Equillium, Inc.

1. Organization and Accounting Pronouncements

Description of Business

Equillium, Inc., together with its wholly owned subsidiaries (the Company), was incorporated in the state of Delawareon March 16, 2017.

The Company is a biotechnology innovator developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. The Company's primary goal is to advance EQ504, its novel aryl hydrocarbon receptor modulator, into and through clinical development.

The Company is headquartered in La Jolla, California, and it manages its business as one operating segment. Refer to Note 14 for additional information.

Liquidity and Business Risks

As of December 31, 2025, the Company had $30.3 million in cash and cash equivalents, excluding the gross proceeds of approximately $35.0 million from the Company's equity financing in March 2026. From inception through December 31, 2025, substantially all of the Company’s efforts have been focused on research, development and the advancement of the Company’s clinical and preclinical product candidates. The Company has not yet generated product sales and as a result has incurred significant operating losses and negative cash flows from operations. As a result, the Company has an accumulated deficit of $216.2 million as of December 31, 2025. The Company expects to incur additional losses in the future to conduct research and development for which it will need to raise additional capital to implement.

During the third quarter of 2025, the Company completed an equity financing with gross proceeds of approximately $30 million with the ability to raise an additional $20 million subject to achieving certain clinical and pricing related milestones. Refer to Note 9 for additional information. In March 2026, the Company completed an equity financing with gross proceeds of approximately $35.0 million. Refer to Note 15 for additional information. Management believes that the Company's cash and cash equivalents will be sufficient to fund operations for at least the next 12 months from the date this Annual Report on Form 10-K is filed with the Securities and Exchange Commission (SEC).

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the SEC. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Foreign Currency Translation

The Company’s wholly-owned subsidiary in Australia uses its local currency as its functional currency. Assets and liabilities are translated into U.S. dollars at quarter-end exchange rates and revenues and expenses are translated at average exchange rates during the year-to-date periods. Foreign currency translation adjustments for the reported periods are included in accumulated other comprehensive (loss) income, net in the Company’s consolidated statements of comprehensive loss, and the cumulative effect is included in the stockholders’ equity section of the Company’s consolidated balance sheets.

Recently Issued and Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires annual disclosures of specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold and a disaggregation of income taxes paid, net of refunds. ASU 2023-09 also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. ASU 2023-09 is effective for the Company beginning with the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Early adoption is permitted. ASU 2023-09 should be applied prospectively. Retrospective adoption is permitted. The Company adopted ASU 2023-09 during the year ended December 31, 2025, on a prospective basis. The adoption didnot have a material impact on the Company's consolidated financial statements, as the amendments relate to disclosure requirements only. See Note 11 for more information on the effects of the adoption of ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve disclosures around an entity's expenses. Upon adoption, companies will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. The standard is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted, and can be applied either prospectively or retrospectively. The Company plans to adopt the standard in its 2027 annual period and is currently assessing the impact this standard will have on the Company's consolidated financial statement disclosures.

No other new accounting pronouncements or legislation issued or effective as of December 31, 2025 have had, or are expected to have, a material impact on the Company’s consolidated financial statements.

2. Summary of Significant Accounting Policies

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business inone segment, which is the business of developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. See Note 14 for more information on the Company's segment reporting.

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, revenues and expenses and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Significant estimates in the Company’s consolidated financial statements relate to accrued research and development expenses, revenue recognition and the valuation of equity awards. 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.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents and short-term investments. 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’s investment policy includes guidelines for the quality of the related institutions and financial instruments and defines allowable investments that the Company may invest in, which the Company believes minimizes the exposure to concentration of credit risk.

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the consolidated financial statements in the period in which they are recognized. 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 investments and foreign currency translation gains and losses. Other comprehensive (loss) income, net includes unrealized gains or losses on short-term investments as well as foreign currency translation gains or losses.

Cash and Cash Equivalents

Cash and cash equivalents include cash in readily available checking and savings accounts, and money market funds. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. At December 31, 2025 and 2024, the Company's cash and cash equivalents were primarily comprised of money market funds.

Short-Term Investments

Available-for-sale securitiesare carried at fair value, with the unrealized gains and losses reported in comprehensive loss. 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. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense. 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 income.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Property and Equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three tofive years).

Leases

The Company determines if an arrangement is a lease at inception. Lease right-of-use 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. For operating leases with an initial term greater than 12 months, the Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of lease payments over the lease term at the commencement date. Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives. Lease terms include options to renew or terminate the lease when the Company is reasonably certain that the renewal option will be exercised or when it is reasonably certain that the termination option will not be exercised. For the Company's operating leases, if the interest rate used to determine the present value of future lease payments is not readily determinable, the Company estimates its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient to not separate lease and non-lease components.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. While the Company’s current and historical operating losses and negative cash flows are indicators of impairment, management believes that future cash flows to be received support the carrying value of its long-lived assets and, accordingly, has not recognized any impairment losses since inception.

Accrued Research and Development Expense

The Company is required to estimate its expenses resulting from its obligations under contracts with vendors, consultants and contract research organizations, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided 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 and efforts are expended. The Company accounts for these expenses according to the progress of the nonclinical or clinical study as measured by the timing of various aspects of the study or related activities. The Company determines accrual estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and development personnel as to the progress of studies, or other services being conducted. During the course of a study, the Company adjusts its rate of expense recognition if actual results differ from its estimates. The Company classifies its estimates for accrued research and development expenses as accrued expenses on the accompanying consolidated balance sheets.

Australian Research and Development Tax Incentive

Equillium Australia Pty Ltd (Equillium Australia), a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program (the Tax Incentive) to obtain a cash refund from the Australian Taxation Office (ATO) for eligible research and development expenditures. The cash refund is received by Equillium Australia upon filing of a Tax Incentive claim in connection with Equillium Australia’s annual income tax return.

The Tax Incentive is a self-assess program whereby Equillium Australia must assess each year (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim refunds under the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures.

Although Equillium Australia believes that it has complied with all relevant conditions of eligibility under the program for all periods claimed, the ATO has the right to review Equillium Australia’s qualifying programs and related expenditures for a period of up to four years. Additionally, the period open for review is indefinite if the ATO suspects fraud. If such a review were to occur, the ATO may have different interpretations of certain eligibility requirements. If the ATO disagreed with Equillium Australia’s assessments and any related subsequent appeals, it could require adjustment to and potential repayment of current or previous years’ claims already received. If Equillium Australia was unable to demonstrate a reasonably arguable position taken on such claims, the ATO could also assess penalties and interest on potential adjustment amounts. The Company has not provided any allowance for any such potential adjustments, should they occur in the future.

The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured. During the year ended December 31, 2025, the Company didnot record a reduction to research and development expenses related to the Tax Incentive due to the substantial completion of its EQ101 and EQ102 clinical trials in Australia. During the year ended December 31, 2024, the Company recorded $1.7 million as a reduction to research and development expenses related to the Tax Incentive. The Company classifies its estimate for the Tax Incentive as prepaid expenses and other current assets on the accompanying consolidated balance sheets. As of December 31, 2025, there wereno amounts recorded within prepaid and other current assets attributed to the Tax Incentive. As of December 31, 2024, the Company recorded $1.0 million within prepaid and other current assets attributed to the Tax Incentive.

Distinguishing Liabilities from Equity

The Company evaluates equity or liability classification for freestanding financial instruments, including warrants and options, pursuant to the guidance under ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480). The Company classifies as liabilities all freestanding financial instruments that are (i) mandatorily redeemable, (ii) represent an obligation to repurchase the Company’s equity shares by transferring assets, or (iii) represent an unconditional obligation (or conditional obligation if the financial instrument is not an outstanding share) to issue a variable number of shares predominantly based on a fixed monetary amount, variations in something other than the fair value of the Company’s equity shares, or variations inversely related to changes in fair value of the Company’s equity shares.

If a freestanding financial instrument does not represent an outstanding equity share and does not meet liability classification under ASC 480, the Company then assesses whether the freestanding financial instrument is indexed to its own stock and meets equity classification pursuant to ASC 815-40, Derivatives and Hedging (ASC 815). The Company further assesses whether the freestanding financial instruments should be classified as temporary equity. Freestanding financial instruments that are redeemable for cash or other assets at a fixed or determinable date, at the option of the holder, or upon the occurrence of an event are classified in temporary equity in accordance with ASC 480. Otherwise, the freestanding financial instruments are classified in permanent equity.

See Note 9, Stockholders' Equity, for additional information on the freestanding financial instruments assessed under ASC 480 and ASC 815-40 for equity or liability classification.

Revenue Recognition

The Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company follows a five-step approach: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service. The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. The Company applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

Research and Development

Research and development expenses include salaries and related overhead expenses, non-cash stock-based compensation expense, external research and development expenses incurred under arrangements with third parties, costs of services performed by consultants and contract research organizations, and regulatory costs including those related to preparing and filing INDs with the FDA. Research and development costs are expensed as incurred.

Patent Costs

The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss.

Stock-Based Compensation

The Company measures employee and nonemployee stock-based awards, including stock options and purchase rights, at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. The Company uses the Black-Scholes option pricing model to value its stock option awards. Estimating the fair value of stock option awards requires management to apply judgment and make estimates of certain assumptions, including the volatility of the Company’s common stock, the expected term of the Company’s stock options, the expected dividend yield and the fair value of the Company’s common stock on the measurement date. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

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 net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Pursuantto the Internal Revenue Code of 1986, as amended (IRC), specifically Sections 382 and 383, the Company’s ability to use tax attribute carryforwards to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company completed an ownership change analysis through December 31, 2024 pursuant to IRC Section 382 and determined that the Company’s ability to offset taxable income in 2024 is not expected to be impacted by ownership changes occurring prior to that date. If ownership changes within the meaning of IRC Section 382 occur in the future, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company's deferred tax assets associated with such tax attributes could be significantly reduced or eliminated upon realization of an ownership change within the meaning of IRC Section 382. If eliminated, the related asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. Additionally, limitations on the utilization of the Company's tax attribute carryforwards can increase the amount of taxable income and current income tax expense recognized. Due to the existence of the valuation allowance, ownership change limitations that are not significant may not impact the Company's effective tax rate.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basisof the technical merits of the position and (2) 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.

Net Loss per Share

Basic and diluted net loss per share is determined by dividing the net loss by the weighted-average number of common shares outstanding for the period. For all periods presented, the Company’s potentially dilutive securities include outstanding options under the Company’s 2018 Equity Incentive Plan, 2024 Inducement Plan and outstanding warrants to purchase common stock, each of which have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. Pre-funded warrants to purchase 30,816,705 shares of common stock are included in the computation of basic and diluted net loss per share for the year ended December 31, 2025, as the pre-funded warrants are exercisable for nominal consideration. There were no pre-funded warrants to purchase common stock in the year ended December 31, 2024. For all periods presented, there is no difference in the number of shares of common stock or common stock equivalents used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

3. Fair Value of Financial Instruments

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—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and short-term investments. Cash equivalents consisted of money market funds and short-term investments consisted of U.S. treasury securities. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bid and/or offers.

The following tables summarize the Company’s assets that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

(a) Money Market funds included in cash and cash equivalents in the consolidated balance sheets, are valued at quoted market prices in active markets.

(b) U.S. treasury securities included in short-term investments in the consolidated balance sheet as of December 31, 2024, are recorded at fair market value, which is determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. There were no short-term investments as of December 31, 2025.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

The Company didnot hold any Level 1, 2 or 3 financial liabilities that are recorded at fair value on a recurring basis as of December 31, 2025 or 2024.

4. Short-term Investments

The following table summarizes the Company’s short-term investments (in thousands):

The Company doesnot have any available-for-sale securities as of December 31, 2025. All of the Company’s available-for-sale securities are available to the Company for use in its current operations. As a result, the Company categorizes all of these securities as current assets.

There wereno impairments considered other-than-temporary during the periods presented, as it is management’s intention and ability to hold the securities until a recovery of the cost basis or recovery of fair value. Unrealized gains and losses are included in accumulated other comprehensive incomein the Company's consolidated balance sheets.

5. Property and Equipment

Property and equipment consisted of the following (in thousands):

Depreciation expense related to property and equipment was $0.1 million for each of the years ended December 31, 2025 and 2024. During the year ended December 31, 2025, the Company disposed of property and equipment with a net book value totaling $31,000 for cash proceeds of $12,000. As a result, the Company recognized a loss on disposal of property and equipment of $19,000, which is included in other income (expense), net in the consolidated statement of operations and comprehensive loss. No material gains or losses on the disposal of property and equipment were recorded for the year ended December 31, 2024.

6. Leases

In September 2025, the Company entered into anon-cancelable operating lease for laboratory space in San Diego, California which expires in January 2028. Upon lease commencement, the Company recognized a right-of-use asset and a corresponding lease liability of $0.5 million. The Company's lease for laboratory space in La Jolla, California expired in August 2025 and the Company did not renew that lease. The Company also leases office space located in La Jolla that expires in February 2027.

The terms of the Company’s non-cancelable operating lease arrangements typically contain fixed lease payments which increase over the term of the lease at fixed rates and include rent holidays and provide for additional renewal periods. Lease expense is recognized over the term of the lease on a straight-line basis. All of the Company’s leases are classified as operating leases. The Company has determined that periods covered by options to extend the Company’s leases are excluded from the lease term as the Company is not reasonably certain the Company will exercise such options. Operating lease expense, including expenses related to short-term leases, was $0.5 million for each of the years ended December 31, 2025 and 2024.

Under the lease arrangements, the Company may be required to pay directly, or reimburse the lessor for real estate taxes, insurance, utilities, maintenance and other operating costs. Such amounts are variable and therefore not included in the measurement of the right-of-use assets and related lease liability but are instead recognized as variable lease expense in the Company's consolidated statements of operations and comprehensive loss when they are incurred. Variable lease expense, including expenses related to short-term leases, was $0.3 million for each of the years ended December 31, 2025 and 2024.

The Company records its right-of-use-assets within other assets (long term) and its operating lease liabilities within other current and long-term liabilities.

Additional information related to the Company’s leases as of and for the years ended December 31, 2025 and 2024 is as follows (in thousands, except lease term and discount rate):

Maturities of lease liabilities as of December 31, 2025, were as follows (in thousands):

As of December 31, 2025, the Company did not have any leases that have not yet commenced that create significant rights and obligations.

7. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

8. Partnerships

Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.

On December 5, 2022, the Company and Ono, a Japan kabushiki kaisha, entered into an Asset Purchase Agreement pursuant to which the Company granted Ono the exclusive right, but not the obligation, to acquire the Company’s rights to itolizumab (the Option). These rights included all therapeutic indications and the rights to commercialize itolizumab in the United States, Canada, Australia, and New Zealand. In exchange for the Option, Ono paid the Company a one-time, upfront payment of an amount equal to JPY 3.5 billion, or $26.4 million.

The Company was responsible for conducting all research and development of itolizumab, which had been funded by Ono from July 1, 2022 through October 30, 2024, the end of the option period. On October 30, 2024, the option period expired and the Asset Purchase Agreement automatically terminated pursuant to its terms.

During the year ended December 31, 2025, there wasno revenue recognized under the Asset Purchase Agreement. During the year ended December 31, 2024, the Company recognized revenue of $41.1 million under the Asset Purchase Agreement. Such revenue was comprised of $28.3 million associated with development funding and $12.8 million associated with the amortization of the upfront payment during the year ended December 31, 2024.

Termination of Biocon Collaboration and License Agreement

On September 30, 2025 (the Termination Date), the Company entered into a termination agreement with Biocon Limited (Biocon and the agreement, the Termination Agreement) pursuant to which the Company and Biocon terminated the License Agreement, the Memorandum of Understanding dated April 7, 2022 and certain other corresponding agreements (collectively Biocon Agreements), with all licenses granted by Biocon to the Company under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. See Note 13 for additional details regarding the Biocon Agreements. As consideration for certain technical services the Company was obligated to provide to Biocon following the Termination Date, Biocon agreed to pay the Company a technical service fee of $0.4 million. In lieu of Biocon paying the technical service fee to the Company, Biocon set off amounts owed by the Company to Biocon under or in connection with the Biocon Agreements through the Termination Date, with the amount of such set-off to equal such technical service fee, plus any other amount that has been or may be invoiced by the Company to Biocon for work performed by the Company with respect to itolizumab through the Termination Date, and to be limited to the aggregate amounts that have been or may be invoiced by Biocon to the Company, or are or may be otherwise owed by the Company to Biocon, under or in connection with the Biocon Agreements through the Termination Date. The Company completed its performance obligations under the Termination Agreement in the fourth quarter of 2025, resulting in the set off of amounts owed by the Company to Biocon totaling $0.4 million which was recorded as a reduction of research and development expense in its consolidated statement of operations and comprehensive loss in the year ended December 31, 2025.

9. Stockholders’ Equity

As of December 31, 2025, the Company’s authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

The Company had 61,464,368 and 35,557,563 shares of common stock outstanding as of December 31, 2025 and 2024, respectively.

Securities Purchase Agreement

On August 10, 2025, the Company entered into a Securities Purchase Agreement (the Purchase Agreement) with certain institutional and accredited investors (the Investors), pursuant to which the Company agreed to sell and issue shares (Shares) of the Company’s common stock and pre-funded warrants to purchase shares of common stock (Warrant Shares), in up to two closings in a private placement transaction (the Private Placement).

The initial closing of the Private Placement occurred on August 12, 2025, (the Initial Closing). At the Initial Closing, the Company issued and sold 21,814,874 Shares at a purchase price of $0.57 per share (the Share Price) and pre-funded warrants to purchase up to 30,816,705 Warrant Shares at a purchase price of $0.5699 per Warrant Share (the Warrant Price) to the Investors for gross proceeds to the Company of approximately $30.0 million. Net proceeds from the Private Placement were $27.9 million, after deducting placement agent fees and offering expenses totaling $2.1 million.

Pursuant to the Purchase Agreement, subject to the occurrence of the Milestone Closing Trigger (defined below), the Investors have agreed to purchase at a closing (the Milestone Closing) up to 35,087,717 Shares or pre-funded warrants in lieu thereof at a purchase price per Share and pre-funded warrant equal to the Share Price and the Warrant Price, respectively, for gross proceeds to the Company of up to approximately $20.0 million. The Milestone Closing trigger means: (A) the achievement of either of the following prior to the five-year anniversary of the date of the Purchase Agreement (i) the clearance of an investigational new drug application for EQ504 or (ii) the dosing of the first patient in a single ascending dose or a multiple ascending dose trial of EQ504 in Australia or New Zealand (the first such event to occur, the Milestone Event), and (B) (x) the achievement of a volume weighted average price per share of $2.50 (subject to appropriate, proportional adjustment for any stock splits or combinations of the common stock occurring after the date of the Purchase Agreement) measured during any 10 consecutive trading days during the 30 trading days following the date the Company first announces via a press release or Current Report on Form 8-K the occurrence of the Milestone Event (such period the Measurement Period and such price threshold requirement, the Price Threshold), or (y) the Company’s receipt of a waiver of the Price Threshold signed by the Investors who hold a majority of the securities issued in the Private Placement (determined as if all of the Warrant Shares underlying pre-funded warrants then outstanding have been issued without regard to any limitations on the exercise of such pre-funded warrants) and delivered to the Company during the Measurement Period (the achievement or occurrence of (A) and (B) are collectively, the Milestone Closing Trigger). In the event the Milestone Closing Trigger occurs as a result of a Price Threshold Waiver, only the waiving Investors will be obligated to purchase Shares or pre-funded warrants at the Milestone Closing.

The pre-funded warrants have an exercise price of $0.0001 per Warrant Share, subject to customary adjustments, and are exercisable at any time and will not expire until exercised in full. The pre-funded warrants will also be exercisable on a net exercise “cashless” basis. The pre-funded warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof immediately following such exercise would exceed a specified beneficial ownership limitation, not to exceed 19.99%.

The Company assessed the 30,816,705 pre-funded warrants issued at the Initial Closing and the 35,087,717 Shares or pre-funded warrants in lieu thereof to be issued at the Milestone Closing subject to the occurrence of the Milestone Closing Trigger and determined that they donot require liability classification pursuant to ASC 480. The pre-funded warrants at the Initial Closing and the Shares or pre-funded warrants contingent to be issued at the Milestone Closing do not have any net cash settlement provisions that would preclude equity classification under ASC 815-40. Accordingly, the pre-funded warrants were recorded to additional paid-in capital in the consolidated balance sheet. As of December 31, 2025 and through the date of the filing of this Annual Report on Form 10-K, the pre-funded warrants issued at the Initial Closing have not been exercised.

Registration Rights Agreement

In connection with the Private Placement, the Company entered into a Registration Rights Agreement (the Registration Rights Agreement) with the Investors at the Initial Closing, pursuant to which the Company agreed to prepare and file, within 30 days of the Initial Closing and, if applicable, the Milestone Closing, subject to certain allowable delays, one or more registration statements with the SEC to register for resale the Shares and, as applicable, the Warrant Shares, in each case that were issued under the Purchase Agreement, and generally to cause the applicable registration statements to promptly become effective. Certain cash penalties will apply to the Company in the event of registration failures.

On September 9, 2025, the Company filed a registration statement on Form S-3 (File No. 333-290138) for the resale of the Shares as well as the shares of common stock issuable upon the exercise of the pre-funded warrants that were issued at the Initial Closing, and it was declared effective on September 18, 2025.

2023 ATM Facility

In October 2023, the Company entered into an at-the-market facility with Jefferies LLC (Jefferies) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $21.95 million from time to time through Jefferies acting as the Company's sales agent (the 2023 ATM Facility). There wereno shares sold under the 2023 ATM Facility from October 2023 through December 31, 2024. On August 3, 2025, the Company entered into Amendment No. 1 to the 2023 ATM Facility pursuant to which Jefferies was replaced by LifeSci Capital LLC as the sales agent under the 2023 ATM Facility. During the year ended December 31, 2025, there were 1,719,485 shares of common stock sold under the 2023 ATM Facility for gross proceeds of $1.0 million and net proceeds totaling $0.3 million, after deducting for issuance costs incurred inception-to-date of $0.7 million.

On September 19, 2025, the Company filed a prospectus supplement with the SEC under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $75.0 million, pursuant to the 2023 ATM Facility, as amended.

As of December 31, 2025 and through the date of the filing of this Annual Report on Form 10-K, there were no additional shares sold under the 2023 ATM Facility, as amended.

2018 Equity Incentive Plan

In October 2018, the Company adopted the 2018 Plan which replaced the Company’s legacy 2017 Plan. The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards. As of December 31, 2025, the 2018 Plan had a maximum of 292,972 total shares available for issuance. Thenumber of shares of common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 of each calendar year through January 1, 2028, in an amount equal to 5.0% of the total number of shares of the Company’s capital stock outstanding, including, for purposes of this calculation, shares issuable upon exercise of outstanding pre-funded warrants, on thelast day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Board.

Options granted under the 2018 Plan are exercisable at various dates as determined upon grant and will expire no more thanten years from their date of grant. The exercise price of each option shall be determined by the Board based on the estimated fair value of the Company’s stock on the date of the option grant. The exercise price shall not be less than 100% of the fair market value of the Company’s common stock at the time the option is granted. Most option grants generally vest 25% on the first anniversary of the original vesting commencement date, with the balance vesting monthly over the remaining three years.

2024 Inducement Plan

On March 6, 2024, upon the recommendation of the Compensation Committee of the Company’s board of directors, the Company’s board of directors adopted and approved the Company’s 2024 Inducement Plan (the Inducement Plan) to reserve 1,500,000 shares of the Company's common stock to be used exclusively for grants of equity awards to individuals that were not previously employees or directors of the Company (or who are returning to employment following a bona fide period of non-employment), as an inducement material to the individual’s entry into employment with the Company, pursuant to Nasdaq Listing Rule 5635(c)(4). The Inducement Plan was adopted and approved without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). In addition, the Company's board of directors adopted and approved forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise for use with the Inducement Plan. The terms and conditions of the Inducement Plan are substantially similar to the Company’s stockholder-approved 2018 Equity Incentive Plan (the 2018 Plan). As of December 31, 2025, there are 157,200 options outstanding under the 2024 Inducement Plan.

Stock Options

The following summarizes stock option activity for the year ended December 31, 2025:

(a)

Aggregate intrinsic value in this table was calculated as the positive difference, if any, between the closing price per share of the Company’s common stock on December 31, 2025 of $1.55 and the price of the underlying options.

For the years ended December 31, 2025 and 2024, the weighted-average grant date fair value of stock options granted per share was equal to $1.33 and $0.56, respectively.

As of December 31, 2025, unrecognized compensation expense related to unvested stock options was $7.7 million and is expected to be recognized over a weighted-average period of 3.5 years.

The total intrinsic value, which is the amount by which the exercise price was exceeded by the price of the Company's common stock on the date of exercise, of stock options exercised during the years ended December 31, 2025 and 2024 was $1.5 million and $2,000, respectively. Cash received from stock option exercises for the years ended December 31, 2025 and 2024 was $1.8 million and $4,000, respectively.

The fair value of stock options that vested in the years ended December 31, 2025 and 2024 was $1.7 million and $2.4 million, respectively.

2018 Employee Stock Purchase Plan

In October 2018, the Company adopted the 2018 Equity Stock Purchase Plan (ESPP) whereby eligible employees may elect to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i)85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (ii)85% of the fair market value of a share of the Company’s common stock on the date of the purchase right (purchase right). Initially,343,275 shares of the Company’s common stock were approved for issuance under the ESPP pursuant to purchase rights granted to the Company’s employees or to employees of any of the Company’s designated affiliates. The number of shares of the Company’s common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2028, by the lesser of (1) 1.0% of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (2)343,275 shares; provided that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2).

As of December 31, 2025, the Company had issued 893,708 shares of common stock under the ESPP, none of which were issued during the year ended December 31, 2025. The Company had 1,369,497 shares available for future issuance under the ESPP as of December 31, 2025.

Stock-based Compensation Expense

Total non-cash stock-based compensation expense for all stock awards and purchase rights, net of forfeitures recognized as they occur, that was recognized in the consolidated statement of operations and comprehensive loss is as follows (in thousands):

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and non-employee stock option grants were as follows:

Risk-free interest rate. The risk-free rate assumption is based on the U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options.

Expected volatility. For the year ended December 31, 2025, the expected volatility is based on the historical volatility of the Company's common stock over a period commensurate with the expected term of the Company's stock options. The Company determined that it had sufficient trading data and, therefore, concluded that its own historical volatility provides a more appropriate estimate of expected future volatility. For prior periods, due to the Company’s limited operating history and lack of company-specific historical volatility, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly available.

Expected term. The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding. The Company uses the simplified method for estimating the expected term as provided by the SEC. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

Expected dividend yield. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and doesnot intend to pay dividends.

Forfeitures. The Company reduces stock-based compensation expense for actual forfeitures during the period.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consists of the following as of December 31, 2025 and 2024:

10. Commitments and Contingencies

Leases and Other Commitments

As of December 31, 2025, the Company leased office space in La Jolla, California that expires in February 2027. The Company also leases laboratory space in San Diego that expires in January 2028. All of the Company's leased space is under non-cancelable operating leases.

The Company enters into service agreements with indemnification clauses in the ordinary course of business. Pursuant to such clauses, the Company indemnifies, defends, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by third party claims arising out of the indemnified party’s performance of service. The Company has not incurred costs to defend lawsuits pursuant to these indemnification clauses.

Litigation

As of December 31, 2025, there wasno litigation against the Company.

11. Income Taxes

The components of loss before income tax provision for the years ended December 31, 2025 and 2024 consisted of the following (in thous ands):

During the year ended December 31, 2025, the Company didnot record any federal or state tax expense. During the year ended December 31, 2024, the Company recorded a current federal and state tax expense of $340,000 and $21,000, respectively. During the years ended December 31, 2025 and 2024, the Company didnot record a deferred federal or state income tax expense.

During the year ended December 31, 2025, federal and state income taxes paid, net of refunds, totaled $342,000 and $10,000, respectively.

The Company adopted ASU 2023-09 on a prospective basis beginning with the year ended December 31, 2025. The following is required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our effective amount and rate for the year ended December 31, 2025 (in thousands, except for percentages):

(a)State income taxes in California comprise the majority of the tax effect in this category.

The following is a reconciliation of the expected statutory federal income tax provision to our actual income tax provision prior to the adoption of ASU 2023-09 for the year ended December 31, 2024 (in thousands):

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows (in thousands):

The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a full valuation allowance of $54.7 million as of December 31, 2025, as it does not believe it is more likely than not that certain deferred tax assets will be realized primarily due to the generation of pre-tax book losses in the current year, the lack of feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future. The Company increased its valuation allowance by approximately $3.8 million during the year ended December 31, 2025.

At December 31, 2025, the Company had federal and state tax loss carryforwards of approximately $139.8 million and $92.1 million, respectively. The federal net operating loss carryover includes $139.8 million of net operating losses generated subsequent to 2017. Federal net operating losses, generated after December 31, 2017, carryover indefinitelybut the deductibility of such federal net operating losses is limited to 80% of taxable income. The state net operating loss carryforwards, begin to expire in 2038 unless previously utilized. The Company has $5.0 million of Australian net operating loss carryforwards as of December 31, 2025, that are carried forward indefinitely.

At December 31, 2025, the Company had federal and state tax credit carryforwards of approximately $10.6 million and $3.3 million, respectively, after reduction for uncertain tax positions. The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2035, if unused, and the state credits carryforward indefinitely.

Pursuant to the Internal Revenue Code of 1986, as amended (IRC), specifically Sections 382 and 383, the Company’s ability to use tax attribute carryforwards to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within athree-year testing period. The Company completed an ownership change analysis through December 31, 2024, pursuant to IRC Section 382 and determined that the Company’s ability to offset taxable income in 2024 is not expected to be impacted by ownership changes occurring prior to that date. Due to our estimated U.S. tax loss for the year ended December 31, 2025, we do not expect to utilize tax attribute carryforwards in 2025. If ownership changes within the meaning of IRC Section 382 occur in the future, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company's deferred tax assets associated with such tax attributes could be significantly reduced or eliminated upon realization of an ownership change within the meaning of IRC Section 382. If eliminated, the related asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. Additionally, limitations on the utilization of the Company's tax attribute carryforwards can increase the amount of taxable income and current income tax expense recognized. Due to the existence of the valuation allowance, ownership change limitations that are not significant may not impact the Company's effective tax rate.

The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2025 and 2024 (in thousands):

The unrecognized tax benefit amounts are reflected in the determination of the Company's deferred tax assets and tax payables. As of December 31, 2025 and 2024, the Company had unrecognized tax benefits totaling $0.6 million, which, if recognized, would affect the Company's effective tax rate.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company's consolidated balance sheet as of December 31, 2025, and has not recognized interest and/or penalties in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2025.

All tax years for both federal and state purposes remain open and subject to examination by tax jurisdictions. The Company is subject to taxation in the United States, various U.S. state jurisdictions and Australia.

During the year ended December 31, 2025, the Company hadno income tax expense. During the year ended December 31, 2024, the Company's income tax expense was $0.4 million. The Company’s 2024 income tax expense was primarily attributable to domestic cash tax expense resulting from differences between book and tax treatment of certain items. The Company does not record a deferred tax provision as there is a full valuation allowance offsetting the Company’s net deferred tax assets.

The One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including immediate expensing of domestic Section 174 costs while foreign costs will continue to be capitalized and amortized over 15 years. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. With the enactment of OBBBA, the Company began deducting domestic Section 174 costs in 2025.

12. Retirement Plan

The Company sponsors an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the IRC. Participating employees may defer up to the Internal Revenue Service annual contribution limit. The Company didnot make any contributions for the years ended December 31, 2025 or 2024.

13. Related Party Transactions

On September 30, 2025, the Company entered into a Termination Agreement with Biocon with all licenses granted by Biocon to the Company under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. Refer to Note 8 for additional details. As of December 31, 2025, Biocon no longer holds more than 5% of the Company's common stock and is no longer considered a related party. Biocon was a holder of more than 5% of the Company's common stock in prior periods.

In April 2022, the Company entered into an agreement with Biocon to collaborate on and co-fund a Phase 2 clinical study of itolizumab in subjects with ulcerative colitis that was being conducted by Biocon in India. The Company's share of the total clinical study costs was approximately $1.4 million. During the years ended December 31, 2025 and 2024, the Company recorded a net reduction of research and development expenses of $0.2 million and recognized $0.4 million of research and development expenses, respectively, related to its portion of the total clinical study costs. The reduction in 2025 resulted from the reversal of amounts owed to Biocon pursuant to the Termination Agreement. As of December 31, 2025, no amounts were accrued or invoiced by and payable to Biocon related to this clinical study, compared to accrued expenses of $0.2 million andno amounts invoiced by and payable to Biocon as of December 31, 2024.

In February 2020, the Company entered into a master services agreement with Syngene International Limited (Syngene), a wholly-owned subsidiary of Biocon, for chemistry, manufacturing and controls (CMC) services associated with itolizumab development (the Syngene MSA). In July 2023, the Company issued a work order under the Syngene MSA totaling $5.4 million for CMC activities, substantially all of which was paused in the third quarter of 2024. In 2024, the Company also entered into a work order for stability studies with Syngene totaling $0.1 million as well as purchase orders for CMC projects and purchases of drug product with Biocon totaling approximately $6.5 million, the majority of which was paused as of October 30, 2024. During the years ended December 31, 2025 and 2024, the Company recognized a net reduction of research and development expenses of $29,000 and recognized $3.7 million of research and development expenses, respectively, related to these CMC agreements. As of December 31, 2025, no amounts were accrued, invoiced by or payable to Biocon or Syngene, compared to accrued expenses of $43,000 and amounts invoiced by or payable to Biocon and Syngene of $0.6 million as of December 31, 2024.

The majority of the aforementioned expenses incurred in the prior year associated with work performed by Biocon or its affiliates related to itolizumab development were reimbursed by Ono pursuant to the terms of the Asset Purchase Agreement during the Ono option period which expired on October 30, 2024.

The Company classifies its accruals related to these activities as accrued expenses on the accompanying consolidated balance sheets. The Company classifies amounts invoiced by and payable to Biocon and Syngene as accounts payable on the accompanying consolidated balance sheets.

14. Segment Reporting

The Company operates through asingle operating and reportable segment focused on the business of developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. The Company manages all business activities on a consolidated basis. The Company’s chief operating decision maker (CODM) is the Chief Executive Officer.

The accounting policies of the operating segment are the same as those described in Note 2, Summary of Significant Accounting Policies. The CODM evaluates the performance of the operating segment and allocates resources based on net loss that also is reported on the consolidated statements of operations and comprehensive loss as net loss. The measure of the operating segment assets is reported on the consolidated balance sheets as total assets.

The CODM uses net loss to monitor budget versus actual results and to analyze cash flows in assessing performance of the segment and allocating resources. The significant expense categories regularly provided to the CODM include research and development and general and administrative expenses. These expense categories are reported as separate line items in our consolidated statements of operations and comprehensive loss. All our revenue is attributable to the United States and to our single operating segment.

15. Subsequent Events

On March 11, 2026, the Company entered into a Securities Purchase Agreement (the March Purchase Agreement) with an institutional and accredited investor (the March Investor). At the closing on March 13, 2026, the Company issued and sold 1,179,508 shares of the Company’s common stock for a purchase price of $1.854 per share and a pre-funded warrant to purchase 17,698,593 shares of common stock at a purchase price of $1.8539 per share, with an exercise price of $0.0001 per share, in each case to the March Investor for gross proceeds of approximately $35.0 million. In connection with the issuance and sale of the shares and pre-funded warrant, the Company granted the March Investor customary registration rights pursuant to the Registration Rights Agreement dated March 13, 2026.