Tonix Pharmaceuticals Holding Corp. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors known to us could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to: our need for additional financing; risks related to the failure to obtain FDA clearances or approvals and noncompliance with FDA regulations; risks related to the failure to successfully market any of our products; risks related to the timing and progress of clinical development of our product candidates; uncertainties of patent protection and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence upon third parties; and substantial competition. Business Overview We are a fully-integrated biopharmaceutical company commercializing and developing innovative therapies for central nervous system (“CNS”) disorders, infectious diseases, immunology, and rare diseases. Our portfolio consists of both commercial and development-stage programs. In August 2025, we received approval from the FDA for TONMYA® (cyclobenzaprine HCl sublingual tablets) for the treatment of fibromyalgia. TONMYA, our first internally developed product to become FDA approved, was commercially launched by us in the United States on November 17, 2025. TONMYA is the first new medicine for fibromyalgia in more than 15 years and is a centrally acting, non-opioid analgesic designed for bedtime administration and long-term use. We hold worldwide commercialization rights to TONMYA. In addition to TONMYA, we market two FDA-approved prescription products for the treatment of acute migraine: Zembrace® SymTouch® (sumatriptan injection) and Tosymra® (sumatriptan nasal spray). Our commercial platform includes sales, marketing, market access, distribution, and patient support capabilities. We are advancing a diversified development pipeline generated through internal discovery, in-licensing, acquisitions, and collaborations with academic and non-profit institutions. Our pipeline addresses conditions that span CNS, infectious disease, immunology, and rare disease, with multiple programs in clinical and preclinical development. TONMYA’s proprietary cyclobenzaprine HCl sublingual tablet formulation is referred to as “TNX-102 SL” outside of the fibromyalgia indication. We are exploring the utility of TNX-102 SL in Phase 2 clinical trials for major depressive disorder (MDD) and acute stress disorder (ASD)/acute stress reaction (ASR). TNX-102 SL is being developed to treat ASD/ASR under an Investigator-Initiated investigational new drug application (“IND”) at the University of North Carolina in the ongoing OASIS study funded by a grant they received from the U.S. Department of Defense (“DoD”). A Phase 2 study of TNX-102 SL for MDD is expected to commence mid-2026 under a Tonix IND that has been cleared by FDA. Our clinical stage infectious disease portfolio includes monoclonal antibody TNX-4800 (anti- Borrelia OspA human monoclonal antibody) for the prevention of Lyme disease in the U.S., for which initiation of an adaptive Phase 2 field study is planned for the first half of 2027, pending FDA agreement. TNX-4800 was licensed from UMASS Chan Medical School. Our clinical-stage immunology development portfolio consists of biologics to address organ transplant rejection and autoimmunity, including TNX-1500, which is a Phase 2-ready Fc-modified humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of kidney transplant rejection. Another CNS candidate in clinical development is TNX-1300 (double-mutant cocaine esterase), which is in Phase 2 for the treatment of cocaine intoxication. TNX-1300 has been granted Breakthrough Therapy designation by the FDA and a Phase 2a study was completed. However, because of the challenges of recruiting eligible patients into a subsequent Phase 2 study, we terminated that study and intend to meet with the FDA in 2026 to inform the clinical design of our next Phase 2 study. Our clinical-stage rare disease portfolio includes TNX-2900, intranasal oxytocin potentiated with magnesium, in development for Prader-Willi syndrome and expected to start a Phase 2 study in the first quarter of 2027. Our pre-clinical, pre-IND infectious disease portfolio includes TNX-801 (horsepox, live virus vaccine), as a potential vaccine for mpox and smallpox. We own a facility in Dartmouth, MA that was purpose-built to manufacture TNX-801 under Good Manufacturing Practices (GMP) to support clinical development and potential commercialization. The facility was decommissioned in 2024 and may be reactivated on the earlier of 2027 or in the case of a national or international emergency. Our pre-IND infectious disease portfolio also includes TNX-4200, which is a small molecule broad-spectrum antiviral agent targeting CD45 for the prevention or treatment of high lethality infections to improve the medical readiness of military personnel in biological threat environments. The TNX-4200 program is supported by a $34 million contract over five years from the U.S. DoD’s Defense Threat Reduction Agency (DTRA). We own and operate a state-of-the art research facility in Frederick, Maryland that supports this research. Our pre-IND pre-clinical immunology portfolio includes TNX-1700, which is a fusion protein of TFF2 and albumin is in preclinical development for the treatment of gastric and colorectal cancer in combination with PD-1 blockade in collaboration with Columbia University. Finally, our pre-clinical, pre-IND CNS portfolio also includes TNX-4900, a highly selective small-molecule Sigma-1 receptor (“S1R”) antagonist for neuropathic pain licensed from Rutgers University. Our product candidates in development are investigational new drugs or biologics and have not been approved for any indication. Zembrace SymTouch and Tosymra are registered trademarks of Tonix Medicines. TONMYA is a registered trademark of Tonix Pharma Limited. All other marks are the property of their respective owners. We are led by a management team with significant industry experience in drug development. 25 Results of Operations We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the sale of our commercialized assets, progress of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make. Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 The following table sets forth our operating expenses for the three months ended March 31, 2026 and 2025 (in thousands): Three months ended March 31, 2026 2025 REVENUE Product revenue, net $ 6,878 $ 2,429 COSTS AND EXPENSES: Cost of sales $ 1,578 $ 943 Research and development 18,213 7,436 General and administrative 28,624 10,104 Total operating expenses 48,415 18,483 Operating loss (41,537 ) (16,054 ) Grant income — 923 Loss on extinguishment of debt — (2,092 ) Interest income 1,346 394 Other expense, net (3 ) — Net loss $ (40,194 ) $ (16,829 ) Revenues . Revenue recognized for the three months ended March 31, 2026 and 2025, was $6.9 million and $2.4 million, respectively. The Company’s net product revenues are summarized below: Three months ended March 31, 2026 2025 TONMYA $ 3,731 $ — Zembrace Symtouch 2,930 2,026 Tosymra 217 403 Total product revenues $ 6,878 $ 2,429 Cost of Sales . Cost of sales recognized for the three months ended March 31, 2026 and 2025, was $1.6 million and $0.9 million, respectively. The increase is predominantly due to the launch of Tonmya in November 2025. Research and Development Expenses . Research and development expenses for the three months ended March 31, 2026, were $18.2 million, an increase of $10.8 million, or 146%, from $7.4 million for the three months ended March 31, 2025. The increase is predominately due to increased clinical expenses of $0.8 million, non-clinical expenses of $0.4 million, and manufacturing expenses of $6.6 million as a result of pipeline prioritization period over period, and employee-related expenses of $2.5 million due to an increased workforce predominately as a result of the launch of TONMYA in November 2025. The table below summarizes our direct research and development expenses for our product candidates and development platform for the three months ended March 31, 2026, and 2025. March 31, (in thousands) 2026 2025 Change Research and development expenses: Direct expenses – TNX - 102 SL $ 1,472 $ 1,034 $ 438 Direct expenses – TNX - 801 1,059 319 740 Direct expenses – TNX - 1500 4,277 382 3,895 Direct expenses – TNX - 1900 891 136 755 Direct expenses – TNX - 4200 320 131 189 Direct expenses – TNX - 4800 1,394 — 1,394 Direct expenses – Other programs 768 322 446 Internal staffing, overhead and other 8,032 5,112 2,920 Total research & development $ 18,213 $ 7,436 $ 10,777 Our direct research and development expenses consist principally of external costs for clinical, nonclinical and manufacturing, such as fees paid to contractors, consultants and contract research organizations in connection with our development work. Included in “Internal Staffing, Overhead and Other” is overhead, supplies, research and development employee costs (including stock option expenses), travel, regulatory and legal. 26 Selling, General and Administrative Expenses . General and administrative expenses for the three months ended March 31, 2026, were $28.6 million, an increase of $18.5 million, or 183%, from $10.1 million incurred in the three months ended March 31, 2025. The increase is primarily due to an increase in sales and marketing of $11.3 million, an increase in employee related expenses of $3.9 million, and increased professional fees of $2.7 million, predominately as a result of the launch of TONMYA in November 2025. Net Loss . As a result of the forgoing, the net loss for the three months ended March 31, 2026, was $40.2 million, compared to a net loss of $16.8 million for the three months ended March 31, 2025, an increase of $23.4 million or 139%. The increase in loss is predominately due to increased spending on research and development and selling, general and administrative expenses. License Agreement On June 26, 2025, we obtained an exclusive worldwide license from the University of Massachusetts (“UMass”) Chan Medical School for the development of TNX-4800 (formerly known as mAb 2217LS). As of December 31, 2025, other than an upfront fee of $1.3 million, no payments have been accrued or paid in relation to this agreement. Asset Purchase Agreements On June 23, 2023, we entered into an asset purchase agreement with Upsher Smith for the acquisition of certain assets related to Zembrace and Tosymra. We have assumed certain obligations of Upsher Smith, including the payment of quarterly royalty payments on annual net sales from the Business in the U.S. as follows: for Tosymra, 4% for net sales of $0 to $30 million, 7% of net sales of $30 to $75 million; 9% for net sales of $75 to $100 million; 12% for net sales of $100 to $150 million; and 15% for net sales greater than $150 million. Royalty payments with respect to Tosymra are payable until the expiration or termination of the product’s Orange Book listed patent(s) with respect to the United States or, outside the United States, the expiration of the last valid claim covering the product in the relevant country of the territory. For Zembrace, royalty payments on annual net sales in the U.S. are 3% for net sales of $0 to $30 million, 6% of net sales of $30 to $75 million; 12% for net sales of $75 to $100 million; 16% for net sales of greater than $100 million. Such royalty payments were payable until July 19, 2025. Upon the entry of a generic version of the relevant product, the applicable royalty rates will be reduced by 90% for Zembrace, and by 66.7% for Tosymra. In addition, we have assumed the obligation to pay an additional 3% royalty on net sales of Tosymra, plus an additional 3% if a patent containing certain claims related to Tosymra issues in the U.S., for 15 years from the first commercial sale of Tosymra in the applicable country or for as long as the manufacture, use or sale of Tosymra in such country is covered by a valid claim of a licensed patent, and up to $15 million per Tosymra product on the achievement of sales milestones ranging from $250 million to $1 billion in annual worldwide net sales. Liquidity and Capital Resources As of March 31, 2026, we had working capital of $177.5 million, comprised primarily of cash and cash equivalents of $185.5 million, accounts receivable, net of $8.8 million, inventory of $3.6 million, and prepaid expenses and other of $9.2 million, offset by $9.7 million of accounts payable, $19.8 million of accrued expenses and other current liabilities, and $0.2 million of lease liabilities, short term. A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our clinical programs, and accruals for gross to net deductions related to our commercial products. The following table provides a summary of operating, investing and financing cash flows for the quarters ended March 31, 2026, and 2025, respectively (in thousands): March 31, 2026 2025 Net cash used in operating activities $ (42,318 ) $ (16,579 ) Net cash used in investing activities (1,692 ) (6 ) Net cash provided by (used in) financing activities 20,205 49,533 For the three months ended March 31, 2026, and 2025, we used approximately $42.3 million and $16.6 million in operating activities, respectively, which represents cash outlays for research and development and selling, general and administrative expenses in such periods. For the three months ended March 31, 2026, net cash provided by financing activities was $20.2 million, predominately from the proceeds from the sale of our common stock. For the three months ended March 31, 2025, net cash provided by financing activities was $49.5 million, predominately from the proceeds from the sale of our common stock of $62.2 million, offset by the repayment of the term loan of $9.7 million and repurchase of our common stock of $3.0 million. Cash used by investing activities for the three months ended March 31, 2026, and 2025, was $1.7 million and $6,000 respectively, related to the purchase of property and equipment. The increase is predominately due to more laboratory equipment purchases. We believe that our cash resources at March 31, 2026, and the net proceeds of $22.6 million that we raised from equity offerings in the second quarter of 2026 (See Note 12) will meet our planned operating and capital expenditure requirements into early second quarter of 2027, but will not extend to 12 months from the issuance of these financial statements. We continue to face significant challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to changes we may make in our research and development spending plans. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period from the date of filing of this Form 10-Q. We must obtain additional funding through public or private financing or collaborative arrangements with strategic partners to increase the funds available to fund operations. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development activities, or other operations and potentially delay product development to provide sufficient funds to continue our operations. If any of these events occur, our ability to achieve our development and commercialization goals would be adversely affected and we may be forced to cease operations. 27 Future Liquidity Requirements We expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses, including expenses related to additional clinical trials and the build out of our research and development operations and manufacturing. We will not have enough resources to meet our operating requirements for the one-year period from filing date of this report. Our future capital requirements will depend on a number of factors, including the availability of financing, the timing and outcome of regulatory approvals, the progress of our research and development of product candidates, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of competitive products, and our success in developing markets for our product candidates. We will need to obtain additional capital in order to fund future research and development activities. Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently. 2025 Lincoln Park Transaction On June 11, 2025, we entered into a purchase agreement (the “2025 Purchase Agreement”) and a registration rights agreement (the “2025 Registration Rights Agreement”) with Lincoln Park. Pursuant to the terms of the 2025 Purchase Agreement, Lincoln Park has agreed to purchase up to $75,000,000 of our common stock (subject to certain limitations) from time to time during the term of the 2025 Purchase Agreement. Pursuant to the terms of the 2025 Registration Rights Agreement, we filed with the SEC a registration statement to register for resale under the Securities Act the shares that have been or may be issued to Lincoln Park under the 2025 Purchase Agreement. Pursuant to the terms of the 2025 Purchase Agreement, at the time we signed the 2025 Purchase Agreement and the 2025 Registration Rights Agreement, we issued 48,708 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the 2025 Purchase Agreement. The commitment shares were valued at $1.8 million and recorded as an addition to equity for the issuance of the common stock and treated as other expense, net on the consolidated statement of operations under the 2025 Purchase Agreement. No shares were sold during the quarter ended March 31, 2026, under the 2025 Purchase Agreement. We evaluated the 2025 Purchase Agreement under ASC 815-40 Derivatives and Hedging-Contracts on an Entity’s Own Equity as it represents the right to require Lincoln Park to purchase shares of common stock in the future, similar to a put option. We concluded that the 2025 Purchase Agreement represents a freestanding derivative instrument that does not qualify for equity classification and therefore requires fair value accounting. We analyzed the terms of the contract and concluded that the derivative instrument had insignificant value as of March 31, 2026 and December 31, 2025. 2025 At-the-Market Offering On June 11, 2025, we entered into a Sales Agreement (the “2025 Sales Agreement”), with A.G.P./Alliance Global Partners (“AGP”) pursuant to which we may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $400.0 million in sales. AGP is sales agent under the ATM and paid a 3% commission on each sale under the 2025 Sales Agreement. Our common stock is sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. During the quarter ended March 31, 2026, we sold 1.4 million shares of common stock under the 2025 Sales Agreement, for net proceeds of approximately $20.1 million. Subsequent to March 31, 2026, we sold 1.7 million shares of common stock under the 2025 Sales Agreement, for net proceeds of approximately $22.6 million. 2024 At-the-Market Offering On July 30, 2024, we entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $250.0 million in the ATM. AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. During the three months ended March 31, 2025, we sold approximately 2.7 million shares of common stock under the Sales Agreement, for net proceeds of approximately $59.8 million. 28 Share Repurchase Program In September 2024, the Board of Directors approved a 2024 share repurchase program pursuant to which we may repurchase up to $10.0 million in value of its outstanding common stock from time to time on the open market and in privately negotiated transactions subject to market conditions, share price and other factors. During the three months ended March 31, 2025, the Company repurchased 250,000 of shares of its common stock outstanding under the 2024 share repurchase at prices ranging from $9.98 to $14.33 per share for a gross aggregate cost of approximately $3.0 million. No shares of common stock were repurchased during the three months ended March 31, 2026. The timing and amount of any shares repurchased will be determined based on our evaluation of market conditions and other factors and the share repurchase program may be discontinued or suspended at any time. Repurchases will be made in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements to which the Company may be subject. Repurchases may be made, in part, under a Rule 10b5-1 plan, which allows stock repurchases when the Company might otherwise be precluded from doing so. Stock Compensation Stock Incentive Plans On May 1, 2020, our stockholders approved the Tonix Pharmaceuticals Holding Corp. Amended and Restated 2020 Stock Incentive Plan (“Amended and Restated 2020 Plan”). Under the terms of the Amended and Restated 2020 Plan, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock appreciation rights (“SARs”), (4) restricted stock units, (5) other stock-based awards, and (6) cash-based awards. The Amended and Restated 2020 Plan initially provided for the issuance of up to 50,000 shares of common stock, which amount will be increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan). In addition, the Amended and Restated 2020 Plan contains an “evergreen provision” providing for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31 st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31 st of such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards). The Board of Directors determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020 Plan. However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith. Additionally, the expiration period of grants under the Amended and Restated 2020 Plan may not be more than ten years. As of March 31, 2026, there were 425,649 options available for future grants under the Amended and Restated 2020 Plan. On May 8, 2025, the Company's stockholders approved the addition of 1,000,000 shares to the Company's Amended and Restated 2020 Plan. 29 We measure the fair value of stock options on the date of grant, based on the Black Scholes option pricing model using certain assumptions discussed below, and the closing market price of the Company’s common stock on the date of the grant. The fair value of the award is measured on the grant date. One-third of most stock options granted pursuant to the Plans vest 12 months from the date of grant and 1/36 th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company issues options to directors which vest over a one-year period. The Company also issues premium options to executive officers which have an exercise price greater than the grant date fair value and has issued performance-based options which vest when target parameters are met or probable of being met, subject in each case to a one year minimum service period prior to vesting. Stock-based compensation expense related to awards is amortized over the applicable service period using the straight-line method. The risk-free interest rate is based on the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected term of the options as of the grant date. The expected term of options is determined using the simplified method, as provided in an SEC Staff Accounting Bulletin, and the expected stock price volatility is based on the Company’s historical stock price volatility. The weighted average fair value of options granted for the three-month periods ended March 31, 2026 and 2025 was $13.4 and $7.55 per share, respectively. Stock-based compensation expense relating to options granted of $1.9 million, of which $1.3 million and $0.6 million, related to Selling, General and Administration and Research and Development, respectively, was recognized for the three months ended March 31, 2026. Stock-based compensation expense relating to options granted of $0.9 million, of which $0.6 million and $0.3 million, related to Selling, General and Administration and Research and Development, respectively, was recognized for the three months ended March 31, 2025. As of March 31, 2026, we had approximately $23.3 million of total unrecognized compensation cost related to non-vested awards granted under the Plans, which the Company expects to recognize over a weighted average period of 3.36 years. Employee Stock Purchase Plan On May 5, 2023, our stockholders approved the Tonix Pharmaceuticals Holdings Corp. 2023 Employee Stock Purchase Plan. (the “2023 ESPP”), which was replaced by the Tonix Pharmaceuticals Holdings Corp. 2025 Employee Stock Purchase Plan (the “2025 ESPP”, and together with the 2023 ESPP, the “ESPP Plans”), which was approved by our stockholders on May 8, 2025. The 2025 ESPP allows eligible employees to purchase up to an aggregate of 2,000,000 shares of the Company's common stock. Under the 2025 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of the Company's common stock at the end of the offering period. Each offering period under the 2025 ESPP is for six months, which can be modified from time to time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee's accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2025 ESPP, subject to the statutory limit under the Code. The 2023 ESPP allows eligible employees to purchase up to an aggregate of 250 shares of the Company’s common stock. Under the 2023 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of the Company’s common stock at the end of the offering period. Each offering period under the 2023 ESPP is for six months, which can be modified from time-to-time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2023 ESPP, subject to the statutory limit under the Code. As of March 31, 2026, 159 shares were available for future sales under the 2023 ESPP and 1,994,117 shares were available under the 2025 ESPP. The ESPP Plans are considered compensatory plans with the related compensation cost expensed over the six-month offering period. For the three months ended March 31, 2026 and 2025, $0.1 million and $0, respectively, were expensed. As of December 31, 2025, approximately $90,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In January 2026, 5,883 shares that were purchased as of December 31, 2025, under the 2025 ESPP, were issued. 30 Commitments Research and Development Contracts The Company has entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $49.6 million at March 31, 2026 for future work to be performed. The Company has entered into various exclusive license agreements with various institutions with the right to sublicense, certain patents, technical information and material, and to develop and commercialize products thereunder. In addition to any upfront payments already paid, the Company may be obligated to pay milestone fees ranging from $25,000 to $5.0 million based on the potential achievement of certain development milestones, as well as milestone fees ranging from $55,000 to $20.0 million based on certain potential commercial achievements, as specified in the respective license agreement. Additionally, for licensed products sold during the applicable royalty term, the Company must pay royalties in the low-to-mid single digits, beginning in the year after the Company completes its first commercial sale of a licensed product. Finally, the Company has the right to grant sublicenses to third parties under each license agreement and is required to pay a sublicense income share based on the stage of development of the licensed product at the time the sublicense is granted. Operating leases At March 31, 2026, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in thousands): Year Ending December 31, Remainder of 2026 $ 107 2027 480 2028 451 2029 366 2030 30 1,434 Included interest (144 ) $ 1,290 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition. Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, prompt pay and other sales discounts, and product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Adjustments to these estimates to reflect actual results or updated expectations will be assessed each period. If any of our ratios, factors, assessments, experiences, or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected. The potential of our estimates to vary differs by program, product, type of customer and geographic location. In addition, estimates associated with U.S. Medicare and Medicaid governmental rebate programs are at risk for material adjustment because of the extensive time delay. Research and Development. We outsource certain of our research and development efforts and expense the related costs as incurred, including the cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related to particular research and development projects and had no alternative future uses. 31 We estimate our research and development accrued expenses. Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants and clinical research organizations and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. We account for trial expenses according to the progress of the trial as measured by participant progression and the timing of various aspects of the trial. We determine accrual estimates that take into account discussions with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time. Our clinical trial accruals and prepaid assets are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Stock-Based Compensation. All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the consolidated statements of operations as compensation expense over the relevant vesting period. In addition, for awards that vest immediately and are nonforfeitable, the measurement date is the date the award is issued. Derivative Instruments and Warrant Liabilities. The Company evaluates all of its financial instruments, including issued warrants to purchase common stock under ASC 815 – Derivatives and Hedging, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The Company uses the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates, which is adjusted for instrument-specific terms as applicable. From time to time, certain equity-linked instruments may be classified as derivative liabilities due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. In such a case, the Company has adopted a sequencing approach under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity to determine the classification of its contracts at issuance and at each subsequent reporting date. If reclassification of contracts between equity and assets or liabilities is necessary, the Company first allocates remaining authorized shares to equity on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving the first allocation of shares. In the event of identical issuance dates, shares are then allocated to equity beginning with instruments with the latest maturity date first. Other than contractual obligations incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retain or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity. 32 Recently Adopted Accounting Pronouncements In July 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides guidance for estimating credit losses under the current expected credit losses (CECL) model for current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification 606. We have adopted this ASU on a prospective basis, and it did not have a material impact on our consolidated financial statements and related disclosures. Recently Issued Accounting Pronouncements In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832). The amendments in this ASU establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The amendments in this ASU are effective annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-10 on our consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU amends the existing standard to remove all references to software development project stages and requires entities to start capitalizing software costs when both of the following occur: (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted as of the beginning of a fiscal year. The amendments can be applied prospectively, retrospectively, or via a modified prospective transition method. We are evaluating the impact of adoption on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, to improve transparency in financial reporting by requiring entities to present more detailed information about the nature of expenses included within the Income Statement. The guidance will first be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is in the process of assessing the impact of ASU 2024-03 on our financial statements. ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.