LISATA THERAPEUTICS, INC. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. There is no guarantee that our clinical development programs will be successful or result in the necessary regulatory approvals. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein and under “Risk Factors” in our 2025 Form 10-K. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report and in our 2025 Form 10-K. Overview We are a clinical-stage pharmaceutical company dedicated to the discovery, development, and commercialization of innovative therapies for the treatment of solid tumors and other serious diseases. Our investigational product, certepetide (formerly known as LSTA1 or CEND-1), is designed to activate a novel uptake pathway (the C-end rule active transport mechanism) that allows co-administered or tethered (i.e., molecularly bound) anti-cancer drugs to target and penetrate solid tumors more effectively. Certepetide actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are expected to remain unaffected. Certepetide has also been shown to modify the tumor microenvironment (“TME”) by reducing T-regulatory cells and augmenting cytotoxic T cells, thereby making tumors more susceptible to immunotherapies while also inhibiting the metastatic cascade (i.e., the spread of cancer to other parts of the body). We, our collaborators and other researchers have amassed and continue to amass significant non-clinical data demonstrating enhanced delivery of a range of existing and emerging anti-cancer therapies, including chemotherapeutics, immunotherapies, and RNA-based therapeutics. In addition, certain preclinical data using certepetide in combination with antibody drug conjugates (ADCs) has been generated as part of our research collaboration with Catalent. These data were presented at a scientific meeting during the fourth quarter of 2025. To date, certepetide has also demonstrated favorable safety, tolerability and activity in completed and ongoing clinical trials designed to enhance delivery of standard-of-care chemotherapy, with and without added immunotherapy, for pancreatic cancer. Certepetide is or has been the subject of several Phase 2 clinical studies globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), cholangiocarcinoma, appendiceal cancer, colon cancer and glioblastoma multiforme in combination with a variety of anti-cancer regimens. Recent Developments Termination of Merger Agreement On July 24, 2026, we terminated the previously announced Agreement and Plan of Merger, dated as of March 6, 2026, by and among Kuva Labs Inc., a Delaware corporation (“Parent”) and Kuva Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), and us (as amended, the “Merger Agreement”), pursuant to Section 8.3(a) of the Merger Agreement (the “Termination”). Pursuant to the Merger Agreement, Purchaser agreed to acquire all of our outstanding shares of common stock, par value, $0.001 per share (the “Common Shares”), validly tendered and not validly withdrawn through a tender offer (the “Offer”), at a purchase price of (i) $4.00 per Common Share, net to the seller in cash, without interest, plus (ii) one contingent value right (each, a “CVR”), representing the contractual right to receive two contingent cash payments up to an aggregate of $3.00 per CVR subject to the achievement of certain milestones, in accordance with the terms and subject to the conditions of a contingent value rights agreement. The Offer was to be followed by a merger to acquire all remaining outstanding Common Shares for the same per share consideration paid in the Offer. For a summary of the material terms of the Merger Agreement and the Offer, please see our Current Reports on Form 8-K filed with the Securities and Exchange Commission on March 9, 2026, April 3, 2026, May 4, 2026, May 29, 2026, June 9, 2026 and July 17, 2026 and our Solicitation/Recommendation Statement on Schedule 14D-9 and related amendments filed with the Securities and Exchange Commission on June 10, 2026, July 2, 2026, July 13, 2026, July 17, 2026 and July 21, 2026. During the three and six months ended June 30, 2026, the Company received payments totaling $1,000,000 from Kuva related to the Merger Agreement, which are recorded in Other income (expense), net in the Consolidated Statements of Operations. The Termination followed Parent and Purchaser’s failure to accept for payment all Common Shares validly tendered and not validly withdrawn pursuant to the Offer after the expiration of the Offer one minute after 11:59 p.m., New York City Time, on July 20, 2026. Parent informed us that Parent had been unable to obtain sufficient financing for purposes of funding the Offer and instructed Equiniti Trust Company, LLC, in its capacity as depositary and paying agent for the Offer, to return the Common Shares tendered in the Offer to the holders thereof. 28 Index As a result of the Termination, Parent was obligated under the Merger Agreement to pay us a termination fee of $2,000,000. In addition, we reserved all rights to seek all available legal remedies, including without limitation, damages for Willful Breach (as defined in the Merger Agreement) and any Enforcement Costs (as defined in the Merger Agreement). On July 31, 2026, we commenced an action in the Court of Chancery of the State of Delaware suing Parent and Purchaser over their breach of the Merger Agreement. Among other things, we are seeking payment of the termination fee and damages for the benefits our stockholders expected in connection with the transaction. There can be no assurance that we will be able to obtain damages from Parent or Purchaser, even to the extent legally available in any litigation that we may pursue, due to our limited financial resources available to fund related litigation and to Parent’s or Purchaser’s potential inability to satisfy with its existing assets any judgment that we might obtain. Reduction in Force On August 3, 2026, our board of directors (the “Board”) approved a reduction in workforce by approximately 72%, effective immediately. The decision was based on cost-reduction initiatives intended to reduce our ongoing operating expenses and maximize shareholder value as we plan to pursue strategic options. Affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance for certain employees. We estimate that we will incur approximately $1.2 million of costs in connection with the reduction in workforce related to severance pay and other related termination benefits, which are expected to be incurred through the quarter ending September 30, 2026. This will be offset by a reversal of approximately $0.4 million in accrued bonus expense related to the terminated employees, as it was determined such bonuses will not be paid upon termination. The charges we expect to incur in connection with this reduction in workforce are subject to a number of assumptions, risks and uncertainties, and actual results may materially differ. We may also incur other material charges not currently contemplated due to events that may occur as a result of, or associated with, these actions. In connection with the reduction in workforce approved by the Board on August 3, 2026, effective as of August 3, 2026, the employment of Dr. Kristen K. Buck, M.D., our Executive Vice President of R&D and Chief Medical Officer was terminated. Pursuant to the Amended and Restated Employment Agreement, dated as of June 10, 2025, between us and Dr. Buck (the “Buck Employment Agreement”), Dr. Buck’s departure from our company will constitute a termination without Cause (as defined in the Buck Employment Agreement), and, in accordance therewith, subject to Dr. Buck executing a release in favor of us, Dr. Buck will be entitled to receive an amount equal to 12 months of her base salary and target bonus compensation and we shall pay COBRA premiums for Dr. Buck and her covered dependents for a period of up to 12 months. Review of Strategic Alternatives Our board of directors is assessing strategic options to enhance stockholder value, which may include, but are not limited to, an acquisition, merger, reverse merger, other business combination, sales of assets, liquidation and dissolution or other strategic transactions. There can be no assurance that the process to identify strategic alternatives for our business will result in a successfully consummated transaction. If we are unable to identify a viable strategic alternative or if such a transaction is not completed in a timely manner, or if we are unable to raise additional capital sufficient to fund our operations, our board of directors may determine to pursue liquidation and dissolution or other wind down of our business. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our operations while we evaluate our strategic options. Development Programs Targeted Solid Tumor Penetration via CendR Active Transport Many solid tumor cancers, including but not limited to pancreatic ductal adenocarcinoma (“PDAC”) and cholangiocarcinoma, are surrounded by dense fibrotic tissue, known as the tumor stroma. This stroma often limits the penetration of anti-cancer therapies including chemotherapy into the tumor and thus limits their efficacy. Emerging immunotherapies, including but not limited to checkpoint inhibitors and adoptive cell therapies (e.g., chimeric antigen receptor T cells (CAR-Ts)), also face challenges in effectively treating solid tumors. Many tumors exhibit an immunosuppressive TME, which suppresses a patient's immune system and can thus limit the effectiveness of immunotherapies and/or contribute to metastases. These factors, i.e., the combination of a dense stroma and an immunosuppressive TME, negatively impact the ability of many therapeutic agents to optimally treat these cancers. To address the tumor stroma’s role as a key impediment to effective treatment, we make use of the C-end rule (“CendR”) active transport mechanism, a naturally occurring transport system. Our investigational drug, certepetide (a specific, proprietary internalizing R-G-D or iRGD peptide), activates this transport system in a tumor-specific manner (Sugahara, Science, 2010). 29 Index Certepetide enables more selective and efficient uptake of systemically administered anti-cancer drugs resulting in more intratumoral drug accumulation. The overall expected result is enhanced anticancer activity without an increase in systemic adverse side effects. While it is possible to couple/tether or conjugate some anticancer drugs to certepetide, we believe that our initial approach of co-administration of certepetide with anti-cancer therapies is advantageous. Co-administration does not create a new chemical entity (“NCE”) with its attendant development and regulatory hurdles, thereby providing an anticipated faster-to-clinic and faster-to-market product opportunity for a range of combination therapies. That said, an attractive life-cycle management strategy for certepetide would be to molecularly bind it to a variety of anti-cancer agents (as an alternative to co-administration), thereby creating new NCEs with the potential for distinct patent protection, compositionally or otherwise. Certepetide has demonstrated favorable safety, tolerability, and activity to date in clinical trials enhancing the selective delivery of standard-of-care chemotherapies for mPDAC. Certepetide’s cancer targeting characteristics may also enable emerging solid tumor treatment modalities to prove more effective. For example, preliminary results of certepetide in combination with both immunotherapy and chemotherapy are promising. Certepetide as a treatment for solid tumor cancers in combination with other anti-cancer agents Certepetide is an investigational drug that actuates the CendR active transport mechanism. Certepetide has been shown to modify the TME, making it less immunosuppressive and thereby making the tumor more susceptible to attack by the immune system while also inhibiting the metastatic cascade. It targets tumor vasculature, endothelial cells, tumor cells and some intratumoral immunosuppressive cells by its selective affinity for alpha-v beta-3 and alpha-v beta-5 integrins that are upregulated on these cells. Certepetide is a nine amino acid cyclic proprietary internalizing RGD (“iRGD”) peptide that, once bound to these integrins, undergoes proteolytic cleavage to release a linear peptide fragment, called a CendR peptide fragment. After dissociation from the integrin receptor, the CendR peptide fragment then binds with high selectivity and affinity to an adjacent receptor, called neuropilin-1, also upregulated in solid tumors, to activate the novel uptake pathway that allows circulating anticancer drugs to more selectively and effectively penetrate solid tumors. The ability of certepetide and iRGD peptides to modify the TME to enhance delivery and efficacy of co-administered drugs has been demonstrated in many preclinical models in a range of solid tumors. We, our collaborators, and research groups around the world have published more than 400 scientific papers related to the benefits of iRGD peptides and the CendR pathway. Clinically, certepetide has been the subject of multiple Phase 1 and Phase 2 trials. These studies include a Phase 1b/2a study in first line mPDAC patients. Study CEND1-201 was conducted in China by our former licensee, Qilu Pharmaceutical. Two dose levels of certepetide (1.6 and 3.2 mg/kg) were combined with SoC chemotherapy (gemcitabine and nab-paclitaxel). There were 55 patients in the study, 53 of whom were evaluable for efficacy. Twenty-five (25) patients were treated with 1.6 mg/kg certepetide and 28 patients with 3.2 mg/kg certepetide. In the 1.6 mg/kg certepetide group, partial response occurred in 11/25 (44.0%) patients, and stable disease occurred in 12/25 (48%) patients. In the 3.2 mg/kg certepetide group, partial response occurred in 11/28 (39.3%) patients, and stable disease occurred in 12/28 (42.9%) patients. The ORR was 41.5% for all doses. The ORR was 44.0% and 39.3% in the 1.6 mg/kg group and 3.2 mg/kg group, respectively. The DCR was 86.8% for all doses. The DCR in the 1.6 mg/kg group and 3.2 mg/kg group was 92.0% and 82.1%, respectively. The median PFS was 5.82 months for all doses combined. The median PFS was 7.36 months and 5.75 months in the 1.6 mg/kg group and 3.2 mg/kg group, respectively. The median OS was 11.10 months for all doses combined. The median OS was 10.35 months and 11.10 months in 1.6 mg/kg group and in 3.2 mg/kg group, respectively. The adverse event profile at both dose levels was similar to that for SoC alone. Qilu has informed us that they completed enrollment in the Phase 2 CEND1-202 study (n=96) in first line mPDAC in combination with SoC gemcitabine and nab-paclitaxel. We have not received a final clinical study report from the trial nor do we expect to, given that rights to certepetide have reverted to Lisata based on a mutual license termination agreement with Qilu, and there is no obligation on Qilu’s part that such a report is to be received by Lisata. Additionally, since Qilu was the sponsor of the aforementioned Phase 2 trial, Lisata does not own rights to any of the data. Certepetide was also the subject of a Phase 2b trial in first-line mPDAC patients, the ASCEND trial. We collaborated with the academic sponsor of the ASCEND trial, the Australasian Gastrointestinal Clinical Trials Group (AGITG) now called GI Cancer Trials along with the University of Sydney to conduct the study at 25 sites in Australia and New Zealand. The Phase 2 double-blind, randomized (2:1), placebo-controlled, multi-center ASCEND trial evaluated certepetide in combination with SoC chemotherapy (gemcitabine and nab-paclitaxel) for the treatment of mPDAC. The original ASCEND protocol included one dosing scheme for certepetide. Following the acquisition of Cend Therapeutics and, by extension, certepetide in September 2022, Lisata collaborated with AGITG to amend the protocol to ensure it respected international regulatory standards. Thus, endpoints typically recognized by regulators as primary in registration studies and more effective in guiding next stages of clinical development (e.g., overall survival), were added. The amended protocol was designed to assess the efficacy of two different dosing regimens of certepetide in two separate cohorts: Cohort A, where 95 patients received a single intravenous (IV) dose of certepetide 3.2 mg/kg or placebo in combination with SoC, and Cohort B, where 63 patients received two IV doses of certepetide 3.2 mg/kg or placebo administered 4 hours apart in combination with SoC. The preliminary data from Cohort A were reported at the ASCO GI meeting on January 24, 2025, demonstrating a median overall survival (mOS) of 12.68 months 30 Index for the certepetide treated group, compared to 9.72 months for the placebo treated group. Despite a numerical trend in 6-month PFS favoring the certepetide treatment group, no significant improvement in median PFS was observed (mPFS of 5.5 months in both groups). However, the objective response rate (ORR) benefit is positive with 4/65 (6.2%) complete responses in the certepetide treated group, compared to 0/28 (0%) the placebo treated group. The preliminary data from Cohort B were presented at the ESMO-GI meeting in July 2025, demonstrating a six-month progression-free survival (“6MPFS”) of 60.8% for the certepetide-treated group, whereas the 6MPFS in the placebo-treated group was 25%. Median progression-free survival (“mPFS”) was 7.5 months for the certepetide-treated group and 4.7 months for the placebo-treated group. Objective response rate (“ORR”) was 45.2% for the certepetide-treated group and 19% for the placebo-treated group. Median overall survival (“mOS”) was 10.32 months for the certepetide-treated group compared to 9.23 months for the placebo-treated group. A comparison of the preliminary data from Cohorts A and B indicated that the addition of two doses of certepetide (Cohort B regimen) to SoC chemotherapy resulted in a clinically meaningful improvement in both PFS and ORR for patients with mPDAC. We believe that these clinically significant findings provide compelling support for the continued and expedited investigation of certepetide as a novel therapeutic agent for the treatment of metastatic pancreatic cancer. The adverse event profile of Cohorts A and B remain similar in subjects treated with certepetide compared to placebo, confirming previous observations of certepetide’s benign safety profile. Additional data from Cohorts A and B was presented at the ESMO annual meeting in October 2025 with a final study report of the ASCEND study anticipated to be made available in 2026. Additionally, certepetide is the subject of clinical trials being conducted globally in a variety of solid tumor types and in combination with several chemotherapy and immunotherapy anti-cancer regimens. These include three investigator-initiated trials: a Phase 2a trial in glioblastoma multiforme (GBM) in patients with newly diagnosed GBM, a Phase 1b/2a trial (iLSTA) in locally advanced non-resectable pancreatic ductal adenocarcinoma, and a Phase 1b/2a trial (CENDIFOX) in pancreatic, colon, and appendiceal cancers. Data announcements and final study reports from these investigator-initiated trials are entirely within the purview of the academic sponsors. Lisata’s Phase 2a BOLSTER trial, evaluating a single 3.2 mg/kg dose of certepetide in combination with standards of care in first and second-line cholangiocarcinoma completed and demonstrated no evidence of benefit or increase in adverse events when a single 3.2 mg/kg dose of certepetide was added to standard of care. Results of Operations Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 The following table summarizes our results of operations for the three months ended June 30, 2026 and June 30, 2025 (in thousands): Three Months Ended June 30, 2026 2025 Change Revenue $ — $ 70 $ (70) Operating Expenses: Research and development $ 584 $ 2,253 $ (1,669) General and administrative 3,408 2,685 723 Total operating expenses 3,992 4,938 (946) Loss from operations (3,992) (4,868) 876 Total other income 1,063 209 854 Benefit from income taxes — — — Net loss $ (2,929) $ (4,659) $ 1,730 Overall, net losses were $2.9 million for the three months ended June 30, 2026, compared to $4.7 million for the three months ended June 30, 2025. Revenue We did not have any revenue for the three months ended June 30, 2026. For the three months ended June 30, 2025, revenue totaled $70 thousand in connection with an upfront license fee related to a research license agreement. 31 Index Operating Expenses For the three months ended June 30, 2026, operating expenses totaled $4.0 million, compared to $4.9 million for the three months ended June 30, 2025, representing a decrease of $0.9 million or 19.2%. Operating expenses are comprised of the following: • Research and development expenses were approximately $0.6 million for the three months ended June 30, 2026, compared to $2.3 million for the three months ended June 30, 2025, representing a decrease of $1.7 million or 74.1%. This was primarily due to a reduction in expenses associated with our Phase 2a proof-of-concept Bolster trial which completed in the prior year and a reduction in clinical department expenses as a result of the elimination of several positions during the prior year. • General and administrative expenses were approximately $3.4 million for the three months ended June 30, 2026, compared to $2.7 million for the three months ended June 30, 2025, representing an increase of $0.7 million or 26.9%. This was primarily due to an increase in legal fees and consulting expenses in connection with the proposed acquisition by Kuva Labs Inc. Historically, to minimize our use of cash, we have used a variety of equity instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past. Other Income Total other income was $1.1 million for three months ended June 30, 2026, compared to $0.2 million for the three months ended June 30, 2025, representing an increase of $0.9 million primarily due to a $1.0 million receipt from Kuva related to the Merger Agreement partially offset by a reduction of investment income of $0.1 million from cash and cash equivalents as a result of lower investment balances. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The following table summarizes our results of operations for the six months ended June 30, 2026 and June 30, 2025 (in thousands): Six Months Ended June 30, 2026 2025 Change Revenue $ — $ 70 $ (70) Operating Expenses: Research and development 1,787 4,856 (3,069) General and administrative 7,146 5,930 1,216 Total operating expenses 8,933 10,786 (1,853) Loss from operations (8,933) (10,716) 1,783 Total other income 1,128 371 757 Benefit from income taxes (387) (962) (575) Net loss $ (7,418) $ (9,383) $ 1,965 Revenue 32 Index We did not have any revenue for the six months ended June 30, 2026. For the six months ended June 30, 2025, revenue totaled $70 thousand in connection with an upfront license fee related to a research license agreement. Operating Expenses For the six months ended June 30, 2026, operating expenses totaled $8.9 million, compared to $10.8 million for the six months ended June 30, 2025, representing a decrease of $1.9 million or 17.2%. Operating expenses are comprised of the following: • Research and development expenses were approximately $1.8 million for the six months ended June 30, 2026, compared to $4.9 million for the six months ended June 30, 2025, representing a decrease of $3.1 million or 63.2%. This was primarily due to a reduction in expenses associated with our Phase 2a proof-of-concept Bolster trial which completed in the prior year and a reduction in clinical department expenses as a result of the elimination of several positions during the prior year. • General and administrative expenses were approximately $7.1 million for the six months ended June 30, 2026, compared to $5.9 million for the six months ended June 30, 2025, representing an increase of $1.2 million or 20.5%. This was primarily due to an increase in legal fees and consulting expenses in connection with the proposed acquisition by Kuva Labs Inc. partially offset by severance costs in the prior year and lower equity expense in the current year. Historically, to minimize our use of cash, we have used a variety of equity instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past. Other Income (Expense) Total other income (expense) is comprised primarily of investment income from cash, cash equivalents and marketable securities and losses on sales of our New Jersey net operating losses for the six months ended June 30, 2026 and 2025. Total other income was $1.1 million for the six months ended June 30, 2026, compared to $0.4 million for the six months ended June 30, 2025, representing an increase of $0.8 million primarily due to a $1.0 million receipt from Kuva related to the Merger Agreement partially offset by a reduction of investment income of $0.3 million from cash and cash equivalents as a result of lower investment balances. Income Tax Benefit In February 2026, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (the “Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $0.3 million. The $0.4 million of our NJ NOL tax benefits have been recorded as a benefit from income taxes and the loss on sale of $38 thousand recorded in other income (expense). In January 2025, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $0.9 million. The $1.0 million of our NJ NOL tax benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense). 33 Index Analysis of Liquidity and Capital Resources As of June 30, 2026, we had cash and cash equivalents of approximately $10.4 million, working capital of approximately $8.0 million, and stockholders’ equity of approximately $8.2 million. During the six months ended June 30, 2026, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation. Net cash (used in) or provided by, operating, investing and financing activities were as follows (in thousands): Six Months Ended June 30, 2026 2025 Net cash used in operating activities $ (5,732) $ (9,358) Net cash provided by investing activities — 9,936 Net cash provided by financing activities 210 41 Operating Activities Our cash used in operating activities during the six months ended June 30, 2026 was $5.7 million, which is comprised of (i) our net loss of $7.4 million, adjusted for non-cash expenses totaling $0.6 million (which includes adjustments for equity-based compensation and depreciation), and (ii) changes in operating assets and liabilities providing approximately $1.1 million. Our cash used in operating activities during the six months ended June 30, 2025 was $9.4 million, which is comprised of (i) our net loss of $9.4 million, adjusted for non-cash expenses totaling $0.8 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities) and (ii) changes in operating assets and liabilities using approximately $0.8 million. Investing Activities Our cash provided by investing activities during the six months ended June 30, 2026 totaled $0. Our cash provided by investing activities during the six months ended June 30, 2025 totaled $9.9 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities). Financing Activities Our cash provided by financing activities during the six months ended June 30, 2026 totaled $0.2 million and consisted primarily of warrant exercise proceeds of $0.2 million, option exercise proceeds of $0.1 million partially offset by tax withholding-related payments on net share settlement equity awards to employees of $0.2 million. Our cash used in financing activities during the six months ended June 30, 2025 totaled $41.0 thousand and consisted of $0.3 million in proceeds primarily from the issuance of shares through our ATM Agreement (as defined below) partially offset by tax withholding-related payments on net share settlement equity awards to employees of $0.3 million. Liquidity and Capital Requirements Outlook As of June 30, 2026, we had cash and cash equivalents of approximately $10.4 million. We will need to raise additional capital to fund our operations. However, we cannot guarantee that we will be able to obtain sufficient additional funding or that if we do obtain additional funding, that such funding will be obtainable on terms satisfactory to us. Based on our current business plan and existing capital resources, management has concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of twelve months from the date of issuance of the accompanying consolidated financial statements. The accompanying financial statements have been prepared on a going concern basis and do not include any adjustments to the carrying amounts and classification of assets and liabilities that may be necessary if we were unable to continue as a going concern. To meet our short and long-term liquidity needs, including severance payments, we expect to use existing cash balances. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. In addition, we have sued Kuva to receive the termination fee under the Merger Agreement and for damages for the benefits our stockholders expected in connection with the transaction. However, there can be no assurance that we will be able to obtain the termination fee or damages from Kuva. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand 34 Index for the equity and debt of pharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. On July 24, 2026, following the termination of the Merger Agreement, we announced that our board of directors initiated a process to explore a range of strategic options to enhance stockholder value, which may include, but are not limited to, an acquisition, merger, reverse merger, other business combination, sales of assets, dissolution or other strategic transactions. Our board of directors continues to evaluate potential strategic alternatives. We expect to continue devoting significant time and resources and to incur expenses in identifying and evaluating strategic alternatives for our company, which could have a material adverse effect on our business. A considerable portion of these expenses will be incurred regardless of whether a transaction is completed. Any such expenses will decrease the remaining cash available for use in our business. As a result of our reduction in force of approximately 72% of our employees, we estimate that we will incur approximately $1.2 million of costs in connection with the reduction in workforce related to severance pay and other related termination benefits. The charges we expect to incur in connection with this reduction in workforce are subject to a number of assumptions, risks and uncertainties, and actual results may materially differ. We may also incur other material charges not currently contemplated due to events that may occur as a result of, or associated with, these actions. In the event that we do not successfully identify a viable strategic alternative, or consummate such a transaction, or if we are unable to raise sufficient capital to fund our operations, our board of directors may determine to pursue a liquidation and dissolution or other wind down of our business. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies and estimates during the six months ended June 30, 2026, compared to those reported in our 2025 Form 10-K. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.