Tempest Therapeutics, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TEMPEST THERAPEUTICS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 106 Consolidated Balance Sheets 108 Consolidated Statements of Operations 109 Consolidated Statements of Stockholders’ Equity 110 Consolidated Statements of Cash Flows 111 Notes to Consolidated Financial Statements 112 105 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Tempest Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Tempest Therapeutics, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2025, and 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 at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. The Company's Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred operating losses since inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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. 106 Valuation of modified stock-based compensation awards Description of the Matter As described in Note 8 to the financial statements under the caption “Stock-based compensation,” in the fourth quarter of 2025, the Company modified 416,005 stock options to extend the post-termination exercise period. The modifications of current and former employees' stock option grants resulted in modification accounting under ASC 718, Compensation – Stock Compensation. During the year ended December 31, 2025, the Company recognized $0.8 million in stock-based compensation expense due to modifications, a portion of which related to the modification of stock options in the fourth quarter. Auditing the Company’s valuation of certain stock options modified in the fourth quarter, including the derived service period, was complex and required significant auditor judgment due to the subjectivity in estimating the fair value of the modified awards and the fair value of the original awards immediately before they were modified, including the adjustment to the stock price on the modification date for the fair value of the warrant dividend and the expected stock price volatility. How We Addressed the Matter in Our Audit To test the valuation of certain stock options modified in the fourth quarter, our audit procedures included, among others, assessing the completeness of the awards modified, evaluating the key terms and conditions of the awards modified to assess the accounting treatment, and testing the clerical accuracy of the calculation related to the expense recorded. Also, our procedures included evaluating the methodologies used to estimate the fair value of the modified awards and the original awards immediately before they were modified. Additionally, we involved our internal valuation specialists to (i) calculate the adjustments to the stock price by assessing the fair value of the warrant dividend on the modification date, (ii) develop an independent estimate of the volatility by utilizing third party historical data of closing stock prices, and (iii) perform a Monte Carlo simulation to assess the fair value of the awards after modification and the derived service period over which the compensation expense will be attributed. /s/ Ernst & Young LLP We have served as the Company's auditor since 2021. Chicago, Illinois March 30, 2026 107 Tempest Therapeutics, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) As of December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 7,707 $ 30,268 Prepaid expenses and other current assets 562 1,206 Total current assets 8,269 31,474 Property and equipment — net 605 886 Operating lease right-of-use assets 7,540 8,643 Other noncurrent assets 517 485 Total assets $ 16,931 $ 41,488 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 1,038 $ 2,450 Accrued expenses 937 2,726 Current loan payable (net of discount and issuance costs of nil and $ 74 , respectively) — 6,354 Current operating lease liabilities 1,192 869 Accrued compensation 147 1,762 Interest payable — 59 Total current liabilities 3,314 14,220 Operating lease liabilities, less current portion 6,949 8,142 Total liabilities 10,263 22,362 Commitments and contingencies (Note 5) Stockholders’ equity: Common stock, $ 0.001 par value; 100,000,000 shares authorized; 4,927,161 and 3,382,432 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively (1) 5 3 Additional paid-in capital (1) 240,031 226,229 Accumulated deficit ( 233,368 ) ( 207,106 ) Total stockholders’ equity 6,668 19,126 Total liabilities and stockholders’ equity $ 16,931 $ 41,488 (1) Results, including shares issued and outstanding have been adjusted to reflect the one-for-thirteen stock split effected in April 2025. See Note 1, Organization and Description of the Business, for details. See accompanying Notes to Consolidated Financial Statements 108 Tempest Therapeutics, Inc. Consolidated Statements of Operations (in thousands, except share and per share amounts) Year Ended December 31, 2025 2024 Operating expenses: Research and development $ 12,606 $ 28,476 General and administrative 13,969 13,550 Operating loss ( 26,575 ) ( 42,026 ) Other income (expense), net: Interest expense ( 207 ) ( 1,316 ) Interest income and other income (expense), net 520 1,499 Other income (expense), net 313 183 Provision for income taxes — — Net loss $ ( 26,262 ) $ ( 41,843 ) Net loss per share of common stock and pre-funded warrants, basic and diluted (1) $ ( 6.33 ) $ ( 19.50 ) Weighted-average shares of common stock and pre-funded warrants outstanding, basic and diluted (1) 4,149,733 2,146,276 (1) Results, including shares of common stock, have been adjusted to reflect the one-for-thirteen stock split effected in April 2025. See Note 1, Organization and Description of the Business, for details. See accompanying Notes to Consolidated Financial Statements 109 Tempest Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) Common Stock Additional Paid-In Deficit Total Stockholders' Shares (1) Amount (1) Capital (1) Accumulated Equity (Deficit) BALANCE — December 31, 2023 1,695,788 $ 2 $ 192,029 $ ( 165,263 ) $ 26,768 Issuance of common stock for cash (net of issuance cost of $ 1,105 ) 1,663,554 1 28,590 — 28,591 Share-based compensation — — 5,303 — 5,303 Issuance of common stock under equity plan awards 23,090 — 307 — 307 Net loss — — — ( 41,843 ) ( 41,843 ) BALANCE — December 31, 2024 3,382,432 $ 3 $ 226,229 $ ( 207,106 ) $ 19,126 Issuance of common stock for cash (net of issuance cost of $ 535 ) 1,204,774 2 6,045 — 6,047 Share-based compensation — — 3,118 — 3,118 Issuance of pre-funded warrants (net of issuance cost of $ 416 ) 334,000 — 3,309 — 3,309 Issuance of common stock warrants (net of issuance cost of $ 165 ) — — 1,283 — 1,283 Issuance of common stock under equity plan awards 5,955 — 47 — 47 Net loss — — — ( 26,262 ) ( 26,262 ) BALANCE — December 31, 2025 4,927,161 $ 5 $ 240,031 $ ( 233,368 ) $ 6,668 (1) Results, including shares of common stock, have been adjusted to reflect the one-for-thirteen stock split effected in April 2025. See Note 1, Organization and Description of the Business, for details. See accompanying Notes to Consolidated Financial Statements 110 Tempest Therapeutics, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 Operating activities: Net loss $ ( 26,262 ) $ ( 41,843 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 266 389 Stock-based compensation expense 3,118 5,303 Noncash lease expense 1,103 1,309 Noncash interest and other expense, net 85 202 Changes in operating assets and liabilities: Prepaid expenses and other assets 615 ( 110 ) Accounts payable ( 1,412 ) 1,605 Accrued expenses and other liabilities ( 3,404 ) 1,273 Interest payable ( 59 ) ( 54 ) Operating lease liabilities ( 870 ) ( 1,101 ) Cash used in operating activities ( 26,820 ) ( 33,027 ) Investing activities: Purchase of property and equipment — ( 435 ) Cash used in investing activities — ( 435 ) Financing activities: Proceeds from the issuance of common stock, net of issuance costs 6,045 28,591 Proceeds from the issuance of pre-funded warrants, net of issuance costs 3,309 — Proceeds from the issuance of common stock warrants, net of issuance costs 1,284 — Repayment of loan ( 6,426 ) ( 4,398 ) Proceeds from the issuance of common stock under equity plan awards 47 307 Cash provided by financing activities 4,259 24,500 Net increase in cash and cash equivalents ( 22,561 ) ( 8,962 ) Cash, cash equivalents and restricted cash at beginning of period 30,711 39,673 Cash, cash equivalents and restricted cash at end of period 8,150 30,711 Supplemental disclosure of cash flow information: Cash paid for interest $ 192 $ 1,177 Cash paid for business taxes $ 43 $ 54 Non-cash investing activities: Property and equipment in accounts payable $ — $ — See accompanying Notes to Consolidated Financial Statements 111 Tempest Therapeutics, Inc. Notes to Consolidated Financial Statements As of and For the Years Ended December 31, 2025 and 2024 (In Thousands, Except Share and Per Share Amount) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Description of Business Tempest Therapeutics, Inc. (“Tempest” or the “Company”) is a clinical-stage biotechnology company advancing a diverse portfolio of targeted and immune-mediated product candidates with the potential to be first-in-class to treat a wide range of cancers. Tempest’s portfolio includes both cell therapy and small molecule product candidates spanning discovery through late-stage development. The Company is headquartered in Brisbane, California. Reverse Stock Split On December 3, 2024, the Company’s stockholders approved a proposal to effect an amendment to the Company’s Restated Certificate of Incorporation to implement a reverse stock split. On April 4, 2025, the Company filed a certificate of amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the one-for-thirteen ( 1 :13) reverse stock split of its outstanding common stock (the "Reverse Stock Split"). On April 8, 2025, the Company effected the Reverse Stock Split. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding options and warrants, and the number of shares authorized for issuance pursuant to the Company’s equity incentive plans have been reduced proportionately. The Reverse Stock Split did not reduce the number of authorized shares of common stock and did not alter the par value. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would have otherwise been entitled to receive a fractional share received a cash payment in lieu thereof. The Reverse Stock Split affected all stockholders proportionately and did not affect any stockholder’s percentage ownership of the Company’s common stock (except to the extent that the Reverse Stock Split resulted in any stockholder owning only a fractional share). Liquidity and Going Concern The Company has incurred operating losses since inception. As of December 31, 2025, the Company had $ 7.7 million of cash and cash equivalents. While the Company implemented cost reductions in 2025, the Company has finite cash resources available to fund its operations. In April 2025 , the Company announced plans to explore a full range of strategic alternatives to advance its promising clinical stage programs and maximize stockholder value. The Company retained MTS Health Partners, L.P., an internationally recognized financial advisor with substantial experience in the biotechnology industry, to support it with the strategic evaluation process. As part of the cost reductions, the Company reduced its workforce by 21 of 26 full-time employees, which became effective April 30, 2025 . Further, in support of such efforts, on June 5, 2025, each of Stephen Brady, the Company’s Chief Executive Officer and President, Samuel Whiting, the Company’s Executive Vice President and Chief Medical Officer, and Nicholas Maestas, the Company’s Chief Financial Officer and Head of Corporate Strategy, transitioned to consulting arrangements with the Company, pursuant to which they continued to serve the Company in their respective executive roles. The Company incurred $ 3.2 million of one-time cash severance payments, benefits and other related costs (excluding non-cash charges associated with stock-based compensation), with the majority of such costs incurred in the second quarter of 2025. On February 3, 2026, the Company closed the Asset Acquisition (as defined below). See Note 13, Subsequent Events. Pursuant to the Asset Purchase Agreement (as defined below), Factor (as defined below) has made the Funding Commitment (as defined below) to provide the Company with financial support for at least 18 months following the closing of the Asset Acquisition, up to a maximum amount of $ 20.0 million that is inclusive of any amounts raised and received by the Company after the date of the Asset Purchase Agreement, on the terms and subject to the conditions and other provisions of a funding commitment letter contemplated by and entered into concurrently with the Asset Purchase Agreement. However, there is significant uncertainty as 112 to whether we will be able to satisfy the terms and conditions and other provisions set forth in the funding commitment letter, and, if we are unable to do so, we may be limited in the amount of funding that we are able to access under the Funding Commitment or we may not be able to access any funds under the Funding Commitment. The timing of any additional funding from Factor is uncertain. The Company expects that its existing cash and cash equivalents will fund the Company’s projected operating expense requirements through less than 12 months from the date our consolidated financial statements were available to be issued. Accordingly, there is substantial doubt about the Company’s ability to continue to operate as a going concern for a period of 12 months from the date of issuance of these consolidated financial statements. The accompanying financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any separate adjustments relating to the recovery of recorded assets or the classification of liabilities; however, such adjustments may be necessary in the future when the Company is unable to continue as a going concern. ATM Program On July 23, 2021, the Company entered into a sales agreement with Jefferies LLC (“Jefferies”), pursuant to which the Company may sell, from time to time at its sole discretion through Jefferies, as its sales agent, shares of its common stock having, up to an aggregate sales price of $ 100.0 million of its common stock through Jefferies (the “Prior ATM Program”). As of June 20, 2024, the Company had sold an aggregate 9,017,110 shares of its common stock for gross proceeds of $ 42.7 million ($ 41.5 million net of commissions and estimated expenses) under the Prior ATM Program. On June 20, 2024, the Company and Jefferies terminated the Prior ATM Program and entered a new Open Market Sale Agreement (the “Sales Agreement”) to sell shares of common stock from time to time through Jefferies acting as sales agent (the “ATM Program”). The Company will pay Jefferies a commission up to 3.0 % of the gross sales proceeds of any shares of its common stock sold through Jefferies under the ATM Program and also has provided Jefferies with indemnification and contribution rights. Pursuant to the prospectus supplement dated June 20, 2024 filed by the Company with the U.S. Securities and Exchange Commission (“SEC”), the Company was able to offer and sell up to $ 205.0 million of its shares of common stock pursuant to the Sales Agreement. On February 6, 2025, the Company filed a prospectus supplement with the SEC limiting the availability under the ATM Program to $ 14.5 million. On June 11, 2025, in connection with the RDO (as defined below), the Company delivered written notice to Jefferies that it was suspending and terminating the prospectus supplement, dated February 6, 2025, related to the ATM Program (the “ATM Prospectus”). The Company will not make any sales of its securities pursuant to the Sales Agreement, unless and until a new prospectus, prospectus supplement or a new registration statement is filed. Other than the termination of the ATM Prospectus, the Sales Agreement remains in full force and effect. Under current SEC regulations, if at any time the Company's public float is less than $ 75.0 million, and for so long as the Company’s public float remains less than $ 75.0 million, the amount the Company can raise through primary public offerings of securities in any 12-month period using shelf registration statements is limited to an aggregate of one-third of the Company's public float, which is referred to as the baby shelf rules. As of the year ended December 31, 2025, the Company has sold an aggregate of 312,830 shares of its common stock for proceeds of $ 2.8 million, pursuant to the ATM Program. Registered Direct Offerings On June 11, 2025, the Company sold an aggregate of 405,000 shares of the Company’s common stock and pre-funded warrants to purchase 334,000 shares of its common stock (the “June 2025 Pre-Funded Warrants”) in a registered direct offering (“June RDO”). The offering price was $ 6.25 per share of common stock and $ 6.249 per June 2025 Pre-Funded Warrant , which is the price of each share of common stock sold in the RDO, minus the $ 0.001 exercise price per June 2025 Pre-Funded Warrant . The net proceeds from the RDO were approximately $ 4.1 million, after deducting placement agent fees and offering expenses payable by the Company. As of December 31, 2025, all June 2025 Pre-Funded Warrants had been exercised. On November 24, 2025, the Company sold an aggregate of 487,000 shares of the Company's common stock, pre-funded warrants to purchase 685,414 shares of its common stock (the “November 2025 Pre-Funded Warrants”) and warrants to purchase an aggregate of 1,172,414 shares of common stock (the “Common Warrants”) in a registered direct offering (the “November RDO”). 113 The combined purchase price of each share of common stock and accompanying Common Warrant was $ 3.625 . The combined purchase price of each November 2025 Pre-Funded Warrants and accompanying Common Warrant was $ 3.624 (equal to the combined purchase price per share of common stock and accompanying Common Warrant, minus $ 0.001 ) The exercise price of the Common Warrants is $ 3.50 per share. The net proceeds from the RDO were approximately $ 3.8 million, after deducting placement agent fees and estimated offering expenses payable by the Company. As of December 31, 2025, all November 2025 Pre-Funded Warrants and Common Warrants remained outstanding. All November 2025 Pre-Funded Warrants were subsequently exercised in January and February 2026. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation —The accompanying Consolidated Financial Statements have been prepared in accordance with US generally accepted accounting principles ("GAAP") and necessarily include amounts based on estimates and assumptions by management. Use of Estimates —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to research and development accruals, recoverability of long-lived assets, right-of-use assets, lease obligations, stock-based compensation and income taxes uncertainties and valuation allowances. Management bases its estimates on historical experience and on various other assumptions that are believed 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 those estimates. Segment Information —The Company operates and manages its business as one reportable and operating segment, which is the business of discovery and development of small molecule drugs to treat cancers. All assets and operations are in the U.S. The Company’s Chief Executive Officer , who is the chief operating decision maker (“CODM”), reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. For additional segment information, see Note 12, Segment Reporting. Risks and Uncertainties —The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on single-source vendors, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval, prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties. Concentration of Credit Risk —Financial instruments, which potentially subject the Company to concentration of risk, consist principally of cash and money market fund. All of the Company’s cash and money market fund are deposited in accounts with a major financial institution in excess of federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheets. The Company has no 114 off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Cash and Cash Equivalents —The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisitions to be cash equivalents. As of December 31, 2025 and 2024 , the Company’s cash and cash equivalents consisted of bank deposits and money market funds. Leases —The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the customer has the right to control the use of the identified asset. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the lease term. The right-of-use (“ROU”) asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Property and Equipment —Property and equipment is recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Upon disposal of an asset, the related cost and accumulated depreciation are removed from the asset accounts and any resulting gain or loss is included in the consolidated statements of operations. Repair and maintenance costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment. The estimated useful lives of the Company’s respective assets are as follows: Computer equipment and software 3 years Furniture and fixtures 7 years Laboratory equipment 5 years Leasehold improvements Shorter of the useful life of the asset or the life of the lease Impairment of Long-Lived Assets —Long-lived assets are reviewed for impairment if events or circumstances indicate the carrying amount of these assets may not be recoverable. If this review indicates that these assets will not be recoverable, based on the forecasted undiscounted future operating cash flows expected to result from the use of long-lived assets and their eventual disposition, the Company’s carrying value of the long-lived assets is reduced to fair value based on a discounted future cash flow approach or quoted market values. Research and Development Expenses and Accrued Research and Development —Research and development expenses are charged to expense as incurred. Research and development expenses include certain payroll and personnel expenses including stock-based compensation, laboratory supplies, consulting costs, external contract research and development expenses and facility or lease expenses. In-licensing fees and other costs to acquire technologies that are utilized in research and development, and that are not expected to have alternative future use, are expensed when incurred. Advance payments for goods or services for future research and development activities are deferred and expensed as the goods are delivered or the related services are performed. The Company estimates preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on the 115 Company’s behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers, the Company’s estimates of accrued expenses and on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. The estimates are trued up to reflect the best information available at the time of the financial statement issuance. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary. Patent Costs —Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain. These patent-related legal costs are reported as a component of general and administrative expenses. General and Administrative Expenses —General and administrative costs are expensed as incurred and include employee-related expenses including salaries, benefits, travel and stock-based compensation for the Company’s personnel in executive, finance and accounting, and other administrative functions, as well as fees paid for legal, accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include general corporate legal fees and patent costs. Fair Value Measurements —Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The carrying amounts of the Company’s financial instruments approximate fair value due to their short-term maturities. Stock-Based Compensation Expense —The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based payments made to employees, directors and non-employees based on estimated grant-date fair values. The Company uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period. The Company estimates the fair value of stock options to employees, directors and non-employees using the Black-Scholes option-valuation model. The Black-Scholes model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term, risk-free rate of return, and the fair value of the underlying common stock on the date of grant. Due to the lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the life science industry. The Company uses the simplified method to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they occur. Net Loss per Share Attributable to Common Stockholders —The Company follows the two-class method when computing net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. 116 Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, convertible preferred stock and warrants to purchase shares of convertible preferred stock are considered potential dilutive common shares. Income Taxes —The Company accounts for income taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period when such determination is made. As of December 31, 2025 and 2024, the Company has recorded a full valuation allowance on its deferred tax assets. Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax. Recently Adopted Accounting Standards —In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose specific tax rate reconciliation categories, as well as income taxes paid disaggregated by jurisdiction, amongst other disclosure enhancements. The ASU is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. We adopted the ASU retrospectively for the period ending December 31, 2025, and it affects only our disclosures and does not impact our results of operations or financial condition. 3 . FAIR VALUE MEASUREMENTS The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands): As of December 31, 2025 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 7,707 $ — $ — $ 7,707 Total $ 7,707 $ — $ — $ 7,707 As of December 31, 2024 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 30,268 $ — $ — $ 30,268 Total $ 30,268 $ — $ — $ 30,268 117 4 . BALANCE SHEET ITEMS Prepaid expenses and other current asset consist of the following as of December 31, 2025 and 2024 (in thousands): 2025 2024 Prepaid expenses $ 196 $ 642 Prepaid research and development costs 11 29 Other current assets 355 535 Total $ 562 $ 1,206 Property and equipment, net, consists of the following as of December 31, 2025 and 2024 (in thousands): 2025 2024 Computer equipment and software $ 151 $ 192 Furniture and fixtures 263 328 Lab equipment 1,446 1,485 Leasehold improvements 198 201 Property and equipment 2,058 2,206 Less accumulated depreciation ( 1,453 ) ( 1,320 ) Property and equipment—net $ 605 $ 886 Depreciation expense for the years ended December 31, 2025 and 2024 was $ 266 and $ 389 , respectively. Accrued liabilities as of December 31, 2025 and 2024 consist of the following (in thousands): 2025 2024 Accrued other liabilities $ 627 $ 1,335 Accrued clinical trial liability 310 1,391 Total $ 937 $ 2,726 5 . COMMITMENTS AND CONTINGENCIES Facilities Lease Agreements —In January 2022, the Company entered into an 8-year office lease agreement for a 20,116 square feet facility in Brisbane, California (“Brisbane Lease”). The lease commenced in December 2022 . As of December 31, 2025 and 2024 , the balance of the operating lease right of use assets were $ 7,540 and $ 8,643 , respectively, and the related operating lease liability were $ 8,141 and $ 9,011 , respectively, as shown in the accompanying consolidated balance sheets. Rent expense was $ 1,946 and $ 2,244 for the years ended December 31, 2025 and 2024, respectively. 118 As of December 31, 2025, future minimum annual lease payments under the Company’s operating lease liabilities were as follows: Total Commitment Year Ending (in thousands) 2026 1,926 2027 1,994 2028 2,064 2029 2,136 2030 2,210 Total minimum lease payments 10,330 Less: imputed interest ( 2,189 ) Present value of operating lease obligations 8,141 Less: current portion ( 1,192 ) Noncurrent operating lease obligations $ 6,949 Related to this Brisbane Lease agreement, the Company entered into a letter of credit with a bank to deposit $ 388 in a separate account that is restricted cash to serve as security rent deposit. This amount is included in other noncurrent assets in the accompanying Consolidated Balance Sheets as of December 31, 2025 . 6 . LOAN PAYABLE On January 15, 2021, the Company entered into a loan agreement with Oxford Finance LLC (the “Lender”) to borrow a term loan amount of $ 35,000 to be funded in three tranches (as amended, the “Loan Agreement”). Tranche A of $ 15,000 was wired to the Company on January 15, 2021. Tranche B of $ 10,000 expired on March 31, 2022 . Tranche C of $ 10,000 was available at the Lender’s option. On December 23, 2022, the Company entered into a First Amendment to the Loan Agreement. The amendment modified the Loan Agreement as follows: (i) each of the Company and Millendo Therapeutics US, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Millendo”), were joined as co-borrowers under the Loan Agreement; (ii) the interest-only repayment period was extended through December 31, 2023 (which interest-only period may be further extended through June 30, 2024 under certain circumstances) ; and (iii) a security interest in all of the assets of the Company, TempestTx and Millendo, including any intellectual property, was granted to the Lender. In addition, the Lender permitted a one-time prepayment in the amount of $ 5.0 million, which the Company paid on December 23, 2022. Following the amendment to the Loan Agreement, the term loan had a maturity date of August 1, 2025 and an annual floating interest rate of 7.15 %, which is an Index Rate plus 7.10 %. Index Rate is the greater of (i) 1-Month CME Term SOFR or (ii) 0.05 %. In the fourth quarter of 2023, the Company achieved the circumstances necessary to extend the interest-only repayment period through June 30, 2024. Monthly principal payments of $ 733 were required to begin on July 1, 2024. Related to this borrowing, the Company recorded loan discounts totaling $ 898 and paid $ 95 of debt issuance costs. These amounts would be amortized as additional interest expense over the life of the loan. On April 8, 2025, using cash on hand, the Company made a repayment of $ 3.5 million in full satisfaction of the aggregate outstanding amount, including accrued interest and exit fees as of such date, under the Loan Agreement with the Lender. The payoff amount paid by the Company in connection with the termination of the Loan Agreement was pursuant to a payoff letter with the Lender and included payment of $ 0.6 million as an exit fee. Upon making the repayment, the Loan Agreement was terminated in accordance with its terms and all liens and security interests granted thereunder to secure the obligations were released. For the years ended December 31, 2025 and 2024 , total interest expense was $ 207 and $ 1,316 , respectively. 119 7 . STOCKHOLDERS' EQUITY Authorized Stock The Company is authorized to issue 100,000,000 shares of common stock, par value of $ 0.001 per share, and 5,000,000 shares of preferred stock, 100,000 of which have been designated as Series A Participating Preferred Stock (the “Series A Preferred Stock”), par value of $ 0.001 per share pursuant to the Company’s adoption the Rights Plan (as defined below). No shares of the Company’s Series A Participating Preferred Stock were outstanding as of December 31, 2025 and 2024. Stockholders are entitled to dividends as declared by the Board of Directors, subject to rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no cash dividends declared to date. The holders of each share of common stock are entitled to one vote and the holders of each share of Series A Preferred Stock, if issued, are entitled to 1,000 votes. Except for effecting or validating certain specific actions intended to protect the preferred stockholders, the holders of common stock vote together with preferred stockholders. Rights Plan On October 10, 2023, the Company’s Board of Directors adopted a limited duration stockholder rights plan (the “Rights Plan”), effective immediately, and declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock. The dividend was effective as of October 23, 2023 (the “Record Date”) with respect to stockholders of record on that date. The Rights will also attach to new common stock issued after the Record Date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of the Series A Preferred Stock at a price of $ 25.00 per one one-thousandth of a preferred share, subject to adjustment. The descriptions and terms of the Rights are set forth in a Rights Agreement, dated as of October 10, 2023 (the “Rights Agreement"), between the Company and Computershare Trust Company, NA. On October 9, 2024, the Company entered into Amendment No. 1 (the “Amendment”) to the Rights Agreement. The Amendment extends the Final Expiration Date of the Rights Agreement until immediately following the Company’s 2025 Annual Meeting of Stockholders or, if the Company’s stockholders approve the Rights Plan at or prior to such meeting, to October 10, 2026, unless the Rights are earlier redeemed or exchanged by the Company. The Company does not have any obligation under the Rights Agreement to seek stockholder approval for the Rights Agreement. On December 5, 2024, the Company entered into Amendment No. 2 (the “Second Amendment”) to the Rights Agreement. The Second Amendment makes certain technical amendments to the rights and obligations of the Company’s Board of Directors to administer and make determinations with respect to the Rights Agreement and the rights issued thereunder. The Rights Agreement otherwise remains unmodified and in full force and effect in accordance with its terms. 8 . STOCK-BASED COMPENSATION Equity Plans In 2011, Private Tempest adopted the 2011 Equity Incentive Plan (the “2011 Plan), and in 2017, Private Tempest adopted the 2017 Equity Incentive Plan (the “2017 Plan”), and together with the 2011 Plan, the “Tempest Prior Plans.” The Tempest Prior Plans have been terminated and no additional grants may be made under either plan. All stock awards granted under the Tempest Prior Plans will remain subject to the terms of the applicable prior plan. As a result of the merger with Millendo, the Tempest Prior Plans were assumed by the Company. On April 29, 2019, the Board of Millendo adopted the 2019 Equity Incentive Plan (the “2019 Plan”), subject to approval by the Company’s stockholders, and became effective with such stockholder approval on June 11, 2019. On June 17, 2022, the Company’s stockholders approved the Amended and Restated 2019 Equity Incentive Plan (the “A&R 2019 Plan”), which amended and restated the 2019 Plan and was the successor to, and replacement of, the 2019 Plan. 120 The Board of Tempest adopted the Amended and Restated 2023 Equity Incentive Plan (the “2023 Plan”) on April 30, 2023, subject to approval by the Company’s stockholders. On June 15, 2023, the Company’s stockholders approved the 2023 Plan, which amended and restated the A&R 2019 Plan and will be a successor to, and replacement of, the A&R 2019 Plan. The number of shares of the Company's common stock reserved for issuance under the 2023 Plan will automatically increase on January 1st of each year, for a period of 10 years, from January 1, 2024 continuing through January 1, 2033, by 4 % of the total number of shares of the Company's common stock outstanding on December 31 st of the preceding calendar year, or a lesser number of shares as may be determined by the Board of Directors. Accordingly, on January 1, 2026, the common stock reserved for issuance was increased by 197,086 shares. As of December 31, 2025 , there were 47,745 shares available for future grant under the 2023 Plan. In addition, on January 27, 2026, the Company's stockholders approved the amendment to increase the number of shares issuable under the 2023 Plan by 1,410,000 shares of common stock. The 2023 Plan allows the Company to grant stock awards to employees, directors and consultants of the Company, including incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. The Board of Tempest adopted the 2023 Inducement Plan (“2023 Inducement Plan”) on June 21, 2023, pursuant to which the Company reserved 1,150,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2023 Inducement Plan was approved by the Company’s Board of Directors without stockholder approval in accordance with such rule. As of December 31, 2025 , there were 67,615 shares available for future grant under the 2023 Inducement Plan. The Company measures employee and non-employee stock-based awards at grant date fair value and records compensation expense on a straight-line basis over the vesting period of the award. Employee Stock Ownership Plan The Board of Millendo adopted the 2019 Employee Stock Purchase Plan on April 29, 2019, which became effective upon stockholder approval on June 11, 2019. On June 17, 2022, the Company’s stockholders approved the Amended and Restated 2019 Employee Stock Purchase Plan (the “2019 ESPP”). The 2019 ESPP enables employees to purchase shares of the Company's common stock through offerings of rights to purchase the Company's common stock to all eligible employees. The 2019 ESPP provides that the number of shares of common stock reserved for issuance under the 2019 ESPP will automatically increase on January 1, 2023 and continuing through (and including) January 1, 2029, by the lesser of 1.5 % of the total number of shares of Common Stock outstanding on December 31 st of the preceding calendar year, (ii) 500,000 shares of Common Stock, or (iii) such lesser number of shares of Common Stock as determined by the Board of Directors (which may be zero). On January 1, 2026, the common stock reserved for issuance was increased by 38,461 shares. As of December 31, 2025 , 68,608 shares of common stock remained available for future issuance under the 2019 ESPP. During the year ended December 31, 2025 , 5,955 shares of common stock had been issued under the 2019 ESPP. Stock Options Options to purchase the Company’s common stock may be granted at a price not less than the fair market value in the case of both NSOs and ISOs, except for an options holder who owns more than 10% of the voting power of all classes of stock of the Company, in which case the exercise price shall be no less than 110 % of the fair market value per share on the grant date. Stock options granted under the Plans generally vest over four years and expire no later than ten ( 10 ) years from the date of grant. Vested options can be exercised at any time. Prior to the merger with Millendo, the grant date fair market value of the shares of common stock underlying stock options was determined by the Company’s Board of Directors. Up until the merger, there had been no public market for the Company’s 121 common stock, and therefore the Board of Directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair market value, which included valuations performed by an independent third-party, important developments in the Company’s operations, sales of convertible preferred stock, actual operating results, financial performance, the conditions in the life sciences industry, the economy in general, the stock price performance and volatility of comparable public companies, and the lack of liquidity of the Company’s common stock. The following shows the stock option activities for the years ended December 31, 2025 and 2024: Total Options Outstanding Weighted-Average Exercise Price Balance—December 31, 2023 273,393 $ 94.64 Granted 69,009 51.48 Exercised ( 6,284 ) 24.83 Cancelled and forfeited ( 16,028 ) 106.99 Balance—December 31, 2024 320,090 $ 86.06 Granted 130,014 11.20 Exercised — — Cancelled and forfeited — — Balance—December 31, 2025 450,104 64.44 The following table summarizes information about stock options outstanding at December 31, 2025: Shares Weighted Average Remaining Contractual Life (In Years) Weighted Average Exercise Price Aggregate Intrinsic Value Options outstanding 450,104 7.71 $ 64.44 $ — Vested and expected to vest 450,104 7.71 $ 64.44 $ — Exercisable 441,792 7.70 $ 64.51 $ — During the years ended December 31, 2025 and 2024 , the Company granted employees and non-employees stock options to purchase 130,014 and 69,009 shares of common stock with a weighted-average grant date fair value of $ 11.20 and $ 51.48 per share, respectively. As of December 31, 2025 and 2024 , total unrecognized compensation costs related to unvested employee stock options were $ 389 and $ 12,352 , respectively. These costs are expected to be recognized over a weighted-average period of approximately 1.5 years and 2.6 years, respectively. The fair market value of stock options vested was $ 2,576 and $ 5,303 for the years ended December 31, 2025 and 2024, respectively. The Company estimated the fair value of stock options using the Black-Scholes option pricing valuation model. The fair value of employee stock options is being amortized on the straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions for the years ended December 31, 2025 and 2024: 2025 2024 Expected term (in years) 6.0 5.5 - 6.1 Expected volatility 115 % - 116 % 109 % - 124 % Risk-free interest rate 4.4 % 3.5 % - 4.7 % Dividends — % — % Expected Term —The expected term of options granted represents the period of time that the options are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Company’s employee stock options has been determined utilizing the simplified method for awards that qualify as plain-vanilla options. 122 Expected Volatility —The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available. Risk-Free Interest Rate —The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. Dividends —The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used. During the year ended December 31, 2025, the Company accelerated the vesting of approximately 266,108 time-based vesting stock options grants previously awarded to the Company's employees, pursuant to the separation agreements entered into with such employees. The Company also extended the post-termination exercise period from 90 days to 180 days immediately following the separation date for any options that were vested, including the options that were accelerated in vesting, as described above. Further, in the fourth quarter of 2025, approximately 416,005 of modified stock options were further modified to extend the post-termination exercise period from either (i) 180 days to December 31, 2026 or (ii) to the earlier of (a) the date that is 90 days following termination of continuous service, and (b) the expiration of the term of the options as set forth in the award agreements. The above modifications to current and former employees stock options grants resulted in modification accounting under ASC 718, Compensation – Stock Compensation. As a result, the Company recognized approximately $ 0.8 million of stock compensation expense during the year ended December 31, 2025. For vested awards with no future service period required to be provided, the expense was measured on the modification date by calculating the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified with immediate expense recognition. For unvested awards with no future service period required to be provided, the Company reversed any stock compensation expense previously recognized, remeasured the fair value of the modified award and immediately recognized stock compensation expense on the modification date. For stock options that were further modified to extend the post-termination exercise period upon termination of continuous service, the Company measured the expense by calculating the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified. The fair value of those awards included a reduction to the share price for the fair value of the warrant dividend as the holders of the modified stock options were not participants in the warrant dividend. A portion of this modification was recorded as stock compensation expense in the fourth quarter and the remainder to be attributed over the derived service period. Stock-Based Compensation Expense The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of operations for the years ended December 31, 2025 and 2024: 2025 2024 Research and development $ 1,179 $ 2,222 General and administrative 1,939 3,081 Total $ 3,118 $ 5,303 9 . INCOME TAXES There was no provision for income taxes for the years ended December 31, 2025 and 2024, because the Company has incurred losses since inception. At December 31, 2025 and 2024 the Company concluded it was not more likely than not that it would realize its deferred tax assets, and therefore has recorded a full valuation allowance. 123 The Company paid no income taxes for the years ended December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21 % to pre-tax loss as follows (in thousands): Year Ended December 31, 2025 2024 U.S. federal provision (benefit) At statutory rate $ ( 5,514 ) 21.0 % $ ( 8,786 ) 21.0 % Change in valuation allowance 5,105 - 19.4 % 9,199 - 22.0 % Nontaxable or Nondeductible Items Stock-based compensation 343 - 1.3 % 709 - 1.7 % Transaction costs 454 - 1.7 % — 0.0 % Nontaxable or nondeductible items 90 - 0.4 % 14 0.0 % Tax credits Research and development credit ( 478 ) 1.8 % ( 1,136 ) 2.7 % Total $ — 0.0 % $ — 0.0 % State income taxes in California comprise the majority of the state income taxes, net of federal effect category for the years ended December 31, 2025 and 2024, respectively. Significant components of the Company’s deferred tax assets at December 31, 2025 and 2024 are shown below. 2025 2024 Deferred tax assets: Net operating losses $ 152,074 $ 143,896 Research and development tax credits 21,198 20,513 Amortization 489 603 Lease liability 2,354 2,625 Stock based compensation 1,583 1,167 Other 98 491 Capitalized R&D 7,901 10,041 Total gross deferred tax assets 185,697 179,336 Less: valuation allowance ( 183,498 ) ( 176,799 ) Total deferred tax assets 2,199 2,537 Deferred tax liability: Right-of-use assets ( 2,180 ) ( 2,518 ) Fixed assets ( 19 ) ( 19 ) Total gross deferred tax liabilities ( 2,199 ) ( 2,537 ) Net deferred tax assets $ — $ — The valuation allowance increased by $ 6.7 million from December 31, 2024 to December 31, 2025 due primarily to the generation of net operating losses and research and development credits. As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands): Year Ended December 31, 2025 2024 Beginning Balance 176,799 164,643 Change related to continuing operations 6,699 12,156 Ending Balance $ 183,498 $ 176,799 124 As of December 31, 2025 , the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $ 534.5 million and $ 501.9 million, respectively. As of December 31, 2024 , the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $ 502.2 million and $ 487.8 million, respectively. The federal and state net operating loss carryforwards begin to expire in 2031 and 2025, respectively, if not utilized. Federal net operating losses of $ 313.3 million are not subject to expiration. As of December 31, 2025 , the Company had federal and state research and development carryforwards of approximately $ 14.7 million and $ 4.4 million, respectively. The Company also had $ 7.4 million of Orphan Drug Credit. As of December 31, 2024 , the Company had federal and state research and development carryforwards of approximately $ 14.1 million and $ 4.1 million, respectively. The federal and state credits begin to expire in 2031 and 2029, respectively, if not utilized; $ 3.3 million of the state credits can be carried forward indefinitely. Utilization of some of the federal and state net operating loss and credit carryforwards may be subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The Company has not performed a Section 382 study as of December 31, 2025 . At least $ 455.8 thousand of legacy Millendo federal net operating losses are expected to expire unused due to prior ownership changes. The Company has the following activity relating to unrecognized tax benefits as of December 31, 2025 and 2024: 2025 2024 Beginning balance $ 5,239 $ 4,923 Gross increase - tax position in current period 167 316 Ending balance $ 5,406 $ 5,239 As of December 31, 2025 and 2024, none of the unrecognized tax benefits would impact the Company's effective tax rate due to the valuation allowance. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the accompanying balance sheet as of December 31, 2025 and 2024, respectively, and has not recognized penalties and/or interest in the accompanying statements of operations for the years ended December 31, 2025 and 2024, respectively. The Company is subject to taxation in the United States, California, Massachusetts, and Michigan. The Company's tax years from inception are subject to examination by the IRS and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits. 10. RETIREMENT PLAN The Company participates in a qualified 401(k) Plan sponsored by its professional service organization. The retirement plan is a defined contribution plan covering eligible employees. Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service. During the year ended December 31, 2025 , the Company contributed $ 124 to the 401(k) Plan. During the year ended December 31, 2024 , the Company contributed $ 161 to the 401(k) Plan. 11. NET LOSS PER SHARE The following table sets forth the computation of the Company’s basic and diluted net loss per share for the years ended December 31, 2025 and 2024 (in thousands, except share and per share amounts): 125 2025 2024 Numerator: Net loss $ ( 26,262 ) $ ( 41,843 ) Denominator: Weighted-average common shares outstanding 4,149,733 2,146,276 Weighted-average shares used in computing basic and diluted net loss per share 4,149,733 2,146,276 Net loss per share attributable to common stockholders—basic and diluted $ ( 6.33 ) $ ( 19.50 ) As of December 31, 2025 and 2024 , the Company’s potentially dilutive securities included unvested stock warrants and stock options, which have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be anti-dilutive. The issuance of pre-funded warrants and vested RSUs have been included in the computation of basic and diluted net loss per share attributable to common stockholders. Based on the amounts outstanding as of December 31, 2025 and 2024, the Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect: 2025 2024 Options to purchase common stock 450,104 320,090 Restricted stock units — — Common stock warrants 1,172,878 464 1,622,982 320,554 12. SEGMENT REPORTING The Company operates and manages its business as one reportable and operating segment, which is the business of discovery and development of small molecule drugs to treat cancers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer . The determination of a single business segment is consistent with the consolidated financial information regularly reviewed by the CODM for purposes of assessing performance, allocating resources and planning and forecasting future periods. As the Company has not generated revenue, the CODM assesses Company performance through the achievement of research goals towards advancing the Company’s product candidates through stages of development. As such, the CODM is regularly provided with budgeted and forecasted expense information as well as the Company’s Consolidated Financial Statements which is used to determine the Company’s liquidity needs and pipeline resource allocation. The CODM regularly reviews and evaluates research and development expenses and uses consolidated net loss, as reported on the Company’s Consolidated Statements of Operations, to assess the performance of the segment and to allocate resources. The consolidated net loss and significant segment expenses reviewed by the CODM are reported on the Company’s Consolidated Statements of Operations for the years ended December 31, 2025 and 2024. The measure of segment assets is reported on the Consolidated Balance Sheet as total assets. The CODM monitors the Company's cash and cash equivalents as reported on the Consolidated Balance Sheets. All financial information required for segment reporting that is provided to the chief operating decision maker is contained within the financial statements and notes to financial statements. 13. SUBSEQUENT EVENTS Acquisition of Erigen Assets On November 19, 2025 , the Company executed an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Erigen LLC, a Delaware limited liability company (“Erigen”), and Factor Bioscience Inc., a Delaware corporation (together with Erigen, “Sellers”), pursuant to which Sellers agreed to sell and transfer to the Company all right, title and interest of Sellers in and to all 126 of the assets primarily related to (a) the autologous BCMA/CD19 dual-targeting CAR T-cell therapy known as ERI-2003, (b) the autologous CD70/CD70 dual-targeting CAR T-cell therapy known as ERI-2206, (c) the allogeneic BCMA/CD19 dual-targeting CAR T-cell therapy with a gene edit in the TRAC locus that inactivates the T cell receptor known as ERI-3003, and (d) the allogeneic CD70/CD70 dual-targeting CAR T-cell therapy with a gene edit in the TRAC locus that inactivates the T cell receptor known as ERI-3206 (collectively referred to herein as the “Erigen Assets”), in exchange for an aggregate purchase price of 8,268,495 shares of the Company’s common stock to be issued to Erigen on behalf of both Sellers. On February 3, 2026 , the Company completed the acquisition of the Erigen Assets (the “Erigen Closing”) under the Asset Purchase Agreement (the “Asset Acquisition”) and issued to Erigen 8,268,495 shares of the Company’s common stock. Based on an assumed common stock price of approximately $ 2.41 per share, the aggregate consideration related to the Asset Acquisition is approximately $ 19.9 million. The Company incurred approximately $ 6.7 million of transaction costs in connection with the Asset Acquisition. The Company expects to account for the Asset Acquisition as an asset acquisition. Transaction costs are expected to be capitalized as part of the total cost of the Asset Acquisition. The Company is in the process of evaluating the assets acquired and any liabilities assumed and has not finalized the allocation of the consideration. Accordingly, the Company cannot reasonably estimate the financial statement impact of the transaction as of the date these consolidated financial statements were issued. Pursuant to the Asset Purchase Agreement, Factor has made a funding commitment (the “Funding Commitment”) to provide the Company with financial support for at least 18 months following the Erigen Closing, up to a maximum amount of $ 20.0 million that is inclusive of any amounts raised and received by us after the date of the Asset Purchase Agreement, on the terms and subject to the conditions and other provisions of a funding commitment letter contemplated by and entered into concurrently with the Asset Purchase Agreement. Warrant Dividend On January 20, 2026, the Company’s Board of Directors declared a record date of January 30, 2026 (the “Record Date”), for the distribution of a dividend (the “Warrant Dividend”) in the form of a warrant to purchase a share of the Company’s common stock (collectively, the “Warrants”) for each share of common stock outstanding on the Record Date at an exercise price of $ 18.48 per share. The Warrants were issued on the terms and conditions described in the Warrant Agreement, dated February 3, 2026, between the Company, Computershare Inc., and its affiliate, Computershare Trust Company, N.A., as Warrant Agent, on February 3, 2026. In addition, on February 3, 2026, certain warrants that were outstanding on the Record Date also received Warrants on a one-for-one basis, pursuant to the terms of such warrants (together with the Warrant Dividend, the “Warrant Distribution”). In the aggregate, 6,784,989 Warrants were issued pursuant to the Warrant Distribution. Equity Plan Amendment On January 27, 2026, the Company’s stockholders approved Amendment No. 1 to the 2023 Plan to increase the number of shares of the Company’s common stock issuable under such plan by 1,410,000 shares. Rights Plan Approval On January 27, 2026, the Company’s stockholders approved the Company’s Rights Agreement. Such stockholder approval extended the final expiration date of the Rights Agreement until October 10, 2026, unless the rights thereunder are earlier redeemed or exchanged by the Company. The Rights Agreement otherwise remains unmodified and in full force and effect in accordance with its terms. Employment Agreements In connection with his appointment as President and Chief Executive Officer of the Company, effective February 3, 2026, the Company entered into an employment agreement with Matthew Angel (the “Angel Employment Agreement”). Pursuant to the 127 Angel Employment Agreement, Dr. Angel is entitled to receive an annual base salary of $ 650,000 and will be eligible to receive an annual bonus equal to 50 % of his base salary, as determined by the Board in its sole discretion. In addition, on February 3, 2026, Dr. Angel received an option to purchase 269,621 shares of common stock, with an exercise price per share equal to the fair market value on the grant date (the “Option”). The Option vests over a four-year period, with one quarter (1/4) of the shares subject to the Option vesting on the first anniversary of the grant date, and the remaining shares vesting equally over the following 36 months of continuous service. On February 3, 2026, the Company entered into an employment agreement with Nicholas Maestas (the “Maestas Employment Agreement”), pursuant to which Mr. Maestas is entitled to receive compensation consistent with his previously filed employment agreement. Private Placement On March 20, 2026, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with (a) two institutional investors (the “Institutional Investors”) and (b) Factor Bioscience Inc. (together with the Institutional Investors, each, an “Investor” and, together, the “Investors”), pursuant to which the Company agreed to issue and sell in a private placement (the “Private Placement”) an aggregate of 462,964 shares (the “Shares”) of the Company’s common stock, and, in lieu of common stock, pre-funded warrants to purchase up to 462,963 shares of common stock (the “2026 Pre-Funded Warrants”), in each case accompanied by (i) Series A warrants to purchase up to 925,927 shares of common stock (the “Series A Warrants”) and (ii) Series B warrants to purchase up to 925,927 shares of common stock (the “Series B Warrants” and, together with the Series A Warrants, the “Common Warrants”). The Shares and the Common Warrants are immediately separable and were issued separately. The combined purchase price per Share and accompanying Common Warrants was $ 2.16 and the combined purchase price per Pre-Funded Warrant and accompanying Common Warrants was $ 2.159 . The gross proceeds to us from the Private Placement were approximately $ 2.0 million (excluding up to approximately $ 4.0 million of aggregate gross proceeds that may be received in the future upon the cash exercise of the Common Warrants), before deducting placement agent fees and other offering expenses payable by the Company. Pursuant to the Purchase Agreement, the Company agreed to seek approval from our stockholders for the issuance of the shares issuable upon exercise of the Common Warrants within 90 days following the date of the Purchase Agreement (the “Stockholder Approval”). The Series A Warrants will become exercisable on the effective date of the Stockholder Approval (the “Stockholder Approval Date”) and have a term of five years from the later of the Stockholder Approval Date and the Effectiveness Date (as defined below). The Series B Warrants will become exercisable on the Stockholder Approval Date and have a term of twenty-four months from the later of the Stockholder Approval Date and the Effectiveness Date. The Common Warrants have an exercise price of $ 2.16 per share. The Pre-Funded Warrants are exercisable immediately following the closing date of the Private Placement have an exercise price of $ 0.001 per share and may be exercised at any time until exercised in full. In addition, pursuant to the Purchase Agreement, the Company agreed not to sell any shares of the Company’s common stock or any securities convertible into or exercisable or exchangeable into shares of common stock, subject to certain customary exceptions, for a period of thirty (30) days after the Effectiveness Date. In connection with the Private Placement, the Company entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed to file registration statements under the Securities Act with the SEC covering the resale of the Shares to be issued in the Private Placement and the shares of the Company’s common stock underlying the Common Warrants and Pre-Funded Warrants no later than 15 calendar days following the date of the Purchase Agreement, and to use reasonable best efforts to have the registration statement declared effective by 45 calendar days following the date of the Purchase Agreement, and in any event no later than 75 calendar days following the date of the Purchase Agreement in the event of a “full review” by the SEC (the “Effectiveness Date”). 128 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.