red-brown livers compared to DIO control.
Metabolic parameters: In this study, the highest-dose group showed lower blood sugar (glucose; 197 mg/dL in high dose vs 320 mg/dL in DIO control; p<0.0001) and lower total cholesterol (162 mg/dL in high dose vs 209 mg/dL in DIO control; nominal p<0.05). HDL-C (high-density lipoprotein cholesterol), the dominant lipoprotein in DIO mice, also decreased to 130 mg/dL in high dose vs 165 mg/dL in DIO control; nominal p<0.05.
Tolerability: ALN1003 was generally well tolerated throughout the study; however, on Day 16 (during the PK portion of the study), two mice in the high-dose group were noted to be slightly dehydrated for the remainder of the study, although they otherwise appeared normal.
Important Context and Model Limitations
Behavior-coupled dosing in unrestricted (ad libitum) drinking-water studies: In this paradigm, ALN1003 caused dose-related loss of appetite and thirst (anorexia/hypodipsia), leading to avoidance of medicated water. Despite actual doses consumed approximating planned doses in this study, reductions in drinking may confound attribution of weight loss solely to drug exposure in this model.
Development Roadmap
The findings from these two studies support the Company’s strategy to focus on additional preclinical studies and CMC activities to optimize formulations while maintaining effective overall drug levels. We are also planning to conduct studies to better understand mechanisms of ALN1003, including measuring liver fat levels and scoring MASLD severity of the liver in a blinded manner. We are planning to further refine manufacturing processes and to run a small-scale production run based on these improvements. Thereafter, a larger scale production run is planned. In parallel, the Company has initiated a computational chemistry program to design, make, and test ALN1003 variations to strengthen the Company’s intellectual property and assess next-generation compounds. These initiatives, including large animal pharmacokinetic studies, will inform plans to conduct IND enabling studies.
The advancement of this program is subject to numerous risks and uncertainties inherent in early-stage drug development. Subject to favorable data from these preclinical studies and our ability to secure additional capital, we plan to advance a selected development candidate into formal investigational new drug (IND)-enabling studies. We intend to actively explore strategic financing and collaboration opportunities to fund the continued development of this program.
Nasdaq Shareholders Equity Deficiency Notice
On August 19, 2025, Nasdaq notified the Company that it had regained compliance with the continued listing requirements of the Nasdaq Capital Market. Based on the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2025, evidencing stockholders’ equity of $3.66 million, the Listing Qualifications staff determined that the Company now complies with the Nasdaq Listing Rules and confirmed that the matter is closed. As of September 30, 2025, we had $2.82 million in stockholder’ equity resulting in compliance with the Nasdaq rule. As of December 31, 2025, our stockholders’ equity was $2.2 million, which remains below the $2.5 million threshold. We are likely to receive a notice from Nasdaq and may have 45 calendar days from the date of the notice to submit a compliance plan, and if accepted, we may be granted up to 180 calendar days from the date of the notice to evidence compliance. There can be no assurance that our compliance plan will be accepted or that we will regain compliance within any granted period. Given our current trading price of approximately $3.15 per share, the immediate risk of a Minimum Bid Price deficiency is lower at this time; however, our stock price remains volatile and a future decline could still trigger a separate delisting notice
Due to the Company’s limited cash runway and ongoing operating losses, there can be no assurance that the Company will maintain compliance with Nasdaq’s continued listing requirements in the future.
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Results of Operations for the Fiscal Years ended December 31, 2025 and 2024
For the years ended December 31,
Revenue $ 5 $ 10
Operating expenses:
Other income (expense):
Change in fair value of warrant liability (31 ) -
Other income (expense), net 80 133
Other income (expense), net 49 133
Revenue
We have not generated any product revenue to date. Collaboration and research and development funding revenue is recognized over the estimated period of performance; such revenue has been de minimis in recent periods, $5,000 and $10,000 as of December 31, 2025 and 2024, respectively. Unless and until we receive regulatory approval for any product candidate, we cannot sell our products and will not generate product revenue.
Revenue during the years ended December 31, 2025 and 2024 were as follows:
For the years ended December 31,
($ in thousands)
Research and Development Expenses
Research and development expenses have historically consisted primarily of salaries and related personnel costs, contract manufacturing and research organization fees, costs of facilities, reagents and equipment, consulting and license fees, and impairment charges. Following our August 2023 reprioritization, these expenses have shifted materially away from clinical trial and TCR-T-related activities toward preclinical studies, formulation development, and manufacturing scale-up for our small-molecule obesity and metabolic disorders program. We expect research and development spending to remain variable and dependent on the pace of additional animal studies, CMC activities and IND-enabling work for our obesity assets, subject to available capital.
Research and development expenses during the years ended December 31, 2025 and 2024 were as follows:
For the years ended December 31,
($ in thousands)
Research and development expenses for the year ended December 31, 2025 increased by $1.0 million when compared to the year ended December 31, 2024 due to the expansion of the obesity and metabolic disorders program.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and stock-based compensation, consulting and professional fees (including patent-related costs), general corporate costs, and facility costs not otherwise included in research and development. These expenses have decreased following our workforce reductions and cost-saving initiatives, though they continue to include ongoing costs related to public company compliance, legacy contract wind-down, and support for our obesity program.
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General and administrative expenses during the years ended December 31, 2025 and 2024 were as follows:
For the years ended December 31,
($ in thousands)
General and administrative expenses for the year ended December 31, 2025 decreased by $1.6 million as compared to the year ended December 31, 2024.
Other Income (Expense)
Other income (expense), net consists primarily of interest income on cash reserves and changes in the fair value of the warrant liability. In recent periods, other income, net was lower primarily due to decreased interest income resulting from lower cash reserve balances period over period, partially offset by a gain recognized from the change in fair value of the warrant liability.
Other income (expense) during the years ended December 31, 2025 and 2024 was as follows:
For the years ended December 31,
($ in thousands)
Total other income (expense), net for the year ended December 31, 2025 decreased $53 as compared to the year ended December 31, 2024.
Liquidity and Capital Resources
Sources of Liquidity
We have not generated any revenue from product sales. Since inception, we have incurred net losses and negative cash flows from our operations. We have operated at a loss since inception in 2003 and have no significant recurring revenue from operations. We anticipate that losses will continue for the foreseeable future. As of December 31, 2025, our accumulated deficit was approximately $924.6 million. Our working capital as of December 31, 2025 was $1.2 million, consisting of $2 million in current assets and $0.8 million in current liabilities. Our actual cash requirements may vary materially from those planned because of a number of factors, including changes in the focus, direction and pace of our development programs.
To date, we have financed our operations primarily through public offerings and private placements of equity securities (including common stock, pre-funded warrants, and Series A-1 and Series A-2 Convertible Preferred Stock), as well as limited historical collaborations.
As of December 31, 2025, we had approximately $1.4 million of cash and cash equivalents. Our current monthly cash burn rate is approximately $0.28 million. At this rate we anticipate that our existing cash resources will be sufficient to fund operations into the second quarter of 2026. This estimate excludes any potential costs related to strategic transactions, unexpected legacy wind-down activities, unforeseen liabilities, or acceleration of our obesity and metabolic disorders program.
We have no committed sources of additional capital. To continue operations beyond our current forecasted runway and to advance our preclinical Obesity and Metabolic Disorders Program through additional animal studies, formulation optimization, manufacturing scale-up, and IND-enabling work, we will need to raise substantial additional capital through equity or debt financings, collaborations, or other strategic transactions. There can be no assurance that additional funding will be available on favorable terms, or at all.
Our actual cash requirements may vary materially from those currently planned due to a number of factors, including the pace and results of our preclinical studies for the obesity program, any changes in the focus or direction of our development efforts, costs associated with legacy obligations (including the remaining payments under the December 2025 MD Anderson Settlement and Release Agreement), and the outcome of any potential strategic opportunities. We have based our runway estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.
Based on our current cash forecast, management has determined that our present capital resources will not be sufficient to fund our planned operations for at least one year after the date these financial statements are issued. This raises substantial doubt about our ability to continue as a going concern. If we are unable to raise additional capital when required, we may be forced to further delay, reduce, or eliminate our development activities, which could ultimately lead to dissolution or liquidation. See “Risk Factors — We may require substantial additional financial resources to continue as a going concern and to advance our obesity and metabolic program” for additional discussion.
Series A-1 Preferred Stock
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In April 2025, we entered into a Subscription Agreement, with an accredited investor, pursuant to which we sold 500 shares of Series A-1 Convertible Preferred Stock, par value of $0.001 per share (the “Series A-1 Preferred Stock”), at a price per share of $1,000 (the “Preferred Offering”) for an aggregate purchase price of $0.5 million. The Preferred Offering also relates to the offering of the shares of our common stock (the "Common Stock") issuable upon the conversion of or otherwise pursuant to the terms of the Series A-1 Preferred Stock).
In connection therewith, we filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-1 Convertible Preferred Stock, designating 1,000 shares of preferred stock as our Series A-1 Preferred Stock.
Series A-1 Preferred Stock together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at option of the holder, into shares of Common Stock at initial fixed “Conversion Price” of $2.76 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-1 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-1 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the common stock, the holders of Series A-1 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-1 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to our stockholders for their action on an as-converted basis, a number of votes equal to the number of shares of common stock into which the shares of Series A-1 Preferred Stock are convertible under the terms of the Certificate of Designation.
Securities Purchase Agreement for Registered Direct Offering
In June 2025, we entered into a Securities Purchase Agreement with certain institutional investors, pursuant to which we agreed to sell (i) 338,725 shares of common stock at a purchase price of $3.36 per share and (ii) 271,674 pre-funded warrants to purchase common stock at a purchase price of $3.359 per warrant share, in a registered direct offering. In connection therewith, we received net proceeds totaling $1,911,000 after deduction of transaction related expenses. Subsequent thereto and through June 30, 2025, a total of 96,500 the prefunded warrants were exercised at $0.001 per share, resulting in the issuance of 96,500 shares of common stock. Subsequent to June 30, 2025, an aggregate of 112,875 prefunded warrants were exercised resulting in the issuance of an additional 112,875 shares of common stock.
Series A-2 Preferred Stock
In June 2025, we entered into a subscription agreement with certain accredited investors, pursuant to which we sold, in a private placement, 850 shares of Series A-2 Convertible Preferred Stock, par value $0.001 per share, at a price of $1,000 per share, for aggregate gross proceeds of $0.85 million.
In connection therewith, we filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-2 Convertible Preferred Stock, designating 1,000 shares of preferred stock as our Series A-2 Preferred Stock.
Series A-2 Preferred Stock, together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at the option of the holder, into shares of Common Stock at an initial fixed “Conversion Price” of $4.49 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-2 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-2 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the Common Stock, the holders of Series A-2 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-2 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to our stockholders for their action on an as-converted basis, a number of votes equal to the number of shares of Common Stock into which the shares of Series A-2 Preferred Stock are convertible under the terms of the Certificate of Designation.
Series A-1 and A-2 Preferred Stock Cumulative Dividends
Cumulative dividends on the Company’s Series A-1 and Series A-2 Convertible Preferred Stock accrue at 10% per annum and compound quarterly by increasing the liquidation preference. Undeclared cumulative dividends are not recorded as a liability. Because the Company reported a net loss for the periods presented, cumulative preferred dividends increased the net loss attributable to common stockholders in the earnings-per-share calculation. As of December 31, 2025, undeclared cumulative dividends totaled $60 for Series A-1 and $45 for Series A-2.
Cash Flows
The following table summarizes our net increase (decrease) in cash and cash equivalents for the years ended December 31, 2025 and 2024:
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For the years ended December 31,
($ in thousands)
Net cash flows from:
Operating activities $ (2,869 ) $ (4,971 )
Investing activities (98 ) —
Financing activities 3,261 —
Net increase (decrease) in cash and cash equivalents $ 294 $ (4,971 )
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net loss for:
•
Non-cash operating items such as depreciation, amortization, and stock-based compensation; and
•
Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.
Net cash flows used in operating activities for the year December 31, 2025 was $2.87 million, as compared to net cash used in operating activities of $4.97 million for the year ended December 31, 2024. The decrease in net cash used in operating activities was primarily related to reductions in our net loss, offset by an increase in timing of accounts payable and accrued expenses.
The net cash flows used in investing activities for the year December 31, 2025 was $98 as compared to $0 for the year ended December 31, 2024. The increase in net cash used in investing activities was directly attributed to an equipment purchase made during the period to be used in our obesity and metabolic disorders program.
The net cash flows from financing activities for the year December 31, 2025 was $3.26 million as compared to $0 for the year ended December 31, 2024. The financing activity was directly attributable to proceeds from the issuance of common stock and prefunded warrants, the sale of Series A-1 Preferred Stock, and the sale of Series A-2 Preferred Stock.
Operating Leases
As of December 31, 2025, we have no lease commitments, other than a short-term lease.
Royalty and License Fees
In June 2022, Solasia Pharma K. K., or Solasia, announced that darinaparsin had been approved for relapsed or refractory Peripheral T-Cell Lymphoma by the Ministry of Health, Labor and Welfare in Japan. During the years ended December 31, 2025 and 2024, the Company earned $5 and $10, respectively, in royalty revenues on net sales under the Solasia License and Collaboration Agreement.
Critical Accounting Policies and Significant Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions.
We believe the following are our more significant estimates and judgments used in the preparation of our financial statements:
•
Clinical trial expenses and other research and development expenses;
•
Collaboration agreements;
•
Fair value measurements of equity-linked instruments; and
•
Income taxes.
Accounting for Stock-Based Compensation
Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period. Stock-based compensation expense is based on the number of awards ultimately expected to vest and is reduced for forfeitures as they occur. Consistent with prior years, the Company uses the Black-Scholes option pricing model, which requires estimates of the expected term option holders will retain their options before exercising them and the estimated volatility of the Company’s common stock price over the expected term.
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We review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value share-based awards granted in future periods. Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.
Income Taxes
In preparing our financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which, prior to the consideration for the need for a valuation allowance, are included on our balance sheet. Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial accounting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and the effects of tax planning strategies. Our estimates of future taxable income include, among other items, our estimates of future income tax deductions related to the exercise of stock options. In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our business, financial condition, results of operations, cash flows and prospects.
We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. We evaluate uncertain tax positions on an annual basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Our liabilities for uncertain tax positions can be relieved only if the contingency becomes legally extinguished through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associated with the position meet the “more-likely-than-not” threshold or the liability becomes effectively settled through the examination process. We consider matters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews; we have no plans to appeal or litigate any aspect of the tax position; and we believe that it is highly unlikely that the taxing authority would examine or re-examine the related tax position. We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.
Recent Accounting Pronouncements
For a discussion of new accounting standards, please read Note 3 to the accompanying financial statements, Summary of Significant Accounting Policies included in this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this Item 7A.
Item 8. Financial Statements and Supplementary Data
None.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer and our principal accounting officer, we have evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of December 31, 2025. Based on that evaluation, our principal executive officer and principal financial officer has concluded that as of December 31, 2025, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to the lack of sufficient personnel to allow for the required segregation of duties.
We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.
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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and our principal accounting officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer and our principal accounting officer, we assessed our internal control over financial reporting as of December 31, 2025, based on criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because we are a smaller reporting company, our independent registered public accounting firm is not required to, and has not, issued an attestation report on our internal control over financial reporting. Our management’s assessment of the effectiveness of our internal control over financial reporting included testing and evaluating the design and operating effectiveness of our internal controls. In management’s opinion, we have determined that our internal controls over our financial reporting was not effective due to the lack of sufficient number of personal to allow for the required segregation of duties as of December 31, 2025, based on the criteria discussed above.
Inherent Limitations on Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act) that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Trading Plans
During the year ended December 31, 2025, no director or Section 16 officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
41
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item 10 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Policy Prohibiting Insider Trading and Related Procedures.
Our insider trading policy has been reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and Nasdaq listing standards. Our Insider Trading Policy is filed hereto as Exhibit 19.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Item 11. Executive Compensation
The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
42
PART IV
Item 15. Exhibits, Financial Statement Schedules
(1) Financial Statements:
The Financial Statements required to be filed by Item 8 of this Annual Report, and filed in this Item 15, are as follows:
Page
Report of Independent Registered Public Accounting Firm F-1
Report of Independent Registered Public Accounting Firm F-2
Statements of Operations for the Years Ended December 31, 2025 and 2024 F-4
Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 F-6
Notes to Financial Statements F-7
(2) Financial Statement Schedules:
Schedules are omitted because they are not applicable, or are not required, or because the information is included in the financial statements and notes thereto.
(3) Exhibits:
Exhibit No. Description of Document
43
44
23.1* Consent of Independent Registered Public Accounting Firm
19.1* Insider Trading Policy
45
97.1 Alaunos Therapeutics, Inc. Clawback Policy
101.INS* Inline XBRL Instance Document
101.SCH* Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
* Filed herewith.
** Furnished herewith.
+ Indicates management contract or compensatory plan.
Item 16. Form 10-K Summary
None.
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALAUNOS THERAPEUTICS, INC.
Date: March 31, 2026 By: /s/ Holger Weis
Holger Weis
Chief Executive Officer and Director
(Principal Executive Officer and Principal Financial Officer)
Date: March 31, 2026 By: /s/ Ferdinand Groenewald
Ferdinand Groenewald
Vice President, Finance
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Holger Weis
/s/ Ferdinand Groenewald
/s/ Michael A. Jerman
Michael A. Jerman Director March 31, 2026
/s/ Robert W. Postma
Robert W. Postma Director March 31, 2026
/s/ Jaime Vieser
Jaime Vieser Director March 31, 2026
47
Alaunos Therapeutics, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 00677) F-1
Statements of Operations for the Years Ended December 31, 2025 and 2024 F-3
Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 F-5
Notes to Financial Statements F-6
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Alaunos Therapeutics, Inc.
Fort Lauderdale, Florida
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Alaunos Therapeutics, Inc. (the “Company”) as of December 31, 2025, and the related statements of operations, stockholders’ equity, and cash flows the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Company as of and for the year ended December 31, 2023, before the retroactive adjustments described in Note 3 with respect to the July 2024 one-for-ten reverse stock split were audited by other auditors whose report, dated April 1, 2024, expressed an unqualified opinion, with an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern, on those statements. We also audited the adjustments described in Note 3 that were applied retroactively to the 2023 financial statements to reflect the July 2024 one-for-ten reverse stock split and the related disclosures included therein. In our opinion, such adjustments and related disclosures are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2023 financial statements of the Company other than with respect to the adjustments and disclosures referred to herein and, accordingly, we do not express an opinion or any other form of assurance on the 2023 financial statements taken as a whole.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s evaluations of the events and conditions and management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
/s/ Cherry Bekaert LLP
We have served as the Company’s auditor since 2024.
Tampa, Florida
March 31, 2026
F-1
Alaunos Therapeutics, Inc.
BALANCE SHEETS
(in thousands, except share and per share data)
December 31, December 31,
ASSETS:
Current assets:
Cash and cash equivalents $ 1,385 $ 1,091
Receivables 3 5
Prepaid expenses and other current assets, current 600 1,659
Property and equipment, net 91 —
Prepaid expenses and other assets, non current 887 —
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Total current liabilities 813 692
Commitments and contingencies (Note 5)
Stockholders' equity
Total liabilities and stockholders' equity $ 2,966 $ 2,755
The accompanying notes are an integral part of these financial statements.
F-2
Alaunos Therapeutics, Inc.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
For the years ended December 31,
Revenue $ 5 $ 10
Operating expenses:
Other income (expense):
Change in fair value of warrant liability (31 ) —
Other income (expense), net 49 133
Basic and diluted earnings per share $ (2.20 ) $ (2.92 )
The accompanying notes are an integral part of these financial statements.
F-3
Alaunos Therapeutics, Inc.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
Shares Amount Shares Amount Shares Amount
Stock-based compensation — — — — — — 414 — 414
Shares issued as consideration for board service fees 60,384 — — — — — 195 — 195
Shares issued as consideration for services 77,463 — — — — — 187 — 187
Sale of Series A-1 preferred stock — — 500 — — — 500 — 500
Reclassification of Warrant Liability to equity — — — — — — 209 — 209
Exercise of prefunded warrants 271,656 — — — — — — — —
Sale of Series A-2 preferred stock — — — — 850 — 850 — 850
Shares Amount
Stock-based compensation — — 435 — 435
The accompanying notes are an integral part of these financial statements.
F-4
Alaunos Therapeutics, Inc.
STATEMENTS OF CASH FLOWS
(in thousands)
For the years ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 7 2
Change in fair value of warrant liability 31 —
Common stock issued for services rendered 382 —
Stock-based compensation 414 435
Changes in operating assets and liabilities:
Receivables 2 (4 )
Prepaid expenses and other current assets 350 539
Accounts payable 97 (100 )
Net cash flows from operating activities (2,869 ) (4,971 )
Cash flows from investing activities:
Purchases of property and equipment (98 ) —
Net cash flows from investing activities (98 ) —
Cash flows from financing activities:
Proceeds from sale of Series A-1 preferred stock 500 —
Proceeds from sale of Series A-2 preferred stock 850 —
Net cash flows from financing activities 3,261 —
Net increase (decrease) in cash, cash equivalents 294 (4,971 )
Cash and cash equivalents, beginning of period 1,091 6,062
Cash and cash equivalents, end of period $ 1,385 $ 1,091
Supplementary disclosure of cash flow information:
Cash paid for interest $ — $ —
Noncash financing activities:
The accompanying notes are an integral part of these financial statements.
F-5
Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1.
Organization
Alaunos Therapeutics, Inc., which is referred to herein as “Alaunos,” or the “Company,” is a pre-clinical stage obesity and metabolic disorders company with a current focus on developing oral small molecules for obesity and other metabolic disorders. The Company was historically involved in the development of adoptive TCR therapies, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs.
The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts.
As of December 31, 2025 there were 2,349,480shares of common stock outstanding and an additional 328,937 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.
Liquidity and Going Concern
The Company has operated at a loss since its inception in 2003 and has minimal recurring revenue from operations. The Company anticipates that losses will continue for the foreseeable future. As of December 31, 2025, the Company had approximately $1.4 million of cash and cash equivalents. The Company’s accumulated deficit at December 31, 2025 was approximately $924.6 million. Given its current development plans and cash management efforts, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2026. The Company’s ability to continue operations after its current cash resources are exhausted depends on future events including its ability to obtain additional financing or to achieve profitable results, as to which no assurances can be given. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations to conserve cash until sufficient additional capital is raised. There can be no assurances that such a plan would be successful.
Based on the current cash forecast and the Company's dependence on its ability to obtain additional financing to fund its operations after the current resources are exhausted, about which there can be no certainty, management has determined that the Company's present capital resources will not be sufficient to fund its planned operations for at least one year from the issuance date of the financial statements which raises substantial doubt as to the Company's ability to continue as a going concern. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.
F-6
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.
The Company’s most significant estimates and judgments used in the preparation of the financial statements are:
•
Clinical trial expenses and other research and development expenses;
•
Collaboration agreements;
•
Fair value measurements of stock-based compensation; and
•
Income taxes.
Cash and Cash Equivalents
Cash equivalents consist primarily of demand deposit accounts, certificates of deposit and deposits in short-term U.S. treasury money market mutual funds. Cash equivalents are stated at cost, which approximates fair market value.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash accounts in commercial banks, which may, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis using the following periods, which represent the estimated useful lives of the assets:
Office and computer equipment 3 years
Software 3 years
Laboratory equipment 5 years
Operating Segments
Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s chief operating decision maker (“CODM”) and relied upon when making decisions regarding resource allocation and assessing performance. When evaluating the Company’s financial performance, the CODM reviews total revenues, total expenses, and expenses by functional classification; using this information to make decisions on a company-wide basis. The Company views its operations and manages its business in one operating segment.
F-7
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Warrants
The Company assesses whether warrants issued require accounting as derivatives. The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with Financial Accounting Standards Board, or FASB, ASC Topic 815, Derivatives and Hedging. As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.
Derivative Liabilities
In accordance with applicable accounting standards, upon issuance of financial instruments, whether stand alone or embedded, the Company performs an analysis to determine the appropriate classification of the financial instrument as either a derivative liability, or if certain conditions are met, as equity. Derivative liabilities are initially recorded at fair value and subsequently remeasures the derivative liability at each reporting period with changes in fair value recognized in earnings. The Company continually evaluates the classification and if the terms of the agreement are modified, the Company performs an assessment of the impact. Upon modification, if the instrument qualifies for equity classification, at that time it is remeasured at fair value, with changes in fair value since last measurement recognized in earnings and thereafter the balance is reclassified at its then fair value to equity. During the year ended December 31, 2025, the Company determined that certain warrants initially qualified as derivative liabilities. Such warrants were subsequently modified at which point the warrants qualified for equity classification. See further discussion in Note 9 - Warrants.
Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
•
Level 1—Quoted prices in active markets for identical assets or liabilities.
•
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value on a recurring and nonrecurring basis as of December 31, 2025 and 2024 are as follows:
($ in thousands) Fair Value Measurements at Reporting Date Using
($ in thousands) Fair Value Measurements at Reporting Date Using
Cash equivalents $ 779 $ 779 $ — $ —
The cash equivalents represent demand deposit accounts and deposits in a short-term United States treasury money market mutual fund quoted in an active market and classified as a Level 1 asset. There have been no changes to the valuation methods during the years ended December 31, 2025 and 2024.
F-8
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Revenue Recognition from Collaboration Agreements
Revenue for the year ended December 31, 2025 consisted of $5 and for the year ended December 31, 2024 consisted of $10. For the years ended December 31, 2025 and 2024, the Company recognized revenue through its Collaboration Agreement with Solasia Pharma K.K. primarily due to the achievement of milestones, as further described in Note 5, Commitments and Contingencies.
Research and Development Costs
Research and development expenses are recognized as incurred. The Company is required to estimate accrued research and development expenses as of each balance sheet date based on the facts and circumstances known at that time. This process includes reviewing open contracts and purchase orders, communicating with internal personnel and third-party service providers, and estimating the amount of services performed and the related costs incurred for which invoices have not yet been received.
The Company’s research and development activities are primarily related to its preclinical obesity and metabolic disorders program, including the development of oral small molecules for obesity and other metabolic disorders. The Company also incurs limited costs related to its historical oncology focused cell therapy programs.
Estimated accrued research and development expenses primarily include amounts due to third-party vendors supporting preclinical development, manufacturing, regulatory, and other research and development activities. The Company records accruals based on its estimates of the services received and efforts expended under contractual arrangements. Certain agreements may involve milestone-based or uneven payment terms, and payments to vendors may, at times, exceed the level of services provided as of the reporting date, resulting in prepaid research and development assets.
Significant judgment is required in estimating accrued research and development expenses. Differences between the Company’s estimates and actual amounts incurred are recorded in the period in which such differences become known. Although the Company does not expect these estimates to be materially different from actual results, changes in the status or timing of services performed may result in reported amounts being higher or lower in any particular period.
Income Taxes
Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.
The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates this tax position on an annual basis. The Company also accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense (Refer to Note 11, Income Taxes).
Accounting for Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the employee’s requisite service period. Stock-based compensation expense is based on the number of awards ultimately expected to vest and is reduced for forfeitures as they occur. Consistent with prior years, the Company uses the Black-Scholes option pricing model, which requires estimates of the expected term option holders will retain their options before exercising them and the estimated volatility of the Company’s common stock price over the expected term.
The Company recognized the full impact of its share-based employee payment plans in the statements of operations for each of the years ended December 31, 2025 and 2024 and did not capitalize any such costs on the balance sheets. The Company recognized $0.4 million of compensation expense related to stock options for the year ended December 31, 2025 and $0.4 million of compensation expense related to stock options for the
F-9
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
year ended December 31, 2024. The total compensation expense relating to vesting of stock options and stock issued for board service fees and other services for the year ended December 31, 2025 was $0.8 million and $0.4 million for the year ended December 31, 2024.
The fair value of each stock option is estimated at the date of grant using the Black-Scholes option pricing model. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model. The volatility assumption is based on the historical experience. The Company calculated expected term using the simplified method described in SEC Staff Accounting Bulletin, or SAB, No. 107 and No. 110.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of amounts paid in advance for goods and services to be received in future periods. Such amounts are recorded at cost and amortized to expense over the period in which the related goods or services are received. The Company classifies prepaid amounts expected to be realized within twelve months as current assets and the remaining portion as non-current assets. The Company reviews prepaid balances for recoverability and records expense when it is determined that the future economic benefit is no longer probable. As of December 31, 2025, the Company’s prepaid balances included a multi-year insurance contract, of which $222 was classified in prepaid expenses and other current assets and $887 was classified in prepaid expenses and other non-current assets.
Net Loss per Share
Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period, plus the dilutive effect of outstanding options and warrants, using the treasury stock method and the average market price of the Company’s common stock during the applicable period, unless their effect on net loss per share is antidilutive. The effect of computing diluted net loss per common share was antidilutive for any potentially issuable shares of common stock from the conversion of stock options, unvested restricted stock and warrants and, as such, have been excluded from the calculation.
Certain shares related to some of the Company’s outstanding common stock options and warrants have not been included in the computation of diluted net loss per share for the years ended December 31, 2025 and 2024 as the result would be antidilutive. Such potential common shares on December 31, 2025 and 2024 consist of the following:
December 31,
Series A-1 Preferred Stock 181,159 -
Series A-2 Preferred Stock 189,309 -
The following table show the net loss attributable to common shareholders after including undeclared cumulative preferred dividend used to calculate the basic and diluted earnings per share, as shown on the statement of operations (See Note 6. Equity - Series A-1 and A-2 Preferred Stock Cumulative Dividends):
For the years ended December 31,
Cumulative preferred dividends (106 ) -
Net loss attributable to common stockholders $ (4,282 ) $ (4,679 )
New Accounting Pronouncements
F-10
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances income tax disclosures, including disclosures related to the rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for public business entities for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 effective January 1, 2025 on a Prospective basis. The adoption of this guidance impacted the Company’s disclosures only and did not have a material effect on its consolidated financial position, results of operations, or cash flows.
In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements—Amendments to Remove References to the Concept Statements. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. The Company adopted ASU 2024-02 effective January 1, 2025. The adoption of this standard did not have a material impact on the Company’s financial statements or related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. For public business entities, the amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact of this guidance. Because the amendments relate principally to interim reporting, the Company does not expect the standard to materially affect its annual financial statements, but adoption may affect the format and content of future interim disclosures.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is evaluating the impact of this guidance and does not currently expect adoption to have a material impact on its financial statements.
3.
Property and Equipment, net
Property and equipment, net, consists of the following:
December 31, December 31,
Office and computer equipment $ - $ 15
Laboratory equipment 98 -
Less: accumulated depreciation (7 ) (15 )
Property and equipment, net $ 91 $ -
Depreciation expense for the year ended December 31, 2025 and 2024 was $7 and was $2, respectively.
4.
Accrued Expenses
Accrued expenses consist of the following:
Preclinical services $ 123 $ 97
Sales and use taxes 54 -
Professional services 23 79
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Alaunos Therapeutics, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
5.
Commitments and Contingencies
Exclusive License Agreement with Precigen
On April 3, 2023, the Company entered into the Amended and Restated Exclusive License Agreement with Precigen, or the A&R License Agreement, which restated and amended the parties' previous license agreement in full. Under the A&R License Agreement, the Company still had exclusive, worldwide rights to research, develop and commercialize TCR products designed for neoantigens or driver mutations for the treatment of cancer and non-exclusive rights to use non-driver mutation TCRs. On October 4, 2024, pursuant to Section 10.2 of the License Agreement, the Company duly notified Precigen of its full termination of all rights under the License Agreement.
The decision to terminate the A&R License Agreement was made after a thorough review of our strategic priorities and business objectives, including recognizing that the non-viral Sleeping Beauty gene transfer platform patent will expire in 2026. The Company continues to prosecute certain of the intellectual property underlying the TCRs targeting driver mutations such as KRAS, TP53 and EGFR, and the hunTR TCR discovery platform used in the discovery of our proprietary TCR library. The Company continues to explore strategic alternatives, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.
License Agreement and Research and Development Agreement —The University of Texas MD Anderson Cancer Center
In 2015, the Company, together with Precigen, entered into a license agreement, or the MD Anderson License with MD Anderson (which Precigen subsequently assigned to PGEN). Pursuant to the MD Anderson License, the Company, together with Precigen, holds an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs.
In 2015, the Company, Precigen and MD Anderson entered into the 2015 R&D Agreement to formalize the scope and process for the transfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.
As provided under the MD Anderson License, the Company provided funding for research and development activities in support of the research programs under the 2015 R&D Agreement. At various times, the Company amended the 2015 R&D Agreement to extend the term until December 31, 2026 and in 2019 entered into the 2019 R&D Agreement, pursuant to which the Company agreed to collaborate with respect to the TCR program.
The 2019 R&D Agreement will terminate on December 31, 2026 and either party may terminate the 2019 R&D Agreement following written notice of a material breach. The 2019 R&D Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters.
During the reporting period, the Company continued to engage with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) to wind down the TCR trials. The parties completed the final reconciliation of amounts due under the related R&D agreements, and the Company received the final invoice during the second quarter of 2025. Amounts due to MD Anderson and recorded in accounts payable were $143 and $257 as of December 31, 2025 and 2024, respectively.
On November 4, 2025, the Office of the Attorney General of Texas, on behalf of MD Anderson, issued a demand for payment. On December 17, 2025, the Company entered into a Settlement and Release Agreement with MD Anderson to resolve the matter. Pursuant to the agreement, the Company agreed to pay $285 thousand in six installments through May 30, 2026, in full satisfaction of the outstanding invoices. The agreement also provides for mutual general releases, subject to customary exceptions, including for breach of the settlement agreement and certain ongoing matters such as Protocol 2006-0676.
Patent and Technology License Agreement—The University of Texas MD Anderson Cancer Center and the Texas A&M University System
In August 2004, the Company entered into a patent and technology license agreement with MD Anderson and the Texas A&M University System, which the Company refers to, collectively, as the Licensors. Under this agreement, the Company was granted an exclusive, worldwide license to rights (including rights to U.S. and foreign patent and patent applications and related improvements and know-how) for the manufacture and commercialization of two classes of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.
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Under the terms of the agreement, the Company may be required to make payments to the Licensors upon achievement of certain milestones in varying amounts which, on a cumulative basis could total up to an additional $4.5 million. In addition, the Licensors are entitled to receive low single digit royalties on net sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain circumstances. During the years ended December 31, 2025 and 2024, the Company did not incur any milestone expenses or royalty expenses under this agreement.
Collaboration Agreement with Solasia Pharma K.K.
In 2011, the Company entered into a License and Collaboration Agreement with Solasia Pharma K. K., or Solasia, which was amended in 2014 to include an exclusive worldwide license and further amended in 2021 to revise certain payment schedule details, or, as so amended, the Solasia License and Collaboration Agreement. Pursuant to the Solasia License and Collaboration Agreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use.
As consideration for the license, the Company is eligible to receive from Solasia development- and sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenue generated by Solasia.
During the years ended December 31, 2025 and 2024, the Company earned royalty revenue totaling $5 and $10, respectively, on net sales under this agreement.
Insurance Contract
During the year ended December 31, 2025 , the Company's insurance arrangement for certain risks which were previously paid in full began to be in force for a period of six years. Accordingly, the Company began amortizing the prepaid expense related to the contract. The Company has classified the prepaid contract between its current portion and long term-portion. As of December 31, 2025, $222is included in prepaid expenses and other current assets and $887 is included in prepaid expense and other non-current assets in the accompanying balance sheet.
Director Resignation
On April 15, 2025, Dr. Robert Hofmeister, Ph.D. resigned as a member of the Board of Directors of the Company with immediate effect. Dr. Robert Hofmeister's, Ph.D. resignation was not the result of any disagreement on any matter relating to the Company’s operations, policies or practices.
Changes in Corporate Governance
On July 1, 2025, Dale Curtis Hogue, Jr. resigned from his positions as Chief Executive Officer and a member of the Board of Directors of the Company, effective immediately. His resignation was not due to any disagreement with the Company. In connection with his departure, the Company entered into a Consulting Agreement with Mr. Hogue, effective July 1, 2025, under which he will provide strategic and advisory services to the Company at a rate of $250 per hour. The agreement remains in effect until terminated by either party.
On July 2, 2025, the Board appointed Holger Weis as Chief Executive Officer, effective immediately. Mr. Weis will continue to serve as Chair of the Board of Directors, but has relinquished his roles on the Audit and Compensation Committees, pursuant to applicable Nasdaq Listing Rules. In connection with his appointment, the Company entered into an Employment Agreement with Mr. Weis, providing for an annual base salary of $275 and a stock option to purchase 130,000 shares of common stock at an exercise price of $5.06 per share. One-quarter of the option vested immediately, with the remainder vesting in equal quarterly installments over three years.
On July 15, 2025, the Board of Directors of the Company appointed Mr. Michael A. Jerman as an independent director of the Company, effective immediately, to fill the vacancy on the Board of Directors created by the resignation of Mr. Hogue and the vacancies on the audit and compensation committees from Mr. Weis’s appointment as CEO. In connection with his appointment, Mr. Jerman was also named to the Audit Committee and the Compensation Committee of the Board, and will serve as the Chair of the Audit Committee. Upon his appointment, Mr. Jerman was awarded options to purchase Common Stock pursuant to the Company's Non-employee Director Compensation Policy.
On July 16, 2025, Melinda Lackey notified the Company of her decision to terminate the Consulting Agreement dated November 14, 2023 (the “Agreement”) pursuant to terms of the agreement, with such termination to be effective 30 days from the date of notice, or August 15, 2025. In
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connection with the termination of the Agreement, Ms. Lackey resigned from her roles as Legal and Administrative Officer and Corporate Secretary of the Company as of the effective Date. Ms. Lackey’s departure is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
On August 14, 2025, the Board of Directors of the Company appointed Mr. Ferdinand Groenewald as Corporate Secretary effective upon the resignation of Ms. Lackey.
Sales Tax Contingency
The Company is subject to examination by certain state and local taxing authorities related to sales and use tax matters. The Company records a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. As of December 31, 2025, the Company has recorded an estimated liability of $54 to these matters. In addition, the Company may be exposed to additional loss; however, the Company cannot reasonably estimate the amount or range of additional loss at this time.
6.
Equity
Increase in Authorized Shares
On July 3, 2025, the Company stockholders approved an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 5,000,000 to 50,000,000. The amendment was filed with the Secretary of State of the State of Delaware and became effective upon filing.
Equity Incentive Plan Amendment
On July 3, 2025, the Company's stockholders approved an amendment to the Company’s 2020 Equity Incentive Plan to increase the number of shares of common stock authorized for issuance under the plan from 130,745 to 1,130,745 shares.
Series A-1 Preferred Stock
In April 2025, the Company entered into a Subscription Agreement (the “A-1 Agreement”), with an accredited investor, pursuant to which the Company sold 500 shares of Series A-1 Convertible Preferred Stock, par value of $0.001 per share (the “Series A-1 Preferred Stock”), at a price per share of $1,000 (the “Preferred Offering”) for an aggregate purchase price of $0.5 million. The Preferred Offering also relates to the offering of the shares of the Company's common stock (the "Common Stock") issuable upon the conversion of or otherwise pursuant to the terms of the Series A-1 Preferred Stock.
In connection therewith, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-1 Convertible Preferred Stock of the Company, designating 1,000 shares of preferred stock as Series A-1 Preferred Stock.
Series A-1 Preferred Stock together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at option of the holder, into shares of Common Stock at initial fixed “Conversion Price” of $2.76 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-1 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-1 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the common stock, the holders of Series A-1 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-1 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to the stockholders of the Company for their action on an as-converted basis, a number of votes equal to the number of shares of common stock into which the shares of Series A-1 Preferred Stock are convertible under the terms of the Certificate of Designation.
Director Compensation
On April 13, 2025, the Board of Directors of the Company elected to receive compensation in the form of shares of common stock and stock
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(in thousands, except share and per share data)
options in lieu of cash for the then outstanding cumulative deferred board service fees for the first quarter of 2025, totaling $139. Accordingly, the Company issued 38,269 shares of common stock with an aggregate fair value of $112 and granted 10,904 fully vested stock options, with an exercise price of $2.92 per share and an aggregate grant date fair value of $27.
On July 3, 2025, the Board of Directors of the Company elected to receive compensation in the form of shares of common stock and stock options in lieu of cash for the second quarter board service fees. The total deferred board service fees amounted to $37. In exchange for these deferred fees, the Company issued 7,450 shares of common stock and on August 18, 2025 granted 13,676 fully vested stock options, with an exercise price of $2.32 per share and an aggregate grant date fair value of $27.
On November 21, 2025, members of the Board of Directors of the Company elected to receive compensation in equity rather than in cash for their third quarter board service fees. Accordingly, the Company issued 14,665 shares of common stock with an aggregate fair value of $49.
Securities Purchase Agreement for Registered Direct Offering
In June 2025, the Company entered into a Securities Purchase Agreement with certain institutional investors, pursuant to which the Company agreed to sell (i) 338,725 shares of common stock at a purchase price of $3.36 per share and (ii) 271,674 pre-funded warrants to purchase common stock at a purchase price of $3.359 per warrant share, in a registered direct offering. In connection therewith, Company received net proceeds totaling $1.91 million after deduction of transaction related expenses. As of December 31, 2025, all pre-funded warrants had been exercised, including certain warrants exercised on a cashless basis, resulting in the issuance of an aggregate of 271,656 shares of common stock.
Series A-2 Preferred Stock
In June 2025, the Company entered into a subscription agreement with certain accredited investors, pursuant to which the Company sold, in a private placement, 850 shares of Series A-2 Convertible Preferred Stock, par value $0.001 per share, at a price of $1,000 per share, for aggregate gross proceeds of $0.85 million.
In connection therewith, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-2 Convertible Preferred Stock of the Company, designating 1,000 shares of preferred stock as Series A-2 Preferred Stock.
Series A-2 Preferred Stock, together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at the option of the holder, into shares of Common Stock at an initial fixed “Conversion Price” of $4.49 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-2 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-2 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the Common Stock, the holders of Series A-2 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-2 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to the stockholders of the Company for their action on an as-converted basis, a number of votes equal to the number of shares of Common Stock into which the shares of Series A-2 Preferred Stock are convertible under the terms of the Certificate of Designation.
Series A-1 and A-2 Preferred Stock Cumulative Dividends
Cumulative dividends on the Company’s Series A-1 and Series A-2 Convertible Preferred Stock accrue at 10% per annum and compound quarterly by increasing the liquidation preference. Undeclared cumulative dividends are not recorded as a liability. Because the Company reported a net loss for the periods presented, cumulative preferred dividends increased the net loss attributable to common stockholders in the earnings-per-share calculation. As of December 31, 2025, undeclared cumulative dividends totaled $60 for Series A-1 and $45 for Series A-2.
Consulting Services
On August 18, 2025, the Company issued 10,775 shares of common stock for services, with an aggregate grant-date fair value of $25 to the Company's Vice President of Finance. In addition, the Company issued 4,000 stock options to the consultant with a grant date fair value of $8. One-sixteenth of the shares underlying the option vest in equal quarterly installments measured from August 18, 2025, with the first vesting occurring on November 18, 2025.
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NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
On October 10, 2025, the Company issued 53,832 shares of common stock for services, with an aggregate grant-date fair value of $199. The issuance partially settled accounts payable outstanding at September 30, 2025 pursuant to a revised consulting agreement. For services render through out the remainder of the year ended December 31, 2025 the Company issued an aggregate of 12,856 shares of common stock for services, with an aggregate grant-date fair value of $38 pursuant to the consulting agreement.
7.
Warrants
The following is a summary of the Company's warrant activity for the years ended December 31, 2025:
In May 2025, the Company entered into an equity purchase agreement with an investor under which the Company has the option to sell up to $25.0 million of common stock over a period of 24 months at 97% of the prior trading day’s volume-weighted average price, subject to volume and ownership limitations. In connection with the agreement, the Company issued a warrant to purchase 79,900 shares of common stock at $4.00 per share, with a five-year term.
Due to anti-dilution and variable pricing features, the warrant was initially classified as a derivative liability measured at fair value using the Black-Scholes model, which was determined to be approximately equivalent to a lattice or monte carlo model. On the issuance date, the fair value of the derivative liability totaled $177, with a corresponding increase in deferred issuance costs for the same amount, which is included in other assets in the balance sheet and will be amortized as a reduction to the proceeds received equity instruments sold pursuant to the agreement or upon its termination in the event the entirety of the shares are not sold. On June 9, 2025, the Company and the investor agreed to amend the warrant to introduce a $0.57 floor price, eliminate certain share-count adjustments, and remove certain fundamental transaction rights. As a result, the warrant, as amended, qualified for equity classification, was remeasured at fair value, and was reclassified from liabilities to equity, which resulted in a charge of $31 recognized as a change in fair value of derivative liability and is included in other expense in the statement of operations.
The fair value of the warrant issued to the investor was initially measured using the Black-Scholes option pricing model as of May 19, 2025, based on the following assumptions: expected volatility of 118.36%, risk-free interest rate of 4.19%, dividend yield of 0%, expected term of 5.0 years, stock price of $3.12, and exercise price of $3.48. On June 9, 2025, in connection with the amendment of the warrant terms, the fair value was remeasured using updated inputs, which included an expected volatility of 125.81%, risk-free interest rate of 4.09%, dividend yield of 0%, expected term of 5.0 years, stock price of $3.12, and a revised exercise price of $3.36. Both valuations reflect management’s best estimates at the respective measurement dates. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model. The volatility assumption is based on the historical experience
8.
Income Taxes
There is no provision for income taxes because the Company has incurred operating losses since inception. The reported amounts of income tax expense for the years ended December 31, 2025 and 2024 differ from the amounts that would result from applying domestic federal statutory tax
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NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
rates to pretax losses primarily because of the changes in the valuation allowance. Significant components of the Company’s deferred tax assets at December 31, 2025 and 2024 are as follows:
December 31,
Deferred tax assets:
Start-up and pre-clinical studies 8,683 11,011
Research and development credit carryforwards 40,345 40,486
Stock-based compensation 766 699
Capitalized acquisition costs 556 1,050
Lease liability — —
Depreciation 0 1
Capitalized research expenses 0 5,400
Total deferred tax assets — —
Right-of-use asset — —
Total deferred tax liabilities $ — $ —
Net deferred taxes $ — $ —
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2025, the Company has aggregate net operating loss carryforwards for federal tax purposes of approximately $775 million, of which approximately $339 million expire at various dates through December 31, 2037 and approximately $436 million can be carried forward indefinitely. The Company has generated a gross net operating loss of approximate $10.9 million in Florida for the current year. The Company is reducing its approximately $498 million of state net operating loss carryforwards to $0 as these state net operating loss carryforwards all related to Massachusetts filings and, as of December 31, 2024 the Company no longer had any employees or property in Massachusetts and, as a result, the Company will no longer have income tax nexus in Massachusetts or an income tax filing obligation after the year ended December 31, 2024. Additionally, the Company has approximately $40.3 million of federal and state research and development credits at December 31, 2025, expiring in varying amounts through 2045, which may be available to reduce future taxes. The Company has reduced its Massachusetts credits carryforward to $0 as well at December 31, 2024.
The Company has provided a valuation allowance for the full amount of its net deferred tax assets since it is more likely than not that these future benefits will not be realized. However, these deferred tax assets may be available to offset future income tax liabilities and expenses. The valuation allowance increased by $303 in 2025 due primarily to net operating loss carryforwards and the increase in research and development credits.
Income taxes using the federal statutory income tax rate differ from the Company’s effective tax rate primarily due to non-deductible expenses related to the Company’s issuance of warrants along with the change in the valuation allowance on deferred tax assets.
Beginning in 2025 annual reporting, we adopted ASU 2023-09 prospectively. See Note 2 — Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax expense (benefit) to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:
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NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Year Ended December 31,
Federal income tax at statutory rates $ (859 ) 21 %
State income tax, net of federal tax benefit 196 (5 )%
Research and development credits - — %
Research and development true-up 1,254 (31 )%
Stock-based compensation 18 — %
Federal/state rate change (914 ) 22 %
Change in valuation allowance 305 (7 )%
Effective tax rate $ - 0 %
A reconciliation of the U.S. federal statutory income tax expense (benefit) to our effective tax rate for the years ended December 31, 2024 is as follows (in percentages):
Year Ended December 31,
Federal income tax at statutory rates 21 %
State income tax, net of federal tax benefit (2 )%
Research and development credits — %
Research and development true-up 29 %
Stock-based compensation — %
Federal/state rate change 0 %
Change in valuation allowance (48 )%
Effective tax rate — %