Evommune, Inc.

1. Organization and Description of the Business

Business and Organization

Evommune, Inc. and its subsidiaries (“Evommune” or the “Company”) is a Delaware corporation headquartered in Palo Alto, California. Evommune is a clinical stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases.

Liquidity

The Company has incurred significant operating losses since inception and has relied primarily on equity financing and license revenue to fund its operations. As of September 30, 2025, the Company had an accumulated deficit of$192.8 million. The Company expects to continue to incur substantial losses, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenue to support its cost structure. The Company may never achieve profitability and, unless and until it does, the Company will need to continue to raise additional capital.

As previously disclosed in the Company’s consolidated financial statements for the year ended December 31, 2024, management identified conditions that raised substantial doubt about the Company’s ability to continue as a going concern. During the nine months ended September 30, 2025, management implemented plans that alleviated the substantial doubt. The principal factor leading to this conclusion is additional capital raised through the issuance of preferred stock (Note 7), and the issuance of common stock in the Company’s initial public offering (“IPO”) in November 2025 (Note 11), through which the Company raised gross proceeds of $172.5 million. As of September 30, 2025, management expects that existing cash, cash equivalents and short-term investments will be sufficient to fund the Company’s current operating plan for at least twelve months from the issuance date of these financial statements.

Significant Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: its ability to obtain future financing; its ability to continue research and development of its product candidates; payment obligations under license or collaboration agreements; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s product candidates; development of sales, marketing and distribution infrastructure; competing therapies and marketing development; investment in or in-license other technologies; certain strategic relationships; competition from pharmaceutical or other biotechnology companies with greater financial resources or expertise; litigation or claims against its intellectual property portfolio, patent, product, regulatory, or other factors; operational, financial and management systems; and the Company’s ability to attract and retain employees necessary to support its growth.

Products candidates being developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a material adverse impact on the Company.

The Company has expended and expects to continue to expend substantial funds to complete the research, development and pre-clinical and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of product candidates that may receive regulatory approval. If adequate funds are unavailable from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and results of operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consistent of normal recurring adjustments, considered necessary for a fair statement have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2025 or other interim periods. The Condensed Consolidated Balance Sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s significant accounting policies, other than as described below.

Reverse Stock Split

On October 17, 2025, the Company effected a 1-for-8.5180 reverse stock split of its common stock. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split. There was no effect on the number of shares of common stock or preferred stock authorized for issuance under the Company’s certificate of incorporation or the par value of such securities. The shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. In addition, the conversion ratios for each series of the Company’s convertible preferred stock were proportionally adjusted (Note 7).

Segments

The Company operates inone segment considering the nature of the Company’s products and services, class of customers, methods used to distribute the products and the regulatory environment in which the Company operates. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, manages and allocates resources to the operations of the company on a total company basis by assessing the overall level of resources available and how to best deploy these resources across functions and research and development projects that are in line with its long-term company-wide strategic goals. In making these decisions, the CODM uses consolidated financial information for purposes of evaluating performance and forecasting future period financial results. The CODM performs this assessment based on the Company’s consolidated net loss. Through this analysis, the CODM assesses performance by comparing actual net loss versus the budget, and then decides how to allocate resources to invest in the Company’s research and development programs. The following is a breakdown of net loss by category for thethree and nine months ended September 30, 2025 and 2024 as managed by the CODM (in thousands).

Other research and development consists of discovery research, pre-clinical programs and other early-stage development programs. The measure of segment assets, all of which are held in the United States, is reported on the condensed consolidated balance sheets as total assets. Additionally, segment depreciation expense is consistent with amounts reported within the consolidated statement of cash flows.

Revenue Recognition

The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”), the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current portion. Since inception, the Company’s only revenues have been generated through license agreements.

License Revenue

The terms of the Company’s license agreements typically may include payment to the Company of one or more of the following: nonrefundable, up-front license fees, research, development and commercial milestone payments; royalties and other contingent payments due based on the activities of the counterparty. Each of these types of revenue are recorded as license revenues in the Company’s consolidated statements of operations. See Note 5 for additional details regarding the Company’s license arrangements.

Transaction Price Allocated to Future Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2025. The guidance provides certain practical expedients that limit this requirement. The Company has various contracts that meet the following practical expedients provided by ASC 606:

The performance obligation is part of a contract that has an original expected duration of one year or less.

Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer.

The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2025 and December 31, 2024, cash and cash equivalents consisted of cash and money market mutual funds. The Company has invested its excess cash in U.S. government securities, and intends and has the ability to hold these investments to maturity. All of the Company’s investments in U.S. government securities are classified as held to maturity and are reported as short-term or long-term based on maturity dates at time of purchase. All of the Company’s short-term investments had original maturity dates of less than 12 months. The fair values of held-to-maturity securities are measured using Level 2 inputs and approximate their amortized cost.

The following tables summarize the amortized cost of the Company’s short-term investments as of September 30, 2025 and December 31, 2024:

Restricted Cash

Restricted cash is defined as cash and cash equivalents that cannot be withdrawn or used for general operating activities. As of September 30, 2025 and December 31, 2024, the Company’s restricted cash was$1.4 million and$0.2 million, respectively, and was associated with letters of credit issued in connection with the Company’s office leases.

Convertible Preferred Stock Forward

Certain provisions of the Series C Preferred Stock Purchase Agreement (“Series C SPA”) obligated the Company to sell, and the investors to purchase, additional tranches of the Series C Convertible Preferred Stock (“Series C”) at a future date and specified price (the “tranche closings forward”) if certain clinical performance milestones were met. The tranche closings forward represented freestanding instruments as they are legally detachable and separately exercisable and, therefore, were accounted for separately from Series C as convertible preferred stock forwards (liability or asset). The tranche closings forward were settled in June 2025. See Note 7 for additional details regarding the Company’s convertible preferred stock.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts and respective tax bases of existing assets and liabilities, as well as for net operating loss carryforwards and research and development credits. Valuation allowances are provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of a change in the tax laws is recorded in the period in which the law is enacted.

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the convertible preferred stock, common stock subject to repurchase, stock options, restricted stock units (“RSUs”), and stock appreciation rights (“SARs”) are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to common stockholders. Because the Company has reported a net loss for the reporting periods presented, the diluted net loss per common share is the same as basic net loss per common share for those periods.

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

The amounts above represent common stock equivalents, where applicable.

Deferred financing costs

The Company capitalizes costs that are directly associated with in-process equity and debt financings until such financings are consummated, at which time such costs are recorded against the gross proceeds from the applicable financing. If a financing is abandoned, deferred financing costs are expensed. As of September 30, 2025, the Company has incurred$2.1 million in fees associated with the IPO,$1.1 million of which has been paid as of September 30, 2025, which are recognized as a component of prepaid expenses and other current assets on the consolidated balance sheet.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require incremental income tax disclosures on an annual basis for all public entities. The amendments require that public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold. The amendments also require disclosure of income taxes paid to be disaggregated by jurisdiction, and disclosure of income tax expense disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual reporting beginning with the fiscal year ending December 31, 2025. The Company does not expect this to have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03 “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures” (“ASU 2024-03”), which will require additional expense disclosures for all public entities. The amendments require that at each interim and annual reporting period, an entity will disclose certain disaggregated expenses included in each relevant expense caption, as well as the total amount of selling expenses and, in annual periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning with the fiscal year ending December 31, 2027, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the incremental disclosures that will be required in its future consolidated financial statements.

3. Fair Value Measurements and Fair Value of Financial Instruments

The following table sets forth the Company’s consolidated financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Items classified as Level 1 within the valuation hierarchy consist of the Company’s cash equivalents held in money market funds. The Company measures these investments at fair value determined based on Level 1 observable quoted price market inputs. The Company’s money market funds are included in cash and cash equivalents in the consolidated balance sheets.

Items classified as Level 2 within the valuation hierarchy consist of the Company’s excess cash invested in U.S. government securities, measured at fair value based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. The Company’s U.S. government securities are included in short-term investments in the consolidated balance sheets.

Items classified as Level 3 within the valuation hierarchy consist of the Company’s convertible preferred stock forward (Note 7). The fair value of the convertible preferred stock forward has been estimated at the date of inception, and re-measured at the end of each reporting period until the forwards expire. The Company used a standard forward pricing valuation model to estimate the fair value of the forward contracts with the following significant assumptions:

The following table is a roll-forward of Level 3 assets for the periods indicated (in thousands) (Note 7):

In June 2025, the Company issued 40,941,587 shares of Series C and settled the convertible preferred stock forward.

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

5. Strategic Collaborations and License Agreements

The Company has entered into several license agreements for products currently under development. The Company’s license agreements are disclosed in “Note 5. Strategic Collaborations and License Agreements” of the Company’s annual audited consolidated financial statements for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s license agreements, other than the following.

Dermira

In December 2020, the Company entered into an exclusive license agreement with Dermira, Inc., a wholly owned subsidiary of Eli Lilly and Company (“Dermira”), to develop and commercialize EVO756 and two other development programs for the treatment of various inflammatory diseases (the “Dermira License Agreement”).

The Dermira License Agreement remains in effect on a product-by-product and a country-by-country basis until the expiration of the royalty term for such product in such country. The Dermira License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy.

Milestones and royalties are contingent upon future events and will be recorded when the milestones are achieved and when payments are due. For the nine months ended September 30, 2025, the Company has recorded $2.5 million as research and development expense upon achievement of a development milestone under the Dermira License Agreement. No other milestones were achieved under the Dermira License Agreement during thenine months ended September 30, 2025 and 2024.

Maruho Co., Ltd.

Maruho Japan Agreement

As of December 31, 2024, the Company had recorded short term deferred revenue of $3.0 million, attributable to the Company’s on-going performance obligations. The Company recognized $3.0 million in license revenue for thenine months ended September 30, 2025 upon the satisfaction of the performance obligation. There wasno deferred revenue recorded as of any other period andno outstanding performance obligations remain under the agreement. In addition, in July 2025, the Company received payment from Maruho of $10.0 million upon the achievement of a development milestone, which is recognized as license revenue for thethree and nine months ended September 30, 2025. No other milestone or royalty revenues related to this agreement have been earned as of September 30, 2025.

AprilBio

In June 2024, the Company entered into a License, Development and Commercialization Agreement with AprilBio Co., Ltd. (“AprilBio”) upon which AprilBio granted the Company an exclusive worldwide license to develop and commercialize an IL-18BP compound (“EVO301”). The Company is responsible for the payments of development milestones of up to $82.5 million, sales milestones of up to $377.5 million, and tiered royalty payments in the mid-to-high single digit percentage on covered product net worldwide sales. For thenine months ended September 30, 2025, the Company has recorded $1.5 million as research and development expense upon achievement of a development milestone under the AprilBio License, Development and Commercialization Agreement. No other milestones were achieved or recorded as research and development expenses for the nine months ended September 30, 2025 or 2024.

6. Commitments and Contingencies

Leases

The Company has operating leases for office space and equipment as well as finance leases of certain lab and office equipment. The Company’s lab and office equipment leases have the original lease terms ofthree years each. Generally, the Company’s leases are non-cancellable and do not have any residual value guarantees or any restrictions or covenants imposed by leases.

In July 2025, the Company executed asixty-three-month lease agreement to lease office space in Palo Alto, California. The lease is expected to commence in January 2026 and includes annual lease payments during each of the first three years of approximately $1.5 million, with increases of approximately 3% each year thereafter for the remainder of the lease. The Palo Alto lease includes an option to terminate the lease after thirty-nine months, subject to a one-time termination fee equal to six months of base rent. The Palo Alto lease also includes a renewal option for one additional five-year period and does not have any residual value guarantees or any restrictions or covenants. The Company is not reasonably certain to exercise either the early-termination or renewal option, and therefore neither option is included in the measurement of the related right-of-use asset and lease liability.

In August 2025, the Company executed asixty-month lease agreement to lease office space in New York, New York. The lease commenced in October 2025 and includes annual lease payments of approximately $0.4 million. The New York lease is non-cancellable and does not include a renewal option, any residual value guarantees or any restrictions or covenants.

As of September 30, 2025, future minimum lease payments included in the measurement of lease liabilities and financing obligations were as follows (in thousands):

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases and finance leases (in thousands):

For the nine months ended September 30, 2025, cash payments were$0.4 million,$0.1 million and$0.3 million for operating leases, financing obligation and finance leases, respectively. For the nine months ended September 30, 2024, cash payments were$0.6 million,$0.2 million and$0.1 million for operating leases, financing obligation and finance leases, respectively. Interest expense is recorded within other expense in the Company’s unaudited condensed consolidated statements of operations. The weighted average discount rate and remaining terms are as follows:

Research and Development Agreements

The Company enters into contracts in the normal course of business with clinical research organizations, contract manufacturing organizations and other third-party vendors for clinical trials, manufacturing, testing and other research and development activities. These contracts generally provide for termination on notice, with varying termination fees, typically up to 50%, dependent on timing of notification in advance of planned activity timelines. As of September 30, 2025 and December 31, 2024, there were no amounts accrued related to termination and cancellation charges as these are not probable.

License Agreements

The Company has entered into various license agreements (Note 5), pursuant to which the Company is required to make payments contingent upon the occurrence of specified events. The Company is required to pay development and sales milestones and royalties on sales of products developed under these agreements. Except as disclosed in Note 5, no such milestone events occurred during the nine months ended September 30, 2025 and 2024.

Guarantees and Indemnifications

The Company accrues a liability for any contingent liabilities when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

Legal proceedings

The Company was not subject to any material legal proceedings during the nine months ended September 30, 2025 and 2024, and no material legal proceedings are currently pending or threatened.

7. Convertible Preferred Stock

The Company’s convertible preferred stock are disclosed in the financial statements included in “Note 7. Convertible Preferred Stock” for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s redeemable convertible preferred stock, other than the following.

On November 7, 2025 all of the Company’s then-outstanding convertible preferred stock were automatically converted into shares of common stock. The Series Seed convertible preferred stock was converted at a ratio of 1-for-8.518, the Series A convertible preferred stock was converted at a ratio of 1-for-7.9557, the Series B convertible preferred stock was converted at a ratio of 1-for-7.8721 and the Series C convertible preferred stock was converted at a ratio of 1-for-8.518.

Series C Convertible Preferred Stock Tranche Closings Forward

The Company determined that its obligation to issue and the investors’ obligation to buy additional shares of Series C in the Series C Tranche Two Closing at a fixed price represent freestanding instruments and forward contracts that are accounted for at fair value at the issuance date and re-measured at each reporting date until the expiration or the settlement of the obligation (the “Series C Tranche Two Forward”). At issuance and as of December 31, 2024, the Series C Tranche Two Forward liability’s fair value was estimated as $8.9 million.

On May 20, 2025, the Company completed, and the board of directors approved, the achievement of the Series C milestone event and as a result, on June 27, 2025, the Company sold 40,941,587 shares of Series C redeemable convertible preferred stock at the original issuance price of $1.59453 when the total fair value of the Series C Tranche Two Forward was $0.0 million. The Company issued 40,941,587 shares of Series C and settled the related forward contracts in June 2025, and recognized a gain of $8.9 million for thenine months ended September 30, 2025. The Company received aggregate gross proceeds of $65.3 million as part of the Series C Tranche Two Closing.

The authorized, issued, and outstanding shares of the Company’s convertible preferred stock and liquidation values as of September 30, 2025 and December 31, 2024 were as follows (in thousands, except for share amounts):

The significant rights and obligations of the Company’s Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively “Convertible Preferred Stock”) are disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2024.

8. Common Stock

As of September 30, 2025, the Company is authorized to issue 223,593,879 shares of $0.0001 par value common stock. Each share of common stock is entitled toone vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to prior rights of the preferred stockholders.

The Company had reserved common stock for future issuance as follows:

9. Stock Option Plan

Stock Options

In May 2020, the board of directors adopted the Evommune, Inc. 2020 Stock Plan (the “2020 Plan”) under which officers, employees, outside directors and consultants may be eligible for the grant of equity awards. The 2020 Plan provides for the direct award or sale of shares, the grant of Incentive Stock Options (“ISO”) and Nonstatutory Stock Options (“NSO”) options to purchase shares and the grant of RSUs to acquire shares. The board of directors has authorized an aggregate number of 4,459,715 shares of the Company’s common stock to be issued under the 2020 Plan. Options under the 2020 Plan may be granted for periods of up to 10 years at exercise prices no less than 100% of the fair market value of the Company’s common stock on the date of grant with the exception of ISOs granted to a 10% holder which is no less than 110% of the fair market value of common stock on the date of grant. As of September 30, 2025, the Company had 121,686 shares available for issuance under the 2020 Plan.

The following table summarizes the Company’s stock option activity from January 1, 2025 to September 30, 2025:

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2025 and 2024 was$3.58 and$1.37 per option, respectively. The aggregate intrinsic value of options exercised for both the nine months ended September 30, 2025 and 2024 was less than $0.1 million. Intrinsic values are calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the fair value per share of the common stock, multiplied by the related in the money options that would have been received by the option holders had they exercised their options at the end of the period.

As of September 30, 2025, the total unrecognized stock-based compensation expense for stock options was$4.0 million, which is expected to be recognized over a weighted-average period of 2.5 years. The total fair value of options vested for the nine months ended September 30, 2025 and 2024 was$1.3 million and$1.6 million, respectively.

The fair value of the stock options granted was estimated using the following assumptions:

Restricted Stock Units

In December 2024, certain employees were granted a total of 437,754 RSUs. The terms of the RSUs are disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2024.

A summary of restricted stock activity during thenine months ended September 30, 2025, is as follows:

As of September 30, 2025, the total unrecognized stock-based compensation expense for unvested restricted stock was$1.3 million, which is expected to be recognized over a weighted-average period of 3.2 years. Prior to the completion of the Company’s IPO on November 7, 2025, the performance condition associated with the RSUs was not considered probable, and accordingly, no stock compensation expense was recognized for thethree and nine months ended September 30, 2025 and 2024. Upon completion of the IPO, the performance condition was met, and the Company began recognizing stock-based compensation expense for the RSUs over the remaining time-based vesting period.

Stock Appreciation Right

In December 2024, an employee was granted 444,992 SARs with a base price of $2.99 per unit. The terms of the SAR are disclosed in the Company’ consolidated financial statements for the year ended December 31, 2024. Prior to the completion of the Company’s IPO on November 7, 2025, the performance condition associated with the SARs was not considered probable, and accordingly, no stock-based compensation expense was recognized for thethree and nine months ended September 30, 2025 and 2024. Upon completion of the IPO, the performance condition was met, and the Company began recognizing stock-based compensation expense for the SARs over the remaining measurement period, regardless of whether the market condition is met and the award does not begin to vest.

A summary of stock appreciation right activity during thenine months ended September 30, 2025 is as follows:

Stock-Based Compensation Expense

Stock compensation expense recorded for the three and nine months ended September 30, 2025 and 2024, consisted of expense for stock options. No stock compensation expense was recorded for RSUs or SARs for thethree and nine months ended September 30, 2025 and 2024. The following table is a summary of stock compensation expense by function recognized for the periods indicated (in thousands):

10. Income Taxes

The Company’s interim income tax provision consists of U.S. federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of September 30, 2025, and December 31, 2024, the Company was in a pre-tax loss position and is anticipated to remain so throughout the year. For the three and nine months ended September 30, 2025 and 2024, the Company didnot record any tax benefit or expense. On July 4, 2025, the United States enacted tax legislation through the One Big Beautiful Bill Act (“OBBBA”). The Company is in the process of assessing the impact of this legislation on its financial statements. The current expectation is that OBBBA will not have a material impact on the Company’s estimated annual effective tax rate in 2025 but will impact the split between current taxes payable and deferred taxes.

In assessing the realizability of deferred tax assets, management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. Management assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Based on these factors, including cumulative losses in recent years, the Company continues to maintain a full valuation allowance against its net deferred tax assets as of September 30, 2025 and December 31, 2024.

11. Subsequent Events

Initial Public Offering

On November 7, 2025, the Company closed its IPO in which the Company sold 10,781,250 shares of its common stock at a public offering price of $16.00 per share, including 1,406,250 shares issued upon the exercise in full of the underwriters’ over-allotment option to purchase additional shares. The Company received gross proceeds of $172.5 million. Net proceeds were $160.4 million, after deducting underwriting discounts and commissions. In addition, immediately prior to the closing of the IPO, all of the Company’s then-outstanding convertible preferred stock were automatically converted into an aggregate of 19,147,559 shares of common stock.

On November 7, 2025 the Company filed an amended and restated certificate of incorporation, pursuant to which it increased the number of shares of common stock that the Company is authorized to issue to an aggregate of 500,000,000 and reduced the number of shares of preferred stock that the Company is authorized to issue to an aggregate of 10,000,000.

In October 2025, the Company’s board of directors adopted the 2025 Equity Incentive Plan (the “2025 Plan”) and the 2025 Employee Stock Purchase Plan (the “2025 ESPP”), which both became effective in connection with the IPO. The 2025 Plan provides for the grant of incentive stock options, nonstatutory stock options, SARs, RSU awards, performance awards, and other forms of awards to employees, non-employee directors and consultants. A total of 3,128,684 shares of the Company’s common stock have been reserved for future issuance under the 2025 Plan in addition to shares underlying outstanding equity awards granted under the 2020 Stock Plan that expire, or are forfeited, cancelled, or reacquired, and any automatic increases in the number of shares of common stock reserved for future issuance under this plan. The 2025 ESPP reserves a total of 300,000 shares for future issuance of common stock pursuant to purchase rights granted to employees, in addition to any automatic increases in the number of shares of common stock reserved for future issuance under this plan.

In connection with the IPO, the Company granted options to purchase 1,780,638 shares of common stock to certain of our officers at an exercise price equal to the initial public offering price per share of $16.00 and afour-year vesting period. The Company also granted options to purchase 113,880 shares of common stock to certain of our directors at an exercise price equal to the initial public offering price per share of $16.00 and athree-year vesting period. The aggregate grant-date fair value of these awards was approximately $22.2 million, which the Company will recognize over the vesting periods.