What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-05-05 · 64 added, 43 removed, 107 unchanged (50% of the section changed)

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(“Almirall”), who is developing it for the treatment of rare skin diseases.

Between January 2023 and April 2024, we conducted a proof-of-concept Phase 2a open-label trial in the United Kingdom in three patients with autosomal recessive Alport Syndrome (“AS”) and a NM in the COL4A4 gene.

Between January 2023 and April 2024, we conducted a proof-of-concept Phase 2a open-label trial of exaluren in the United Kingdom in three patients with autosomal recessive Alport Syndrome (“AS”) and a NM in the COL4A4 gene.

The primary endpoint of this study was to assess the number of participants with adverse events associated with administration of exaluren.

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We received clearance to proceed with a Phase 2b clinical trial for exaluren in NMAS patients (without kidney biopsies in U.S.

pediatric patients) under an IND from the FDA and we plan to initiate this trial in the first half of 2026.

We anticipate topline data from the initial 16-week placebo-controlled part of the study by mid-2027 with the final readout by the end of 2027.

pediatric patients) under an IND from the FDA and we plan to initiate this trial in the third quarter of 2026.

Our pipeline also includes a preclinical program evaluating exaluren for the treatment of autosomal dominant polycystic kidney disease (“ADPKD”) in patients that have NMs (“nmADPKD”).

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Preclinical organoid and cellular models have shown increased PC1 and PC2 gene expression following treatment with exaluren.

We plan to initiate enrollment in a Phase 2 trial of exaluren for the treatment of nmADPKD in 2027 following protocol finalization and clearance of an investigational New Drug application by the FDA.

We anticipate topline data from this trial by mid-2028.

We plan to initiate enrollment in a Phase 2 trial of exaluren for the treatment of nmADPKD in 2027 following protocol finalization and clearance of an investogational new drug application by the FDA.

In July 2026, the European Commission granted orphan medicinal product designation in the European Union for exaluren for the treatment of autosomal dominant polycystic kidney disease (ADPKD) (EU/3/26/3273), in addition to the orphan drug designation previously granted to exaluren by the FDA for the treatment of AS.

We have also exclusively licensed ZKN-013, an oral ribosome modulating agent (“RMA”) with structural similarity to azithromycin that induces PTC readthrough to Almirall.

In March 2024, we entered into an exclusive global rights agreement with Almirall (the “Almirall License Agreement”) for Almirall to develop and commercialize ZKN-013 for the use in all

In March 2024, we entered into an exclusive global rights agreement with Almirall (the “Almirall License Agreement”) for Almirall to develop and commercialize ZKN-013 for the use in all indications.

Through the Almirall License Agreement, Almirall is developing ZKN-013 for the treatment of recessive dystrophic epidermolysis bullosa (“RDEB”) and junctional epidermolysis bullosa (“JEB”) with NMs.

RDEB and JEB are rare skin diseases characterized by mutations in the Collagen VII (RDEB) and LAMB3 (JEB) proteins.

We estimate that there are approximately 4,000 patients with NMs in these diseases in the major markets of the United States, Japan and Western Europe.

Patients with these diseases suffer from severe skin bruising, wounds and internal lesions resulting in increased risk of skin cancer and severe malnourishment.

Under the Almirall License Agreement, we received an upfront payment of $3 million and a development milestone payment of $3 million in 2024.

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The agreement may be terminated under specified circumstances, including for convenience by Almirall, in which case rights may revert to us.

In May 2026, we effected a one-for-eleven reverse stock split of our common stock.

All share and per share amounts for all periods presented have been retroactively adjusted to reflect the reverse stock split.

No fractional shares were issued in connection with the reverse stock split.

Stockholders who otherwise would have been entitled to receive a fractional share received cash in lieu of such fractional share based on the fair market value of our common stock as specified in the reverse stock split provisions.

A proportionate adjustment was also made to the maximum number of shares issuable under the 2018 Plan.

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

In June 2026, we completed an uplisting to the Nasdaq Capital Market, alongside a public offering.

Net proceeds from the public offering were $58.3 million.

Our common stock was previously listed on the OTC Pink Limited Market.

Results of Operations

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Three Months Ended

Six Months Ended

Operating expenses:

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Research and development expense

Research and development expenses were $1.7 million for the three months ended March 31, 2026, compared to $0.5 million for the same period in 2025, an increase of $1.1 million.

The increase was primarily related to an increase of $0.6 million in clinical trial expenses, a $0.3 million increase in expenses related to subcontractors, advisors, and laboratory supplies in connection with preclinical research and development activities, and an $0.2 million increase in salaries and other personnel costs.

Research and development expenses were $2.8 million for the three months ended June 30, 2026, compared to $0.9 million for the same period in 2025, an increase of $1.9 million.

The increase was primarily related to an increase of $1.6 million in clinical trial expenses, a $0.2 million increase in salaries and other personnel costs, and a $0.1 million increase in expenses related to subcontractors, advisors, and laboratory supplies in connection with preclinical research and development activities.

Research and development expenses were $4.5 million for the six months ended June 30, 2026, compared to $1.4 million for the same period in 2025, an increase of $3.1 million.

The increase was primarily related to an increase of $2.4 million in clinical trial expenses, a $0.4 million increase in salaries and other personnel costs, and a $0.3 million increase in expenses related to subcontractors, advisors, and laboratory supplies in connection with preclinical research and development activities.

General and administrative expenses

General and administrative expenses were $2.1 million for the three months ended March 31, 2026, compared to $0.7 million for the same period in 2025, an increase of $1.4 million.

The increase was primarily related to a $1.1 million increase in expenses attributable to professional and consulting fees, including legal costs and audit and tax fees, and a $0.3 million increase in facility and other general and administrative overhead costs.

General and administrative expenses were $1.6 million for the three months ended June 30, 2026, compared to $0.7 million for the same period in 2025, an increase of $0.9 million.

The increase was primarily related to a $0.7 million increase in expenses attributable to professional and consulting fees, including legal costs and audit and tax fees, and a $0.2 million increase in salaries and other personnel costs.

General and administrative expenses were $3.7 million for the six months ended June 30, 2026, compared to $1.4 million for the same period in 2025, an increase of $2.3 million.

The increase was primarily related to a $1.8 million increase in expenses attributable to professional and consulting fees, including legal costs and audit and tax fees, a $0.3 million

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

Other (income) expense, net

Other income, net, was less than $0.1 million for the three months ended March 31, 2026, compared to $0.5 million in other expense, net, for the same period in 2025, a change of $0.5 million.

The change was primarily related to a decrease in interest expense of $0.4 million due to the majority of our outstanding debt being exchanged for pre-funded warrants in 2025 and a gain on extinguishment of accrued interest of $0.1 m illion due to a waiver of the accrued interest related to the $1.0 million exchange of outstanding debt by Domicilium during the three months ended March 31, 2026.

Other expense, net, was less than $0.1 million for the three months ended June 30, 2026, compared to $0.3 million in other expense, net, for the same period in 2025, a decrease of $0.3 million.

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

Other expense, net, was less than $0.1 million for the six months ended June 30, 2026, compared to $0.8 million in other expense, net, for the same period in 2025, a change of $0.8 million.

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

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses.

Our net losses were $3.8 million and $1.7 million for the three months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026, we had an accumulated deficit of $304.3 million.

Our net losses were $4.5 million and $1.9 million for the three months ended June 30, 2026 and 2025, respectively, and $8.3 million and $3.6 million for the six months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, we had an accumulated deficit of $308.8 million.

To date, we have financed our operations primarily through the sale of equity, license and collaboration agreements, debt securities and, to a lesser extent, grants.

We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital to fund our operations.

We have devoted substantially all of our financial resources and efforts to research and development.

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• operate as a public company including costs associated with our planned uplisting to and maintaining Nasdaq compliance.

We may never achieve profitability, and unless and until we do, we will continue to need to raise additional cash to fund our operations.

We believe that our cash and cash equivalents of $6.4 million as of March 31, 2026 will not be sufficient to maintain our current and planned operations for at least the next twelve months following the filing of this Quarterly Report on Form 10-Q.

We will need to raise additional capital to finance our operations, which cannot be assured.

We have concluded that these conditions, in aggregate, raise substantial doubt about our ability to continue as a going concern for one year after the date these unaudited condensed consolidated financial statements are issued.

Our independent registered public accounting firm, in its report on our consolidated financial statements for the year ended December 31, 2025, has also expressed substantial doubt about our ability to continue as a going concern.

We believe that our cash and cash equivalents of $62.0 million as of June 30, 2026, which includes the $58.3 million in net proceeds from the public offering described above, will be sufficient to maintain our current and planned operations for at least the next twelve months following the filing of this Quarterly Report on Form 10-Q.

The unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Management intends to fund future operations through private or public debt or equity financing transactions and may seek additional capital through arrangements with strategic partners or from other sources, including licensing arrangements.

The availability of sufficient funding to alleviate the conditions that raise substantial doubt is not within management’s control and cannot be assessed as being probable of occurring.

If we are unable to obtain adequate financing, we will evaluate options which may include curtailing expenses contemplated by our current operating plan, and we may be required to delay, limit, reduce or terminate our product development efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which may have a material adverse effect on our operations and future prospects.

Financing Activities for the Three Months Ended March 31, 2026 and 2025

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

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

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

During the three months ended March 31, 2025, we entered into a non-interest-bearing bridge loan with Domicilium for $0.4 million.

The Company recorded interest expense of less than $0.1 million representing imputed interest for the

non-interest-bearing bridge loan during the three months ended March 31, 2025.

In April 2026, we amended certain pre-funded warrants held by Coastlands and Domicilium to increase the beneficial ownership limitation to 19.99% and permit shares issued upon exercise to be converted back into pre-funded warrants at the holder’s election.

Following the amendments, Coastlands and Domicilium exercised a portion of their pre-funded warrants for 113,636 shares each, for a total of 227,272 shares of our common stock, at an exercise price of $0.11 per share, for proceeds of less than $0.1 million.

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

In June 2026, in connection with our uplisting and public offering, we amended certain pre-funded warrants held by Domicilium to increase the beneficial ownership limitation to 19.99% and permit shares issued upon exercise to be converted back into pre-funded warrants at the holder’s election.

The amendments facilitated the issuance of additional shares of common stock in the offering to satisfy Nasdaq listing requirements.

Following the amendments, Domicilium exercised a portion of their pre-funded warrants for 600,000 shares of our common stock, at an exercise price of $0.11 per share, for proceeds of approximately $0.1 million.

We accounted for the amendments under ASC 815, “Derivatives and Hedging” as a modification of a freestanding equity-classified written call option that remained equity-classified after the modification.

As the modification was directly attributable to the uplisting and public offering, we measured the incremental fair value using a Black-Scholes valuation model and determined the impact of the modification to be immaterial to the consolidated financial statements.

In June 2026, in conjunction with the uplisting, we offered 2,975,000 shares of common stock, $0.01 par value per share, at a public offering price of $11.00 per share.

In addition, we offered, to certain investors, in lieu of common stock, pre-funded warrants to purchase up to 3,025,000 shares of our common stock at an offering price of $10.99 per underlying share, which was equal to the public offering price for the common stock in the offering, minus the $0.01 exercise price.

Net proceeds from the public offering were $58.3 million.

Each pre-funded warrant is exercisable for one share of our common stock and has an exercise price of $0.01 per share.

The pre-funded warrants are exercisable at any time after the date of issuance, subject to ownership limitations, as described therein.

During the three and six months ended June 30, 2025, we entered into non-interest-bearing bridge loans with Domicilium for $2.4 million and $2.8 million, respectively, including a bridge loan for $0.5 million with Domicilium following Domicilium's repayment to Hercules of an end of term charge which was treated as a modification of a previous advance.

We received $1.9 million and $2.3 million, respectively, in cash during the three and six months ended June 30, 2025 from these bridge loans.

We recorded interest expense of less than $0.1 million and $0.1 million representing imputed interest for the non-interest-bearing bridge loans during the three and six months ended June 30, 2025, respectively.

The imputed interest of 13.75% was calculated using the sum of 6.25% plus the prime rate, as published in The Wall Street Journal.

In addition, during the three months ended March 31, 2025, the Company repaid $0.3 million for the bridge loans that had been entered into with Domicilium in December 2024, including accrued interest, repaid $0.5 million related to Development and Launch Milestone Payments, in accordance with the terms of the Royalty and Revenue Sharing Agreement, as amended on March 2, 2026 (the “Royalty Agreement”) with Domicilium, and repaid $0.5 million in outstanding debt obligations to Hercules under the Hercules Loan Agreement.

In addition, during the six months ended June 30, 2025, we repaid $0.3 million for the bridge loans that had been entered into with Domicilium in December 2024, including accrued interest, repaid $0.5 million related to Development and Launch Milestone Payments, in accordance with the terms of the Royalty and Revenue Sharing Agreement, as amended on March 2, 2026 (the “Royalty Agreement”) with Domicilium, and repaid $0.5 million in outstanding debt obligations to Hercules under the Hercules Loan Agreement.

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

Three Months Ended

Net cash (used in) provided by operating activities

Net cash provided by (used in) financing activities

Six Months Ended

Net cash used in operating activities

Net cash provided by financing activities

Cash flows from operating activities

Net cash used in operating activities was $5.5 million for the three months ended March 31, 2026, compared to net cash provided by operating activities of $1.2 million for the three months ended March 31, 2025.

During the three months ended March 31, 2026, our net loss was $3.8 million and the change in working capital was $1.7 million.

During the three months ended March 31, 2025, the change in working capital of $2.6 million and debt discount amortization of $0.2 million was partially offset by our net loss of $1.7 million.

Net cash used in operating activities was $10.2 million for the six months ended June 30 2026, compared to net cash used in operating activities of $0.5 million for the six months ended June 30, 2025.

During the six months ended June 30, 2026, our net loss of $8.3 million and the change in working capital of $2.2 million was partially offset by non-cash charges of $0.1 million related to stock-based compensation expense and $0.1 million related to the change in the fair value of warrant liabilities.

During the six months ended June 30, 2025, our net loss of $3.6 million was partially offset by the change in working capital of $2.6 million, and non-cash charges of $0.2 million related to debt discount amortization and $0.1 million related to imputed interest.

Cash flows from financing activities

Net cash provided by financing activities was $7.0 million for the three months ended March 31, 2026, compared to net cash used in financing activities of $0.9 million for the three months ended March 31, 2025.

For the three months ended March 31, 2026, net cash provided by financing activities consisted primarily of $7.0 million in net proceeds from the sale of pre-funded warrants in connection with the 2025 PIPE Financing transaction, net of issuance costs.

For the three months ended March 31, 2025, net cash used in financing activities consisted primarily of repayments of term loan principal of $1.3 million, partially offset by $0.4 million in proceeds from debt financing obligations.

Net cash provided by financing activities was $67.4 million for the six months ended June 30, 2026, compared to net cash provided by financing activities of $1.0 million for the six months ended June 30, 2025.

For the six months ended June 30, 2026, net cash provided by financing activities consisted primarily of $60.3 million of net proceeds from the public offering, including $2.0 million of issuance costs included in accounts payable and accrued expenses as of June 30, 2026, and $7.0 million in net proceeds from the sale of pre-funded warrants under the Coastlands and Domicilium Securities Purchase Agreements transactions.

For the six months ended June 30, 2025, net cash provided by financing activities consisted primarily of $2.3 million in proceeds from debt financing obligations, partially offset by repayments of outstanding debt obligations of $1.3 million.

Critical Accounting Policies and Significant Judgments and Estimates

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We account for forfeitures as they occur.

We grant stock options, restricted stock units (“RSUs”), and restricted stock awards (“RSAs”) to certain employees,

consultants and directors as part of our long-term incentive compensation program.

We grant stock options, restricted stock units (“RSUs”), and restricted stock awards (“RSAs”) to certain employees, consultants and directors as part of our long-term incentive compensation program.

Options are measured at fair value on the grant date using an option-pricing model, the most significant input for which has been the fair value of our common stock.

RSU’s and RSAs are measured at fair value on the grant date, which is also determined based on the fair value of our common stock.

RSU’s and RSAs are measured at fair value on the grant date, which is also determined based on the fair value of our

common stock.

The absence of an active market for our common stock has required the board of directors, the members of which we believe have extensive business, finance and venture capital experience, to determine the fair value of our common stock for purposes of granting stock-based awards and for calculating stock-based compensation expense for the periods presented.

For equity-based grants made in 2024 and during the time we had sufficient trading volume in our common stock, our board of directors determined fair value of our common stock for purposes of stock-based compensation under ASC 718 using the trading price of our common stock on the applicable grant date.

For equity-based grants made in 2024 and 2026, and during the time we had sufficient trading volume in our common stock, our board of directors determined the fair value of our common stock for purposes of stock-based compensation under ASC 718 using the trading price of our common stock on the applicable grant date.

However, for equity-based grants made in 2025 and in the absence of an active market for our common stock, our board of directors determined the fair value of options, RSUs and RSAs granted with reference to contemporaneous third-party valuations prepared using the methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

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Off-Balance Sheet Arrangements

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

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

Quantitative and Qualitati ve Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis