What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-12 compared with 2025-03-06 · 1345 added, 1131 removed, 243 unchanged (91% of the section changed)

Financial Statements and Supplementary Data.

THERAPEUTICS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements and Supplementary

ORUKA THERAPEUTICS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F-2

Consolidated Balance Sheets F-3

Consolidated Statement of Operations and Comprehensive Loss F-4

Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity F-5

Consolidated Statement of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 80

Consolidated Balance Sheets 81

Consolidated Statements of Operations 82

Consolidated Statements of Comprehensive Loss 83

Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity 84

Consolidated Statement of Cash Flows 85

Notes to Consolidated Financial Statements 86

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheets of Oruka Therapeutics, Inc.

and its subsidiaries (the “Company”) as of December 31, 2024

and February 6, 2024, and the related consolidated statements of operations and comprehensive loss, of convertible preferred stock and

stockholders’ equity and of cash flows for the period from February 6, 2024 (inception) to December 31, 2024, including

the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and February

6, 2024, and the results of its operations and its cash flows for the period from February 6, 2024 (inception) to December 31, 2024

We have audited the accompanying consolidated balance sheets of Oruka

Therapeutics, Inc.

and its subsidiary (the “Company”) as of December 31, 2025 and December 31, 2024, and the related consolidated

statements of operations, of comprehensive loss, of convertible preferred stock and stockholders’ equity and of cash flows for the year

ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024, including the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its

operations and its cash flows for the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31,

2024 in conformity with accounting principles generally accepted in the United States of America.

18 unchanged sentences

no such opinion.

Our audits included performing

procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for

Critical Audit Matters

The critical audit matter

communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or

required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated

financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit

matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating

the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which

The critical audit matter communicated below is a matter arising from

the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee

and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate

opinion on the critical audit matter or on the accounts or disclosures to which it relates.

External Research and Development Costs

As described in Note 2 to

the consolidated financial statements, research and development costs are expensed as incurred.

Research and development costs include

salaries and bonuses, stock-based compensation, employee benefits, and external costs of vendors and consultants engaged to conduct research

and development activities, as well as allocated human resource costs, information technology costs, and facility-related costs, including

rent, maintenance, utilities, and depreciation.

As disclosed by management, the Company’s research and development expense for the

period from February 6, 2024 (inception) to December 31, 2024 was $75.1 million, $57.7 million of which relates to external research and

development costs.

As described in Note 2 to the consolidated financial statements, research

and development costs are expensed as incurred.

Research and development costs include salaries and bonuses, stock-based compensation,

employee benefits, and external costs of vendors and consultants engaged to conduct research and development activities, as well as allocated

human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation.

As disclosed by management, the Company’s research and development expense for the year ended December 31, 2025 was $100.6 million,

$64.4 million of which relates to external research and development costs.

The principal consideration

1 unchanged sentence

degree of auditor effort in performing procedures related to the Company’s external research and development costs.

Addressing the matter involved

performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing external research and development costs, on a sample basis, by obtaining and agreeing

the contractual terms of the agreement, amounts incurred to date, and estimates of work performed to date to the (i) underlying agreements

with vendors engaged to conduct research and development;

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among

others, testing external research and development costs, on a sample basis, by obtaining and agreeing the contractual terms of the agreement,

amounts incurred to date, and estimates of work performed to date to the (i) underlying agreements with vendors engaged to conduct research

and development;

(ii) purchase orders;

(iii) invoices received;

(iv) underlying payments made

for expenses incurred on the contracts;

(iv) underlying payments made for expenses incurred on the contracts;

and (v) external confirmations or communications obtained by management from vendors.

3 unchanged sentences

We have served as the Company’s auditor

THERAPEUTICS, INC.

BALANCE SHEETS

thousands, except share and per share data)

Current assets:

and cash equivalents

securities, current

expenses and other current assets

ORUKA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

Current assets:

securities, long-term

and equipment, net

lease right-of-use assets

non-current assets

Convertible Preferred Stock and Stockholders’ Equity

expenses and other current liabilities

lease liability, current

party accounts payable and other current liabilities

Cash and cash equivalents

Marketable securities, current

Prepaid expenses and other current assets

Total current assets

Marketable securities, long-term

Property and equipment, net

Operating lease right-of-use assets

Other non-current assets

Liabilities and Stockholders’ Equity

Current liabilities:

lease liability, non-current

and contingencies (Note 13)

Series A convertible preferred stock, $ 0.0001 par value;

no shares and 20,000,000 shares authorized as of December 31, 2024 and February 6, 2024, respectively;

none issued and outstanding as of December 31, 2024 and February 6, 2024

Series A non-voting convertible preferred stock, $ 0.001 par value;

none authorized as of December 31, 2024 and February 6, 2024;

none issued and outstanding as of December 31, 2024 and February 6, 2024

Stockholders’

Series B non-voting convertible preferred stock, $ 0.001 par value;

251,504 and no shares authorized as of December 31, 2024 and February 6, 2024, respectively;

137,138 and no shares issued and outstanding as of December 31, 2024 and February 6, 2024, respectively

Common stock, $ 0.001 and $ 0.001 par value as of December 31, 2024 and February 6, 2024, respectively;

545,000,000 and 65,000,000 shares authorized, 37,440,510 and 3,197,975 shares issued and outstanding as of December 31, 2024 and February 6, 2024, respectively

paid-in capital

other comprehensive loss

Accounts payable

Accrued expenses and other current liabilities

Operating lease liability, current

Related party accounts payable and other current liabilities

Total current liabilities

Operating lease liability, non-current

Total liabilities

Commitments and contingencies (Note 15)

Stockholders’ equity:

liabilities, convertible preferred stock and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS, INC.

STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

thousands, except share and per share data)

Series B non-voting convertible preferred stock, $ 0.001 par value;

251,504 shares authorized as of December 31, 2025 and 2024;

137,138 shares issued and outstanding as of December 31, 2025 and 2024

Common stock, $ 0.001 par value as of December 31, 2025 and 2024;

545,000,000 shares authorized as of December 31, 2025 and 2024, 48,722,309 and 37,440,510 shares issued and outstanding as of December 31, 2025 and 2024, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of

these consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

February 6, 2024

(inception) to

Operating expenses:

and development (1)

and administrative (2)

operating expenses

Research and development (1)

General and administrative (2)

Total operating expenses

Loss from operations

2 unchanged sentences

Interest expense (3)

other income, net

loss on marketable securities

Comprehensive loss

Net loss per share attributable

to common stockholders, basic and diluted

loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

Other income (expense), net

Total other income, net

$ ( 105,433 )

loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

Weighted-average

shares used in computing net loss per share attributable to common stockholders, basic and diluted

Weighted-average

shares used in computing net loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

Weighted-average

shares used in computing net loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

(1) Includes related party amount of $ 42,640 for the period from February 6, 2024 (inception) to December 31, 2024

(2) Includes related party amount of $ 1,364 for the period from February 6, 2024 (inception) to December 31, 2024

(3) Includes related party amount of $ 1,468 for the period from February 6, 2024 (inception) to December 31, 2024

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS, INC.

STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

thousands, except share data)

Net loss per share attributable to common stockholders, basic and diluted

Net loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

$ ( 3,873.25 )

Net loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to Series A non-voting convertible preferred stockholders, basic and diluted

Weighted-average shares used in computing net loss per share attributable to Series B non-voting convertible preferred stockholders, basic and diluted

(1) Includes related party amounts of $ 17,129 and $ 42,640 for the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024, respectively

(2) Includes related party amounts of $ 139 and $ 1,364 for the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024, respectively

(3) Includes related party amounts of nil and $ 1,468 for the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024, respectively

The accompanying notes are an integral part of

these consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(inception) to

$ ( 105,433 )

Other comprehensive income (loss):

Unrealized gains (losses) on marketable securities

Total comprehensive loss

$ ( 104,846 )

The accompanying notes are an integral part of

these consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Preferred Stock

3 unchanged sentences

Stockholders’

as of February 6, 2024 (inception)

of common stock

Income (Loss)

Balances as of February 6, 2024 (inception)

Issuance of common stock

Issuance of Series A convertible preferred stock, net of issuance costs of $ 69

of Series A convertible preferred stock for Series B non-voting convertible preferred stock upon the closing of the reverse capitalization

Exchange of Series A convertible preferred stock for Series B non-voting convertible preferred stock upon the closing of the reverse capitalization

( 20,000,000 )

of convertible notes (including accrued interest) into common stock upon the closing of the reverse recapitalization

of common stock and pre-funded warrants in the Pre-Closing Financing

costs of Pre-Closing Financing and reverse recapitalization

of common stock to former stockholders of ARCA biopharma, Inc.

Conversion of convertible notes (including accrued interest) into common stock upon the closing of the reverse recapitalization

Issuance of common stock and pre-funded warrants in the Pre-Closing Financing

Issuance costs of Pre-Closing Financing and reverse recapitalization

Issuance of common stock to former stockholders of ARCA biopharma, Inc.

in connection with the closing of reverse recapitalization

of common stock, Series A non-voting convertible preferred stock, and pre-funded warrants in connection with the PIPE Financing

costs of PIPE Financing

of Series A non-voting convertible preferred stock to common stock

of common stock under employee stock purchase plan

Reclassification

of the Paruka warrant from liability to equity

compensation expense

loss on marketable securities

as of December 31, 2024

accompanying notes are an integral part of these consolidated financial statements.

THERAPEUTICS, INC.

STATEMENT OF CASH FLOWS

Issuance of common stock, Series A non-voting

convertible preferred stock, and pre-funded warrants in connection with the 2024 PIPE Financing

Issuance costs of 2024 PIPE Financing

Conversion of Series A non-voting convertible preferred stock to common stock

Issuance of common stock under employee stock purchase plan

Reclassification of the Paruka warrant from liability to equity

Stock-based compensation expense

Unrealized losses on marketable securities

Balances as of December 31, 2024

Issuance of common stock and pre-funded warrants in connection with the 2025 PIPE Financing

Issuance cost of the 2025 PIPE Financing

Issuance of common stock upon exercise of pre-funded warrants

Issuance of common stock upon exercise of stock options and employee warrants

Issuance of common stock under employee stock purchase plan

Cancellation of restricted stock awards

Reclassification of the Paruka warrant from liability to equity

Stock-based compensation expense

Unrealized gains on marketable securities

Balances as of December 31, 2025

$ ( 189,157 )

The accompanying notes are an integral part of

these consolidated financial statements.

ORUKA THERAPEUTICS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

February 6, 2024

(inception) to

Cash flows from operating activities:

Adjustments to reconcile

net loss to net cash used in operating activities:

Stock-based compensation

Net accretion of premiums

and discounts on marketable securities

$ ( 105,433 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

Net accretion of premiums and discounts on marketable securities

Non-cash interest expense

1 unchanged sentence

Depreciation expense

Changes in operating

assets and liabilities:

Prepaid expenses and

other current assets

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

Accrued expenses and

other current liabilities

Operating lease liability

party accounts payable and other current liabilities

cash used in operating activities

Cash flows from investing

Purchases of property

and equipment

of marketable securities

cash used in investing activities

Cash flows from financing

from issuance of Pre-Merger Oruka Series A Preferred Stock, net of issuance costs paid

from issuance of notes payable to related party, net of issuance costs paid

Proceeds from the Pre-Closing

Financing, net

Proceeds from the PIPE

Financing, net

Cash acquired in connection

with the reverse recapitalization

from issuance of common stock

cash provided by financing activities

Net increase in cash and

cash equivalents

Cash at beginning of period

Cash and cash equivalents

at end of period

Supplemental disclosures

of non-cash operating and financing activities:

Accrued expenses and other current liabilities

Operating lease liability

arising from obtaining operating right-of-use asset

Assets acquired in connection

with the reverse capitalization

Other liabilities assumed

in connection with the reverse recapitalization

Non-cash accrued interest

on convertible note converted to common stock

exchange of Pre-Merger Oruka Series A preferred stock for Series B convertible preferred stock

Conversion of Series

A non-voting convertible preferred stock to common stock

Reclassification of

the Paruka warrant from liability to equity

accompanying notes are an integral part of these consolidated financial statements

THERAPEUTICS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Related party accounts payable and other current liabilities

Net cash used in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Purchases of marketable securities

Proceeds from maturities of marketable securities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of Pre-Merger Oruka Series A Preferred Stock, net of issuance costs paid

Proceeds from issuance of notes payable to related party, net of issuance costs paid

Proceeds from the Pre-Closing Financing, net

Proceeds from the PIPE Financings, net

Cash acquired in connection with the reverse recapitalization

Proceeds from issuance of common stock upon exercise of stock options and employee warrants and purchases under employee stock purchase plan

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of non-cash operating and financing activities:

Operating lease liability arising from obtaining operating right-of-use asset

Assets acquired in connection with the reverse recapitalization

Other liabilities assumed in connection with the reverse recapitalization

Non-cash accrued interest on convertible note converted to common stock

Non-cash exchange of Pre-Merger Oruka Series A Preferred Stock for Company Series B Convertible Preferred Stock

Conversion of Series A non-voting convertible preferred stock to common stock

Reclassification of the Paruka warrant from liability to equity

The accompanying notes are an integral part of

these consolidated financial statements

ORUKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nature of the Business and Basis of Presentation

and Basis of Presentation

Therapeutics, Inc., together with its subsidiaries (collectively, the “Company”), formerly known as ARCA biopharma, Inc.

(“ARCA”), is a clinical-stage biotechnology company that is the result of the reverse recapitalization discussed below.

to the reverse recapitalization, the private company Oruka Therapeutics, Inc.

(“Pre-Merger Oruka”) was established and incorporated

under the laws of the state of Delaware on February 6, 2024 (referred to in the Notes as the inception of the Company).

is headquartered in Menlo Park, California.

The Company is focused on developing novel monoclonal antibody therapeutics for psoriasis

(“PsO”) and other inflammatory and immunology (“I&I”) indications.

accompanying consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries.

balances and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared

in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”).

Any reference in

these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”)

and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Recapitalization and Pre-Closing Financing

August 29, 2024 (the “Merger Closing”), the Company completed the acquisition (the “Merger”) of Pre-Merger Oruka

pursuant to an Agreement and Plan of Merger and Reorganization, dated as of April 3, 2024 (the “Merger Agreement”).

the transactions contemplated by the Merger Agreement, Pre-Merger Oruka merged with and into Atlas Merger Sub Corp., a wholly owned subsidiary

of ARCA and following that, Pre-Merger Oruka then merged with and into Atlas Merger Sub II, LLC (“Second Merger Sub”), with

Second Merger Sub being the surviving entity.

Second Merger Sub changed its corporate name to “Oruka Therapeutics Operating Company,

LLC.” On August 29, 2024, the Company changed its name from “ARCA biopharma, Inc.” to “Oruka Therapeutics, Inc.”

and its Nasdaq ticker symbol from “ABIO” to “ORKA”.

consummation of the Merger, the Company effected a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the common

stock, par value $ 0.001 per share, of the Company (“Company Common Stock”), which became effective on September 3, 2024.

The Company Common Stock commenced trading on a post-Reverse Stock Split, post-Merger basis at the opening of trading on September 3,

The Company is led by the Pre-Merger Oruka management team and remains focused on developing biologics to optimize the treatment

of inflammatory skin diseases.

prior to the execution and delivery of the Merger Agreement on April 3, 2024, certain new and existing investors of Pre-Merger Oruka

entered into a subscription agreement with Pre-Merger Oruka (the “Subscription Agreement”), pursuant to which, and on the

terms and subject to the conditions of which, immediately prior to the Closing, those investors purchased shares of common stock of Pre-Merger

Oruka (“Pre-Merger Oruka Common Stock”) and Pre-Merger Oruka pre-funded warrants for gross proceeds of approximately $ 275.0

million (which includes $ 25.0 million of proceeds previously received from the issuance of the Convertible Note (as defined in Note 7)

and accrued interest on such note which converted to shares of Pre-Merger Oruka Common Stock) (the “Pre-Closing Financing”).

The Company incurred transaction costs of $ 20.5 million which was recorded as a reduction to additional paid-in capital in the consolidated

financial statements.

At the Merger Closing, the shares of Pre-Merger Oruka Common Stock and Pre-Merger Oruka pre-funded warrants issued

pursuant to the Subscription Agreement were converted into shares of Company Common Stock and pre-funded warrants of Company Common Stock

in accordance with the Exchange Ratio (defined below).

accordance with an Exchange Ratio determined by terms of the Merger Agreement and upon the effective time of the First Merger (the “First

Effective Time”), (i) each then-issued and outstanding share of Pre-Merger Oruka Common Stock including outstanding and unvested

Pre-Merger Oruka restricted stock and shares of Pre-Merger Oruka Common Stock issued in connection with the Subscription Agreement, were

converted into the right to receive a number of shares of Company Common Stock, equal to the Exchange Ratio of 6.8569 shares of Company

Common Stock, which were subject to the same vesting provisions as those immediately prior to the Merger, (ii) each share of Pre-Merger

Oruka Series A convertible preferred stock, par value $ 0.0001 (“Pre-Merger Oruka Series A Preferred Stock”), outstanding

immediately prior to the First Effective Time was converted into the right to receive a number of shares of ARCA Series B non-voting

convertible preferred stock, par value $ 0.001 per share (“Company Series B Preferred Stock”), which are convertible into

shares of Company Common Stock, at a conversion ratio of approximately 83:3332:1 (iii) each outstanding option to purchase Pre-Merger

Oruka Common Stock was converted into an option to purchase shares of Company Common Stock, (iv) each outstanding warrant to purchase

shares of Pre-Merger Oruka Common Stock was converted into a warrant to purchase shares of Company Common Stock, and (v) each share of

Company Common Stock issued and outstanding at the First Effective Time remain issued and outstanding in accordance with its terms and

Subsequent to the close of the merger, the common stock shares were then subject to the reverse stock split of 1-for-12

effected on September 3, 2024.

part of the Pre-Closing Financing and the Merger Closing, investors in the Pre-Closing Financing received 22,784,139 shares of Company

Common Stock in exchange for 39,873,706 shares of Pre-Merger Oruka Common Stock (which includes the issuance of 2,722,207 shares of Company

Common Stock in exchange for 4,764,032 shares of Pre-Merger Oruka Common Stock on the conversion of Convertible Note along with the accrued

interest through the conversion date) and 5,522,207 Company pre-funded warrants in exchange for 9,664,208 Pre-Merger pre-funded warrants.

Merger was accounted for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, Pre-Merger Oruka

was deemed to be the accounting acquirer for financial reporting purposes.

This determination was primarily based on the fact that, immediately

following the Merger:

(i) Pre-Merger Oruka stockholders own a substantial majority of the voting rights in the combined company;

Pre-Merger Oruka’s largest stockholders retain the largest interest in the combined company;

(iii) Pre-Merger Oruka designated

a majority of the initial members of the board of directors of the combined company;

and (iv) Pre-Merger Oruka’s executive management

team became the management team of the combined company.

Background and Basis of Presentation

Oruka Therapeutics, Inc.,

together with its subsidiary (collectively, the “Company”), formerly known as ARCA biopharma, Inc.

a clinical-stage biopharmaceutical company that is the result of the reverse recapitalization discussed below.

Prior to the reverse recapitalization,

the private company Oruka Therapeutics, Inc.

(“Pre-Merger Oruka”) was established and incorporated under the laws of the state

of Delaware on February 6, 2024 (referred to in the Notes as the inception of the Company).

The Company is headquartered in Menlo

Park, California.

The Company is focused on developing novel monoclonal antibody therapeutics for psoriasis (“PsO”) and other

inflammatory and immunology (“I&I”) indications.

The accompanying consolidated

financial statements reflect the operations of the Company and its wholly-owned subsidiary.

Intercompany balances and transactions have

been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared in conformity with United States

(“U.S.”) generally accepted accounting principles (“GAAP”).

Any reference in these notes to applicable guidance

is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards

Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Reverse Recapitalization and Pre-Closing Financing, and

Reverse Stock Split

On August 29, 2024 (the “Closing”),

the Company completed the acquisition (the “Merger”) of Pre-Merger Oruka pursuant to an Agreement and Plan of Merger and Reorganization,

dated as of April 3, 2024 (the “Merger Agreement”).

Following the transactions contemplated by the Merger Agreement, Pre-Merger

Oruka merged with and into Atlas Merger Sub Corp., a wholly owned subsidiary of ARCA and following that, Pre-Merger Oruka then merged

with and into Atlas Merger Sub II, LLC (“Second Merger Sub”), with Second Merger Sub being the surviving entity.

Second Merger

Sub changed its corporate name to “Oruka Therapeutics Operating Company, LLC”.

On August 29, 2024, the Company changed its

name from “ARCA biopharma, Inc.” to “Oruka Therapeutics, Inc.” and the Company effected a 1-for-12 reverse stock

split (the “Reverse Stock Split”) of its common stock, par value $ 0.001 per share (“Company Common Stock”), which

became effective on September 3, 2024.

All references to common stock, options to purchase common stock, outstanding common stock warrants,

common stock share data, per share data, Company Common Stock, and related information contained in the consolidated financial statements

have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented, unless otherwise specifically

indicated or the context otherwise requires.

Immediately prior to

the execution and delivery of the Merger Agreement, certain new and existing investors of Pre-Merger Oruka entered into a

subscription agreement with Pre-Merger Oruka (that was subsequently amended and restated in July 2024, the “Subscription

Agreement”), pursuant to which, and on the terms and subject to the conditions of which, immediately prior to the Closing,

those investors purchased shares of common stock of Pre-Merger Oruka (“Pre-Merger Oruka Common Stock”) and Pre-Merger

Oruka pre-funded warrants for gross proceeds of approximately $ 275.0 million (which includes $ 25.0 million of proceeds previously

received from the issuance of the Convertible Note (as defined in Note 9) and accrued interest on such note which converted to

shares of Pre-Merger Oruka Common Stock) (the “Pre-Closing Financing”).

The Company incurred transaction costs of $ 20.5

million, which were recorded as a reduction to additional paid-in capital in the consolidated financial statements.

In connection with the Closing,

the shares of Pre-Merger Oruka Common Stock were converted into shares of Company Common Stock and pre-funded warrants of Company Common

Stock in accordance with the Exchange Ratio (as defined below and determined by the terms of the Merger Agreement).

part of the Closing, (i) then-issued and outstanding shares of Pre-Merger Oruka Common Stock (including outstanding and unvested Pre-Merger

Oruka restricted stock and shares of Pre-Merger Oruka Common Stock issued in connection with the Subscription Agreement) were converted

into the right to receive a number of shares of Company Common Stock, equal to the exchange ratio of 6.8569 shares of Company Common Stock

(the “Exchange Ratio”), which were subject to the same vesting provisions as those immediately prior to the Merger;

share of Pre-Merger Oruka Series A convertible preferred stock, par value $ 0.0001 (“Pre-Merger Oruka Series A Preferred Stock”)

was converted into the right to receive a number of shares of ARCA Series B non-voting convertible preferred stock, par value $ 0.001 per

share (“Company Series B Preferred Stock”), which are convertible into shares of Company Common Stock at a conversion ratio

of approximately 83.3332:1 after the Reverse Stock Split, (iii) each outstanding option to purchase Pre-Merger Oruka Common Stock was

converted into an option to purchase shares of Company Common Stock, and (iv) each outstanding warrant to purchase shares of Pre-Merger

Oruka Common Stock was converted into a warrant to purchase shares of Company Common Stock.

The Merger was accounted

for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, Pre-Merger Oruka was deemed to be the

accounting acquirer for financial reporting purposes.

This determination was primarily based on the fact that, immediately following the

(i) Pre-Merger Oruka stockholders owned a substantial majority of the voting rights in the combined company;

(ii) Pre-Merger Oruka’s

largest stockholders retained the largest interest in the combined company;

(iii) Pre-Merger Oruka designated a majority of the initial

members of the board of directors of the combined company;

and (iv) Pre-Merger Oruka’s executive management team became the management

team of the combined company.

Accordingly, for accounting purposes:

(i) the Merger was treated as the equivalent

of Pre-Merger Oruka issuing stock to acquire the net assets of ARCA, and (ii) the reported historical operating results of the combined

company prior to the Merger are those of Pre-Merger Oruka.

(a) the Merger was treated as the equivalent of Pre-Merger Oruka issuing

stock to acquire the net assets of ARCA, and (b) the reported historical operating results of the combined company prior to the Merger

are those of Pre-Merger Oruka.

As part of the reverse recapitalization, the Company acquired a cash balance of $ 4.94 million from ARCA.

Additional information regarding the Merger is included in Note 3.

September 3, 2024, the Company effected the Reverse Stock Split, a 1-for-12 reverse stock split of Company Common Stock.

The par value

per share and the number of authorized shares were not adjusted as a result of the Reverse Stock Split.

The shares of Company Common

Stock underlying outstanding stock options, common stock warrants and other equity instruments were proportionately reduced and the respective

exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

All references to common stock, options to purchase common stock, outstanding common stock warrants, common stock share data, per share

data, and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect

of the Reverse Stock Split for all periods presented, unless otherwise specifically indicated or the context otherwise requires.

September 11, 2024, the Company entered into a Securities Purchase Agreement for a private placement (the “PIPE Financing”)

with certain institutional and accredited investors.

The closing of the PIPE Financing occurred on September 13, 2024.

to the Securities Purchase Agreement, the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase

price of $ 23.00 per share, an aggregate of 2,439 shares of the Company’s Series A non-voting convertible preferred stock, par value

$ 0.001 per share (“Company Series A Preferred Stock”), at a purchase price of $ 23,000.00 per share (each Company Series A

Preferred Stock is convertible into 1,000 shares of Company Common Stock), and pre-funded warrants to purchase an aggregate of 680,000

shares of Company Common Stock at a purchase price of $ 22.999 per pre-funded warrant, for aggregate net proceeds of approximately $ 188.7

million (net of issuance costs of $ 11.9 million).

and Going Concern

its inception, the Company has devoted substantially all of its resources to advancing the development of its portfolio of programs,

organizing and staffing the Company, business planning, raising capital, and providing general and administrative support for these operations.

Current and future programs will require significant research and development efforts, including preclinical and clinical trials, and

regulatory approvals to commercialization.

Until such time as the Company can generate significant revenue from product sales, if ever,

the Company expects to finance its operating activities through a combination of equity offerings and debt financings.

Company has not generated any revenue from product sales or other sources and has incurred significant operating losses and negative

cash flows from operations since inception.

For the period from February 6, 2024 (inception) to December 31, 2024, the Company has incurred

a net loss of $ 83.7 million and used net cash of $ 57.8 million for its operating activities.

of December 31, 2024, the Company had cash, cash equivalents, and marketable securities of $ 393.7 million.

The Company’s management

expects that the existing cash, cash equivalents, and marketable securities will be sufficient to fund the Company’s operating

plans for at least twelve months from the date these consolidated financial statements were issued.

The Company expects that its research

and development and general and administrative costs will continue to increase significantly, including in connection with conducting

future pre-clinical activities and clinical trials and manufacturing for its existing product candidates and any future product candidates

to support commercialization and providing general and administrative support for its operations, including the costs associated with

operating as a public company.

As of December 31,

2025, the Company had cash, cash equivalents, and marketable securities of $ 479.6 million and an accumulated deficit of

$ 189.2 million.

Since its inception, the Company has devoted substantially all of its resources to advancing the development of

its portfolio of programs, organizing and staffing the Company, business planning, raising capital, and providing general and

administrative support for these operations.

Current and future programs will require significant research and development efforts,

including preclinical and clinical trials, and regulatory approvals to commercialization.

Until such time as the Company can

generate significant revenue from product sales, if ever, the Company expects to finance its operating activities through a

combination of equity offerings and debt financings.

The Company expects that

its research and development and general and administrative costs will continue to increase significantly, including in connection with

conducting future pre-clinical activities and clinical trials and manufacturing for its existing product candidates and any future product

candidates to support commercialization and providing general and administrative support for its operations, including the costs associated

with operating as a public company.

The Company’s ability to access capital when needed is not assured and, if capital is not available

4 unchanged sentences

Summary of Significant Accounting Policies

preparation of the Company’s consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates,

assumptions, and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at

the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting periods.

estimates and assumptions reflected within these consolidated financial statements include but are not limited to research and development

expenses and related prepaid or accrued costs and the valuation of stock-based compensation awards and related expenses.

bases its estimates on known trends and other market-specific or other 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

could differ materially from those estimates or assumptions.

Concentrations

of Credit Risk and Other Risks and Uncertainties

instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities.

The Company’s investment policy limits investments to high credit quality securities issued by the U.S.

Use of Estimates

The preparation of the Company’s

consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates, assumptions, and judgments

that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated

financial statements and the reported amounts of income and expenses during the reporting periods.

Significant estimates and assumptions

reflected within these consolidated financial statements include but are not limited to research and development expenses and related

prepaid or accrued costs and the valuation of stock-based compensation awards and related expenses.

The Company bases its estimates on

known trends and other market-specific or other 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 could differ materially

from those estimates or assumptions.

Concentrations of Credit Risk and Other Risks and Uncertainties

Financial instruments that

potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities.

The Company’s

investment policy limits investments to high credit quality securities issued by the U.S.

government, U.S.

government-sponsored

agencies, highly rated banks, and corporate issuers, subject to certain concentration limits and restrictions on maturities.

government-sponsored agencies,

highly rated banks, and corporate issuers, subject to certain concentration limits and restrictions on maturities.

The Company’s

5 unchanged sentences

As of December 31, 2025, the balance at the Company’s U.S.

banking institution exceeded the FDIC

The Company has not experienced any losses on its deposits of cash and cash equivalents and its accounts are monitored by management

to mitigate risk.

The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash

equivalents, and bond issuers.

Company is dependent on third-party organizations to research, develop, manufacture, and process its product candidates for its development

programs, including its two most advanced programs, ORKA-001 and ORKA-002.

The Company expects to continue to be dependent on a small

number of manufacturers to supply it with its requirements for all products.

The Company’s research and development programs could

be adversely affected by a significant interruption in the supply of the necessary materials.

A significant amount of the Company’s

research and development activities are performed under its agreements with Paragon Therapeutics, Inc.

banking institution exceeded the FDIC limits.

The Company has not experienced any losses on its deposits of cash and cash equivalents and its accounts are monitored by management to

mitigate risk.

The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents,

and bond issuers.

The Company is dependent

on third-party organizations to research, develop, manufacture, and process its product candidates for its development programs, including

its two most advanced programs, ORKA-001 and ORKA-002.

The Company expects to continue to be dependent on a small number of manufacturers

to supply it with its requirements for all products.

The Company’s research and development programs could be adversely affected

by a significant interruption in the supply of the necessary materials.

A significant amount of the Company’s research and development

activities are performed under its agreements with Paragon Therapeutics, Inc.

(“Paragon”) (see Note 14).

and Cash Equivalents

Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to

be cash equivalents.

The cash equivalents were comprised of investments in money market funds, U.

Cash and Cash Equivalents

The Company considers all

highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents.

cash equivalents were comprised of investments in money market funds, U.

treasury securities, U.S.

agency securities, and debt securities and are stated at fair value.

Company invests in marketable securities, primarily securities issued by the U.S.

government and its agencies, commercial paper and corporate

debt securities.

The Company’s marketable securities are classified as available-for-sale and reported at fair value, with unrealized

gains and losses included as a component of accumulated other comprehensive loss.

available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more

likely than not that it will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria

regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized

in other income (expense) in the results of operations.

For available-for-sale debt securities that do not meet the aforementioned criteria,

the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment,

management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating

agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit

loss exists, an allowance is recorded for the difference between the present value of cash flows expected to be collected and the amortized

cost basis of the security.

Impairment losses attributable to credit loss factors are charged against the allowance when management believes

an available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met.

unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit loss factors are recognized as

a component of accumulated other comprehensive loss, net of unrealized gains.

Realized gains and losses and declines in fair value, if

any, on available-for-sale securities are included in other income, net, in the results of operations.

securities with stated maturities of greater than three months from the date of purchase but less than one year from the consolidated

balance sheet date are classified as current, while marketable securities with maturities in one year or beyond one year from the consolidated

balance sheet date are classified as long-term.

government agency securities, and

debt securities and are stated at fair value.

Marketable Securities

The Company invests in marketable

securities, primarily securities issued by the U.S.

government and its agencies, commercial paper and corporate debt securities.

The Company’s

marketable securities are classified as available-for-sale and reported at fair value, with unrealized gains and losses included as a

component of accumulated other comprehensive loss.

For available-for-sale debt

securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it

will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement

to sell is met, the security’s amortized cost basis is written down to fair value and recognized in other income (expense) in the

results of operations.

For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether

the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent

to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions

specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, an allowance is recorded

for the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security.

losses attributable to credit loss factors are charged against the allowance when management believes an available-for-sale security is

uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Any unrealized losses from

declines in fair value below the amortized cost basis as a result of non-credit loss factors are recognized as a component of accumulated

other comprehensive loss, net of unrealized gains.

Realized gains and losses and declines in fair value, if any, on available-for-sale

securities are included in other income, net, in the results of operations.

Marketable securities with

stated maturities of greater than three months from the date of purchase but less than one year from the consolidated balance sheet date

are classified as current, while marketable securities with maturities in one year or beyond one year from the consolidated balance sheet

date are classified as long-term.

The cost of securities sold is determined using the specific-identification method.

earned and adjustments for the amortization of premiums and discounts on investments are included in interest income on the consolidated

statements of operations and comprehensive loss.

Issuance Costs

issuance costs incurred in connection with the Convertible Note (see Note 7) are recorded as a reduction of the carrying value of

the notes payable liability on the Company’s balance sheet and are amortized to interest expense over the term of the loan using

the effective interest method.

At the effective time of the Merger the Converted Note was converted to common stock and is no longer

on the balance sheet as of December 31, 2024.

Company accounts for any notes received in exchange for common stock as a subscription receivable, provided the note underlying the receivable

is paid prior to the date the financial statement is available to be issued.

Value Measurements

assets and liabilities are carried at fair value under U.S.

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 use 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:

Interest earned

and adjustments for the amortization of premiums and discounts on investments are included in interest income on the consolidated statements

of operations and comprehensive loss.

Debt Issuance Costs

Debt issuance costs incurred

in connection with the Convertible Note (see Note 9) are recorded as a reduction of the carrying value of the notes payable liability

on the Company’s balance sheet and are amortized to interest expense over the term of the loan using the effective interest method.

At the effective time of the Merger the Convertible Note was converted to common stock and is no longer on the balance sheet as of December

Fair Value Measurements

Certain assets and liabilities

are carried at fair value under U.S.

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 use 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:

1 — Quoted prices in active markets that are identical assets or liabilities.

● Level 2 — Observable

inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar

assets or liabilities, quoted prices in markets that are not active for identical or similar

assets or liabilities, or other inputs that are observable or can be corroborated by observable

inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in

markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated

by observable market data.

● Level 3 — Unobservable

inputs that are supported by little or no market activity that are significant to determining

the fair value of the assets or liabilities, including pricing models, discounted cash flow

methodologies, and similar techniques.

Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy

described above (see Note 4).

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable

and accrued expenses and other current liabilities approximate their fair values due to their relatively short maturity period.

and Equipment

and equipment are stated at cost less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over

the estimated useful life of each asset as follows:

Furniture and fixtures

Computer and office equipment

Classification

of Convertible Preferred Stock

to the reverse recapitalization, the Company had classified its Pre-Merger Oruka Series A Preferred Stock outside of stockholders’

equity on the Company’s consolidated balance sheet because the holders of such stock have certain liquidation rights in the event

of a deemed liquidation event that, in certain situations, is not solely within the control of the Company and would require the redemption

of the then-outstanding convertible preferred stock.

the closing of the Merger, the Company converted its Pre-Merger Oruka Series A Preferred Stock to Company Series B Preferred Stock and

has classified the Company Series B Preferred Stock within stockholders’ equity on its consolidated balance sheet because the Company

Series B Preferred Stock is not redeemable or puttable to the Company by the holder under any circumstances.

connection with the PIPE Financing (see Note 1) the Company issued Company Series A Preferred Stock, and has classified the Company Series

A Preferred Stock outside of stockholders’ equity on the Company’s consolidated balance sheet because the holders of such

stock have certain rights (see Note 8) that, in certain situations, is not solely within the control of the Company and would require

the redemption of the then-outstanding convertible preferred stock.

In November 2024, the Company Series A Preferred Stock shares were

converted to common stock, and as of December 31, 2024, there were no shares of Company Series A Preferred Stock outstanding.

to Related Party

Company accounted for the Convertible Note (as defined in Note 7) at amortized cost.

The Company considered if optional conversion features

are required to be bifurcated and separately accounted for as a derivative.

Costs related to the issuance of the Convertible Note were

recorded as a debt discount, amortized over the term of the Convertible Note (see Note 7) and were accounted for as interest

expense in other income (expenses) within the consolidated statement of operations and comprehensive loss using the effective interest

At the effective time of the Merger, shares of Pre-Merger Oruka Common Stock issued pursuant to the conversion of the Convertible

Note (including accrued interest) automatically converted into shares of Company Common Stock (see Note 1).

and Development Contract Costs Accruals

Company records the costs associated with research studies and manufacturing development as incurred.

These costs are a significant component

of the Company’s research and development expenses, with a substantial portion of the Company’s ongoing research and development

activities conducted by third-party service providers, including contract research organizations (“CROs”) and contract manufacturing

organizations (“CMOs”), and the Company’s related-party Paragon (see Note 12).

Company accrues for expenses resulting from obligations under its two antibody discovery and option agreements (the “Option Agreements”)

(see Note 12), by and among Paragon, Paruka Holding LLC (“Paruka”), an entity formed by Paragon as a vehicle to hold equity

in the Company, and the Company as well as agreements with CROs, CMOs, and other outside service providers for which payment flows do

not match the periods over which materials or services are provided to the Company.

Accruals are recorded based on estimates of services

received and efforts expended pursuant to agreements established with Paragon, CROs, CMOs, and other outside service providers.

estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with

internal personnel and external service providers as to the progress or stage of completion of the services.

The Company makes significant

judgments and estimates in determining the accrual balance in each reporting period.

If advance payments are made to Paragon, a CRO,

CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be expensed as the contracted services

are performed.

Changes in these estimates that result in material changes to the Company’s accruals could materially affect the

Company’s results of operations.

As of December 31, 2024, the Company has not experienced any material deviations between accrued

and actual research and development expenses.

the lease commencement date, when control of the underlying asset is transferred from the lessor to the Company, the Company classifies

a lease as either an operating or finance lease and recognizes a right-of-use (“ROU”) asset and a current and non-current

lease liability, as applicable, in the balance sheet if the lease has a term greater than one year.

Lease terms may include options to

extend or terminate the lease when it is reasonably certain that the Company will exercise its option.

the lease commencement date, operating lease liabilities and their corresponding ROU assets are recorded at the present value of future

minimum lease payments over the expected remaining lease term.

The Company determines the present value of lease payments using the implicit

rate, if it is readily determinable, or the risk-free discount rate for a period comparable with that of the lease term.

For operating

leases, lease expense for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, lease expense

includes amortization expense of the ROU asset recognized on a straight-line basis over the lease term and interest expense recognized

on the finance lease liability.

In addition, certain adjustments to the ROU asset may be required for items such as lease prepayments,

incentives received or initial direct costs.

As of December 31, 2024, the Company has one operating lease and no finance leases.

Company accounts for lease and non-lease components related to operating leases as a single lease component.

The Company has elected

that costs associated with leases having an initial term of 12 months or less are recognized in the consolidated statement of operations

and comprehensive loss on a straight-line basis over the lease term and are not recorded on its consolidated balance sheets.

lease expense is recognized as incurred and consists primarily of real estate taxes, utilities, and other office space related expenses.

inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities,

including pricing models, discounted cash flow methodologies, and similar techniques.

The Company’s cash

equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses and

other current liabilities approximate their fair values due to their relatively short maturity period.

Property and Equipment

Property and equipment are

stated at cost less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging

from three to five years .

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets.

Maintenance and repairs

are charged to expense as incurred.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed

from the consolidated balance sheet and any resulting gain or loss is reflected in operations in the period realized.

Classification of Convertible Preferred Stock

Prior to the reverse recapitalization,

the Company had classified its Pre-Merger Oruka Series A Preferred Stock outside of stockholders’ equity on the Company’s

consolidated balance sheet because the holders of such stock have certain liquidation rights in the event of a deemed liquidation event

that, in certain situations, is not solely within the control of the Company and would require the redemption of the then-outstanding

convertible preferred stock.

Upon the closing of the Merger,

the Company converted its Pre-Merger Oruka Series A Preferred Stock to Company Series B Preferred Stock and has classified the Company

Series B Preferred Stock within stockholders’ equity on its consolidated balance sheet because the Company Series B Preferred Stock

is not redeemable or puttable to the Company by the holder under any circumstances.

In connection with the 2024

PIPE Financing (see Note 4) the Company issued Company Series A Preferred Stock, and has classified the Company Series A Preferred Stock

outside of stockholders’ equity on the Company’s consolidated balance sheet because the holders of such stock have certain

rights (see Note 10) that, in certain situations, is not solely within the control of the Company and would require the redemption of

the then-outstanding convertible preferred stock.

In November 2024, the Company Series A Preferred Stock shares were converted to common

stock, and as of December 31, 2025 and December 31, 2024, there were no shares of Company Series A Preferred Stock outstanding.

Note Payable to Related Party

The Company accounted for

the Convertible Note (as defined in Note 9) at amortized cost.

The Company considered if optional conversion features are required to

be bifurcated and separately accounted for as a derivative.

Costs related to the issuance of the Convertible Note were recorded as a debt

discount, amortized over the term of the Convertible Note (see Note 9) and were accounted for as interest expense in other income

(expenses) within the consolidated statements of operations using the effective interest method.

At the effective time of the Merger,

shares of Pre-Merger Oruka Common Stock issued pursuant to the conversion of the Convertible Note (including accrued interest) automatically

converted into shares of Company Common Stock (see Note 1).

Research and Development Contract Costs Accruals

The Company records the costs

associated with research studies and manufacturing development as incurred.

These costs are a significant component of the Company’s

research and development expenses, with a substantial portion of the Company’s ongoing research and development activities conducted

by third-party service providers, including contract research organizations (“CROs”) and contract manufacturing organizations

(“CMOs”), and the Company’s related-party Paragon (see Note 14).

The Company accrues for expenses

resulting from obligations under its antibody discovery and option agreements (the “Option Agreements”) (see Note 14),

by and among Paragon, Paruka Holding LLC (“Paruka”), an entity formed by Paragon as a vehicle to hold equity in the Company,

and the Company as well as agreements with CROs, CMOs, and other outside service providers for which payment flows do not match the periods

over which materials or services are provided to the Company.

Accruals are recorded based on estimates of services received and efforts

expended pursuant to agreements established with Paragon, CROs, CMOs, and other outside service providers.

These estimates are typically

based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external

service providers as to the progress or stage of completion of the services.

The Company makes significant judgments and estimates in

determining the accrual balance in each reporting period.

If advance payments are made to Paragon, a CRO, CMO, or outside service provider,

the payments will be recorded as a prepaid asset which will be expensed as the contracted services are performed.

Changes in these estimates

that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

of December 31, 2025 and December 31, 2024, the Company has not experienced any material deviations between accrued and actual research

and development expenses.

At the lease commencement

date, when control of the underlying asset is transferred from the lessor to the Company, the Company classifies a lease as either an

operating or finance lease and recognizes a right-of-use (“ROU”) asset and a current and non-current lease liability, as applicable,

in the balance sheet if the lease has a term greater than one year.

Lease terms may include options to extend or terminate the lease when

it is reasonably certain that the Company will exercise its option.

At the lease commencement

date, operating lease liabilities and their corresponding ROU assets are recorded at the present value of future minimum lease payments

over the expected remaining lease term.

The Company determines the present value of lease payments using the implicit rate, if it is readily

determinable, or the risk-free discount rate for a period comparable with that of the lease term.

For operating leases, lease expense

for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, lease expense includes amortization

expense of the ROU asset recognized on a straight-line basis over the lease term and interest expense recognized on the finance lease

In addition, certain adjustments to the ROU asset may be required for items such as lease prepayments, incentives received

or initial direct costs.

As of December 31, 2025, the Company has two operating leases and no finance leases.

The Company accounts for

lease and non-lease components related to operating leases as a single lease component.

The Company has elected that costs associated

with leases having an initial term of 12 months or less are recognized in the consolidated statements of operations on a straight-line

basis over the lease term and are not recorded on its consolidated balance sheets.

Variable lease expense is recognized as incurred and

consists primarily of real estate taxes, utilities, and other office space-related expenses.

Segment Reporting

The Company operates as a

4 unchanged sentences

the CODM regularly reviews total operating expenses and consolidated net loss.

and Development Costs

and development costs are expensed as incurred.

Research and development costs include salaries and bonuses, stock-based compensation,

employee benefits, and external costs of vendors and consultants engaged to conduct research and development activities, as well as allocated

human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation.

Nonrefundable

advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid

expenses on the accompanying consolidated balance sheet.

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.

If nonrefundable advance

payments represent a one-time cost for obtaining goods or services, with anticipated benefits to be utilized within a year of period

end, the payment is expensed immediately.

and Administrative Expenses

and administrative expenses consist primarily of salaries and bonuses, stock-based compensation, employee benefits, finance and administration

costs, patent and intellectual property costs, professional fees, as well as allocated human resource costs, information technology costs,

and facility-related costs, including rent, maintenance, utilities and depreciation.

and Contingencies

Company is subject to contingent liabilities, such as legal proceedings and claims, that arise in the ordinary course of business activities.

The Company accrues for loss contingencies when losses become probable and are reasonably estimable.

If the reasonable estimate of the

loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the

balance sheet.

The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but

not probable;

however, it discloses the range of reasonably possible losses.

As of December 31, 2024, no liabilities were recorded for

loss contingencies (see Note 13).

Company estimates the fair value of its stock awards using the Black-Scholes option pricing model, which uses as inputs the fair value

of the Company’s common stock, and certain management estimates, including the expected stock price volatility, the expected term

of the award, the risk-free interest rate, and expected dividends.

Expected volatility is calculated based on reported volatility data

for a representative group of publicly traded companies for which historical information is available.

The Company selects companies

with comparable characteristics with historical share price information that approximates the expected term of the equity-based awards.

The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the

equivalent period that approximates the calculated expected term of the stock options.

The Company will continue to apply this method

until a sufficient amount of historical information regarding the volatility of its stock price becomes available.

The risk-free interest

rate is based on the U.S.

Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.

and non-employee awards (except the Paruka warrant) the Company uses the simplified method, under which the expected term is presumed

to be the midpoint between the vesting date and the end of the contractual term.

The Company utilizes this method due to lack of historical

exercise data.

For the Paruka warrant, the contractual term is used for the expected term.

The expected dividend yield is assumed to

be zero as the Company has no current plans to pay any dividends on common stock.

Company measures restricted common stock awards (“RSAs”) using the difference, if any, between the purchase price per share

of the award and the fair value of the Company’s common stock at the date of grant.

Company grants stock options, restricted stock awards, and warrants that are subject to service or performance-based vesting conditions.

Compensation expense for awards to employees and directors with service-based vesting conditions is recognized using the straight-line

method over the requisite service period, which is generally the vesting period of the respective award.

Compensation expense for awards

to non-employees with service-based vesting conditions is recognized in the same manner as if the Company had paid cash in exchange for

the goods or services, which is generally over the vesting period of the award.

Research and Development Costs

Research and development

costs are expensed as incurred.

Research and development costs include salaries and bonuses, stock-based compensation, employee benefits,

and external costs of vendors and consultants engaged to conduct research and development activities, as well as allocated human resource

costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation.

Nonrefundable advance payments

for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses on

the accompanying consolidated balance sheet.

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.

If nonrefundable advance payments represent

a one-time cost for obtaining goods or services, with anticipated benefits to be utilized within a year of period end, the payment is

expensed immediately.

General and Administrative Expenses

General and administrative

expenses consist primarily of salaries and bonuses, stock-based compensation, employee benefits, finance and administration costs, patent

and intellectual property costs, professional fees, as well as allocated human resource costs, information technology costs, and facility-related

costs, including rent, maintenance, utilities and depreciation.

Commitments and Contingencies

The Company is subject to

contingent liabilities, such as legal proceedings and claims, that arise in the ordinary course of business activities.

The Company accrues

for loss contingencies when losses become probable and are reasonably estimable.

If the reasonable estimate of the loss is a range and

no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the balance sheet.

Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable;

it discloses the range of reasonably possible losses.

As of December 31, 2025 and 2024, no liabilities were recorded for loss contingencies

(see Note 15).

Stock-Based Compensation

The Company estimates the

fair value of its stock awards using the Black-Scholes option pricing model, which uses as inputs the fair value of the Company’s

common stock, and certain management estimates, including the expected stock price volatility, the expected term of the award, the risk-free

interest rate, and expected dividends.

Expected volatility is calculated based on reported volatility data for a representative group

of publicly traded companies for which historical information is available.

The Company selects companies with comparable characteristics

with historical share price information that approximates the expected term of the equity-based awards.

The Company computes the historical

volatility data using the daily closing prices for the selected companies’ shares during the equivalent period that approximates

the calculated expected term of the stock options.

The Company will continue to apply this method until a sufficient amount of historical

information regarding the volatility of its stock price becomes available.

The risk-free interest rate is based on the U.S.

Treasury yield

curve in effect at the time of grant, commensurate with the expected term assumption.

For employee and non-employee awards (except the

Paruka warrant) the Company uses the simplified method, under which the expected term is presumed to be the midpoint between the vesting

date and the end of the contractual term.

The Company utilizes this method due to lack of historical exercise data.

For the Paruka warrant,

the contractual term is used for the expected term.

The expected dividend yield is assumed to be zero as the Company has no current plans

to pay any dividends on common stock.

The Company measures restricted

common stock awards (“RSAs”) using the difference, if any, between the purchase price per share of the award and the fair

value of the Company’s common stock at the date of grant.

The Company grants stock

options, restricted stock awards, and warrants that are subject to service or performance-based vesting conditions.

Compensation expense

for awards to employees and directors with service-based vesting conditions is recognized using the straight-line method over the requisite

service period, which is generally the vesting period of the respective award.

Compensation expense for awards to non-employees with service-based

vesting conditions is recognized in the same manner as if the Company had paid cash in exchange for the goods or services, which is generally

over the vesting period of the award.

Forfeitures are accounted for as they occur.

reporting date, the Company estimates the probability that specified performance criteria will be met and does not recognize compensation

expense until it is probable that the performance-based vesting condition will be achieved.

Company has issued stock options, warrants, and RSAs with service-based and performance-based vesting conditions.

Company recognizes the compensation expense for the option to purchase common stock under the Employee Stock Purchase Plan (“ESPP”),

based on the fair value of the common stock estimated using the closing price of the Company’s common stock as reported on the

date of offering, less the purchase discount percentage provided for in the plan.

Company classifies stock-based compensation expense in its consolidated statement of operations and comprehensive loss in the same manner

in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified,

as applicable.

Comprehensive

loss includes net loss as well as other changes in stockholders’ equity that result from transactions and events other than those

with stockholders.

The Company’s unrealized gains and losses on marketable securities represent the only component of other comprehensive

loss that are excluded from the reported net loss and that are presented in the consolidated statement of comprehensive loss.

Loss per Share Attributable to Stockholders

and diluted net loss attributable to stockholders per share is presented in conformity with the two-class method required for participating

securities (Pre-Merger Oruka Series A Preferred Stock).

Basic earnings per share is computed by dividing net income available to each

class of shares by the weighted-average number of shares of common stock and participating securities outstanding during the period.

Pre-funded warrants were included as the exercise price is negligible and these warrants are fully vested and exercisable.

Company Series

A Preferred Stock and Company Series B Preferred Stock share the same characteristics as Common Stock and have no substantive preference

attributed to them and, accordingly, have been considered as classes of Common Stock in the computation of net loss per share regardless

of their legal form.

loss is allocated to common stock based on its proportional ownership on an as-converted basis.

Net loss is not allocated to participating

securities as they do not have an obligation to fund losses.

The weighted-average number of shares outstanding of common stock reflects

changes in ownership over the periods presented.

As of each reporting date, the Company estimates the

probability that specified performance criteria will be met and does not recognize compensation expense until it is probable that the

performance-based vesting condition will be achieved.

The Company has issued stock

options, warrants, and RSAs with service-based and performance-based vesting conditions.

The Company recognizes the

compensation expense for the option to purchase common stock under the Employee Stock Purchase Plan (“ESPP”), based on the

fair value of the common stock estimated using the closing price of the Company’s common stock as reported on the date of offering,

less the purchase discount percentage provided for in the plan.

The Company classifies stock-based

compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs

are classified or in which the award recipient’s service payments are classified, as applicable.

Comprehensive Loss

Comprehensive loss includes

net loss as well as other changes in stockholders’ equity that result from transactions and events other than those with stockholders.

The Company’s unrealized gains and losses on marketable securities represent the only component of other comprehensive loss that

is excluded from the reported net loss and that is presented in the consolidated statements of comprehensive loss.

Net Loss per Share Attributable to Stockholders

Basic and diluted net loss

attributable to stockholders per share is presented in conformity with the two-class method required for participating securities (Pre-Merger

Oruka Series A Preferred Stock).

Basic earnings per share is computed by dividing net income available to each class of shares by the

weighted-average number of shares of common stock and participating securities outstanding during the period.

Pre-funded warrants were

included as the exercise price is negligible and these warrants are fully vested and exercisable.

Company Series A Preferred Stock and

Company Series B Preferred Stock share the same characteristics as Common Stock and have no substantive preference attributed to them

and, accordingly, have been considered as classes of Common Stock in the computation of net loss per share regardless of their legal form.

Net loss is allocated to

common stock based on its proportional ownership on an as-converted basis.

Net loss is not allocated to participating securities as they

do not have an obligation to fund losses.

The weighted-average number of shares outstanding of common stock reflects changes in ownership

over the periods presented.

See Note 10 — Convertible Preferred Stock and Stockholders’ Equity.

net loss per share is computed by dividing the net loss attributable to stockholders adjusted for income (expenses), net of tax, related

to any diluted securities, by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for

For purposes of this calculation, stock options to purchase common stock, employee warrants to purchase common stock, and

unvested RSAs are considered potential dilutive common shares.

Company generated a net loss for the periods presented.

Accordingly, basic and diluted net loss per share is the same because the inclusion

of the potentially dilutive securities would be anti-dilutive.

income, net, consists of interest earned on the Company’s cash, cash equivalents, and marketable securities;

interest expense on

the convertible note from a related party and foreign currency transactions gains and losses.

Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax

Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis

of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.

in deferred tax assets and liabilities are recorded in the provision for income taxes.

The Company assesses the likelihood that its deferred

tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence,

that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established

through a charge to income tax expense.

The potential for recovery of deferred tax assets is evaluated by estimating the future taxable

profits expected and considering prudent and feasible tax planning strategies.

Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to

determine the amount of tax benefit to be recognized.

First, the tax position must be evaluated to determine the likelihood that it will

be sustained upon external examination by the taxing authorities.

If the tax position is deemed more likely than not to be sustained,

the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements.

of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered

appropriate as well as the related net interest and penalties.

The Company had accrued no amounts for interest or penalties related to

uncertain tax positions as of December 31, 2024.

Adopted Accounting Pronouncements

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”),

which enhances the segment disclosure requirements for public entities on an annual and interim basis.

Under this standard, public entities

will be required to disclose significant segment expenses that are regularly provided to the CODM and included within each reported measure

of segment profit or loss.

Additionally, current annual disclosures about a reportable segment’s profit or loss and assets will

be required on an interim basis.

Entities will also be required to disclose information about the CODM’s title and position at

the Company along with an explanation of how the CODM uses the reported measures of segment profit or loss in their assessment of segment

performance and deciding how to allocate resources.

Finally, ASU 2023-07 requires all segment disclosures for public entities that

have only a single reportable segment.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15,

2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company adopted

ASU 2023-07 in 2024 and additional required disclosures have been included in Note 10.

Issued Accounting Pronouncements

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Diluted net loss per share

is computed by dividing the net loss attributable to stockholders adjusted for income (expenses), net of tax, related to any diluted securities,

by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period.

of this calculation, stock options to purchase common stock, employee warrants to purchase common stock, and unvested RSAs are considered

potential dilutive common shares.

The Company generated a net

loss for the periods presented.

Accordingly, basic and diluted net loss per share is the same because the inclusion of the potentially

dilutive securities would be anti-dilutive.

Other income (expense), net

Other income (expense), net,

consists of interest earned on the Company’s cash, cash equivalents, and marketable securities;

interest expense on the convertible

note from a related party, and foreign currency transactions gains and losses.

The Company accounts for

income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected

future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns.

tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis of assets and liabilities

using enacted tax rates in effect for the years in which the differences are expected to reverse.

Changes in deferred tax assets

and liabilities are recorded in the provision for income taxes.

The Company assesses the likelihood that its deferred tax assets will

be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely

than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge

to income tax expense.

The potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected

and considering prudent and feasible tax planning strategies.

The Company accounts for

uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount

of tax benefit to be recognized.

First, the tax position must be evaluated to determine the likelihood that it will be sustained upon

external examination by the taxing authorities.

If the tax position is deemed more likely than not to be sustained, the tax position is

then assessed to determine the amount of benefit to recognize in the consolidated financial statements.

The amount of the benefit that

may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

The provision

for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as

well as the related net interest and penalties.

The Company had accrued no amounts for interest or penalties related to uncertain tax

positions as of December 31, 2025.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes

Improvements to Income Tax Disclosures.

expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding taxes paid both in the U.S.

foreign jurisdictions.

This update is effective beginning with the Company’s 2025 fiscal year annual reporting period.

is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

(Subtopic 220-40):

This ASU expands disclosures in an entity’s income tax rate reconciliation

table and disclosures regarding taxes paid both in the U.S.

and foreign jurisdictions.

This update is effective beginning with the

Company’s 2025 fiscal year annual reporting period.

The Company adopted ASU 2023-09 in 2025 and applied the update retrospectively

for the period from February 6, 2024 (inception) to December 31, 2024, and the impact of the adoption of this update was not material

to the Company’s consolidated financial position and results of operations since the update requires only enhancements of existing

income tax disclosures.

The additional required disclosures have been included in Note 13.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting

Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This ASU requires more detailed disclosures, on an annual and interim

basis, about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense

captions presented on the face of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and

interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

This ASU may be applied either prospectively

or retrospectively.

The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

Reverse Recapitalization and Pre-Closing Financing

described within the Reverse Recapitalization and Pre-Closing Financing section in Note 1, on August 29, 2024, the reverse recapitalization

between Pre-Merger Oruka and ARCA was consummated.

requires more detailed disclosures, on an annual and interim basis, about specified categories of expenses (including employee compensation,

depreciation, and amortization) included in certain expense captions presented on the face of the income statement.

This ASU is effective

for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption

is permitted.

This ASU may be applied either prospectively or retrospectively.

The Company is currently evaluating the impact of the adoption

of this ASU on its consolidated financial statements.

Reverse Recapitalization and Pre-Closing

As described within the Reverse

Recapitalization and Pre-Closing Financing section in Note 1, on August 29, 2024, the reverse recapitalization between Pre-Merger Oruka

and ARCA was consummated.

The Merger was accounted for as a reverse recapitalization in accordance with U.S.

At the effective time of the Merger, substantially all of the assets of ARCA consisted of cash and cash equivalents and other nominal

non-operating assets and liabilities.

At the effective time

of the Merger, substantially all of the assets of ARCA consisted of cash and cash equivalents and other nominal non-operating assets and

No goodwill or intangible assets were recognized.

part of the recapitalization, the Company acquired the assets and liabilities listed below (in thousands):

As part of the recapitalization,

the Company acquired the assets and liabilities listed below (in thousands):

Cash and cash equivalents

1 unchanged sentence

Accrued liabilities

assets acquired

Net assets acquired

PIPE Financings

On September 11, 2024, the

Company entered into a Securities Purchase Agreement (the “2024 Securities Purchase Agreement”) for a private placement (the

“2024 PIPE Financing”) with certain institutional and accredited investors.

The closing of the 2024 PIPE Financing occurred

on September 13, 2024.

to the 2024 Securities Purchase Agreement, the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase

price of $ 23.00 per share, an aggregate of 2,439 shares of the Company’s Series A non-voting convertible preferred stock, par value

$ 0.001 per share (“Company Series A Preferred Stock”), at a purchase price of $ 23,000.00 per share (each share of Company

Series A Preferred Stock was convertible into 1,000 shares of Company Common Stock), and pre-funded warrants to purchase an aggregate

of 680,000 shares of Company Common Stock at a purchase price of $ 22.999 per pre-funded warrant, for aggregate net proceeds of approximately

$ 188.7 million (net of issuance costs of $ 11.9 million).

In November 2024, the 2,439 shares of the Company Series A Preferred Stock were

converted to 2,439,000 shares of Company Common Stock.

On September 17, 2025, the

Company entered into a Securities Purchase Agreement (the “2025 Securities Purchase Agreement”) for a private placement (the

“2025 PIPE Financing”) with certain institutional and accredited investors.

The closing of the 2025 PIPE Financing occurred

on September 19, 2025.

Pursuant to the 2025 Securities

Purchase Agreement, the investors purchased an aggregate of 10,933,405 shares of Company Common Stock at a purchase price of $ 15.00 per

share, and pre-funded warrants to purchase an aggregate of 1,066,666 shares of Company Common Stock at a purchase price of $ 14.999 per

pre-funded warrant, for aggregate net proceeds of approximately $ 169.6 million (net of issuance costs of $ 10.4 million).

On October 3, 2025, the

Company entered into a Sales Agreement with TD Securities (USA) LLC (the “Sales Agreement”), as its sales agent,

pursuant to which the Company may issue and sell, from time to time, shares of the Company Common Stock for aggregate gross proceeds

of up to $ 200.0 million under an at-the-market (“ATM”) offering program.

The Company is not obligated to make any sales

of shares under the Sales Agreement.

No securities were sold under the ATM offering program during the year ended December 31, 2025.

Subsequent to the year end, the Company issued and sold an aggregate of 1,167,895 shares of Company Common Stock pursuant to the ATM

offering program at an average price per share of $ 33.99 for total net proceeds of $ 38.9 million after deducting sales agents’

Fair Value Measurements

following tables present the Company’s fair value hierarchy for financial assets measured as of December 31, 2024 (in thousands):

The following tables present

the Company’s fair value hierarchy for financial assets measured as of December 31, 2025 and 2024 (in thousands):

December 31, 2025

Cash equivalents

Money market funds

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

Corporate debt securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

December 31, 2024

Cash equivalents

Marketable securities

Marketable securities,

Money market funds

treasury securities

government agency

government agency securities

Commercial papers

debt securities

marketable securities, current

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

Total cash equivalents

and marketable securities

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

There were no transfers in

or out of Level 3 during the period from February 6, 2024 (inception) to December 31, 2024.

or out of Level 3 during the year ended December 31, 2025, and the period from February 6, 2024 (inception) to December 31, 2024.

Cash Equivalents and Marketable Securities

equivalents and marketable securities, which are classified as available-for-sale, consisted of the following as of December 31, 2024

(in thousands):

Unrealized Gains

Unrealized Losses

Cash equivalents and marketable

securities, which are classified as available-for-sale, consisted of the following as of December 31, 2025 and 2024 (in thousands):

December 31, 2025

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash equivalents

Money market funds

Commercial papers

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

treasury securities

Corporate debt securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

December 31, 2024

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash equivalents

Marketable securities

Marketable securities,

Money market funds

treasury securities

government agency

government agency securities

Commercial papers

debt securities

marketable securities, current

Total cash equivalents

Marketable securities

Marketable securities, current

treasury securities

government agency securities

Commercial papers

Corporate debt securities

Total marketable securities, current

Marketable securities, long-term

Total cash equivalents

and marketable securities

following table summarizes the available-for-sale securities in an unrealized loss position, aggregated by major security type and length

of time in a continuous unrealized loss position, for which an allowance for credit losses was not recorded as of December 31, 2024,

(in thousands):

than 12 months

treasury securities

government agency securities

Total marketable securities, long-term

Total cash equivalents and marketable securities

The following table summarizes the available-for-sale securities in

an unrealized loss position, aggregated by major security type and length of time in a continuous unrealized loss position, for which

an allowance for credit losses was not recorded as of December 31, 2025 and 2024 (in thousands):

December 31, 2025

Less than 12 months

12 months or longer

Unrealized Losses

Cash equivalents

securities, current

Commercial papers

Marketable securities

Marketable securities, current

Corporate debt securities

Marketable securities, long-term

Corporate debt securities

December 31, 2024

Less than 12 months

12 months or longer

Cash equivalents

Commercial papers

Marketable securities

Marketable securities, current

treasury securities

government agency securities

debt securities

securities, long-term

Corporate debt securities

Marketable securities, long-term

treasury securities

government agency securities

Company evaluated its securities for credit losses and considered the decline in market value to be primarily attributable to current

economic and market conditions and not to a credit loss or other factors.

Additionally, the Company does not intend to sell the securities

in an unrealized loss position and it is not more likely than not that the Company will be required to sell the securities before recovery

of the unamortized cost basis, which may be at maturity.

There were no material realized gains or realized losses on marketable securities

for the period presented.

Given the Company’s intent and ability to hold such securities until recovery, and the lack of significant

change in credit risk of these investments, the Company does not consider these marketable securities to be impaired as of December 31,

As of December 31, 2024, the Company did not record an allowance for credit losses.

following table summarizes the contractual maturities of the Company’s marketable securities at estimated fair value (in thousands):

The Company evaluated its securities for credit losses and considered

the decline in market value to be primarily attributable to current economic and market conditions and not to a credit loss or other factors.

Additionally, the Company does not intend to sell the securities in an unrealized loss position and it is not more likely than not that

the Company will be required to sell the securities before recovery of the unamortized cost basis, which may be at maturity.

no material realized gains or realized losses on marketable securities for the period presented.

Given the Company’s intent and

ability to hold such securities until recovery, and the lack of significant change in credit risk of these investments, the Company does

not consider these marketable securities to be impaired as of December 31, 2025 and 2024.

As of December 31, 2025 and 2024, the Company

did not record an allowance for credit losses.

The following table summarizes

the contractual maturities of the Company’s marketable securities at estimated fair value (in thousands):

Due in one year or less

1 unchanged sentence

Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consisted of the following (in thousands):

Accrued employee compensation and

Accrued expenses and other

current liabilities consisted of the following (in thousands):

Accrued employee compensation and benefits

Accrued research and development

Accrued professional and consulting

Accrued research and

Note Payable with Related Party

March 2024, Pre-Merger Oruka entered into a Series A Preferred Stock and Convertible Note Purchase Agreement (the “Purchase

Agreement”) with Fairmount Healthcare Fund II, L.P.

(“Fairmount”), whereby Pre-Merger Oruka issued a convertible

note (the “Convertible Note”), with an initial principal amount of $ 25.0 million that, at the time of issuance, could be

converted into Pre-Merger Oruka Series A Preferred Stock (or a series of preferred shares that is identical in respect to the

shares of preferred shares issued in its next equity financing) or shares of Pre-Merger Oruka Common Stock in exchange for aggregate

proceeds of $ 25.0 million.

In March 2024, Pre-Merger Oruka entered into a Series A Preferred

Stock and Convertible Note Purchase Agreement (the “Purchase Agreement”) with Fairmount Healthcare Fund II, L.P.

(“Fairmount”),

whereby Pre-Merger Oruka issued a convertible note (the “Convertible Note”), with an initial principal amount of $ 25.0 million

that, at the time of issuance, could be converted into Pre-Merger Oruka Series A Preferred Stock (or a series of preferred shares

that is identical in respect to the shares of preferred shares issued in its next equity financing) or shares of Pre-Merger Oruka Common

Stock in exchange for aggregate proceeds of $ 25.0 million.

The Convertible Note accrued interest at a rate of 12.0 % per annum.

At issuance, the Convertible Note

required all unpaid interest and principal to mature on December 31, 2025 (the “Maturity Date”) and prepayment was not

permitted without prior written consent of Fairmount.

Company assessed all terms and features of the Convertible Note in order to identify any potential embedded features that would require

As part of this analysis, the Company assessed the economic characteristics and risks of the embedded features.

determined that the share settled redemption feature was clearly and closely related to the debt host and did not require separate accounting.

The Company determined that the conversion options of the Convertible Note were not clearly and closely associated with a debt host.

However, these features did not meet the definition of a derivative under ASC 815, Derivatives and Hedging, and as a result, did

not require separate accounting as a derivative liability.

Company paid debt issuance costs of less than $ 0.1 million in relation to the Convertible Note.

The debt issuance costs were reflected

as a reduction of the carrying value of Convertible Note on the consolidated balance sheet and were being amortized as interest expense

over the term of the Convertible Note using the effective interest method.

For the period from February 6, 2024 (inception) to December

31, 2024, the Company recognized interest expenses related to the Convertible Note of $ 1.5 million, which includes non-cash interest

expense related to the amortization of debt issuance.

prior to the completion of the Merger (see Note 1), the Convertible Note was converted into shares of Pre-Merger Oruka Common Stock based

1 unchanged sentence

was determined based upon the Company’s fully-diluted capitalization immediately prior to the Merger.

At the effective time of

the Merger, the Pre-Merger Oruka Common Stock issued upon the conversion of the Convertible Note (including accrued interest) automatically

At the effective time of the

Merger, the Pre-Merger Oruka Common Stock issued upon the conversion of the Convertible Note (including accrued interest) automatically

converted into 2,722,207 shares of Company Common Stock.

As of December 31, 2024, the Convertible Note is not outstanding.

Convertible Preferred Stock and Stockholders’ Equity

August 2024, pursuant to the Subscription Agreement and immediately prior to the Closing, certain new and current investors purchased

pre-funded warrants, which, at the effective time of the Merger, were exercisable for 5,522,207 shares of Company Common Stock at

a purchase price of approximately $ 9.70 per warrant.

After the Merger, there are 5,522,207 pre-funded warrants outstanding and are exercisable

for 5,522,207 shares of the Company Common Stock at an exercise price of $ 0.01 per share.

September 2024, in connection with the PIPE Financing, the Company issued and sold 680,000 pre-funded warrants, at a purchase price of

$ 22.999 per warrant, exercisable for 680,000 shares of Company Common Stock at an exercise price of $ 0.001 per share.

pre-funded warrants were recorded as a component of stockholders’ equity within additional paid-in-capital and have no expiration

As of December 31, 2024, none of the pre-funded warrants have been exercised and 6,202,207 pre-funded warrants remain outstanding.

July 2024, Pre-Merger Oruka entered into a Subscription Agreement that provided for, among other things, the issuance of warrants to

certain of Pre-Merger Oruka’s employees and directors immediately prior to the closing of the Merger.

During the period from February

6, 2024 (inception) to December 31, 2024, 3,054,358 employee warrants were issued at an exercise price of $ 7.80 per warrant.

These warrants

vest over a period of four years .

Per the terms of the Employee Warrant Agreement, the holders of the Company’s warrants shall

not have any of the rights or privileges of a stockholder of the Company in respect of any shares purchasable upon the exercise of the

warrant or any portion thereof unless and until a certificate or certificates representing such shares have been issued or a book entry

representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian.

Company recognizes compensation cost related to warrants on a straight-line basis over the requisite service period, which is the period

in which the related services are received.

As of December 31, 2024, none of the warrants have been exercised and 3,054,358 warrants

remain outstanding.

Preferred Stock

March 2024, Pre-Merger Oruka issued and sold an aggregate of 20,000,000 shares of Pre-Merger Oruka Series A Preferred Stock

to Fairmount (see Note 15), at a purchase price of approximately $ 0.15 per share, for aggregate gross proceeds of $ 3.0 million.

Pre-Merger Oruka incurred less than $ 0.1 million of issuance costs in connection with this transaction.

Upon the issuance of the

Pre-Merger Oruka Series A Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities

as described below and determined that such features did not require the Company to separately account for these features.

August 2024, upon the closing of the Merger, the Company converted the Pre-Merger Oruka Series A Preferred Stock to 137,138 shares of

The Company assessed all

terms and features of the Convertible Note in order to identify any potential embedded features that would require bifurcation.

of this analysis, the Company assessed the economic characteristics and risks of the embedded features.

The Company determined that the

share settled redemption feature was clearly and closely related to the debt host and did not require separate accounting.

determined that the conversion options of the Convertible Note were not clearly and closely associated with a debt host.

However, these

features did not meet the definition of a derivative under ASC 815, Derivatives and Hedging, and as a result, did not require separate

accounting as a derivative liability.

The Company paid debt issuance costs of less than $ 0.1 million

in relation to the Convertible Note.

The debt issuance costs were reflected as a reduction of the carrying value of Convertible Note on

the consolidated balance sheet and were being amortized as interest expense over the term of the Convertible Note using the effective

interest method.

For the year ended December 31, 2025 and the period from February 6, 2024 (inception) to December 31, 2024, the

Company recognized interest expenses related to the Convertible Note of nil and $ 1.5 million, respectively, which includes non-cash interest

expense related to the amortization of debt issuance.

As of December 31, 2025 and 2024, the Convertible Note was not outstanding.

Convertible Preferred Stock and Stockholders’

Pre-Funded Warrants

In August 2024, pursuant

to the Subscription Agreement and immediately prior to the Closing, certain new and current investors purchased pre-funded warrants,

which, at the effective time of the Merger, were exercisable for 5,522,207 shares of Company Common Stock at a purchase price of approximately

$ 9.70 per warrant.

After the Closing, there were 5,522,207 pre-funded warrants outstanding and were exercisable for 5,522,207 shares of

the Company Common Stock at an exercise price of $ 0.01 per share.

The Company issued 25,014 shares of Company Common Stock on net exercises

of 25,024 pre-funded warrants during the year ended December 31, 2025.

In September 2024, in connection

with the 2024 PIPE Financing, the Company issued and sold 680,000 pre-funded warrants, at a purchase price of $ 22.999 per warrant, exercisable

for 680,000 shares of Company Common Stock at an exercise price of $ 0.001 per share.

The Company issued 299,986 shares of Company Common

Stock on net exercises of 300,000 pre-funded warrants during the year ended December 31, 2025.

In September 2025, in connection

with the 2025 PIPE Financing, the Company issued and sold 1,066,666 pre-funded warrants, at a purchase price of $ 14.999 per warrant, exercisable

for 1,066,666 shares of Company Common Stock at an exercise price of $ 0.001 per share.

The pre-funded warrants were recorded as a component of stockholders’

equity within additional paid-in-capital and have no expiration date.

Collectively, 6,943,849 and 6,202,207 pre-funded warrants were outstanding

as of December 31, 2025 and 2024, respectively.

Employee Warrants

The Subscription Agreement

provided for, among other things, the issuance of warrants to certain of Pre-Merger Oruka’s employees and directors immediately

prior to the Closing.

During the period from February 6, 2024 (inception) to December 31, 2024, 3,054,358 employee warrants were issued

at an exercise price of $ 7.80 per warrant.

These warrants vest over a period of four years .

Per the terms of the Employee Warrant Agreement,

the holders of the Company’s warrants shall not have any of the rights or privileges of a stockholder of the Company in respect

of any shares purchasable upon the exercise of the warrant or any portion thereof unless and until a certificate or certificates representing

such shares have been issued or a book entry representing such shares has been made and such shares have been deposited with the appropriate

registered book-entry custodian.

The Company recognizes compensation cost related to warrants on a straight-line basis over the requisite

service period, which is the period in which the related services are received.

During the year ended December 31, 2025, 19,570 warrants

were exercised.

No employee warrants were exercised during the period from February 6, 2024 (inception) to December 31, 2024.

As of December

31, 2025 and 2024, 3,029,510 and 3,054,358 warrants, respectively, were outstanding.

Convertible Preferred Stock

In March 2024, Pre-Merger

Oruka issued and sold an aggregate of 20,000,000 shares of Pre-Merger Oruka Series A Preferred Stock to Fairmount, at a purchase

price of approximately $ 0.15 per share, for aggregate gross proceeds of $ 3.0 million.

Pre-Merger Oruka incurred less than $ 0.1 million

of issuance costs in connection with this transaction.

Upon the issuance of the Pre-Merger Oruka Series A Preferred Stock, the Company

assessed the embedded conversion and liquidation features of the securities as described below and determined that such features did not

require the Company to separately account for these features.

In August 2024, upon Closing,

the Pre-Merger Oruka Series A Preferred Stock converted to 137,138 shares of Company Series B Preferred Stock.

In September 2024, in connection with the 2024 PIPE Financing, the

Company issued and sold an aggregate of 2,439 shares of the Company Series A Preferred Stock at a purchase price of $ 23,000.00 per share.

November 2024, the 2,439 shares of the Company Series A Preferred Stock were converted to 2,439,000 shares of Company Common Stock.

of December 31, 2025 and 2024, there are no outstanding shares of Company Series A Preferred Stock.

As of December 31, 2025 and 2024, convertible preferred stock consisted

of the following (in thousands, except share data):

December 31, 2025

Company Series B Preferred Stock

September 2024, in connection with the PIPE Financing, the Company issued and sold an aggregate of 2,439 shares of the Company Series

A Preferred Stock at a purchase price of $ 23,000.00 per share.

In November 2024, the 2,439 shares of the Company Series A Preferred

Stock were converted to 2,439,000 shares of Company Common Stock.

As of December 31, 2024, there are no outstanding shares of Company

Series A Preferred Stock.

of December 31, 2024, convertible preferred stock consisted of the following (in thousands, except share data):

Series B convertible preferred

to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock (the

“Series A Certificate of Designation”) filed in connection with the PIPE Financing, holders of Company Series A Preferred

December 31, 2024

Company Series B Preferred Stock

Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock

(the “Series A Certificate of Designation”) filed in connection with the PIPE Financing, holders of Company Series A Preferred

Stock were entitled to receive dividends on shares of Company Series A Preferred Stock equal to, on an as-if-converted-to-Company Common

5 unchanged sentences

or winding-up of the Company.

Subject to the terms and limitations contained in the Series A Certificate of Designation, the Company

Series A Preferred Stock issued in the PIPE Financing will not become convertible until the Company’s stockholders approve the

conversion of the Company Series A Preferred Stock into shares of Company Common Stock in accordance with the listing rules of the Nasdaq

Stock Market (the “Stockholder Approval”), which, on issuance, resulted in the Company Series A Preferred Stock being classified

outside of stockholders’ equity on the Company’s consolidated balance sheet.

Subject to the terms and limitations contained in the Series A Certificate of Designation, the Company Series

A Preferred Stock issued in the PIPE Financing will not become convertible until the Company’s stockholders approve the conversion

of the Company Series A Preferred Stock into shares of Company Common Stock in accordance with the listing rules of the Nasdaq Stock Market

(the “Stockholder Approval”), which, on issuance, resulted in the Company Series A Preferred Stock being classified outside

of stockholders’ equity on the Company’s consolidated balance sheet.

Following the Stockholder Approval in November 2024,

each share of Company Series A Preferred Stock was automatically converted into 1,000 shares of Company Common Stock.

to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Non-Voting Convertible Preferred Stock (the

“Series B Certificate of Designation”) filed in connection with the Merger, holders of Company Series B Preferred Stock are

entitled to receive dividends on shares of Company Series B Preferred Stock equal to, on an as-if-converted-to-Company Common Stock basis,

and in the same form as, dividends actually paid on shares of Company Common Stock.

Except as provided in the Series B Certificate of

Designation or as otherwise required by law, the Company Series B Preferred Stock does not have voting rights.

The Company Series B Preferred

Stock shall rank on parity with the Company Common Stock as to the distribution of assets upon any liquidation, dissolution, or winding-up

of the Company.

Each share of Company Series B Preferred Stock is convertible at the option of the holder, at any time, and without the

payment of additional consideration by the holder.

As of December 31, 2024, each outstanding share of Company Series B Preferred Stock

was convertible into common stock at a ratio of approximately 83.3332:1 .

December 31, 2024, the Company settled its 2024 obligations under the Paruka Warrant Obligation (defined below) by issuing Paruka a warrant

to purchase 596,930 shares of Company Common Stock at an exercise price of $ 19.39 per share.

The warrant has a term of 10 years, is fully

vested, and is exercisable in part or full at any time during the term of the warrant.

As of December 31, 2024, the warrant issued under

the Paruka Warrant Obligation is outstanding and unexercised.

Pursuant to the Certificate of Designation of Preferences, Rights and

Limitations of the Series B Non-Voting Convertible Preferred Stock (the “Series B Certificate of Designation”) filed in connection

with the Merger, holders of Company Series B Preferred Stock are entitled to receive dividends on shares of Company Series B Preferred

Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as, dividends actually paid on shares of Company

Common Stock.

Except as provided in the Series B Certificate of Designation or as otherwise required by law, the Company Series B Preferred

Stock does not have voting rights.

The Company Series B Preferred Stock shall rank on parity with the Company Common Stock as to the distribution

of assets upon any liquidation, dissolution, or winding-up of the Company.

Each share of Company Series B Preferred Stock is convertible

at the option of the holder, at any time, and without the payment of additional consideration by the holder.

As of each of December 31,

2025 and 2024, each outstanding share of Company Series B Preferred Stock was convertible into common stock at a ratio of approximately

Paruka Warrant

On December 31, 2024, the

Company settled its 2024 obligations under the Paruka Warrant Obligation (defined below) by issuing Paruka a warrant to purchase 596,930

shares of Company Common Stock at an exercise price of $ 19.39 per share.

On December 12, 2025, the Company settled its 2025 obligations

under the Paruka Warrant Obligation (defined below) by issuing Paruka a warrant to purchase 375,000 shares of Company Common Stock at

an exercise price of $ 30.18 per share.

The warrants have a term of 10 years, are fully vested, and are exercisable in part or full at

any time during the term of the warrant.

As of December 31, 2025 and 2024, the warrants issued under the Paruka Warrant Obligation are

outstanding and unexercised.

See Note 11 for additional information on the Paruka Warrant Obligation.

of December 31, 2024, the Certificate of Incorporation provides for 545,000,000 authorized shares of Company Common Stock.

As of December

31, 2024, 37,440,510 shares of Company Common Stock were issued and outstanding, including 2,207,553 shares of RSAs issued and outstanding.

of December 31, 2024, the Company had common stock reserved for future issuance as follows:

Shares issuable on conversion of

Company Series B Preferred Stock

The Certificate of Incorporation provides for 545,000,000 authorized

shares of Company Common Stock as of each of December 31, 2025 and 2024.

As of December 31, 2025, 48,722,309 shares of Company Common

Stock were issued and outstanding, including 2,159,609 shares of RSAs issued and outstanding.

As of December 31, 2024, 37,440,510 shares

of Company Common Stock were issued and outstanding, including 2,207,553 shares of RSAs issued and outstanding.

As of December 31, 2025 and 2024, the Company had common stock reserved

for future issuance as follows:

Shares issuable on conversion of Company Series B Preferred Stock

Shares issuable upon exercise of pre-funded warrants

Shares issuable upon exercise of warrant under

the Paruka Warrant Obligation

Shares issuable upon exercise of warrants under the Paruka Warrant Obligation

Outstanding and issued stock options

Outstanding and issued employee warrants

Shares available for grant under 2024 Stock

Incentive Plan

Shares available for

grant under 2024 Employee Stock Purchase Plan

shares of common stock reserved

Shares available for grant under 2024 Stock Incentive Plan

Shares available for grant under 2024 Employee Stock Purchase Plan

Total shares of common stock reserved

Stock-Based Compensation

2024 Equity Incentive Plan

2024 Equity Incentive Plan (“2024 Plan”) was adopted by the board of directors of Pre-Merger Oruka on February 6, 2024.

The 2024 Plan provided for Pre-Merger Oruka to grant stock options, restricted stock awards, restricted stock units, and other stock-based

awards to employees, officers, directors, consultants, and advisors.

Equity Incentive Stock options granted under the 2024 Plan generally

vest over four years, subject to the participant’s continued service, and expire after ten years, although two non-employee

stock options were granted with vesting terms less than four years.

As of December 31, 2024, there are no shares of common

stock available for issuance.

The 2024 Equity Incentive Plan (“2024 Plan”) was adopted

by the board of directors of Pre-Merger Oruka on February 6, 2024.

The 2024 Plan provided for Pre-Merger Oruka to grant stock options,

restricted stock awards, restricted stock units, and other stock-based awards to employees, officers, directors, consultants, and advisors.

Equity incentive stock options granted under the 2024 Plan generally vest over four years, subject to the participant’s continued

service, and expire after ten years, although two non-employee stock options were granted with vesting terms less than four years.

As of December 31, 2025, and 2024, 1,167,826 shares and 1,179,193 shares, respectively, were subject to options outstanding under the

2024 Plan and will become available under the 2024 Stock Incentive Plan (defined below) to the extent the options are forfeited or lapse

2024 Stock Incentive Plan

August 22, 2024, the 2024 Stock Incentive Plan (“2024 Stock Plan”) was approved by the Company’s stockholders and on

August 29, 2024, the board of directors of the Company (the “Board”) ratified the 2024 Stock Plan.

The 2024 Stock Plan allows

for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stockholder-based awards

and incentive bonuses.

The 2024 Stock Plan is administered by the Compensation Committee of the Board (the “Compensation Committee”)

or another committee designated by the Board to administer the Plan.

The initial share pool under the 2024 Stock Plan is 4,634,891 shares

of Company Common Stock.

During the period from February 6, 2024 (inception) to December 31, 2024, 388,567 shares were subject to outstanding

stock options, and as of December 31, 2024, there were 4,246,324 shares available in the pool.

The shares that may be issued under the

2024 Stock Plan will be automatically increased on January 1 of each year beginning in 2025 and ending with a final increase on January

1, 2034 in an amount equal to 5 % of the diluted stock (including Company Common Stock, preferred stock and unexercised pre-funded warrants)

on the preceding December 31, unless a lower, or no, increase is determined by the Compensation Committee.

Current or prospective employees,

officers, non-employee directors, and other independent service providers of the Company and its subsidiaries are eligible to participate

in the 2024 Stock Plan.

On August 22, 2024, the

2024 Stock Incentive Plan (“2024 Stock Plan”) was approved by the Company’s stockholders and on August 29, 2024, the

board of directors of the Company (the “Board”) ratified the 2024 Stock Plan.

The 2024 Stock Plan allows for the grant of

stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stockholder-based awards and incentive

The 2024 Stock Plan is administered by the Compensation Committee of

the Board (the “Compensation Committee”) or another committee designated by the Board to administer the Plan.

share pool under the 2024 Stock Plan was 4,634,891 shares of Company Common Stock.

The shares that may be issued under the 2024 Stock

Plan will be automatically increased on January 1 of each year beginning in 2025 and ending with a final increase on January 1, 2034 in

an amount equal to 5 % of the diluted stock (including Company Common Stock, preferred stock and unexercised pre-funded warrants) on the

preceding December 31, unless a lower, or no, increase is determined by the Compensation Committee.

An additional 2,753,543 shares and

3,354,715 shares became available for issuance under the 2024 Stock Plan on January 1, 2025 and 2026, respectively, as a result of the

annual increase pursuant to the evergreen provision.

Current or prospective employees, officers, non-employee directors, and other independent

service providers of the Company and its subsidiary are eligible to participate in the 2024 Stock Plan.

As of December 31, 2025, 7,383,349 shares were reserved for issuance

under the 2024 Stock Plan, of which 4,600,217 shares were available for future grant and 2,783,132 shares were subject to outstanding

As of December 31, 2024, 4,634,891 shares were reserved for issuance under the 2024 Stock Plan, of which 4,246,324 shares were

available for future grant and 388,567 shares were subject to outstanding options.

2024 Employee Stock Purchase Plan

2024 Employee Stock Purchase Plan (the “ESPP”) became effective on August 29, 2024, at which time 463,489 shares of Company

Common Stock were reserved for issuance.

Eligible employees may purchase shares of Company Common Stock under the ESPP at 85 % of

the lower of the fair market value of the Company Common Stock as of the first or the last day of each offering period.

Employees are

limited to contributing 15 % of the employee’s eligible compensation and may not purchase more than $ 25,000 of stock during

any calendar year.

The ESPP will terminate ten years from the first purchase date under the plan, unless terminated earlier

by the board of directors.

shares that may be issued under the ESPP will be automatically increased on January 1 of each year beginning in 2025 and ending with

a final increase on January 1, 2034 in an amount equal to 1 % of the diluted stock (including Company Common Stock, preferred stock and

unexercised pre-funded warrants) on the preceding December 31, unless a lower, or no increase is determined by the Compensation Committee.

During the period from February 6, 2024 (inception) to December 31, 2024, 2,960 shares of Company Common Stock were issued out of the

ESPP and as of December 31, 2024, there were 460,529 shares of Company Common Stock available in the pool.

the period February 6, 2024 (inception) to December 31, 2024, stock-based compensation expense related to the ESPP was less than $ 0.1

Option Valuation

following table summarizes the weighted-average assumptions used in calculating the fair value of the awards for the period from February 6,

2024 (inception) to December 31, 2024:

The 2024 Employee Stock

Purchase Plan (the “ESPP”) became effective in August 2024, at which time 463,489 shares of Company Common Stock were reserved

for issuance.

Eligible employees may purchase shares of Company Common Stock under the ESPP at 85 % of the lower of the fair market

value of the Company Common Stock as of the first or the last day of each offering period.

Employees are limited to contributing 15 %

of the employee’s eligible compensation and may not purchase more than $ 25,000 of stock during any calendar year.

will terminate ten years from the first purchase date under the plan, unless terminated earlier by the board of directors.

The shares that may be issued under the ESPP will be automatically

increased on January 1 of each year beginning in 2025 and ending with a final increase on January 1, 2034 in an amount equal to 1 % of

the diluted stock (including Company Common Stock, preferred stock and unexercised pre-funded warrants) on the preceding December 31,

unless a lower, or no increase is determined by the Compensation Committee.

An additional 550,709 shares and nil shares became available

for issuance under the ESPP on January 1, 2025 and 2026, respectively, as a result of the annual increase pursuant to the evergreen provision.

The Company issued

35,316 and 2,960 shares during the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31,

2024, respectively, out of the ESPP.

As of December 31, 2025 and 2024, there were 975,922 and 460,529 shares, respectively, of

Company Common Stock available in the pool for future issuances.

For the year ended December 31, 2025 and for the period from February

6, 2024 (inception) to December 31, 2024, stock-based compensation expenses related to the ESPP were $ 0.2 million and less than $ 0.1 million,

respectively.

Stock Option Valuation

The following table summarizes

the weighted-average assumptions used in calculating the fair value of the awards for the year ended December 31, 2025 and the period

from February 6, 2024 (inception) to December 31, 2024:

2025 Period from

(inception) to

3 unchanged sentences

Expected dividend yield —

following table summarizes the stock option activities under the 2024 Plan and 2024 Stock Plan for the period of February 6, 2024

(inception) through December 31, 2024:

Stock Option Activity

The following table summarizes

the stock option activities under the 2024 Plan and 2024 Stock Plan for the year ended December 31, 2025:

Outstanding Weighted

2 unchanged sentences

(in Thousands)

Balance as of February 6, 2024 (inception) — $ — — $ —

Balance as of December 31, 2024 1,567,760 $ 11.39 9.4 $ 15,470

Granted 2,440,400 $ 13.35

Exercised ( 16,452 ) $ 8.59

Forfeited — $ —

Canceled/forfeited ( 40,750 ) $ 11.09

Balance as of December 31, 2025 3,950,958 $ 12.61 8.9 $ 69,966

1 unchanged sentence

Exercisable, December 31, 2025 972,898 $ 10.75 8.6 $ 19,029

weighted average grant-date fair value per share of stock options granted during the period from February 6, 2024 (inception) to

December 31, 2024 was $ 9.12 per share.

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying

Company Common Stock and the exercise price of outstanding, in-the-money employee stock options.

February 2024 and March 2024, the Company issued 2,207,553 shares of RSAs to certain employees, directors, and consultants at a

price of $ 0.0001 per share, the then par value of Pre-Merger Oruka Common Stock.

Such RSAs have service-based vesting conditions only

and vest over a four-year period, during which time all unvested shares are subject to forfeiture in the event the holder’s service

with the Company voluntarily or involuntarily terminates.

As of December 31, 2024, none of the RSAs had vested.

For the period February

6, 2024 (inception) to December 31, 2024, stock-based compensation expense related to RSAs was less than $ 0.1 million.

following table summarizes the RSA activity for the period from February 6, 2024 (inception) through December 31, 2024:

Unvested balance as of February 6, 2024 (inception)

The weighted average grant-date

fair value per share of stock options granted during the year ended December 31, 2025 and the period from February 6, 2024 (inception)

to December 31, 2024 was $ 10.49 and $ 9.12 per share, respectively.

Aggregate intrinsic value represents the difference between the estimated

fair value of the underlying Company Common Stock and the exercise price of outstanding, in-the-money employee stock options.

intrinsic value of the options exercised during the year ended December 31, 2025 and for the period from February 6, 2024 (inception)

to December 31, 2024 was $ 0.3 million and nil , respectively.

Restricted Stock Awards

In February 2024 and March 2024, the Company issued 2,207,553

shares of RSAs to certain employees, directors, and consultants at a price of $ 0.0001 per share, the then par value of Pre-Merger Oruka

Common Stock.

Such RSAs have service-based vesting conditions only and vest over a four-year period, during which time all unvested shares

are subject to forfeiture in the event the holder’s service with the Company voluntarily or involuntarily terminates.

the year ended December 31, 2025 and the period February 6, 2024 (inception) to December 31, 2024, stock-based compensation expenses related

to RSAs were less than $ 0.1 million.

The following table summarizes

the RSA activity for the year ended December 31, 2025:

Unvested balance as of January 1, 2025

( 1,010,020 )

Unvested balance as of December 31, 2025

Agreements and the Paruka Warrant Obligation

part of the Option Agreements, on December 31, 2024 the Company granted and on December 31, 2025, will grant Paruka a warrant

to purchase a number of shares equal to 1.00 % of outstanding shares as of the date of the grant on a fully-diluted basis, with an exercise

price equal to the fair market value of the underlying shares on the grant date (the “Paruka Warrant Obligation”).

grant dates for the issuance of warrants were expected to be December 31, 2024 and December 31, 2025 as all terms of the award,

including number of shares and exercise price, will be known by all parties.

The Company determined that the 2024 and 2025 grants are

two separate grants, as there would be no obligation for the 2025 grant had the Company exercised or terminated all of the options under

the Option Agreements prior to December 31, 2024.

The service inception period for the grant precedes the grant date, with the full award

being vested as of the grant date with no post-grant date service requirement.

Accordingly, the warrant expected to be granted to Paruka

was accounted for as a liability on the balance sheet on the service inception date and, after the initial recognition, the liability

is adjusted to fair value at the end of each reporting period, with changes in fair value recorded in the consolidated statement of operations

and comprehensive loss as stock-based compensation expenses under research and development expenses.

Accordingly, the Company measured

the grant date fair value of the warrant granted on December 31, 2024 at $ 10.4 million.

For the period from February 6, 2024 (inception)

to December 31, 2024, $ 10.4 million was recognized as stock-based compensation expense related to the Paruka Warrant Obligation in the

consolidated statement of operations and comprehensive loss.

As of December 31, 2024, there was no unamortized expense related to the

December 31, 2024 Paruka Warrant Obligation.

On issuance of the warrant to Paruka, the fair value of the warrant was reclassified from

liability to equity on the consolidated balance sheet as of December 31, 2024.

As stated above, on July

The fair value of restricted stock awards that vested during the year ended December 31, 2025 was $ 14.0 million.

Option Agreements and the Paruka Warrant Obligation

As part of the Option Agreements,

the Company granted warrants to purchase a number of shares equal to 1.00 % of outstanding shares as of the date of the grant on a fully-diluted

basis, or based upon the agreed number of warrants as disclosed in the Warrant Agreement, with an exercise price equal to the fair market

value of the underlying shares on the grant date (the “Paruka Warrant Obligation”).

The grant dates for the issuance

of warrants were expected to be December 31, 2024 and December 31, 2025 as all terms of the award, including number of shares and exercise

price, will be known by all parties.

The Company determined that the 2024 and 2025 grants are two separate grants, as there would be no

obligation for the 2025 grant had the Company exercised or terminated all of the options under the Option Agreements prior to December

The service inception period for the grant precedes the grant date, with the full award being vested as of the grant date with

no post-grant date service requirement.

Accordingly, a liability related to the Paruka Warrant Obligation was recorded during the 2024

and 2025 interim periods.

The liability is adjusted to fair value at the end of each interim reporting period, with changes in fair value

recorded in the consolidated statements of operations as stock-based compensation expenses under research and development expenses.

The Company settled its 2024

and 2025 obligations under the Paruka Warrant Obligation by issuing Paruka 596,930 and 375,000 warrants, respectively, to purchase the

Company Common Stock at an exercise price per share per warrant of $ 19.39 and $ 30.18 , respectively.

For the year ended December 31, 2025

and for the period from February 6 (inception) to December 31, 2024, $ 10.1 million and $ 10.4 million, respectively, were recognized as

stock-based compensation expenses related to the Paruka Warrant obligation.

On issuance of the warrants to Paruka, the fair value of the

warrants was reclassified from liability to equity on the consolidated balance sheet as of December 31, 2025 and 2024.

The following table summarizes the assumptions used in calculating the fair value of the Paruka Warrant Obligation for the year ended

December 31, 2025 and the period from February 6, 2024 (inception) to December 31, 2024:

2025 Period from

(inception) to

Expected term (in years) 10.0 10.0

Expected volatility 94.08 % 95.08 %

Risk-free interest rate 4.19 % 4.58 %

Expected dividend yield —

As of December 31, 2025, the unamortized expense related to Paruka

Warrant Obligation was nil .

Employee Warrants

As stated above, in July

2024, the Subscription Agreement was amended and restated, among other things, for employee warrants to be issued to certain Pre-Merger

Oruka employees and directors immediately prior to the closing of the Merger.

Pursuant to this amendment, during the period from February

6, 2024 (inception) to December 31, 2024, the Company issued 3,054,358 warrants at an exercise price of $ 7.80 per warrant, which are accounted

as equity in the consolidated financial statements.

The employee warrants were subject to performance and service based vesting requirements

and upon completion of the Merger the performance-based requirements had been achieved.

following table summarizes the warrant activity for the period from February 6, 2024 (inception) through December 31, 2024:

Oruka employees and directors prior to the Closing.

During the period from February 6, 2024 (inception) to December 31, 2024, the Company

issued 3,054,358 warrants at an exercise price of $ 7.80 per warrant, which are accounted as equity in the consolidated financial statements.

The employee warrants were subject to performance and service based vesting requirements and upon completion of the Merger the performance-based

requirements had been achieved.

The following table summarizes

the employee warrant activity for the period during the year ended December 31, 2025:

Outstanding Weighted

Share Weighted

Per Share Weighted

(in Years) Aggregate

(in Thousands)

Balance as of February 6, 2024 (inception) — $ — — $ —

Granted 3,054,358 $ 7.80

Balance as of December 31, 2024 3,054,358 $ 7.80 9.5 $ 35,400

Exercised ( 19,570 ) $ 7.80

Forfeited — $ —

Canceled/forfeited ( 5,278 ) $ 7.80

Balance as of December 31, 2025 3,029,510 $ 7.80 8.5 $ 68,194

1 unchanged sentence

Exercisable, December 31, 2025 1,221,338 $ 7.80 8.5 $ 27,492

weighted average grant-date fair value per share of warrants granted during the period from February 6, 2024 (inception) to December

31, 2024 was $ 6.27 per share.

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying

Company Common Stock and the exercise price of outstanding, in-the-money warrants.

following table summarizes the weighted-average assumptions used in calculating the fair value of the warrants for the period from February 6,

2024 (inception) to December 31, 2024:

No employee warrants

were granted during the year ended December 31, 2025.

The weighted average grant-date fair value per share of the employee warrants

granted during the period from February 6, 2024 (inception) to December 31, 2024 was $ 6.27 per share.

Aggregate intrinsic value represents the difference between the estimated

fair value of the underlying Company Common Stock and the exercise price of outstanding, in-the-money warrants.

The total intrinsic value

of the employee warrants exercised during the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December

31, 2024 was $ 0.4 million and nil , respectively.

The following table summarizes the weighted-average assumptions used

in calculating the fair value of the warrants for the period from February 6, 2024 (inception) to December 31, 2024:

(inception) to

3 unchanged sentences

Expected dividend yield —

Compensation Expense

following table summarizes the classification of the Company’s stock-based compensation expense in the consolidated statement of

operations and comprehensive loss (in thousands):

Stock-Based Compensation Expense

The following table summarizes

the classification of the Company’s stock-based compensation expense in the consolidated statements of operations (in thousands):

(inception) to

1 unchanged sentence

General and administrative

of December 31, 2024, total unrecognized compensation cost related to the unvested stock options was $ 12.7 million, which is expected

to be recognized over a weighted average period of approximately 3.2 years.

As of December 31, 2024, total unrecognized compensation

cost related to the unvested RSAs was less than $ 0.1 million, which is expected to be recognized over a weighted average period of 3.1

As of December 31, 2024, the unrecognized compensation cost related to the employee warrants was $ 16.3 million, which is expected

to be recognized over a weighted average period of 3.3 years.

following table summarizes the award types of the Company’s stock-based compensation expense in the consolidated statement of operations

and comprehensive loss (in thousands):

As of December 31, 2025, total unrecognized compensation cost related

to the unvested stock options was $ 29.1 million, which is expected to be recognized over a weighted average period of approximately 2.9

As of December 31, 2025, total unrecognized compensation cost related

to the unvested RSAs was less than $ 0.1 million, which is expected to be recognized over a weighted average period of 2.1 years.

As of December 31, 2025, the unrecognized compensation cost related

to the employee warrants was $ 11.0 million, which is expected to be recognized over a weighted average period of 2.3 years.

The following table summarizes

the award types of the Company’s stock-based compensation expense in the consolidated statements of operations (in thousands):

(inception) to

2 unchanged sentences

Stock options

Employee stock purchase

Employee stock purchase plan

Segment Disclosures

Company operates and manages its business activities on a consolidated basis and operates in one reportable segment.

The Company operates as a single reportable and operating segment.

Its Chief Executive Officer, serving as the Chief Operating Decision Maker (“CODM”), oversees operations on an aggregated

basis to allocate resources effectively.

In assessing the Company’s financial performance, the CODM regularly reviews total operating

expenses and consolidated net loss.

The Company operates and

manages its business activities on a consolidated basis and operates in one reportable segment.

The Company operates as

a single reportable and operating segment.

Its Chief Executive Officer , serving as the Chief Operating Decision Maker (“CODM”),

oversees operations on an aggregated basis to allocate resources effectively.

In assessing the Company’s financial performance,

the CODM regularly reviews total operating expenses and consolidated net loss.

measure of segment assets is reported on the balance sheet as total consolidated assets.

2 unchanged sentences

As of December 31, 2025 all of long-lived assets were in the U.S.

table below is a summary of the segment loss from operations, including significant segment expenses (in thousands):

(Inception) to December 31,

Research and development personnel-related

(excluding stock-based compensation)

General and administrative personnel-related

(excluding stock-based compensation)

table summarizes the segment loss from operations, including significant segment expenses (in thousands):

(inception) to

Research and development personnel-related (excluding stock-based compensation)

General and administrative personnel-related (excluding stock-based compensation)

Research and development stock-based compensation

2 unchanged sentences

Other research and development

General and administrative,

excluding personnel-related and stock-based compensation

operating expenses

from operations

provision for income taxes was recorded for the period from February 6, 2024 (inception) to December 31, 2024.

following table summarizes the loss before income tax expense by jurisdiction for the periods indicated:

General and administrative, excluding personnel-related and stock-based compensation

Total operating expenses

Loss from operations

$ ( 122,051 )

No provision for income taxes was recorded for the year ended December

31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024.

The following table summarizes

the loss before income tax expense by jurisdiction for the periods indicated (in thousands):

(inception) to

before income tax expense

For the period from February

6, 2024 (inception) to December 31, 2024, the Company recognized no provision or benefit from income taxes.

The difference

between the Company’s provision for income taxes and the amounts computed by applying the statutory federal income tax rate to income

before income taxes is as follows:

$ ( 105,433 )

Loss before income tax expense

$ ( 105,433 )

the year ended December 31, 2025 and for the period from February 6, 2024 (inception) to December 31, 2024, the Company recognized no provision

or benefit from income taxes.

The difference between the Company’s provision for income taxes and the amounts computed by applying

the statutory federal income tax rate to income before income taxes is as follows (amounts in thousands):

(inception) to

Tax benefit derived by applying the federal statutory rate to income before income taxes

Permanent differences

Tax benefit derived by applying the federal statutory rate to loss before income taxes

Nontaxable or nondeductible items

Research and development credits

Worldwide changes in unrecognized tax benefits

Change in the valuation allowance

Income tax (benefit) expense

components of the deferred tax assets and liabilities consist of the following (in thousands):

The components of the deferred

tax assets and liabilities consist of the following (in thousands):

Deferred tax assets

9 unchanged sentences

Total deferred tax liabilities

Less valuation allowance

Valuation allowance

Deferred tax assets, net

T he Company has established

a full federal and state valuation allowance equal to the net deferred tax assets due to uncertainties regarding the realization of the

deferred tax asset based on the Company’s lack of earnings history.

The valuation allowance increased by $ 21.3 million primarily

due to continuing loss from operations.

Beginning balance as of February 6, 2024

Company has established a full federal and state valuation allowance equal to the net deferred tax assets due to uncertainties regarding

the realization of the deferred tax asset based on the Company’s lack of earnings history.

The valuation allowance increased by

$ 27.4 million and $ 21.3 million, respectively during the year ended December 31, 2025 and the period from February 6, 2024 (inception)

to December 31, 2024, primarily due to continuing loss from operations.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

(inception) to

Beginning balance

Change in valuation allowance

Ending balance as of December 31, 2024

of December 31, 2024, the Company had U.S.

net operating loss carryforwards (“NOL”) of $ 10.8 million.

NOL carryforwards do not expire and can be utilized to offset up to 80 % of the taxable income in any tax year.

For the period from February

6, 2024 (inception) to December 31, 2024 the Company had federal tax credit carryforwards and state tax credit carryforwards of

$ 3.8 million and $ 0.4 million, respectively.

The federal credits will expire starting in 2044 if not utilized, and the state

research credit can be carried forward indefinitely.

Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership

of a company.

The annual limitation may result in the expiration of net operating losses and credits before utilization.

has not performed a Section 382 analysis through December 31, 2024.

To the extent that an assessment is completed in the future, the

Company’s ability to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before

they are utilized.

The Company will examine the impact of any potential ownership changes in the future.

reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

Ending balance

of December 31, 2025 and 2024, the Company had U.S.

net operating loss carryforwards (“NOL”) of $ 28.2 million and $ 10.8 million,

respectively.

The federal NOL carryforwards do not expire and can be utilized to offset up to 80 % of the taxable income in any tax year.

As of December 31, 2025 and 2024, the Company also had state NOL carryforwards of $ 7.5 million and nil , respectively.

The state NOL carryforwards

will expire starting in 2044, if not utilized.

For the year ended December

31, 2025, the Company had federal tax credit carryforwards and state tax credit carryforwards of $ 6.7 million and $ 0.5 million, respectively.

For the period from February 6, 2024 (inception) to December 31, 2024 the Company had federal tax credit carryforwards and state tax credit

carryforwards of $ 3.8 million and $ 0.4 million, respectively.

The federal credits will expire starting in 2044 if not utilized,

and the state research credit can be carried forward indefinitely.

The Tax Reform Act of 1986

limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a company.

annual limitation may result in the expiration of net operating losses and credits before utilization.

The Company has not performed a

Section 382 analysis through December 31, 2025.

To the extent that an assessment is completed in the future, the Company’s ability

to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before they are utilized.

Company will examine the impact of any potential ownership changes in the future.

A reconciliation of the

beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

(inception) to

Beginning balance as of February 6, 2024

related to tax positions taken in the current year

Beginning balance

Additions based on tax positions taken in the current year

Reductions for tax positions taken in prior years

Ending balance

as of December 31, 2024

Company includes penalties and interest expense related to income taxes as a component of income tax expense, as necessary.

As of December

31, 2024, the Company had no accrued interest or penalties related to uncertain tax positions.

Company will be filing initial year income tax returns in the United States federal jurisdiction and state jurisdictions.

operating loss carryforwards, the statute of limitations will remain open for income tax examination.

The Company includes penalties

and interest expense related to income taxes as a component of income tax expense, as necessary.

As of December 31, 2025 and 2024, the

Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income

tax returns in the United States federal jurisdiction and various state jurisdictions.

The Company is not currently under

examination by income tax authorities in federal, state, or other jurisdictions.

Option Agreements and License Agreements

March 2024, the Company entered into two antibody discovery and option agreements (“Option Agreements”) with Paragon

Under the terms of each agreement, Paragon identifies, evaluates, and develops antibodies directed against certain mutually

agreed therapeutic targets of interest to the Company.

From time to time, the Company can choose to add additional targets to the collaboration

upon agreement with Paragon and Paruka.

Under the Option Agreements, the Company has the exclusive option to, on a research program-by-research

program basis, be granted an exclusive, worldwide license to all of Paragon’s right, title, and interest in and to the intellectual

property resulting from the applicable research program to develop, manufacture, and commercialize the antibodies and products directed

to the selected target(s) (each, an “Option”).

The Company has initiated certain research programs with Paragon that

generally focus on discovering, generating, identifying and/or characterizing antibodies directed to a particular target (each, a “Research

Program”), including for IL-23 and IL-17A/F for ORKA-001 and ORKA-002, respectively.

The exclusive option with respect to each

Research Program is exercisable at the Company’s sole discretion at such time as specified in the Option Agreements (the “Option

Option Agreements – Paragon Therapeutics

In March 2024, the

Company entered into two antibody discovery and option agreements (the “Option Agreements”) with Paragon Therapeutics, Inc.

(“Paragon”) and Paruka.

Under the terms of each agreement, Paragon identifies, evaluates, and develops antibodies directed

against certain mutually agreed therapeutic targets of interest to the Company.

From time to time, the Company can choose to add additional

targets to the collaboration upon agreement with Paragon and Paruka.

Under the Option Agreements, the Company has the exclusive option

to, on a research program-by-research program basis, be granted an exclusive, worldwide license to all of Paragon’s rights, titles,

and interest in and to the intellectual property resulting from the applicable research program to develop, manufacture, and commercialize

the antibodies and products directed to the selected target(s) (each, an “Option”).

The Company has initiated certain research

programs with Paragon that generally focus on discovering, generating, identifying and/or characterizing antibodies directed to a particular

target (each, a “Research Program”), including for IL-23 and IL-17A/F for ORKA-001 and ORKA-002, respectively.

The exclusive

option with respect to each Research Program is exercisable at the Company’s sole discretion at such time as specified in the Option

Agreements (the “Option Period”).

There is no payment due upon exercise of an Option pursuant to the Option Agreements.

For each of these agreements, once

the Company enters into the corresponding license agreements, it will be required to make non-refundable milestone payments to Paragon

of up to $ 12.0 million under each respective agreement upon the achievement of certain clinical development milestones, up to $ 10.0 million

under each respective agreement upon the achievement of certain regulatory milestones, as well as a low single-digit percentage royalty

for antibody products beginning on the first commercial sale in each program.

Company may terminate any Option Agreement or any Research Program at any time for any or no reason upon 30 days’ prior written

notice to Paragon, provided that it must pay certain unpaid fees due to Paragon upon such termination, as well as any non-cancellable

obligations reasonably incurred by Paragon in connection with its activities under any terminated Research Program.

Paragon may terminate

any Option Agreement or a Research Program immediately upon written notice to the Company if, as a result of any action or failure to

act by the Company or its affiliates, such Research Program or all material activities under the applicable Research Plan are suspended,

discontinued or otherwise delayed for a certain consecutive number of months.

Each party has the right to terminate the Option Agreements

or any Research Program upon material breach that remains uncured or the other party’s bankruptcy.

Therapeutics – License Agreements

September 2024, the Company exercised the Option to acquire certain rights to ORKA-001, and in December 2024, it entered into the corresponding

license agreement with Paragon (the “ORKA-001 License Agreement”), pursuant to which Paragon granted the Company a royalty-bearing,

world-wide, exclusive license to develop, manufacture, commercialize or otherwise exploit certain antibodies and products targeting IL-23

in all fields other than the field of inflammatory bowel disease (“ORKA-001 Field”).

In December 2024, the Company exercised

the Option with respect to ORKA-002 for the IL-17A/F program, and in February 2025, it entered into the corresponding license agreement

with Paragon (the “ORKA-002 License Agreement” and together with the ORKA-001 License Agreement, the “License Agreements”),

In December 2025, the Company entered into an additional option agreement

for an antibody with Paragon and Paruka to enter into a license agreement, which the Company exercised in December 2025.

ended December 31, 2025 the Company incurred $ 1.5 million related to this additional option agreement which was recognized as research

and development expense.

Per the terms of this option agreement, once the Company enters into the corresponding license agreement, it

will be required to make non-refundable milestone payments to Paragon of up to $ 12.0 million under the agreement upon the achievement

of certain clinical development milestones, up to $ 10.0 million under the agreement upon the achievement of certain regulatory milestones,

as well as a low single-digit percentage royalty for antibody products beginning on the first commercial sale.

As of December 31, 2025,

the Company has not entered into a license agreement with Paragon and Paruka related to this additional option agreement.

As part of the Option Agreements

and the additional option agreement mentioned above, on December 31, 2024, the Company settled its 2024 obligations under the Paruka Warrant

Obligation by issuing Paruka a warrant to purchase 596,930 shares of Company Common Stock at an exercise price of $ 19.39 per share, and

on December 12, 2025, the Company settled its 2025 obligations under the Paruka Warrant Obligation by issuing Paruka a warrant to purchase

375,000 shares of Company Common Stock at an exercise price of $ 30.18 per share.

License Agreements – Paragon Therapeutics

In September 2024, the Company

exercised its exclusive option to acquire certain rights to ORKA-001, and in December 2024, it entered into a corresponding license agreement

with Paragon (the “ORKA-001 License Agreement”), pursuant to which Paragon granted the Company a royalty-bearing, world-wide,

exclusive license to develop, manufacture, commercialize, or otherwise exploit certain antibodies and products targeting IL-23 in all

fields other than the field of inflammatory bowel disease (“ORKA-001 Field”).

In December 2024, the Company exercised its

exclusive option to acquire certain rights to ORKA-002, and in February 2025, it entered into the corresponding license agreement with

Paragon (the “ORKA-002 License Agreement” and together with the ORKA-001 License Agreement, the “License Agreements”),

pursuant to which Paragon granted the Company a royalty-bearing, world-wide, exclusive license to develop, manufacture, commercialize,

1 unchanged sentence

the ORKA-001 Field, the “Fields”).

License Agreements provide the Company with exclusive licenses in the Fields to Paragon’s patent applications covering the related

antibodies, their method of use and their method of manufacture and Paragon has agreed not to conduct any new campaigns that generate

anti-IL-23 monospecific antibodies or anti-IL-17A/F monospecific antibodies for the ORKA-001 Field or the ORKA-002 Field, respectively,

for at least five years.

Each of the ORKA-001 and ORKA-002 License Agreements may be terminated on 60 days’ notice to Paragon,

on material breach without cure, and on a party’s insolvency or bankruptcy to the extent permitted by law.

to the terms of each of the ORKA-001 and ORKA-002 License Agreements, the Company is obligated to pay Paragon non-refundable milestone

payments of up to $ 12.0 million under each respective agreement upon the achievement of certain clinical development milestones and up

to $ 10.0 million under each respective agreement upon the achievement of certain regulatory milestones, including a $ 1.5 million fee

for nomination of a development candidate (or initiation of an IND-enabling toxicology study) and a further milestone payment of $ 2.5

million upon the first dosing of a human patient in a Phase 1 trial for each of ORKA-001 and ORKA-002.

In addition, the Company is obligated

to pay Paragon a low single-digit percentage royalty for antibody products for each of ORKA-001 and ORKA-002.

For each of the License

Agreements, the royalty term ends on the later of (i) the last-to-expire licensed patent or our patent directed to the manufacture, use

or sale of a licensed antibody in the country at issue or (ii) 12 years from the date of first sale of a Company product.

There is also

a royalty step-down if there is no Paragon patent in effect during the royalty term for each program.

Additionally,

as part of the Option Agreements, on December 31, 2024 the Company granted and on December 31, 2025, will grant Paruka a warrant

to purchase a number of shares equal to 1.00 % of outstanding shares as of the date of the grant on a fully-diluted basis, with an exercise

price equal to the fair market value of the underlying shares on the grant date.

to the Option Agreements, on a research program-by-research program basis following the finalization of the research plan for each respective

research program, the Company was required to pay Paragon a one-time, nonrefundable research initiation fee of $ 0.8 million related

to the ORKA-001 program.

This amount was recognized as a research and development expense during the period from February 6, 2024

(inception) to December 31, 2024.

In June 2024, pursuant to the Option Agreements with Paragon, the Company completed the selection process

of its development candidate for IL-23 antibody for ORKA-001 program.

The Company was responsible for 50 % of the development costs incurred

through the completion of the IL-23 selection process.

The Company received the rights to at least one selected IL-23 antibody in June

During the period from February 6, 2024 (inception) to December 31, 2024, the Company exercised its option for ORKA-001 and recorded

a $ 1.5 million milestone payment related to the achievement of development candidate as research and development expense in the Company’s

consolidated statement of operations and comprehensive loss.

In addition, during the period from February 6, 2024 (inception) to December

31, 2024, the Company recorded a $ 2.5 million milestone payment related to the first dosing of a human subject in a Phase 1 trial of

ORKA-001 in December 2024 as research and development expense in its consolidated statement of operations and comprehensive loss.

Company’s share of development costs incurred for the period from February 6, 2024 (inception) to December 31, 2024 was $ 13.5 million

(excluding research initiation fee and milestones), which were recorded as research and development expenses.

An amount of $ 2.8 million

related to ORKA-001 is included in related party accounts payable and other current liabilities as of December 31, 2024.

Company was also required to reimburse Paragon $ 3.3 million for development costs related to ORKA-002 incurred by Paragon through

December 31, 2023 and certain other development costs incurred by Paragon between January 1, 2024 and March 6, 2024 as

stipulated by the Option Agreements.

This amount was recognized as a research and development expense during the period from February 6,

2024 (inception) to December 31, 2024.

The Company is also responsible for the development costs incurred by Paragon from January 1,

2024 through the completion of the IL-17 selection process.

The Company recognized an amount of $ 0.8 million payable to Paragon

for the research initiation fee related to ORKA-002 following the finalization of the ORKA-002 research plan.

This was recognized as

research and development expenses in the period from February 6, 2024 (inception) to December 31, 2024.

During the period from February

6, 2024 (inception) to December 31, 2024, the Company exercised its option for ORKA-002 and recorded a $ 1.5 million milestone payment

related to the achievement of development candidate as research and development expense in its consolidated statement of operations and

comprehensive loss.

The Company accounted for development costs of $ 7.8 million (excluding research initiation fee, milestone, and reimbursements

of development costs through December 31, 2023) for the period from February 6, 2024 (inception) to December 31, 2024 as research and

Pursuant to each of the two License Agreements, Paragon has agreed not to conduct any

new campaigns that generate anti-IL-23 monospecific antibodies or anti-IL-17A/F monospecific antibodies in the respective agreed-upon

The License Agreements provide

the Company with exclusive licenses in the Fields to Paragon’s patent applications covering the related antibodies, their method

of use and their method of manufacture and Paragon has agreed not to conduct any new campaigns that generate anti-IL-23 monospecific

antibodies or anti-IL-17A/F monospecific antibodies for the ORKA-001 Field or the ORKA-002 Field, respectively, for at least five years.

Each of the License Agreements may be terminated on 60 days’ notice to Paragon, on material breach without cure, and on a party’s

insolvency or bankruptcy to the extent permitted by law.

Pursuant to the terms of each of the License Agreements, the Company

is obligated to pay Paragon non-refundable milestone payments of up to $ 12.0 million under each respective agreement upon the achievement

of certain clinical development milestones and up to $ 10.0 million under each respective agreement upon the achievement of certain regulatory

In addition, the Company is obligated to pay Paragon a low single-digit percentage royalty for antibody products for each

of ORKA-001 and ORKA-002.

For each of the License Agreements, the royalty term ends on the later of (i) the last-to-expire licensed patent

or our patent directed to the manufacture, use or sale of a licensed antibody in the country at issue or (ii) 12 years from the date of

first sale of a Company product.

There is also a royalty step-down if there is no Paragon patent in effect during the royalty term for

each program.

Each of the License Agreements may be terminated on 60 days’ notice to Paragon, on material breach without cure, and

on a party’s insolvency or bankruptcy to the extent permitted by law.

As of December 31, 2025, the Company has incurred and expensed

milestone payments of $ 7.0 million and $ 4.0 million in connection with the ORKA-001 License Agreement and the ORKA-002 License Agreement,

respectively.

Pursuant to the Option Agreements and License Agreements, on a research

program-by-research program basis following the finalization of the research plan for each respective research program, the Company was

required to pay certain initiation fees, development costs and milestone payments to Paragon.

For the ORKA-001 program, the Company recognized research and development

expenses related to the following milestones during the period from February 6, 2024 (inception) to December 31, 2024:

a one-time, nonrefundable

research initiation fee of $ 0.8 million;

$ 1.5 million related to exercising the Company’s Option and achievement of development

and $ 2.5 million related to completing the first dosing of a human subject in a Phase 1 trial.

The Company was responsible

for 50 % of the development costs incurred through the completion of the IL-23 selection process, which was completed in June 2024.

amount of $ 13.5 million was incurred during the period from February 6, 2024 (inception) to December 31, 2024 for research and development

expenses for the ORKA-001 program.

For the ORKA-002 program, the Company recognized research and development

expenses related to the following milestones during the period from February 6, 2024 (inception) to December 31, 2024:

a one-time, nonrefundable

research initiation fee of $ 0.8 million and $ 1.5 million related to exercising the Company’s Option and achievement of development

The Company was responsible for the development costs incurred through the completion of the IL-23 selection process, which

was completed in December 2024.

An amount of $ 11.1 million was incurred during the period from February 6, 2024 (inception) to December

31, 2024 for research and development expenses for the ORKA-002 program.

Pursuant to the Option Agreements

and License Agreements, for year ended December 31, 2025, the Company’s share of research and development expenses for the ORKA-001

program was nil .

The Company recognized a milestone payment of $ 3.0 million related to completing the first dosing of a human patient

in a Phase 2 trial for the ORKA-001 program during the year ended December 31, 2025.

These costs were recorded as research and development

As of December 31, 2025 and 2024, nil and $ 2.8 million, respectively, related to ORKA-001 were included in related

party accounts payable and other current liabilities.

Pursuant to the Option Agreements

and License Agreements, for the year ended December 31, 2025, the Company’s share of research and development expense for the ORKA-002

program was $ 0.1 million.

The Company recognized a milestone payment of $ 2.5 million related to completing the first dosing of a human

subject in a Phase 1 trial for the ORKA-002 program during the year ended December 31, 2025.

These costs were recorded as research and

development expenses.

An amount of $ 2.7 million related to ORKA-002 is included in related party accounts payable and other current liabilities

as of December 31, 2024.

Company expenses the service fees as the associated costs are incurred when the underlying services are rendered.

Such amounts are classified

within research and development expenses in the accompanying consolidated statement of operations and comprehensive loss.

Company concluded that the rights obtained under the Option Agreements represent an asset acquisition whereby the underlying assets comprise

in-process research and development assets with no alternative future use.

The Option Agreements did not qualify as a business combination

because substantially all of the fair value of the assets acquired was concentrated in the exclusive license options, which represent

a group of similar identifiable assets.

The research initiation fee represents a one-time cost on a research program-by-research program

basis for accessing research services or resources with benefits that are expected to be consumed in the near term, therefore the amounts

paid are expensed as part of research and development costs immediately.

Amounts paid as reimbursements of ongoing development cost,

monthly development cost fee and additional development expenses incurred by Paragon due to work completed for selected targets prior

to the effective date of the Option Agreements that is associated with services being rendered under the related Research Programs are

recognized as research and development expense when incurred.

the period from February 6, 2024 (inception) to December 31, 2024, the Company recognized $ 42.0 million

of expenses in connection with services provided by Paragon and Paruka under the Option Agreements.

Commitment and Contingencies

April 2024, the Company entered into an operating lease agreement for the Company’s headquarters in Menlo Park, California, which

commenced on June 15, 2024 with an initial term of 39.5 months.

The Company leases office space under this noncancelable operating lease

Lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining

the present value of lease payments, the Company used its incremental borrowing rate when measuring operating lease liabilities as discount

rates were not implicit or readily determinable.

of December 31, 2024, the Company had $ 0.9 million of operating lease right-of-use assets, operating lease liability, current of $ 0.2

million, and operating lease liability, noncurrent of $ 0.8 million on its consolidated balance sheet.

As of December 31, 2024, the operating

lease arrangement had a remaining lease term of 33 months and a discount rate of 17.95 %.

For the period from February 6, 2024 (inception)

to December 31, 2024, the Company recorded operating and variable lease expense of $ 0.3 million in general and administrative expenses

in its consolidated statement of operations and comprehensive loss.

following table presents the Company’s supplemental cash flow information related to leases (in thousands):

As of December 31, 2025 and 2024, nil and $ 2.7 million, respectively, related to ORKA-002 were included in related

party accounts payable and other current liabilities.

The Company expenses the

service fees as the associated costs are incurred when the underlying services are rendered.

Such amounts are classified within research

and development expenses in the accompanying consolidated statements of operations.

The Company concluded that

the rights obtained under the Option Agreements represent an asset acquisition whereby the underlying assets comprise in-process research

and development assets with no alternative future use.

The Option Agreements did not qualify as a business combination because substantially

all of the fair value of the assets acquired was concentrated in the exclusive license options, which represent a group of similar identifiable

The research initiation fee represents a one-time cost on a research program-by-research program basis for accessing research

services or resources with benefits that are expected to be consumed in the near term, therefore the amounts paid are expensed as part

of research and development costs immediately.

Amounts paid as reimbursements of ongoing development cost, monthly development cost fee

and additional development expenses incurred by Paragon due to work completed for selected targets prior to the effective date of the

Option Agreements that is associated with services being rendered under the related Research Programs are recognized as research and

development expense when incurred.

Commitments and Contingencies

In April 2024, the Company entered into an operating lease agreement

for the Company’s headquarters in Menlo Park, California, which commenced on June 15, 2024 with an initial term of 39.5 months.

In February 2025, the Company entered into an operating lease agreement in Waltham, Massachusetts, which commenced on April 1, 2025 with

an initial term of 54 months.

The Company leases office spaces under noncancelable operating lease agreements.

Lease liabilities are based

on the net present value of the remaining lease payments over the remaining lease terms.

In determining the present value of lease payments,

the Company used its incremental borrowing rate when measuring operating lease liabilities, as discount rates were not implicit or readily

determinable.

For the year ended December 31, 2025 and for the period from February

6, 2024 (inception) to December 31, 2024, the Company recorded operating and variable lease expenses of $ 0.9 million and $ 0.3 million,

respectively, in general and administrative expenses in its consolidated statements of operations.

The following table presents

the Company’s supplemental cash flow information related to leases (in thousands):

2025 Period from

(inception) to

Cash paid for amounts included

in the measurement of lease liabilities

following table summarizes a maturity analysis of the Company’s operating lease liabilities showing the aggregate lease payments

as of December 31, 2024 (in thousands):

ending December 31,

Total undiscounted lease

Cash paid for amounts included in the measurement of lease liabilities $ 700 $ 116

Weighted average remaining lease terms (years) 3.0 2.8

Weighted-average discount rate 13.07 % 17.95 %

The following table summarizes

a maturity analysis of the Company’s operating lease liabilities showing the aggregate lease payments as of December 31, 2025 (in

Year ending December 31,

Total undiscounted lease payments

imputed interest

Total discounted lease

Total discounted lease payments

current portion of lease liability

portion of lease liability

Line License Agreement

Non-current portion of lease liability

Cell Line License Agreement

In March 2024, the Company

6 unchanged sentences

Licensed Technology is used in certain manufacturing activities in support of the ORKA-001 and ORKA-002 programs.

consideration for the license, the Company agreed to pay WuXi Biologics a non-refundable license fee of $ 150,000 , which was recognized

as a research and development expense during the period from February 6, 2024 (inception) to December 31, 2024.

Additionally, to

the extent that the Company manufactures its commercial supplies of bulk drug product with a manufacturer other than WuXi Biologics or

its affiliates, the Company is required to make royalty payments to WuXi Biologics at a rate of less than one percent of net sales of

WuXi Biologics Licensed Products manufactured by the third-party manufacturer.

Pursuant to an amendment to the Cell Line License Agreement

effective in November 2024, a provision was added that permits the royalties owed under the agreement to be bought out on a product-by-product basis

for a lump-sum payment.

Cell Line License Agreement will continue indefinitely unless terminated (i) by the Company

upon six months’ prior written notice and its payment of all undisputed amounts due

to WuXi Biologics through the effective date of termination, (ii) by WuXi Biologics for a

material breach by the Company that remains uncured for 60 days after written notice, (iii)

by WuXi Biologics if the Company fails to make a payment and such failure continues for 30

days after receiving notice of such failure, or (iv) by either party upon the other party’s

In consideration for the

license, the Company agreed to pay WuXi Biologics a non-refundable license fee of $ 150,000 , which was recognized as a research and development

expense during the period from February 6, 2024 (inception) to December 31, 2024.

Additionally, to the extent that the Company manufactures

its commercial supplies of bulk drug product with a manufacturer other than WuXi Biologics or its affiliates, the Company is required

to make royalty payments to WuXi Biologics at a rate of less than one percent of net sales of WuXi Biologics Licensed Products manufactured

by the third-party manufacturer.

Pursuant to an amendment to the Cell Line License Agreement effective in November 2024, a provision

was added that permits the royalties owed under the agreement to be bought out on a product-by-product basis for a lump-sum payment.

The Cell Line License Agreement

will continue indefinitely unless terminated (i) by the Company upon six months’ prior written notice and its payment of all undisputed

amounts due to WuXi Biologics through the effective date of termination, (ii) by WuXi Biologics for a material breach by the Company

that remains uncured for 60 days after written notice, (iii) by WuXi Biologics if the Company fails to make a payment and such failure

continues for 30 days after receiving notice of such failure, or (iv) by either party upon the other party’s bankruptcy.

Net Loss Per Share

and diluted net loss per share attributable to stockholders were calculated as follows (in thousands, except share and per share data):

from February 6, 2024

(Inception) to

The following table summarizes

the basic and diluted net loss per share attributable to stockholders were calculated as follows (in thousands, except share and per

Year Ended December 31, 2025

February 6, 2024 (inception) to

December 31, 2024

Loss Allocation

Company Series A Preferred Stock (1)

$ ( 3,873.25 )

Company Series B Preferred

(1) The weighted-average number of shares of as-converted Company Series A Preferred Stock used in the loss allocation was 495,191 for the period from February 6, 2024 (inception) to December 31, 2024.

(2) The weighted-average number of shares of as-converted Company Series B Preferred Stock used in the loss allocation was 4,328,844 for the period from February 6, 2024 (inception) to December 31, 2024.

the computation of basic net loss per share attributable to stockholders, the amount of weighted-average shares outstanding excludes

all shares of unvested restricted common stock as such shares are not considered outstanding for accounting purposes until vested.

amount of weighted-average shares outstanding includes the pre-funded warrants as the exercise price is negligible and these warrants

are fully vested and exercisable.

potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to stockholders for

the periods presented because including them would have had an anti-dilutive effect were as follows:

Outstanding employee warrants to

purchase common stock

Company Series B Preferred Stock (2)

weighted-average number of shares of as-converted Company Series A Preferred Stock used in the loss allocation was nil and 495,191 for

the year ended December 31, 2025 and the period from February 6, 2024 (inception) to December 31, 2024, respectively.

(2) The weighted-average number of shares of as-converted Company Series

B Preferred Stock used in the loss allocation was 11,428,129 and 4,328,844 for the year ended December 31, 2025 and the period from February

6, 2024 (inception) to December 31, 2024, respectively.

For the computation of basic

net loss per share attributable to stockholders, the amount of weighted-average shares outstanding excludes all shares of unvested restricted

common stock as such shares are not considered outstanding for accounting purposes until vested.

The amount of weighted-average shares

outstanding includes the pre-funded warrants as the exercise price is negligible and these warrants are fully vested and exercisable.

The potential shares of

common stock that were excluded from the computation of diluted net loss per share attributable to stockholders for the periods presented

because including them would have had an anti-dilutive effect were as follows:

Outstanding employee warrants to purchase common stock

Outstanding unvested restricted stock awards

Outstanding and issued common stock options

Outstanding and issued

warrant to Paruka

Outstanding and issued warrant to Paruka

Related Party Transactions

and Paruka each beneficially own less than 5% of the Company’s capital stock through their respective holdings of Company Common

beneficially owns more than 5% of the Company’s capital, currently has one representative appointed to the Board, and beneficially

owns more than 5% of Paragon.

Fairmount appointed Paragon’s board of directors and has the contractual right to approve the appointment

of any executive officers of Paragon.

following is a summary of related party accounts payable and other current liabilities (in thousands):

Paragon reimbursable Option Agreements’

Paragon milestone payments for Option Agreement

Paragon and Paruka each

beneficially own less than 5% of the Company’s capital stock through their respective holdings of Company Common Stock.

Fairmount beneficially owns

more than 5% of the Company’s capital stock, currently has one representative appointed to the Board, and beneficially owns more

than 5% of Paragon.

Fairmount appointed Paragon’s board of directors and has the contractual right to approve the appointment of

any executive officers of Paragon.

The following is a summary

of related party accounts payable and other current liabilities (in thousands):

Paragon reimbursable Option Agreements’ fees

Paragon milestone payments for License Agreement

Paragon reimbursable other research expenses

Paragon reimbursable

patent expenses

Subsequent Events

February 2025, the Company entered into a lease agreement for an office space located in Waltham, Massachusetts.

The lease is for an

initial period of 54 months.

The Company expects to pay approximately $ 1.6 million over the lease term.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Paragon reimbursable patent expenses

The Company has a retirement and savings plan under Section 401(k) of

the Internal Revenue Code (the “401(k) Plan”) covering all U.S.

401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the Internal Revenue

The Company may make contributions to this plan at its discretion.

During the year ended December 31, 2025 the Company matched 100 %

of each employee’s first 3 % of pay contributed to the 401(k) Plan.

The company match was limited up to $ 10,500 per

employee for the year ende d December 31, 202 5.

The Company recognized

an expense of $ 0.4 million for the year ended December 31, 202 5 .

The Company did not make any matching contributions for the period from February 6, 2024 (inception) to December 31, 2024.

Changes in and Disagreements With

Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data