Aardvark Therapeutics, Inc.

Organization and Basis of Presentation

Description of Business

Aardvark Therapeutics, Inc. (“Aardvark” or the “Company”) was incorporated in the State of Delaware on May 17, 2017 and its principal offices are located in San Diego, California. The Company is a clinical-stage biopharmaceutical company focused on developing novel, small-molecule therapeutics to activate innate homeostatic pathways for the treatment of metabolic diseases. The Company targets biological pathways associated with alleviating hunger.

In October 2024, the Company incorporated a wholly-owned subsidiary, Artisan Therapeutics, Inc., in the State of Delaware and contributed certain assets to the new entity.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Artisan Therapeutics, Inc., and have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.

Reverse Stock Split

On February 5, 2025, the Company effected aone-for-8.474 reverse stock split of its common stock (the "Reverse Stock Split"). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock and the conversion ratio of the redeemable convertible preferred stock have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

Liquidity

As of December 31, 2025, the Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, discovering ARD-101, establishing and maintaining its intellectual property portfolio, conducting research, preclinical studies and clinical trials, manufacturing of ARD-101 and related raw materials, and providing general and administrative support for these operations. The Company does not have any products approved for sale and has not generated any revenue to date. In addition, the Company has a limited operating history, has incurred significant net losses and negative cash flows from operations since its inception and expects that its expenses and operating losses will increase substantially for the foreseeable future. As of December 31, 2025, the Company had an accumulated deficit of $115.9 million.

The Company believes its cash, cash equivalents and short-term investments of $110.0 million as of December 31,2025 will be sufficient for the Company to continue as a going concern for at least one year following the date that the consolidated financial statements are available to be issued.

The Company will be required to raise additional capital and plans to finance its cash needs through public or private equity or debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, there can be no assurance that the Company will be able to obtain additional funding on acceptable terms, or at all. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Use of Estimates

The preparation of the Company’s consolidated financial statements requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Such estimates include the estimated incremental borrowing rate for the determination of the Company’s operating lease right-of-use (“ROU”) assets, valuation of stock-based awards, and the accrual of research and development expenses. Management evaluates its estimates on an ongoing basis. Although estimates are based on the Company’s historical experience, knowledge of current events, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all highly liquid investments that are readily convertible into cash, with original maturities of three months or less when purchased, to be cash equivalents and are stated at cost, which approximates fair value. Cash equivalents are comprised of money market mutual funds and short-term debt obligations of the U. S. Treasury.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents and related party accounts and convertible promissory note receivable (Note 12). The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company invests its excess cash in short-term debt obligations of the U. S. Treasury in order to mitigate credit risk and maintain principal and maximize liquidity.

Short-Term Investments

Short-term investments consist of investments in corporate equity securities with readily determinable fair values and short-term debt obligations of the U.S. Treasury with original maturities in excess of three months. The investments in corporate equity securities with readily determinable fair values are reported at fair value with changes in fair value recorded in the consolidated statements of operations and comprehensive loss. During the years ended December 31, 2025 and 2024, unrealized losses of $5,000 and $0.2 million, respectively, were reported in other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.

The Company obtains pricing information from its investment manager and generally determines the fair value of debt securities using standard observable inputs, including reported trades, broker/dealer quotes, and bid and/or offers. The Company classifies its investment securities as available-for-sale, as the sale of such securities may be required prior to maturity. Management determines the appropriate classification of its investments in debt securities at the time of purchase. Investments with original maturities beyond three months at the date of purchase and which mature at, or less than 12 months from, the balance sheet date are classified as short-term investments. Investments with contractual maturities beyond one year are also classified as short-term due to the Company’s ability to liquidate the investment for use in operations within the next 12 months. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as accumulated other comprehensive income (loss) until realized. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest and dividend income in the accompanying consolidated statements of operations and comprehensive loss and accrued interest receivable is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

At each balance sheet date, the Company reviews its available-for-sale debt securities that are in an unrealized loss position to determine whether the unrealized loss or any potential credit losses should be recognized in the consolidated statements of operations and comprehensive loss. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through net income (loss). For available-for-sale securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other income, net through an allowance account. There have beenno impairment or credit losses recognized during any of the periods presented related to investments in the Company's available-for-sale debt securities.

Deferred Financing Costs

Financing costs, consisting of legal, professional, accounting, and other third-party fees that are directly associated with in-process equity financings are deferred until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of proceeds generated as a result of the offering. In the event a financing is terminated, the deferred financing costs will be expensed as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. As of December 31, 2025 and 2024, capitalized deferred financing costs totaled zero and $2.3 million, respectively, and are included in other assets in the accompanying consolidated balance sheets.

Fair Value of Financial Instruments

The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable.

Operating leases are included in operating lease right-of-use assets and in operating lease liabilities in the accompanying consolidated balance sheets. Operating lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term discounted based on the more readily determinable of (i) the rate implicit in the lease or (ii) the Company’s incremental borrowing rate (which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease). Because the Company’s operating leases do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term.

The Company’s operating lease assets are measured based on the corresponding operating lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives under the lease. The Company does not assume renewals or early terminations unless it is reasonably certain to exercise such options at commencement. The Company has elected the practical expedient such that it does not recognize lease assets or lease liabilities for leases with a term of 12 months or less of all asset classes and to not allocate consideration between lease and non-lease components. Variable lease payments are recognized in the period in which the obligations for those payments are incurred. Operating lease expense is recognized on a straight-line basis over the lease term.

Convertible Preferred Stock

Prior to the completion of the Company's initial public offering ("IPO") in February 2025, the Company had outstanding convertible preferred stock which was classified as temporary equity in the accompanying consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control, including liquidation, sale or transfer of control of the Company. Costs incurred in connection with the issuance of convertible preferred stock were recorded as a reduction of gross proceeds from issuance. The Company did not accrete the carrying values of the convertible preferred stock to the redemption values since the occurrence of any of these events was not considered probable as of December 31, 2024. Immediately prior to the closing of the IPO in February 2025, the Company’s outstanding convertible preferred stock automatically converted into 11,439,838 shares of common stock. Following the closing of the IPO, no shares of convertible preferred stock were authorized or outstanding.

Research and Development Expenses

Research and development expenses are charged to expense as incurred. Research and development expenses consist primarily of external and internal costs incurred in performing preclinical and clinical development activities. External costs include fees paid to contract research organizations and consultants in connection with product development activities, including regulatory activities, costs related to manufacturing materials for preclinical studies and clinical trials and license fees. Internal costs include personnel-related costs such as salaries and related expenses for employees involved in research and development efforts, facilities-related costs, depreciation, and other allocated expenses. Non-refundable advance payments for goods and services for future research and development activities are deferred and included in other assets in the accompanying consolidated balance sheets and are expensed as the goods are delivered or the related services are performed.

The Company estimates its expenses resulting from its obligations under contracts with vendors, consultants, and contract research organizations in connection with the progress of research and development services performed. The financial terms of these contracts vary from contract to contract and may result in payment flows that do not match the periods over which the services are provided or goods delivered under such contracts. The Company reflects research and development expenses in its consolidated financial statements by matching those expenses with the period in which services are provided. The Company accounts for these expenses according to the progress of the preclinical or clinical study as measured by the timing of various aspects of the study or the progress of related activities. During the course of a study, the Company reassesses its estimate of performance prospectively based on actual results or any modification to the agreements. Historically, there have been no material differences between the Company’s estimates and the amounts actually incurred.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Stock-Based Compensation Expense

Stock-based compensation expense represents the grant date fair value of employee and non-employee stock award grants recognized as expense over the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of actual forfeitures during the period. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.

For restricted stock awards, the fair value of the award is the estimated fair value of the Company’s common stock on the grant date.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on certain investments. For the year ended December 31, 2025, comprehensive loss includes unrealized gains on short-term investments. Net loss and comprehensive loss were the same for the year ended December 31, 2024.

Recent Accounting Standards

From time to time, new accounting standards are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

Recently Adopted Accounting Standards

In December 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures(“ASU 2023-09”), which focuses on the rate reconciliation and income taxes paid. ASU 2023-09 requires public business entities to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose further information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, and may be applied prospectively or retrospectively. The Company adopted ASU 2023-09 retrospectively for the years ended December 31, 2025 and 2024, and it affects only the Company's disclosures and doesnot impact its results of operations or financial condition.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)(“ASU 2024-03”), which requires new financial statement disclosures in tabular format, in the notes to the consolidated financial statements, of specified information about certain costs and expenses. This update is effective for all entities beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. ASU 2024-03 can be applied prospectively or retrospectively and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

Net Loss Per Share

Basic net loss per share of common stock attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders 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. The Company has excluded 4,040 and 2,548 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of shares of common stock outstanding for the years ended December 31,2025 and 2024, respectively.

Basic and diluted net loss attributable to common holders per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock were considered participating securities because they participated in dividends with the common stock. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of convertible preferred stock and the holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods. Accordingly, for the years ended December 31, 2025 and 2024, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.

The Company excluded the following potential shares of its common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. 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. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

As of December 31,2025 and 2024, assets measured at fair value on a recurring basis were as follows (in thousands):

Cash Equivalents

There wereno transfers in or out of Level 3 during the years ended December 31, 2025 and 2024.

The Company determines the fair value of its money market mutual funds and treasury bonds based upon quoted prices in active markets for identical and similar assets, as applicable. At December 31, 2025 and 2024, the Company didnot hold any investments, within cash equivalents, that were in a material unrealized gain or loss position.

Short-Term Investments

The following tables summarize the available-for-sale investment debt securities held at December 31, 2025 and 2024 (in thousands):

As of December 31, 2025, the available-for-sale investment debt securities by contractual maturity were as follows (in thousands):

Balance Sheet Details

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

Stockholders’ Equity (Deficit)

Initial Public Offering and Related Transactions

In February 2025, the Company completed its IPO with the sale of 6,120,661 shares of common stock at an initial public offering price of $16.00 per share, which included the partial exercise by the underwriters of their option to purchase 232,661 additional shares, which resulted in net proceeds to the Company of approximately $87.5 million, after deducting underwriting discounts and commissions of approximately $6.9 million and offering-related transaction costs of approximately $3.5 million.

In addition, in connection with the completion of the IPO on February 14, 2025, all outstanding shares of convertible preferred stock were converted into 11,439,838 shares of the Company’s common stock and the Company’s certificate of incorporation was amended and restated to authorize 490,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock.

Convertible Preferred Stock

During 2024, the Company issued 48,030,730 shares of its Series C convertible preferred stock at a per share price of $1.7697, resulting in gross cash proceeds of $85.0 million.

At December 31, 2024, the Company’s convertible preferred stock consisted of the following (in thousands, except share and per share amounts):

At December 31, 2024, the Company’s convertible preferred stock was classified as temporary equity in the accompanying consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control, including liquidation, sale or transfer of control of the Company. Costs incurred in connection with the issuance of convertible preferred stock were recorded as a reduction of gross proceeds from issuance. The Company did not accrete the carrying values of the convertible preferred stock to the redemption values since the occurrence of any of these events was not considered probable as of December 31, 2024.

Equity Incentive Plans

In December 2024, the Company’s board of directors adopted the 2025 Equity Incentive Plan (the “2025 Plan”), and the Company’s stockholders approved the 2025 Plan in February 2025. The 2025 Plan, pursuant to which 2,150,000 shares were initially reserved for issuance, became effective on February 11, 2025. Upon the effectiveness of the 2025 Plan, no further grants will be made under the 2017 Stock Plan (as amended, the “Plan”). In May 2025, the Company adopted the 2025 Inducement Equity Incentive Plan (the "2025 Inducement Plan", and collectively with the 2025 Plan and the Plan, referred to as the "Plans") pursuant to which an additional 900,000 shares of common stock were reserved to be used exclusively for the grant of equity awards as a material inducement for individuals to commence employment at the Company in compliance with Nasdaq Listing Rule 5635(c)(4).

The maximum term of the options granted under the Plans is no more thanten years. Grants generally vest at 25%one year from the vesting commencement date and ratably each month thereafter for a period of 36 months, subject to continuous service. The Plans allow for the early exercise of all stock options granted if authorized by the board of directors at the time of grant. Any shares of common stock issued from the early exercise of stock options are restricted and vest over time. The Company has the option to repurchase any unvested shares at the lower of the original issue price or current fair value upon any voluntary or involuntary termination of such optionee.

Stock option activity for employee and nonemployee awards and related information is as follows:

Aggregate intrinsic value in the above table is the difference between the estimated fair value of the Company’s common stock as of either December 31, 2025 or 2024, and the exercise price of stock options that had exercise prices below that value. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2025 and 2024 was $1.1 million and $0.1 million, respectively.

Employee Stock Purchase Plan

In January 2025, the Company’s board of directors adopted the 2025 Employee Stock Purchase Plan (the "ESPP"), which became effective on February 11, 2025. The ESPP permits participants to purchase common stock through payroll deductions of up to 100% of their eligible compensation. Initially, a total of 215,000 shares of common stock was reserved for issuance under the ESPP. The first offering period under the ESPP commenced in April 2025. Stock compensation expense for the year ended December 31, 2025 related to the ESPP was immaterial. As of December 31, 2025, the unrecognized compensation cost related to current offering periods under the ESPP was $0.8 million and is expected to be recognized over a weighted-average period of 1.0 year.

Stock-Based Compensation Expense

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock options granted in the years ended December 31,2025 and 2024 were as follows:

Risk-free interest rate. The Company based the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

Expected volatility. Given the limited trading history for the Company's common stock, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the “simplified” method, which is an average of the contractual term of the option and its vesting period.

Expected dividend yield. The Company used an expected dividend yield of zero, as it has never paid dividends on its common stock and has no present intention of doing so in the foreseeable future.

The weighted-average fair value of stock options granted during the years ended December 31, 2025 and 2024 was $8.84 and $3.67 per share, respectively.

The allocation of stock-based compensation expense was as follows (in thousands):

As of December 31, 2025, the unrecognized compensation cost related to outstanding time-based options was $18.4 million and is expected to be recognized over a weighted-average period of 3.2 years.

Early Exercise Liability

The right to repurchase shares that were exercised prior to the time the options have vested generally lapses over thefour-year vesting period. As of December 31,2025 and 2024, the early exercise liability was approximately zero and $26,000, respectively, and is included in other long-term liabilities. For accounting purposes, the early exercise of options is not considered to be a substantive exercise until the underlying awards vest and are not considered to be outstanding until those shares vest.

A summary of the unvested common stock issued pursuant to an early exercise of stock option awards is as follows:

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consisted of the following:

Income Taxes

The Company's pretax loss for 2025 and 2024 was solely due to domestic operations.

For the years ended December 31, 2025, and 2024, due to the operating losses reported and the full valuation allowance recorded on the Company’s net deferred income tax assets, the Company recordedno provision for income taxes.

There wereno federal or state payments for income taxes in 2025 or 2024.

A reconciliation of the Company’s income taxes to the amount computed by applying the statutory federal income tax rate to the pretax loss is summarized as follows (in thousands):

*State income taxes in California comprise the majority (greater than 50%) of the tax effect in this category.

Significant components of the Company’s deferred income taxes were as follows (in thousands):

The Company establishes a valuation allowance when it is more likely than not that the Company’s recorded net deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. As of December 31, 2025 and 2024, the valuation allowance for deferred tax assets totaled approximately $38.5 million and $18.4 million, respectively. The net change in the total valuation allowance for the years ended December 31,2025 and 2024 was an increase of $20.1 million and $7.8 million, respectively.

As of December 31, 2025, the Company had federal and state net operating carryforwards of approximately $79.3 million and $96.5 million, respectively. The federal loss carryforwards will carryforward indefinitely and can be used to offset up to 80% of future annual taxable income. The state loss carryforwards begin expiring in 2037, unless previously utilized.

As of December 31, 2025, the Company had federal and state research and development credit carryforwards totaling $2.0 million and $1.4 million, respectively. As of December 31,2025, the Company also had federal orphan drug credit carryovers of $7.1 million. The federal credits begin to expire in 2041, unless previously utilized. State credits of $0.2 million begin to expire in 2040, unless previously utilized, while the remainder of the credits will carryforward indefinitely.

Pursuant to Internal Revenue Code of 1986, as amended (“IRC”), Sections 382 and 383, annual use of the Company’s federal and state net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382 and 383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. The deferred tax asset associated with the Company’s federal and state net operating losses is fully offset by a valuation allowance. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. The Company intends to complete an IRC Section 382 study in the future, which could result in reductions to deferred tax assets and related valuation allowance disclosed above.

Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations, barring an assessment for an issue. The Company recognizes a tax benefit from an uncertain tax position when it is more-likely-than-not that it will be sustained upon examination by tax authorities.

A reconciliation of the amount of unrecognized tax benefits is as follows (in thousands):

The Company’s policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense. The Company has no accruals for interest or penalties in the accompanying consolidated balance sheet as of December 31, 2025 or 2024 and has not recognized interest or penalties in the accompanying consolidated statements of operations and comprehensive loss for the years then ended.

The Company is subject to taxation in the United States and various state jurisdictions. The Company is generally subject to examination by U.S. federal and state tax authorities from inception to date; however, to the extent allowed by law, the taxing authorities may have the right to examine periods where net operating losses were generated and carried forward and make adjustments to the amount of the net operating losses. The Company is not currently under examination by any jurisdictions.

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. Among other changes, the Act reinstates and makes permanent 100% first-year bonus depreciation under Section 168(k) for qualified property acquired and placed in service after January 19, 2025. Additionally, the Act permanently allows immediate expensing of domestic research and experimentation expenditures under Section 174 for tax years beginning after December 31, 2024. The Company has reflected the effects of the Act in its income tax provision in accordance with authoritative guidance. Due to the full valuation allowance, the Act did not have a material impact on the Company's consolidated financial statements.

Leases

Commencing August 1, 2024, the Company leased office space in San Diego, California for a term of 29 months (the “2024 Lease”). Total payments under the lease of approximately $0.9 million will be paid in monthly payments through December 31, 2026. The lease includes an option to renew for 36 months; however, the Company has not included the optional renewal period in the measurement of the lease liability because it is not reasonably certain that the Company will exercise this renewal option.

The Company recognized an operating lease ROU asset and liability for the 2024 Lease based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate and amortizes the ROU asset and liability over the lease term. As the 2024 Lease does not have an implicit interest rate, the present value reflects a 7.0% discount rate, which is the Company’s estimated incremental borrowing rate. The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of December 31,2025 was 1.0 year and 7.0%, respectively. The weighted-average remaining lease term and discount rate related to the Company’s operating lease liabilities as of December 31,2024 was 1.9 years and 7.0%, respectively.

Maturities of lease liabilities due under the operating lease agreements as of December 31,2025 were as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities for operating cash flow from operating leases during the years ended December 31, 2025 and 2024 totaled $0.3 million and $0.2 million, respectively.

Commitments and Contingencies

Acquisition-Related Liabilities

The Company has previously acquired the rights to certain intellectual property in exchange for an upfront cash payments and the sellers’ right to receive additional consideration upon the achievement of specified regulatory and commercial milestones associated with products developed by the Company utilizing the acquired in-process research and development. At December 31, 2025, potential future regulatory and commercial milestone payments under these agreements totaled an aggregate of approximately $180.5 million.

Contingencies

From time to time, the Company may become subject to claims or suits arising in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of December 31, 2025, the Company’s management is not aware of any legal proceedings or matters that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. At December 31, 2025, no claims exist under indemnification arrangements and accordingly, no amounts have been accrued in its consolidated financial statements as of December 31,2025.

Related Party Transactions

The Company’s Chief Executive Officer is a member of the board of directors of Aardwolf Therapeutics, Inc. (Note 12).

Aardwolf Therapeutics, Inc.

In May 2022, through a series of transactions, the Company spun off certain assets of the Company ("the Spinoff") to Aardwolf Therapeutics, Inc. (“Aardwolf”). In accordance with authoritative guidance, the Company has determined that it holds a variable interest in Aardwolf and Aardwolf meets the definition of a variable interest entity (“VIE”) as Aardwolf does not have the ability to finance its activities without additional subordinated financial support and its equity investors will not absorb their proportionate share of expected losses. However, as the Company does not have both (i) the power to direct the economically significant activities of Aardwolf and (ii) the obligation to absorb losses of, or the right to receive benefits from, Aardwolf, the Company is not considered the primary beneficiary of Aardwolf and has not consolidated the financial position or results of operations of Aardwolf in the accompanying consolidated financial statements, although Aardwolf is considered a related party of the Company. The Company will continuously perform this assessment, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of a VIE. At December 31, 2025 and 2024, the maximum exposure to loss waszero.

401(k) Plan

The Company established a defined-contribution savings plan under Section 401(k) of the IRC (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis. The Company's contributions to the 401(k) Plan in the years ended December 31, 2025 and 2024 totaled $0.2 million and $0.1 million, respectively.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM"), or decision-making group, in making decisions regarding resource allocation and assessing performance. The Company’s CODM is its Chief Executive Officer. No product revenue has been generated since inception and all assets are held in the United States.

The Company views its operations and manages its business asone operating segment, focused on the discovery and development of novel therapies for the treatment of metabolic diseases. Segment profit or loss is measured as the Company’s net loss as reported on the Company’s consolidated statements of operations and comprehensive loss. The Company monitors its cash and cash equivalents and short-term investments as reported on the Company’s consolidated balance sheets to determine funding for its research and development.

As the Company does not currently generate revenue, the CODM assesses Company performance through the achievement of pre-clinical and clinical research goals. In addition to the Company’s consolidated statements of operations and comprehensive loss, the CODM is regularly provided with budgeted and forecasted expense information which is used to determine the Company’s liquidity needs and cash allocation. The measure of segment assets is reported on the consolidated balance sheets as total assets.

Segment net loss, including significant segment expenses regularly provided to the CODM, are as follows (in thousands):

Subsequent Events

Formation of Wholly-Owned Subsidiary

In February 2026, the Company incorporated a wholly-owned subsidiary, Ardia Therapeutics, Inc., in the State of Delaware and contri buted certain assets to the new entity.