Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto and other financial information included elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our actual results and the timing of events could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in our most recent Annual Report on Form 10-K, specifically under Item 1A, “Risk Factors” and the “Special Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage biotechnology company committed to the discovery, development, and commercialization of novel, disease-modifying therapies for rare, pediatric LSDs. Our therapeutic philosophy is centered on delivering safe, effective, and patient-friendly treatments that address the underlying pathophysiology of these catastrophic diseases and their significant unmet need. Our multi-modal approach integrates small molecule therapies, including a combination therapy, and a gene therapy, positioning us to potentially address both the genetic and downstream pathological features of LSDs. Our small molecule product candidates share target indications as well as similar mechanisms that have been demonstrated to address lysosomal dysfunction, neuroinflammation, and neuronal loss in our validated animal models that closely mimic human clinical phenotypes. Our most advanced product candidate, PLX-200, targets several LSDs and we intend to launch a Phase 2 proof-of-concept basket trial which may enhance PLX-200’s potential to become the standard of care across multiple LSDs.
Our product candidate pipeline includes:
● PLX-200, our most advanced, clinical-stage product candidate, is an oral, repurposed small molecule.
● PLX-300 is a novel, oral small molecule therapy in IND application-enabling studies in treatment of lysosomal storage disorders.
● PLX-100 is a preclinical stage orally administrable combination therapy comprised of our PPARα agonist, PLX-200, and vitamin A, a retinoid X receptor alpha (“RXRα”) agonist. PLX-100 is being developed for the treatment of LSDs.
● PLX-400 is a preclinical stage novel gene therapy in treatment of lysosomal storage disorders.
We focus our clinical development program on specific LSDs that are typically treated by symptom and palliative care and, with the exception of CLN2, lack approved disease-modifying therapies. We have accumulated an expansive base of preclinical data and knowledge on CLN2 and CLN3, Sandhoff disease, and Krabbe. Our drug candidates have been validated in gold standard preclinical animal models. With similar broad disease pathology shared across multiple LSDs in terms of substrate accumulation, neuroinflammation and neuronal loss, we believe our small molecule drug candidates have the potential to demonstrate high therapeutic potential in other targeted indications. Our development program of focus includes NCLs, Krabbe disease, Tay-Sachs and Sandhoff Diseases.
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We are advancing PLX-200, our most advanced product candidate, through a Phase 2 proof-of-concept basket trial which we refer to as SOTERIA (PLX-200-600). We expect to initiate this trial in the second half of 2026. SOTERIA is an open-label, multi-indication, master study for the treatment of certain LSDs which we believe represent approximately one quarter of our addressable LSD population, including CLN2, CLN3, Krabbe disease, and Sandhoff disease. We held a pre-IND submission meeting in April 2025. We submitted an IND application to the FDA for the SOTERIA trial in August 2025 and received a safe to proceed letter in October 2025. In July 2026, we amended SOTERIA’s trial design; among other amendments, we expanded the number of participants in each of the Sandhoff disease and Krabbe disease cohorts from three to six, thereby aligning enrollment targets across all four cohorts and increasing the total number of trial participants from 18 to 24. We believe that the increase in number of trial participants will generate additional valuable data. We have additionally opened recruitment for the six-patient sentinel safety group, from three patients each drawn from the CLN2 and CLN3 cohorts to six patients drawn from any of the four cohorts. Data readouts from SOTERIA are expected to provide guidance and a clear pathway for each of the four indications towards potentially registrable trials. Further, with the precedent approval of Brineura, a drug approved to treat CLN2 on the basis of a single-arm, natural history comparator, open-label trial, we believe there may be an opportunity in CLN2 and CLN3 for us to seek expedited approval from the FDA for PLX-200 based on precedent approval for a third-party drug with a similar trial design. Should PLX-200 evidence overwhelming efficacy from the CLN2 and CLN3 cohorts in the SOTERIA trial, we believe there may be a case to seek expedited approval. Products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive expedited approval upon a determination that the product has demonstrated a clinically meaningful treatment effect. The precedent case of cerliponase alfa, a drug approved by FDA in treatment of CLN2, provides a benchmark for expedited approval based on results generated from an open-label, single arm trial comparing to natural history data studying Batten disease. SOTERIA’s current trial design for the CLN2 and CLN3 cohorts share the same open-label, single-arm design using natural history.
PLX-200 has already received authorization under two separate IND applications to initiate potentially single pivotal trials in CLN2 and CLN3, the most prevalent subtypes of NCLs. The IND for CLN2 was filed in December 2019 by Polaryx, with CRO support from Premier Research. A Study May Proceed letter was received in January 2020. The IND for CLN3 was filed in March 2020 by Polaryx, with CRO support from Premier Research. A Study May Proceed letter was received in April 2020.
Since our inception in August 2014, we have devoted substantially all of our resources to raising capital, organizing and staffing our company, business and scientific planning, conducting discovery and research activities, acquiring product programs, establishing and protecting our intellectual property portfolio, developing and progressing our pipeline, establishing arrangements with third parties for the manufacture of our programs and component materials, and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue from product sales. Since our inception through the filing date of this Quarterly Report, we have funded our operations primarily through the issuance of approximately $31.5 million of common stock and preferred stock.
We have incurred significant operating losses since inception and expect to incur losses in the future as we continue our research and development activities. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of any product candidates we may develop. We incurred net losses of approximately $1.4 million and $1.0 million for the three months ended June 30, 2026 and 2025, respectively. We incurred net losses of approximately $3.9 million and $6.1 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of approximately $103.6 million.
We expect to continue to incur significantly increased expenses for the foreseeable future if and as we:
● advance the development of our lead product candidates through clinical development, and, if approved by the FDA, commercialization;
● advance our preclinical development programs into clinical development;
● incur manufacturing costs to supply our product candidates;
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● seek regulatory approvals for any of our product candidates that successfully complete clinical trials;
● increase our research and development activities to identify and develop new product candidates;
● hire additional personnel;
● expand our operational, financial and management systems;
● meet the requirements and demands of operating as a public company;
● invest in further development to protect and expand our intellectual property;
● ultimately establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize; and
● expand our manufacturing and develop our commercialization efforts.
Due to the numerous risks and uncertainties associated with biopharmaceutical product development and the economic and developmental uncertainty, we may be unable to accurately predict the timing or magnitude of all expenses. Our ability to ultimately generate revenue to achieve profitability will depend heavily on the development, approval, and subsequent commercialization of our product candidates. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As a result, we will need substantial additional funding to support our long-term continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we will have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.
As of June 30, 2026, we had cash and cash equivalents of approximately $11.5 million. Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the filing date of this Quarterly Report, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through the first quarter of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Financial Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for any of our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
Operating Expenses
Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.
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Research and Development Expenses
Research and development expenses consist of costs associated with the preclinical and clinical development of our product candidates, which include:
● personnel-related expenses, including salaries and benefits for employees engaged in research and development functions;
● expenses incurred in connection with the clinical development and regulatory approval of our product candidates, including under agreements with third parties, such as consultants, contractors and CROs; and
● other expenses related to research and development.
We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.
Research and development activities are central to our business model. We expect that our research and development expenses will increase substantially for the foreseeable future in connection with our planned clinical development activities.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation and benefits for our personnel and advisors. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, direct and allocated facility related expenses and other operating costs.
We anticipate that our general and administrative expenses will increase substantially for the foreseeable future as we increase our administrative headcount to operate as a public company and as we advance our product candidates through clinical development. We also will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the Nasdaq listing rules, additional insurance expenses, investor relations activities and other administrative and professional services. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur expenses associated with building a sales and marketing team if we choose to commercialize such product candidates on our own.
Other Expense — Direct Listing Offering Costs
Other expense — direct listing offering costs primarily consists of costs related to the direct listing public offering completed on February 2, 2026 (the “Direct Listing”), including legal, accounting, and other expenses.
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Statements of Operations
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our statements of operations for the periods presented.
Three Months Ended June 30,
2026 2025 $ Change
(in thousands)
Operating expenses:
Research and development expenses $ 719 $ 476 $ 243
General and administrative expenses 661 408 253
Total operating expenses 1,380 884 496
Operating loss (1,380 ) (884 ) (496 )
Other expense – direct listing offering costs — (124 ) 124
Net loss and comprehensive loss $ (1,380 ) $ (1,008 ) $ (372 )
Research and development expenses
Research and development expenses increased by $243 thousand to $719 thousand for the three months ended June 30, 2026, as compared to $476 thousand for the three months ended June 30, 2025. The increase in research and development expenses was primarily due to CRO expenses incurred for SOTERIA of $263 thousand and an increase in salary and wages of $80 thousand as a result of the timing of new hires. This is offset by a decrease in consulting expenses of $70 thousand. Research and development expenses were substantially related to PLX-200.
General and administrative expenses
General and administrative expenses increased by $253 thousand to $661 thousand for the three months ended June 30, 2026, as compared to $408 thousand for the three months ended June 30, 2025, primarily due to increased public company related expenses incurred in connection with the direct listing in January 2026. Public company related expenses including accounting advisory, investor relations, and directors and officers insurance expenses increased by $250 thousand. Salary and wages expenses also increased $75 thousand as a result of the timing of new hires. This is offset by a decrease in stock-based compensation by $108 thousand due to shares that were issued to a financial advisor in October of 2024.
Other expense — direct listing offering costs
Other expense — direct listing offering costs was zero for the three months ended June 30, 2026, as compared to $124 thousand for the three months ended June 30, 2025 due to legal, accounting, and advisory expenses related to the preparation of the direct listing offering in January 2026.
Income taxes
The effective income tax rate was 0.0% for all periods. Currently, we have recorded a full valuation allowance against our net deferred tax assets.
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Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our statements of operations for the periods presented.
Six Months Ended June 30,
2026 2025 $ Change
(in thousands)
Operating expenses:
Research and development expenses $ 1,398 $ 5,192 $ (3,794 )
General and administrative expenses 1,940 744 1,196
Total operating expenses 3,338 5,936 (2,598 )
Operating loss (3,338 ) (5,936 ) 2,598
Other expense – direct listing offering costs (586 ) (124 ) (462 )
Net loss and comprehensive loss $ (3,924 ) $ (6,060 ) $ 2,136
Research and development expenses
Research and development expenses decreased by $3.8 million to $1.4 million for the six months ended June 30, 2026, as compared to $5.2 million for the six months ended June 30, 2025. The reduction in research and development expenses was primarily due to stock-based compensation of approximately $4.3 million related to the issuance of 3,704,307 shares of common stock in March of 2025 to two existing stockholders in return for an exclusive gene therapy patent license totaling $4.3 million, which was not repeated in 2026. Of the total 3,704,307 shares issued, 277,823 shares were issued to Rush and 3,426,484 shares were issued to Mstone. The decrease in stock-based compensation expense was partially offset by CRO expenses incurred for the six months ended June 30, 2026 related to SOTERIA that increased by $322 thousand, CRO formulation services that increased by $177 thousand and salary and wages that increased by $162 thousand as a result of the timing of new hires. Research and development expenses were substantially related to PLX-200 except for the stock-based compensation expense in 2025.
General and administrative expenses
General and administrative expenses increased by $1.2 million to $1.9 million for the six months ended June 30, 2026, as compared to $744 thousand for the six months ended June 30, 2025, primarily due to increased public company related expenses incurred in connection with the direct listing in January 2026, due to an increase in stock-based compensation, and due to an increase in salary and wages. Public company related expenses including legal, audit, accounting advisory, investor relations, board compensation, and directors and officers insurance expenses increased by $712 thousand. Stock-based compensation increased by $252 thousand due to shares that were issued to a financial advisor in October of 2024. Of the total shares issued, 50% was fully vested upon issuance as compensation for advisory services and concluded in October of 2025 which decreased stock-based compensation by $216 thousand in the second quarter of 2026. The remaining 50% vested upon a public listing of the Company’s common stock. As of March 31, 2026, the remaining 50% was fully vested as our common stock began trading on Nasdaq on February 2, 2026. As such, the Company recorded $467 thousand to stock-based compensation. Salary and wages increased by $149 thousand as a result of the timing of new hires.
Other expense — direct listing offering costs
Other expense — direct listing offering costs was $586 thousand for the six months ended June 30, 2026, as compared to $124 thousand for the six months ended June 30, 2025 due to legal, accounting, and advisory expenses related to the preparation of the direct listing offering in January 2026.
Income taxes
The effective income tax rate was 0.0% for all periods. Currently, we have recorded a full valuation allowance against our net deferred tax assets.
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Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our programs. From our inception through the filing date of this Quarterly Report, we have funded our operations primarily with proceeds from the sales of our equity securities totaling approximately $31.5 million. As of June 30, 2026, we have no outstanding debt.
The following table presents the Company’s cash and cash equivalents as of June 30, 2026 and December 31, 2025:
June 30,
2026 December 31,
2025
(in thousands)
Cash and cash equivalents $ 11,542 $ 5,143
Cash Flows
The following table presents cash provided by (used in) operating and financing activities during the six months ended June 30, 2026 and 2025:
Six Months Ended
June 30,
2026 2025
(in thousands)
Net cash flows (used in) operating activities $ (3,432 ) $ (1,567 )
Net cash flows provided by financing activities 9,831 250
Net change in cash and cash equivalents $ 6,399 $ (1,317 )
Operating Activities
Net cash used in operating activities was $3.4 million for the six months ended June 30, 2026 and was primarily due to a net loss of $3.9 million, offset by stock-based compensation of $467 thousand and an increase in working capital changes of $25 thousand.
Net cash used in operating activities was $1.6 million for the six months ended June 30, 2025 and was primarily due to a net loss of $6.1 million and a decrease in working capital changes of $67 thousand, offset by stock-based compensation of $4.6 million.
Financing Activities
Net cash provided by financing activities was $9.8 million and $250 thousand for the six months ended June 30, 2026 and 2025, respectively, and was due to proceeds from the issuance of common stock.
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Future Funding Requirements
We do not have any products approved for sale, and we have never generated any revenue from product sales. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current or future product candidates and we do not know when, or if, that will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our current and future product candidates, and begin to commercialize any approved products. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, we expect to incur additional costs associated with operating as a public company.
The financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred operating losses and negative cash flows from operations since inception. As of June 30, 2026, we had an accumulated deficit of approximately $103.6 million. Management expects to continue to incur operating losses and negative cash flows.
We will need to raise additional capital to continue to fund our operations. We believe we will be able to obtain additional capital through equity financings or other arrangements to fund operations; however, there can be no assurance that such additional financing, if available, can be obtained on acceptable terms. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.
We believe that our existing capital will enable us to fund our operations through the first quarter of 2027. We will need to raise additional capital in connection with our cash needs for capital expenditures and working capital beyond the first quarter of 2027. We have based the foregoing estimate on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect.
Our future funding requirements will depend on many factors, including, but not limited to:
● the initiation, progress, modification, timeline, cost and results of our clinical trials for our product candidates;
● the initiation, progress, timeline, cost and results of additional research and preclinical studies related to pipeline development and other research programs we initiate in the future;
● the cost and timing of manufacturing activities, including our planned manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development through commercialization;
● the potential expansion of our current development programs to seek new indications;
● the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
● the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, in-licensed or otherwise;
● the effect of competing technological and market developments;
● the payment of licensing fees, potential royalty payments and potential milestone payments;
● the cost of general operating expenses;
● the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; and
● the costs of operating as a public company.
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Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.
If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our preclinical studies, clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations and other licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates are based on several factors including the facts and circumstances available at the time the estimates are made, historical experience, risk of loss, general economic conditions and trends and the assessment of the probable future outcome. Subjective and significant estimates include, but are not limited to, research and development accruals as well as stock-based compensation expense. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the statements of operations in the period that they are determined.
We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. For further information, refer to Note 2 “Summary of Significant Accounting Policies” to our financial statements included elsewhere in this Quarterly Report.
Research and Development Expenses and Accruals
All research and development expenses are charged to operations as incurred. Research and development expenses primarily consist of costs associated with the preclinical and clinical development of the Company’s product candidates, including the following:
● external research and development expenses incurred under arrangements with third parties, such as CROs and other vendors and CMOs to produce drug substance and drug product; and
● employee-related expenses, including salaries and benefits.
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As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced. Most of our service providers invoice monthly in arrears for services performed or when contractual milestones are met. Estimates of accrued expenses as of each balance sheet date in our financial statements are based on facts and circumstances known at that time. We periodically confirm the accuracy of estimates with the service providers and adjust if necessary. The significant estimates in accrued research and development expenses are related to expenses incurred with respect to CROs, contract manufacturing organizations (“CMOs”) and other vendors in connection with research and development and manufacturing activities.
We base our expenses related to CROs and CMOs on estimates of the services received and efforts expended pursuant to quotations and contracts with such vendors that conduct research and development and manufacturing activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the applicable research and development or manufacturing expense. In accruing service fees, we estimate the time over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from estimates, the accrual or prepaid expense is adjusted accordingly. Although estimates are not expected to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented.
Stock-Based Compensation Expense and Common Stock Valuations
We recognize compensation costs related to stock-based awards to employees and non-employees based on the estimated fair value of the awards on the date of grant and it is recognized as an expense over the requisite service period. For grants containing performance-based vesting provisions, the grant-date fair value of the milestone-based stock-based payment awards is recognized as compensation expense once it is probable that the condition will be achieved. We account for actual forfeitures in the period the forfeitures occur.
We will continue to use judgment in evaluating the assumptions utilized for our stock-based compensation expense calculations on a prospective basis. Such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expenses could be materially different.
The calculation of the fair value of awards requires an estimate of the Company’s equity value. As the Company historically has been a privately held company with no trading history for its common stock until February 2, 2026, the estimated fair value of the Company’s common stock has been approved by the Board, with input from management, valuations by third-party specialists, as well as upon the price per share from recent stock issuances to certain investors at that time. To determine the fair value, management considered the price per share from recent stock issuances to certain investors at that time, most recently available third-party valuations of its common stock and an assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. Additional factors include, among others, the nature and history of the Company’s business; the Company’s stage of development and commercialization; external market conditions; valuations of the Company’s industry peers; and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company. These third-party valuations are performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The third-party common stock valuations are prepared using the market approach (guideline public company method) to estimate the Company’s enterprise value.
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Recent Accounting Pronouncements
See Note 2 “Summary of Significant Accounting Policies” to our financial statements included elsewhere in this Quarterly Report for a discussion of accounting pronouncements recently issued but not yet adopted and their potential impact to our financial statements.
Emerging Growth Company Status and Smaller Reporting Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
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