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 consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a fully integrated clinical-stage biotechnology company focused on developing a robust pipeline of T cell receptor (TCR)-engineered T cell, or TCR-T, therapies for the treatment of patients with cancer. Our lead product candidate, TSC-101, is in development for the treatment of patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS) who are undergoing allogeneic hematopoietic cell transplantation (HCT). The product is designed to eliminate residual disease and promote complete donor chimerism, thereby preventing relapse. TSC-101 targets HA-2, an antigen that is present on all blood cells, malignant or benign, in patients with the HLA type A*02:01. We are currently conducting a Phase 1 clinical study of TSC-101 (the ALLOHATM trial, NCT05473910) and during the fourth quarter of 2025, following a productive End-of-Phase meeting with the U.S. Food and Drug Administration (FDA), we reached agreement on a registrational path forward for the TSC-101 program as a potential treatment for patients with AML and MDS. The pivotal study will mirror our ongoing Phase 1 ALLOHA study, using a biologically-assigned (genetically randomized) control arm to support relapse-free survival as the primary endpoint.
We are further expanding our hematologic (heme) malignancies program with the addition of TCRs targeting other HLA types. TSC-102-A01 and TSC-102-A03 are allogeneic, donor-derived TCR-T therapy candidates targeting epitopes derived from CD45. Like TSC-101, these candidates are designed to eliminate residual cancer cells and prevent relapse in patients undergoing HCT. TSC-102-A01 and TSC-102-A03 are designed for patients with HLA types A*01:01 and A*03:01, respectively.
We are also developing multiple TCR-T therapy product candidates for the treatment of solid tumors. One of the challenges of treating solid tumors is that they are heterogeneous – not every tumor cell expresses a given target. To address this challenge, we are developing what we refer to as multiplex TCR-T therapy, in which we treat a patient with more than one TCR-T therapy product candidate at a time. We are designing these multiplex therapies to be a simultaneous administration of up to three highly active TCR-Ts that are customized for each patient based on which targets are expressed in their tumors. On November 3, 2025, following our alignment with the U.S. Food and Drug Administration (FDA) on the registrational path forward for the TSC-101 program, we made the strategic decision to prioritize clinical development of our heme program and pause further enrollment in our solid tumor Phase 1 trial (PLEXI-TTM), while focusing our preclinical efforts on in vivo engineering for solid tumors.We believe an in vivo approach represents a promising and more cost-efficient way to deliver off-the-shelf, multiplexed TCR-T therapy for solid tumors.
While primarily focused on oncology, we believe our target discovery platform is well suited to identify targets that cause T cell-driven autoimmune disorders. We have identified a set of indications in which T cells play a key role and are currently identifying targets and developing potential treatment options for these disorders. Initial indications include ankylosing spondylitis, ulcerative colitis and scleroderma. In addition, the Company is continuing to discover targets for Crohn's disease in partnership with Amgen.
Since our inception in 2018, we have devoted our efforts to raising capital, obtaining financing, filing, prosecuting and maintaining intellectual property rights, organizing and staffing our Company and incurring research and development costs related to the identification of novel targets for TCRs and development of TCR-T therapy product candidates to target and eliminate cancer cells. We do not have any therapies approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily with proceeds from sales of capital stock, revenue received under our collaboration agreements, as well as debt facilities.
Components of Results of Operations
Revenue
To date, our revenue has primarily been derived from our collaboration and licensing agreements, which have been in the scope of ASC 606, Revenue from Contracts with Customers. We have not generated any revenue from the sale of therapies to date, nor do we expect to generate revenues therefrom in the near future, if at all. If our development efforts for our product candidates are successful and result in regulatory approval or if we enter into additional license or collaboration agreements with third parties, we may generate additional revenue in the future from sales of our therapies, payments from license or collaboration agreements that we may enter into with third parties, or any combination thereof. However, there can be no assurance as to when we will generate such revenue, if at all.
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We expect that our revenue for at least the next several years will be derived primarily from collaborations and licenses that we may enter into in the future, if any.
Collaboration Revenue
Amgen
On May 8, 2023, the Company entered into a Collaboration Agreement with Amgen Inc. (the Amgen Agreement) to identify antigens recognized by T cells in patients with Crohn’s disease in accordance with a research plan. Under the terms of the Agreement, Amgen will retain all global development and commercialization rights.
The collaboration included an upfront fee of $30.0 million. We have identified performance obligations for research and development activities, the license, data reporting and participation in joint steering and research committees, which were determined to be a single combined performance obligation due to the services and licenses being highly interrelated. During the years ended December 31, 2025 and 2024, we recognized $10.3 million and $2.8 million, respectively, of revenue associated with the Amgen Agreement. The research term of the Amgen Agreement is expected to be approximately 3 years.
See Note 9, Collaboration and License Agreements, to our audited financial statements included elsewhere in this Annual Report.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with our research activities, including our therapeutic discovery efforts, preclinical and clinical trials, and the development of our proprietary platform technologies and product candidates. We expense research and development costs as incurred, which include:
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employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, and other related costs for those employees involved in research and development efforts;
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expenses incurred in connection with our research programs, including under agreements with third parties, such as consultants and contract research organizations, or CROs;
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the cost of raw materials, developing and scaling our manufacturing process, and manufacturing our product candidates for use in our research and preclinical studies, including under agreements with third parties, such as consultants, contractors, and contract development and manufacturing organizations, or CDMOs;
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laboratory supplies and research materials;
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facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and
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payments made under third-party licensing agreements.
We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
Our direct external research and development expenses consist of costs that include fees, reimbursed materials, direct material costs, and other costs paid to consultants, contractors, CDMOs and CROs in connection with our development and manufacturing activities. We do not allocate employee costs, general laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.
Product candidates in later stages of clinical development generally have higher development costs than those in preclinical and earlier stages of clinical development, primarily due to increased size and duration of later stage clinical trials. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical
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development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with therapeutic development and commercialization, including the following:
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the number and scope of preclinical and clinical programs we decide to pursue;
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the timing and progress of preclinical and clinical development activities for each program;
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our ability to raise additional funds necessary to complete preclinical and clinical development of and commercialize our product candidates;
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the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
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our ability to maintain our current research and development programs and to establish new ones;
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our ability to establish new licensing or collaboration arrangements;
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the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or the FDA, or any comparable foreign regulatory authority;
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the receipt and related terms of regulatory approvals from applicable regulatory authorities;
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the availability of raw materials for use in the manufacture of our product candidates;
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our ability to consistently manufacture our product candidates for use in clinical trials;
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our ability to establish and operate a manufacturing facility, or secure manufacturing supply through relationships with third parties;
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our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the U.S. and internationally;
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our ability to protect our rights in our intellectual property portfolio;
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the commercialization of our product candidates, if and when approved;
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obtaining and maintaining third-party insurance coverage and adequate reimbursement;
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the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
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competition with other products and therapies; and
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a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of these product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates or in establishing market acceptance for any product candidates that may be approved.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel expenses, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.
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Restructuring Charges
On November 3, 2025, following our alignment with the U.S. Food and Drug Administration (FDA) on the registrational path forward for the TSC-101 program, we made the strategic decision to prioritize clinical development of our heme program and pause further enrollment in our solid tumor Phase 1 trial, while focusing our preclinical efforts on in vivo engineering for solid tumors and target discovery in autoimmunity. Pursuant to this strategy, we also implemented a workforce reduction of approximately 30%, or 66 roles. As part of this strategic restructuring, we incurred expenses of approximately $2.0 million for severance-related benefits and other costs, of which $1.6 million is included in research and development expenses and $0.4 million is included in general and administrative expenses in the accompanying consolidated statements of operations. The strategic prioritization is expected to produce annual cost savings of $45.0 million in 2026 and 2027. These expected savings are based on our current operating plan and may vary depending on the timing and scope of our development activities and other operational factors.
Income Taxes
Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits, due to the uncertainty of realizing a benefit from those items. As of December 31, 2025, we had federal and state net operating loss carryforwards of $174.7 million and $186.6 million, respectively, which may be used to offset future taxable income, if any. The state amounts expire at various dates through 2045. The federal net operating losses generated in and after 2018 can be carried forward indefinitely. As of December 31, 2025, we had federal and state tax credit carryforwards of $21.8 million and $13.0 million, which expire at various dates through 2045 and 2040, respectively. Due to the degree of uncertainty related to the ultimate use of the deferred tax assets, we have fully reserved these tax benefits, as the determination of the realization of the deferred tax benefits was not determined to be more likely than not.
Results of Operations
Years ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
Revenue
Operating expenses:
Other (expense) income:
Loss on extinguishment of debt - (1,090 ) 1,090
Revenue
Revenue for the years ended December 31, 2025 and 2024 was $10.3 million and $2.8 million, respectively. The increase was primarily due to the timing of research activities performed pursuant to our collaboration agreement with Amgen which commenced in May 2023.
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Research and Development Expenses
The following table summarizes our research and development expenses for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
Laboratory supplies, research materials and studies $ 35,157 $ 31,468 $ 3,689
Research and development expenses increased $6.8 million and was primarily attributable to a $3.7 million increase in laboratory supplies, research materials and studies expenses driven by timing of manufacturing activities. There was also a $3.4 million increase in facility-related expenses due to the commencement of rent payments for the 830 Winter Street expansion space in December 2024, as well as a $2.2 million increase in personnel expenses which was primarily incurred prior to our enacted strategy in November 2025 to prioritize the clinical development of our heme program. Clinical expenses decreased by $2.4 million due to timing of ongoing trial activities, and depreciation expense decreased by $1.2 million as certain assets became fully depreciated. Research and development expenses included non-cash stock compensation expense of $6.0 million and $4.8 million for the years ended December 31, 2025 and 2024, respectively.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
General and administrative expenses increased by $1.7 million and was primarily due to a $0.5 million increase in personnel expenses. There was also a $0.4 million increase in facility-related and other expenses, a $0.2 million decrease in legal and professional fees, and a $0.1 million decrease in depreciation expense. General and administrative expenses included non-cash stock compensation expense of $5.7 million and $4.7 million for the years ended December 31, 2025 and 2024, respectively.
Other (Expense) Income
Other income decreased $1.3 million primarily due to a $3.2 million decrease in interest income attributable to lower cash balances available for investment. This decrease was offset by a $1.1 million non-recurring charge for loss on extinguishment of debt in 2024 related to the K2HV Loan Agreement repayment and a $0.9 million decrease in interest expense due to more favorable rates in 2025 under the SVB Loan Agreement.
Liquidity and Capital Resources
Sources of Liquidity
We have not generated any revenue from product sales and have incurred net losses and negative cash flows from our operations. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Under the terms of the Amgen Agreement, we received an upfront payment of $30.0
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million in July 2023. In addition, we are eligible to earn success-based milestone payments of over $500 million, based upon the achievement of certain clinical development and commercial milestones, as well as tiered single-digit royalty payments on net sales of products developed from the collaboration, subject to reductions set forth in the Amgen Agreement.
On June 1, 2023, we completed an underwritten public offering of (a) 23,287,134 shares of the Company's Voting Common Stock, inclusive of the underwriters’ 30-day option to purchase 297,660 additional shares of Voting Common Stock, at a price of $2.00 per share, and (b) the Pre-Funded Warrants to purchase up to 47,010,526 shares of the Voting Common Stock, with a purchase price of $1.9999 per warrant and an exercise price of $0.0001 per warrant. The Company received aggregate net proceeds from the offering of $134.7 million after deducting underwriting discounts, commissions and other offering expenses.
On April 24, 2024, we completed an underwritten public offering resulting in the issuance and sale of (a) 4,958,068 shares of Voting Common Stock, including the partial exercise of the underwriters’ option to purchase 2,485,487 additional shares of Voting Common Stock, at the closing market price on April 16, 2024, of $7.13 per share, and (b) Pre-Funded Warrants to purchase up to 18,577,419 shares of the Voting Common Stock, with a purchase price of $7.1299 per warrant and an exercise price of $0.0001 per warrant. We received aggregate net proceeds of approximately $161.4 million after deducting underwriting discounts, commissions and other estimated offering expenses.
Pursuant to the K2HV Loan Agreement dated September 9, 2022, K2HV extended an initial convertible term loan of $30.0 million to the Company in accordance with the K2HV Loan Agreement. On November 20, 2024, K2HV converted $15.0 million outstanding principal under the loan in exchange for 3,134,796 shares of our voting common stock. On December 20, 2024, we entered into a loan agreement with SVB (the SVB Loan Agreement), terminated the K2HV Loan Agreement and repaid all remaining outstanding loan obligations to K2HV. The SVB Loan Agreement provides for term loans up to an aggregate principal amount of $52.5 million, of which $32.5 million was provided on the closing date. We have the option to draw a second tranche of $20.0 million at the lender's sole discretion on or prior to June 30, 2026. See “Notes to Consolidated Financial Statements” and “Item 1A. Risk factors—The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility” for additional details regarding the SVB Loan Agreement.
On December 27, 2024, we completed a registered direct offering with an existing investor for the issuance of Pre-Funded Warrants to purchase up to 7,500,000 shares of the Company's Voting Common Stock with an exercise price of $0.0001 per warrant. The Pre-Funded Warrants were issued at a purchase price of $4.00 per warrant, resulting in gross proceeds of approximately $30.0 million, before deducting offering expenses of $0.2 million.
As of December 31, 2025, we had cash and cash equivalents of $152.4 million, excluding restricted cash of $5.0 million.
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our research programs into preclinical and clinical development. The timing and amount of our operating expenditures will depend largely on:
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the identification of additional research programs and product candidates;
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the scope, progress, results and costs of research and development for our current and future product candidates, including our current and planned clinical trials, and ongoing preclinical development for our current and future product candidates;
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the costs, timing and outcome of regulatory review of any product candidates we may develop;
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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate a clinical trial;
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our decision to develop and expand our manufacturing capabilities;
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our decision to invest in facilities to enable growth;
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investing in next-generation T cell engineering capabilities;
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changes in laws or regulations applicable to any product candidates we may develop, including but not limited to clinical trial requirements for approvals;
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the cost and timing of obtaining materials to produce adequate supply for any preclinical or clinical development of any product candidate we may develop;
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the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any product candidate we may develop for which we obtain marketing approval;
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the legal costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
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additions or departures of key scientific or management personnel;
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our ability to establish and maintain collaborations on favorable terms, if at all, as well as the costs and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; and
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the costs of continuing to operate as a public company.
We believe that our existing cash and cash equivalents will enable us to fund our planned operating expenses and capital expenditure requirements into the second half of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We have not yet received regulatory approval for or commercialized any of our product candidates and do not expect to generate revenue from product sales for several years, if at all. We do not expect to generate any product revenue unless and until we (1) complete development of any of our product candidates; (2) obtain applicable regulatory approvals; and (3) successfully commercialize or enter into collaborative agreements for our product candidates. We do not know with certainty when, or if, any of these items will ultimately occur. We expect to incur continuing significant losses for the foreseeable future and our losses to increase as we ramp up our preclinical and clinical development programs. We may encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.
While we remain an emerging growth company and a smaller reporting company, we are not required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, as we continue to evolve as a business, we will incur increased costs related to legal and financial compliance.
We will require additional capital to develop our product candidates and fund our operations into the foreseeable future. We anticipate that we will eventually need to raise substantial additional capital, the requirements for which will depend on many factors, including:
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the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates;
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the number and scope of clinical programs we decide to pursue;
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the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
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the scope and costs of development and manufacturing activities;
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the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
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the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;
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the extent to which we acquire or in-license other product candidates and technologies;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval;
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our implementation of various computerized information systems;
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impact of health crises and other external disruptions on our clinical development or operations; and
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the costs associated with being a public company.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions, in addition to those contained in our SVB Loan Agreement. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
Adequate funding may not be available to us on acceptable terms or at all. If we are unable to raise capital when needed it could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds as required, we may need to delay, reduce, or terminate some or all development programs and clinical trials. We may also be required to sell or license our rights to product candidates in certain territories or indications that we would otherwise prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates. See Part 2, Item 1A. “Risk Factors” of this Annual Report for additional risks associated with our substantial capital requirements.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
Year Ended December 31,
Net cash provided by (used in) financing activities (336 ) 208,765 (209,101 )
Operating Activities
During the year ended December 31, 2025, net cash used in operating activities of $135.3 million was primarily driven by our net loss of $129.8 million, partially offset by non-cash charges of $12.6 million related to depreciation expense, accretion of marketable securities, stock-based compensation, and non-cash interest expense related to note payable. During 2025, working capital changes resulted in a use of $18.2 million. The change in working capital was primarily driven by revenue recognition related to the Amgen Agreement and changes in accrued expenses.
During the year ended December 31, 2024, net cash used in operating activities of $110.8 million was primarily driven by our net loss of $127.5 million, partially offset by non-cash charges of $11.6 million related to depreciation expense, accretion of marketable securities, stock-based compensation, non-cash interest expense related to note payable, and loss on extinguishment of debt. During 2024, working capital changes contributed $5.1 million to our cash flows. The change in working capital was primarily driven by the timing of payments to our vendors.
Investing Activities
During the year ended December 31, 2025, net cash provided by investing activities was $109.4 million, primarily related to the purchases and maturities of marketable securities, and the purchases of property and equipment.
During the year ended December 31, 2024, net cash used in investing activities was $52.6 million, primarily related to the purchases and maturities of marketable securities, and the purchases of property and equipment.
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Financing Activities
During the year ended December 31, 2025, net cash used in financing activities was $0.3 million, consisting of cash paid for debt issuance and financing costs previously accrued, offset by proceeds from the issuance of common stock under the employee stock purchase plan.
During the year ended December 31, 2024, net cash provided by financing activities was $208.8 million, consisting of net proceeds of $161.4 million from our follow-on public offering in April 2024, cash proceeds of $32.5 million from borrowings under SVB Loan Agreement, cash proceeds of $30.0 million from our direct offering in December 2024, $1.7 million of proceeds from the exercise of stock options, and $0.3 million of proceeds from the issuance of common stock under 2021 ESPP. These proceeds are partially offset by $17.1 million of repayments of the K2HV Loan Agreement.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue recognition
To date, our revenues have primarily consisted of consideration related to the Novartis Agreement and the Amgen Agreement, which we are accounting for under ASC 606. In accordance with ASC 606, we recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the assessment of the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as we satisfy each performance obligation.
As part of the accounting for arrangements under ASC 606, we must use significant judgment to determine the performance obligations based on the determination under step (ii) above. We also use judgment to determine whether milestones or other variable consideration, except for royalties and sales-based milestones, should be included in the transaction price as described below. We recognize revenue based on those amounts when, or as, the performance obligations under the contract are satisfied.
We utilize judgment to assess the nature of the performance obligation to determine whether the performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and the resulting periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the arrangement, which are subject to review by the joint steering committee, or JSC. Such a change could have a material impact on the amount of revenue we record in future periods. We concluded that the transfer of control to the customer for the performance obligation occurs over the time period that the research and development services are provided by us. We recognize revenue for the performance obligation as those services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy the performance obligation. The cost-to-cost method is, in management’s judgment, the best measure of progress towards satisfying the performance condition.
At the inception of each arrangement that includes research, development or regulatory milestone payments, we evaluate whether the milestones are considered likely to be met and estimate the amount to be considered for inclusion in the transaction price using the most-likely-amount method. If it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur, the associated milestone value is included in the transaction price. For milestone payments due upon events that are not within our control, such as regulatory approvals, we are not able to assert that it is likely that the regulatory approval will be granted and that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur until those approvals are received. In making this assessment, we evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone. There is considerable judgment involved in determining whether it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur.
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We reevaluate the transaction price and our total estimated costs expected to be incurred at the end of each reporting period and as uncertain events, such as changes to the expected timing and cost of certain research, development and manufacturing activities that we are responsible for, are resolved or other changes in circumstances occur. If necessary, we will adjust our estimate of the transaction price or our estimates of the total costs expected to be incurred. To date, we have not had any significant changes in our estimates.
Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:
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Vendors in connection with discovery and preclinical development activities;
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CROs in connection with preclinical and clinical studies and testing; and
•
CDMOs in connection with the process development and scale up activities and the production of materials.
We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development, and manufacturing activities; invoicing to date under contracts; communication from the contract research organizations, contract development and manufacturing organizations and other companies of any actual costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Recently Issued Accounting Pronouncements
A description of recently adopted or issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
We are also a “smaller reporting company”, meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal Financial Officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures as of period end. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2025, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles or “GAAP”. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial 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 the assets of our company;
•
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
•
Provide reasonable assurances regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material adverse effect on our financial statements.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
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Based on this assessment, management has concluded that our internal controls over financial reporting were effective as of December 31, 2025 and provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission for “emerging growth companies” that permit us to provide only management’s report in this report.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management does not expect that our internal control over financial reporting will prevent or detect 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 systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any disclosure controls and procedures 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. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
Item 9B. Other Information
None of our directors or “officers,” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, adopted or terminated a Rule 10b5-1 trading plan or arrangement or a non-Rule 10b5-1 trading plan or arrangement, as defined in Item 408(c) of Regulation S-K, during the three months ended December 31, 2025.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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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 Securities and Exchange Commission, or SEC, with respect to our 2026 Annual Meeting of Stockholders and is incorporated by reference.
We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees as required by Nasdaq governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Conduct and Ethics on our website at www.tscan.com.
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 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 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 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 by reference.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
•
For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.
•
Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.
•
Exhibits:
ExhibitNumber Description
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19* Insider Trader Policy.
21* List of Subsidiaries of Registrant.
23.1* Consent of Independent Registered Public Accounting Firm.
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101.SCH Inline XBRL Taxonomy Extension Schema Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
** Furnished herewith
# Indicates a management contract or any compensatory plan, contract or arrangement.
† Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the registrant if disclosed.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
TScan Therapeutics, Inc.
Date: March 4, 2026 By: /s/ Gavin MacBeath
Gavin MacBeath, Ph.D.
Chief Executive Officer (Principal Executive Officer)
Date: March 4, 2026 By: /s/ Jason A. Amello
Jason A. Amello
Chief Financial Officer (Principal Financial Officer)
Each person whose individual signature appears below hereby authorizes and appoints Gavin MacBeath and Jason A. Amello, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on March 4, 2026.
Signature Title Date
Gavin MacBeath, Ph.D.
/s/ Jason A. Amello Chief Financial Officer March 4, 2026
Jason A. Amello (Principal Financial Officer)
/s/ Leiden Dworak Vice President, Finance March 4, 2026
Leiden Dworak (Principal Accounting Officer)
/s/ Garry Nicholson Director March 4, 2026
Garry Nicholson
/s/ Stephen Biggar Director March 4, 2026
Stephen Biggar, M.D., Ph.D.
/s/ Katina Dorton Director March 4, 2026
Katina Dorton, J.D., M.B.A.
/s/ Gabriela Gruia Director March 4, 2026
Gabriela Gruia, M.D.
/s/ Barbara Klencke Director March 4, 2026
Barbara Klencke, M.D.
/s/ R. Keith Woods Director March 4, 2026
R. Keith Woods
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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations and Comprehensive Loss F-4
Consolidated Statements of Stockholders’ Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of TScan Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TScan Therapeutics, Inc. and subsidiary (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for the years then ended, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. 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 audits 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 audits, 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Boston, MassachusettsMarch 4, 2026
We have served as the Company’s auditor since 2020.
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TScan Therapeutics, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets:
Marketable securities - 111,421
Prepaid expenses and other current assets 4,802 2,612
Long-term deposit and other assets 101 1,766
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses and other current liabilities 7,668 15,410
Operating lease liability, current portion 7,167 4,570
Deferred revenue, current portion 2,619 11,698
Deferred revenue, net of current portion - 1,246
Operating lease liability, net of current portion 54,437 60,739
Other long term liabilities - 135
Commitments and contingencies (Note 10)
Stockholders' equity:
Accumulated other comprehensive income - 51
Total liabilities and stockholders' equity $ 228,789 $ 371,118
The accompanying notes are an integral part of these consolidated financial statements
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TScan Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
Year EndedDecember 31,
Revenue
Collaboration and license revenue $ 10,325 $ 2,816
Operating expenses:
Other (expense) income:
Loss on extinguishment of debt - (1,090 )
Net loss per share, basic and diluted $ (1.00 ) $ (1.14 )
Comprehensive loss:
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities (51 ) 51
The accompanying notes are an integral part of these consolidated financial statements
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TScan Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data and issuance costs)
Additional Accumulated Total
Shares Amount Shares Amount Capital Income Deficit Equity
Stock-based compensation expense - - - - 9,549 - - 9,549
Unrealized gain on available-for-sale securities - - - - - 51 - 51
Stock-based compensation expense - - - - 11,706 - - 11,706
Unrealized loss on available-for-sale securities - - - - - (51 ) - (51 )
The accompanying notes are an integral part of these consolidated financial statements
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TScan Therapeutics, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of marketable securities (2,409 ) (3,897 )
Non-cash interest expense related to loan payable 462 773
Loss on extinguishment of debt - 1,090
Changes in current assets and liabilities:
Prepaid expenses and other assets (525 ) (538 )
Right-of-use assets and lease liabilities, net 2,909 1,881
Accrued expense and other liabilities (7,226 ) 4,532
Cash flows from investing activities:
Purchases of property and equipment (4,407 ) (3,825 )
Proceeds from maturities of marketable securities 201,250 192,657
Net cash provided by (used in) investing activities 109,372 (52,613 )
Cash flows from financing activities:
Repayment of loan payable, net - (17,144 )
Proceeds from borrowings under loan agreement, net - 32,457
Proceeds from issuance of common stock, net of offering costs - 33,131
Proceeds from issuance of pre-funded warrants, net of offering costs - 158,271
Issuance of common stock under employee stock purchase plan 264 333
Proceeds from exercise of stock options - 1,717
Cash paid for debt issuance costs (400 ) -
Cash paid for financing costs (200 ) -
Net cash provided by (used in) financing activities (336 ) 208,765
Cash, cash equivalents, and restricted cash - beginning of year 183,720 138,390
Cash, cash equivalents, and restricted cash - end of year $ 157,437 $ 183,720
Total cash, cash equivalents, and restricted cash $ 157,437 $ 183,720
Supplemental disclosure of cash flow information:
Supplemental disclosure of non-cash investing and financing activities:
Debt issuance costs not yet paid $ - $ 400
Financing costs not yet paid $ - $ 200
Lease liability arising from obtaining right-of-use asset $ - $ 6,133
Issuance of common stock upon note conversion $ - $ 14,750
The accompanying notes are an integral part of these consolidated financial statements
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TSCAN THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Basis of Presentation
Nature of Business
TScan Therapeutics, Inc. (the Company) is a biotechnology company that was incorporated in Delaware on April 17, 2018, and has a principal place of business in Waltham, Massachusetts. The Company is a biopharmaceutical company focused on developing a pipeline of T cell receptor (TCR)-engineered T cell (TCR-T) therapies for the treatment of patients with cancer.
Risks, Uncertainties and Going Concern
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of preclinical studies, clinical studies and clinical trials, the need to obtain marketing approval for its product candidates and the ability to successfully market its therapies any products that receive approval, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to scale manufacturing to large scale production. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from therapy sales.
The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.The Company has primarily funded its operations with proceeds from sales of capital stock, including the IPO completed in July 2021, issuance of convertible debt in September 2022, issuance of term loan in December 2024 and with payments received under its license and collaboration agreements. Since its inception, the Company has incurred recurring losses, including net losses of $129.8 million and $127.5 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the Company had an accumulated deficit of $504.9 million. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash and cash equivalents as of December 31, 2025 will be sufficient to fund the Company’s operations for at least the next twelve months from the date of the issuance of the financial statements.
The Company will need to obtain substantial additional funding through equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements in order to fund its research and development and ongoing operating expenses. The Company may not be able to obtain financing on acceptable terms, when needed or at all, and the Company may not be able to enter into collaborations, strategic alliances or licensing arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Any collaborations, strategic alliances or licensing arrangements may require the Company to relinquish rights to certain of its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to the Company. If the Company is unable to obtain funding, the Company could be forced to delay, limit, reduce or eliminate some or all of its research and development programs, pipeline expansion or future commercialization efforts or grant rights to develop and market product candidates, which could adversely affect its business prospects. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations when needed or at all.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements reflect the operations of the Company and the Company’s wholly owned subsidiary, TScan Securities Corporation. The accompanying consolidated financial statements have been prepared in conformity with US GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative US GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.
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Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.
Cash and Cash Equivalents
Cash includes cash in readily available checking and money market accounts. Cash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. The cash equivalents consisted of money market funds and government securities.
Restricted Cash
In connection with the Company’s facility lease agreements, the Company is required to provide letters of credit totaling of $5.0 million for the benefit of the landlords to serve as security deposits. As of December 31, 2025 and 2024, the cash securing the letter of credit was classified as restricted cash (non-current) on the consolidated balance sheets.
Marketable Securities
The Company classifies all of its marketable securities as available-for-sale based upon its intent with regard to such investments. Unrealized gains on available-for-sale debt securities are reported as a component of accumulated other comprehensive loss in stockholders’ equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest and other income, net. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities, are included in interest and investment income.
The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest and other income, net. To determine whether an other-than-temporary impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary.
Concentrations of Credit Risk
Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash deposits on hand at any one financial institution often exceed federally insured limits. The Company places its cash in financial institutions that management believes to be of high credit quality. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets as follows:
Estimated useful life
Laboratory equipment 3 - 5 years
Furniture and fixtures 3 - 5 years
Office and computer equipment 3 - 5 years
Software 3 - 5 years
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Major additions and betterments are capitalized; expenditures for repairs and maintenance, which do not improve or extend the life of the respective assets, are charged to operating expense as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations.
Impairment of Long-Lived Assets
Long-lived assets to be held and used, including property and equipment, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. Evaluation of the recoverability of the asset or asset group is based on an estimate of undiscounted future cash flows resulting from the use of the asset or asset group and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset or asset group, an impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value. The Company did not record any impairment losses on long-lived assets during the periods presented.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under US GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the user of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•
Level 1—Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
•
Level 2—Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
•
quoted prices for similar assets and liabilities in active markets
•
quoted prices for identical or similar assets or liabilities in markets that are not active
•
observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals)
•
inputs that are derived principally from or corroborated by observable market data by correlation or other means
•
Level 3—Unobservable inputs for the assets or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
Leases
The Company records leases under ASU No. 2016-02 Leases (Topic 842) whereby the Company determines if an arrangement is or contains a lease at inception. For leases with a term of 12 months or less, the Company has elected to not recognize a right-of-use asset or lease liability. The Company’s operating leases are recognized on the consolidated balance sheets as other noncurrent assets, other current liabilities, and other noncurrent liabilities. The Company does not have any finance leases.
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the rate implicit on the Company’s leases are not readily determinable, the Company uses an estimate of its incremental borrowing rate for secured borrowings with terms similar to the lease term based on the information available at the lease commencement date in determining the present value of lease payments. Operating lease right-of-use assets also include the effect of any lease payments made, including lease payments made in advance of lease commencement and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
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Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs that are paid in advance of performance (if any) are capitalized as a prepaid expense and amortized over the service period as the services are provided.
Accrued Research and Manufacturing Contract Costs
The Company has entered into various research and development and manufacturing contracts. These agreements are generally cancelable, and related payments are recorded as the corresponding expenses are incurred. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the research studies or clinical trials and manufacturing activities, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.
Patent Costs
All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.
Revenue Recognition
The Company accounts for revenue under ASU No. 2014-19, Revenue from Contracts with Customers (ASC 606). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial instruments. ASC 606 provides a five-step framework whereby revenue is recognized when control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
(i)
identify the contract(s) with a customer;
(ii)
identify the performance obligations in the contract;
(iii)
determine the transaction price;
(iv)
allocate the transaction price to the performance obligations in the contract; and
(v)
recognize revenue when (or as) the performance obligations are satisfied.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the goods or services the Company transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct combined performance obligation is identified.
The Company then allocates the transaction price (that is, the amount of consideration the Company expects to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied. The allocation is based upon standalone selling price. The standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. Because the Company have not sold the same goods or services in our contracts separately to any customers on a standalone basis, the Company estimated the standalone selling price of each performance obligation by taking into consideration internal estimates of research and development personnel needed to perform the research and development services, estimates of expected cash outflows to third parties for services and supplies and typical gross profit margins.
The Company enters into collaboration and licensing arrangements that are within the scope of ASC 606, under which the Company may exclusively license to third parties’ rights to develop, manufacture and commercialize its product candidates as well as options to acquire additional rights. The terms of these arrangements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; development, regulatory and sales milestone payments; and royalties on net sales of licensed products.
Revenue is typically recognized using a cost-to-cost input model as the measure of progress. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete the Company’s performance obligations under an arrangement. The Company evaluates the measure of progress each reporting
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period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods.
Amounts received prior to revenue recognition are recorded as deferred revenue in the balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as the current portion of deferred revenue in the balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion in the balance sheets.
Customer Options
If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. To date, none of our arrangements have included any material rights. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The observable price of a good or service sold separately provides the best evidence of standalone selling price. However, when standalone selling prices are not readily available, the Company is required to estimate the standalone selling price of each performance obligation. Key assumptions to determine the standalone selling price. Amounts allocated to a material right are not recognized as revenue until the option is exercised or terminates.
Milestone Payments
For each arrangement that includes milestone payments upon the achievement of performance-based milestones, such as development and regulatory milestones, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. Upfront and ongoing development milestones per the Company’s collaboration and license agreement are not subject to refund if the development activities are not successful. The Company reevaluates the probability of achievement of such milestones and any related constraint at each reporting period, and any adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. To date, the Company has not recognized any milestone revenues.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license to the Company’s intellectual property is deemed to be the predominant item to which the royalties relate as it is the primary driver of value, the Company recognizes revenue when the related sales occur in accordance with the sales-based royalty exception. To date, the Company has not recognized any royalty revenue resulting from the Company’s collaboration and licensing agreements.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to an amount, which, more likely than not, will be realized.
The Company recognizes the tax benefit from any uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties associated with uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2025 and 2024, the Company has not identified any uncertain tax positions for which reserves would be required.
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Segment Information
Operating segments are defined as components of an entity for which discrete information is available for evaluation by the chief operating decision maker, who is the CEO, in deciding how to allocate resources and in assessing performance. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All of the Company’s assets are held in the U.S.
Stock-Based Compensation
The Company accounts for stock option awards at fair value, which is measured using the Black-Scholes option-pricing model. The measurement date is generally the date of grant.
The Company recognizes stock-based compensation expense over the requisite service period, which is generally the vesting period of the respective award. For awards that include performance-based vesting conditions, stock-based compensation expense is recognized using the accelerated attribution method when the performance condition is deemed to be probable. The Company accounts for forfeitures as they occur. The Company determines the fair value of restricted stock awards in reference to the fair value of its common stock less any applicable purchase price
The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive income was unrealized gains on marketable securities.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted average common shares outstanding during the period.
Diluted net loss per share is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. For purposes of the diluted net income (loss) per share calculation, convertible debt and stock options are considered to be common stock equivalents. All common stock equivalents have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, and is applicable to the Company’s fiscal year beginning January 1, 2025, with early application permitted. The Company adopted this standard for the fiscal year ended December 31, 2025. The adoption of ASU 2023-09 did not have a material impact on the Company's consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements Not Yet Effective
In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-04, Debt-Debt with Conversions and Other Options. ASU 2024-04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.
In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. ASU 2024-03 is intended to improve disclosures about a public business entity’s expense and provide more detailed information to investors about the types of expenses in commonly presented expense captions. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim
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reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.
3. Property and Equipment
Property and equipment consist of the following (in thousands):
December 31,
Office and computer equipment 1,496 1,496
Construction-in-progress 118 100
Less: accumulated depreciation and amortization (21,570 ) (18,704 )
Property and equipment, net $ 8,706 $ 7,242
Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $2.9 million and $4.1 million, respectively.
4. Fair Value Measurements
The following tables set forth by level, within the fair value hierarchy, the assets carried at fair value (in thousands):
Fair value measurements at December 31, 2025 using:
Assets
Cash equivalents – money market funds $ 146,196 $ - $ - $ 146,196
Cash equivalents – government securities 1,987 - - 1,987
Fair value measurements at December 31, 2024 using:
Assets
Cash equivalents – money market funds $ 169,744 $ - $ - $ 169,744
Marketable securities – government securities 111,421 - - 111,421
Money market funds and government securities are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no transfers among Level 1, Level 2, or Level 3 categories in the periods presented.
Assets and Liabilities Not Carried at Fair Value
The carrying value of accounts payable and accrued expenses that are reported on the consolidated balance sheets approximate fair value due to the short-term nature of these liabilities. Based on the borrowing rates currently available to the Company for bank loans with similar maturities, the fair value of long-term debt is approximately equal to its carrying amount as of December 31, 2025 and 2024.
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5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
Accrued employee compensation and benefits $ 4,145 $ 6,845
Accrued research and development 2,458 6,735
Accrued consulting and professional services 568 1,473
Accrued legal services and license fee 301 281
Total accrued expenses and other current liabilities $ 7,668 $ 15,410
6. Stockholders' Equity
ATM Program
On May 16, 2023, the Company entered into a sales agreement (the Sales Agreement) with Wedbush Securities, Inc. (Wedbush), as sales agent, pursuant to which the Company could offer, issue and sell up to an aggregate amount of $75.0 million of shares of the Company's voting common stock, par value $0.0001 per share (Voting Common Stock), from time to time in “at-the-market” (ATM) offerings during the term of the Sales Agreement under a registration statement on Form S-3 (File No. 333-268260) filed with the SEC, which was declared effective on May 16, 2023. No Voting Common Stock has been sold under this Sales Agreement to date.
Equity Offerings
On June 1, 2023, the Company completed an underwritten public offering resulting in the issuance and sale of (a) 23,287,134 shares of Voting Common Stock, at a price of $2.00 per share, and (b) pre-funded warrants (Pre-Funded Warrants) to purchase up to 47,010,526 shares of the Voting Common Stock, with a purchase price of $1.9999 per warrant and an exercise price of $0.0001 per warrant. The Company received aggregate net proceeds of $134.7 million after deducting underwriting discounts, commissions and other offering expenses, with $42.4 million allocated to the Voting Common Stock and $92.3 million allocated to Pre-Funded Warrants.