ATOSSA THERAPEUTICS, INC.

NOTE 1: NATURE OF OPERATIONS

Atossa Therapeutics, Inc. (the Company) was incorporated on April 30, 2009, in the State of Delaware to develop and market medical devices, laboratory tests and therapeutics to address breast health conditions. The Company is focused on developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on breast cancer and other breast conditions, as well as other rare diseases.

NOTE 2: GOING CONCERN

The Company's consolidated financial statements are prepared under the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the year ended December 31, 2025, the Company recorded a net loss of $34.8 million and used $29.8 million of cash in operating activities. As of December 31, 2025, the Company had $41.3 million in unrestricted cash and cash equivalents and working capital of $37.4 million. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern.

In order to alleviate the conditions that raise substantial doubt, the Company will need, among other things, additional capital resources. Management plans to obtain such resources for the Company include obtaining capital from the sale of its equity securities as well as short-term borrowings from banks, stockholders or other related parties if needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraphs and eventually to secure other sources of financing and attain profitable operations.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These Consolidated Financial Statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the SEC) and in accordance with GAAP. The accompanying Consolidated Financial Statements include the financial statements of Atossa Therapeutics, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include the valuation of the investment in non-marketable equity securities, stock-based compensation expense, and prepaid or accrued clinical trial balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.

Reverse Stock Split

On February 2, 2026, the Company effected a 1-for-15 reverse stock split of its issued and outstanding common stock (the Reverse Stock Split). As a result of the Reverse Stock Split, each 15 shares of common stock issued and outstanding immediately prior to February 2, 2026 was automatically converted intoone share of common stock. The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholders' percentage interest in the Company's equity, except to the extent that the Reverse Stock Split would result in a stockholder owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive a fractional share instead were entitled to receive cash in lieu of such fractional share.

The Reverse Stock Split did not change the par value of the common stock or the authorized shares of common stock. The shares of common stock retain a par value of $0.18 per share. Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from “Common stock” to “Additional paid-in capital”.

All common stock and per-share amounts in this Form 10-K have been retroactively restated to reflect the effect of the Reverse Stock Split.

Cash and Cash Equivalents

Cash and cash equivalents include unrestricted cash and all highly liquid instruments with original maturities of three months or less at the date of purchase. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted Cash

The Company’s restricted cash balance as of December 31, 2025 and 2024, consisted entirely of cash pledged as security for the Company’s issued commercial credit cards.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of deposits of cash and cash equivalents, including those deposited in money market deposit and prime money market fund accounts. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any material losses in such accounts and believes it is not exposed to significant risk. The Company invests its excess cash in a highly rated prime money market fund that management believes protects the Company from risk of default and impairment.

Clinical Trial and Preclinical Study Accruals

The Company makes estimates of its accrued expenses for clinical trial and preclinical study activities as of each balance sheet date in its financial statements based on the facts and circumstances known to the Company at that time. These accruals are based upon estimates of costs incurred and fees that may be associated with services provided by clinical trial investigational sites and Contract Research Organizations (CROs), and for other clinical trial-related activities. Payments under certain contracts with such parties depend on factors such as successful enrollment of patients, site initiation and progression through the various stages of the Company's clinical trials. In accruing for these services, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If possible, the Company obtains information regarding unbilled services directly from these service providers. However, the Company may be required to estimate these services based on other information available to it. If the Company underestimates or overestimates the activities or fees associated with a study or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, the Company's estimated accrued liabilities have approximated actual expense incurred. Subsequent changes in estimates may result in a material change in the Company's accruals.

Prepaid Materials

The Company capitalizes the purchase of certain raw materials, active pharmaceutical ingredients and related supplies for use in the manufacturing of drug products for use in its preclinical and clinical development programs, as it has determined that these materials have alternative future use. The Company can use these raw materials and related supplies in multiple clinical drug products, and therefore has future use independent of the development status of any particular drug program until it is utilized in the manufacturing process. The Company expenses the cost of materials when used. The Company periodically reviews these capitalized materials for continued alternative future use and writes down the asset to its net realizable value in the period in which an impairment is identified. Prepaid materials not expected to be used within 12 months of the balance sheet date are presented in Other assets on the Consolidated Balance Sheets.

Variable Interest Entities

The Company reviews agreements it enters into with third-party entities, pursuant to which the Company may have a variable interest in the entity, in order to determine if the entity is a variable interest entity (VIE). If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary of that entity. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (i) the power to direct the economically significant activities of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. If the Company determines it is the primary beneficiary of a VIE, it consolidates that VIE into the Company's consolidated financial statements. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation or deconsolidation event. The Company currently does not consolidate any VIEs.

Investments in Equity Securities

The Company had one investment in non-marketable equity securities. This investment did not have a readily determinable fair value, so the Company elected to measure the investment at cost less any impairment, adjusted to fair value if there are observable price changes in orderly transactions for an identical or similar investment of the same issuer, in accordance with Accounting

Standards Codification (ASC)321, Investments–Equity Securities. At each reporting period, the Company performed an assessment to determine if it still qualified for this measurement alternative.

At each reporting period, the Company made a qualitative assessment considering impairment indicators to evaluate whether the investment was impaired. If a qualitative assessment indicated that the investment was impaired, the Company estimated the investment's fair value. If the fair value was less than the investment's carrying value, an impairment charge is recorded in the Consolidated Statements of Operations equal to the difference between the carrying value and fair value and a new basis in the investment was established. Refer to Note 4 “Investment in Equity Securities” to the Consolidated Financial Statements.

Other Assets

Other assets consist of property and equipment, prepaid materials and clinical deposits.

Fair Value Measurements

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

The fair value hierarchy is broken down into the three input levels summarized below:

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Level 1: Quoted market prices in active markets for identical assets or liabilities;

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Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data; and

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Level 3: Unobservable inputs that cannot be corroborated by market data that reflects the reporting entity's own assumptions.

The carrying amounts reflected in the accompanying Consolidated Balance Sheets for cash and cash equivalents, restricted cash, and accounts payable approximate their fair values due to their short-term nature. Refer to Note 9 to these Consolidated Financial Statements.

Research and Development

Research and development (R&D) costs are expensed as incurred and consist of costs associated with research activities. R&D expenses include, for example, manufacturing expenses for the Company's drugs under development, expenses associated with preclinical studies, clinical trials and associated salaries, bonuses, stock-based compensation and benefits. R&D expenses also include an allocation of the CEO's salary and related benefits, including bonus and non-cash stock-based compensation expense, based on an estimate of his total hours spent on R&D activities. The Company's CEO is involved in the development of the Company's drug candidates and oversight of the related clinical trial activities and also acts as the Company's Chief Medical Officer.

Stock-based Compensation

The Company measures and recognizes compensation expense for all stock-based awards made to employees, officers, non-employee directors, and other key persons providing services to the Company, currently limited to stock options. Stock-based compensation is measured using the estimated grant date fair value and is recognized as an expense over the requisite service period, generally the vesting period. The Company has made a policy election to recognize forfeitures when they occur.

The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the price of the Company's common stock, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and a risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of its stock price. The Company has limited exercise history and has elected the simplified method for the expected life assumption for stock option grants, which averages the contractual term of the options of 10 years with the vesting term, typicallyone tofour years. The dividend yield assumption ofzero is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate assumption is based upon prevailing short-term interest rates over the expected life of the options as of the grant date.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely thannot that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company records any interest or penalties related to income taxes in income tax benefit in the Consolidated Statements of Operations.

Recently Adopted Accounting Pronouncements

For the year ended December 31, 2025, the Company adopted Accounting Standards Update (ASU) No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740). This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. See Note 12 to these Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (the FASB) issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Topic 220-40). This standard requires business entities to disclose in a tabular format, on an annual and interim basis, purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion for each income statement line item that contains those expenses. The guidance is effective for public business entities in annual reporting periods beginning after December 15, 2026, and in interim periods within annual reporting periods beginning after December 15, 2027. Entities may apply the guidance prospectively or retrospectively. The Company is currently assessing the potential impact of this ASU.

NOTE 4: INVESTMENT IN EQUITY SECURITIES

The Company held an investment in Dynamic Cell Therapies, Inc. (DCT), a U.S. private company that was in the pre-clinical stage of developing novel Chimeric Antigen Receptor (CAR) T-cell therapies based on technology licensed from a leading U.S. cancer treatment and research institution. The Company determined that DCT was a VIE however, the Company did not consolidate DCT because it did not have the power to direct DCT’s economically significant activities. The Company had no obligation to provide any future funding to DCT.

The Company considered qualitative and quantitative impairment factors in determining if there were any signs of impairment of this investment as of September 30, 2024. Specifically, the Company considered continued concerns about the investee's ability to continue as a going concern, due to negative cash flows from operations and its inability to raise additional funding during the three and nine months ended September 30, 2024. Based on these impairment indicators, the Company performed a quantitative fair value measurement as of September 30, 2024. The impairment of the Company's Investment in equity securities required the estimation of fair value using unobservable inputs (a level 3 fair value measurement). The Company used the dynamic options approach, which required assumptions regarding (i) the expected average volatility of comparable companies, (ii) the expected term of the Company's investment, and (iii) an estimation of an appropriate risk-free interest rate over the term of the Company's investment. The expected stock price volatility assumption was based upon the average historic volatility of comparable public clinical stage immunotherapy or CAR-T companies. The expected term of the Company's investment was 3.0 years and the risk-free interest rate used was based upon prevailing short-term interest rates over the expected term of the investment. The dynamic options approach was weighted at a 5% outcome probability. An adjusted book value approach was also considered and weighted at a 95% probability due to (i) DCT's limited cash on hand at the time, (ii) the status of fundraising efforts and (iii) the subsequent decision by DCT to lay off all employees and wind down operations. Based on the valuation, the Company concluded that the investment was impaired, and accordingly, an impairment charge of $1.7 million was recorded in the Consolidated Statements of Operations for the year ended December 31, 2024.

NOTE 5: PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

NOTE 6: ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

NOTE 7: PAYROLL LIABILITIES

Payroll liabilities consisted of the following (in thousands):

NOTE 8: RESEARCH AND DEVELOPMENT TAX REBATE LIABILITY

In 2017, the Company formed a wholly owned subsidiary in Australia called Atossa Genetics AUS Pty Ltd. The purpose of this subsidiary is to perform R&D activities, including some of the Company's clinical trials. Australia offers R&D cash rebates on qualified R&D activities incurred in the country. The Australian R&D tax incentive program is a self-assessment program, and as such, the Australian Taxation Office (ATO) has the right to review the Company’s program and related expenditures for a period of four years following the tax return filing date. If a review were to occur, a qualified program and related expenditures could be disqualified by the ATO with interest and penalties. Based on the Company's evaluation of the ATO's taxpayer alert in December 2023, the Company believes that it is not reasonably assured that the full tax position would be sustained under audit. Accordingly, as of December 31, 2025 and 2024, a liability of $1.1 million and $1.5 million, respectively, was included in Other current liabilities in the Consolidated Balance Sheets.

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables present the Company’s fair value hierarchy for all its financial assets and liabilities, by major security type, measured at fair value on a recurring basis (in thousands):

NOTE 10: STOCKHOLDERS’ EQUITY

Common Stock

On June 27, 2024, the Company's stockholders approved an amendment of the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company's common stock, par value $0.18 per share, from 175,000,000 to 350,000,000.

Preferred Stock

The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.001 per share. The Company has designated 750,000 shares of Series A junior participating preferred stock, par value $0.001 per share,4,000 shares of Series A convertible preferred stock, par value $0.001 per share,25,000 shares of Series B convertible preferred stock, par value $0.001 per share, and 20,000 shares of Series C convertible preferred stock, par value $0.001 per share, through the filings of certificates of designation with the Delaware Secretary of State. No shares of Series A junior participating preferred stock, Series A convertible preferred stock, or Series C convertible preferred stock, were outstanding as of December 31, 2025 and 2024.

Series B Convertible Preferred Stock

Conversion. Each share of Series B convertible preferred stock is convertible at the Company's option at any time, or at the option of the holder at any time, into the number of shares of the Company's common stock determined by dividing the $1,000 stated value per share of the Series B convertible preferred stock by a conversion price of $52.80 per share. In addition, the conversion price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications. Subject to limited exceptions, a holder of the Series B convertible preferred stock will not have the right to convert any portion of the Series B convertible preferred stock to the extent that, after giving effect to the conversion, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of the Company's common stock outstanding immediately after giving effect to its conversion.

During the year ended December 31, 2025, certain holders of the Series B convertible preferred stock exercised their conversion option and converted an aggregate of 5 shares of Series B convertible preferred stock into 95 shares of the Company's common stock. No cash was exchanged in connection with the conversion. During the year ended December 31, 2024, there wereno conversions of Series B convertible preferred stock.

Fundamental Transactions. In the event the Company effects certain mergers, consolidations, sales of substantially all of its assets, tender or exchange offers, reclassifications, or share exchanges in which its common stock is effectively converted into or exchanged for other securities, cash or property, the Company consummates a business combination in which another person acquires 50% of the outstanding shares of its common stock, or any person or group becomes the beneficial owner of 50% of the aggregate ordinary voting power represented by its issued and outstanding common stock, then, upon any subsequent conversion of the Series B convertible preferred stock, the holders of the Series B convertible preferred stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series B convertible preferred stock.

Dividends. Holders of Series B convertible preferred stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of common stock. The Company's preferred stock contractually entitles the holders of such securities to participate in dividends but does not contractually require the holders of such securities to participate in losses of the Company.

Voting Rights. Except as otherwise provided in the certificate of designation or as otherwise required by law, the Series B convertible preferred stock has no voting rights.

Liquidation Preference. Upon the Company's liquidation, dissolution or winding-up, whether voluntary or involuntary, holders of Series B convertible preferred stock will be entitled to receive out of the Company's assets, whether capital or surplus, the same amount that a holder of common stock would receive if the Series B convertible preferred stock were fully converted (disregarding for such purpose any conversion limitations under the certificate of designation) to common stock, which amounts shall be paid pari passu with all holders of common stock.

Redemption Rights. The Company is not obligated to redeem or repurchase any shares of Series B convertible preferred stock. Shares of Series B convertible preferred stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous provisions.

Warrants

There wereno warrant exercises during the year ended December 31, 2025. During the year ended December 31, 2025, warrants granted in prior years expired as follows:187,500 warrants granted in December 2020 expired on June 21, 2025;300,000 warrants granted in January 2021 expired on July 8, 2025; and 701,667 warrants granted in March 2021 expired on September 22, 2025. No warrants remain outstanding at December 31, 2025.

During the year ended December 31, 2024, the Company received $3.7 million from the exercises of warrants resulting in the issuance of 244,833 shares of common stock.

NOTE 11: NET LOSS PER SHARE

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock that would have been outstanding during the period assuming the issuance of shares of common stock for all potentially dilutive shares of common stock outstanding. Potentially dilutive shares of common stock consist of future exercises of outstanding stock options, convertible preferred stock and common stock warrants. Because the inclusion of potential shares of common stock would be anti-dilutive for all periods presented, they have been excluded from the calculation.

The following table sets forth the weighted average number of shares of common stock excluded from the calculation of diluted net loss per share, because including them would be anti-dilutive:

NOTE 12: INCOME TAXES

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis effective January 1, 2025. A reconciliation of the income tax benefit calculated at the U.S. federal statutory rate to the recognized income tax benefit and effective income tax rate is as follows (in thousands, except percentages):

The following table summarizes the significant components of the Company's deferred tax assets and liabilities (in thousands):

As of December 31, 2025 and 2024, a valuation allowance was established against the Company's net deferred tax assets due to the uncertainty regarding the realization of such assets as evidenced by the cumulative losses from operations through December 31, 2025 and 2024. The total valuation allowance increased by $7.3 million for the year ended December 31, 2025 primarily as a result of an increase in net operating loss carryforwards, partially offset by a reduction in deferred tax assets related to previously capitalized R&D expenses.

The Company has incurred net operating losses since inception. At December 31, 2025, the Company had domestic federal net operating loss (NOL) carryforwards of $186.7 million and foreign NOL carryforwards of $1.7 million. The 2017 Tax Cut and Jobs Act (the Act) generally allows federal losses generated after 2017 to be carried forward indefinitely, but also limits the NOL deduction to the lesser of the NOL carryover or 80% of a corporation's taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended (the IRC). Additionally, there is no carryback for losses generated after 2017. Losses generated prior to 2018 are deductible using the lesser of a corporation's NOL carryover or 100% of a corporation's taxable income and have a 20 year carryforward period. Federal NOL carryforwards generated prior to 2018 expire at various dates beginning 2029 through 2037. Foreign NOLs do not expire.

The future utilization of the federal NOL carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or may occur in the future. The IRC limits a Company's ability to utilize certain NOL carry forwards in the event of a cumulative change in ownership in excess of 50% (by value) defined in the IRC. The Company has not completed a study to assess whether an ownership change, as defined by the IRC, had occurred since its inception.

The Company hasno unrecognized tax positions as of December 31, 2025 or 2024 and does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company hasnot incurred any interest or penalties related to unrecognized tax positions for the years ended December 31, 2025 or 2024.

The Company files income tax returns in the U.S. and Australia. The Company has incurred net losses since inception and has not been audited for any open taxation years. As such, all tax years remain open for federal tax examinations in the U.S. For Australia, tax years from 2020 to present remain open and subject to audit.

NOTE 13: COMMITMENTS AND CONTINGENCIES

Litigation and Contingencies

On April 3, 2025, Intas Pharmaceuticals Ltd. (Intas) filed a Petition for Post Grant Review (PGR) with the U.S. Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB) (the 391 PGR Petition) seeking to invalidate one of the

Company’s issued patents (U.S. Patent No. 12,071,391) titled “Methods for Making and Using Endoxifen,” on the alleged grounds of anticipation, obviousness, lack of written description, and lack of enablement.

On April 3, 2025, Intas also filed a Petition for Inter Partes Review (IPR) with the USPTO’s PTAB (the 151 IPR Petition) seeking to invalidate one of the Company’s issued patents (U.S. Patent No. 11,261,151) titled “Methods for Making and Using Endoxifen” (together with U.S. Patent No. 12,071,391, the Patents) on the alleged grounds of anticipation and obviousness.

On November 3, 2025, the PTAB released a Decision Granting Institution of PGR for U.S. Patent No. 12,071,391 and a Decision Granting Institution of IPR for U.S. Patent No. 11,261,151. On January 26, 2026, the Company submitted responses to the 391 PGR Petition and the 151 IPR Petition. Final written decisions are expected for the PGR and IPR proceedings by November 3, 2026.

The Company intends to continue to vigorously contest the 391 PGR Petition and the 151 IPR Petition and believes that the Patents were properly granted and include valid and enforceable claims and that the risk of experiencing financial loss related to the Petitions is remote. However, there can be no assurance that the Company will prevail in contesting either the 391 PGR Petition or the 151 IPR Petition.

From time to time, the Company is subject to other legal proceedings and claims that arise in the ordinary course of its business. The Company believes that these matters do not have a material effect, individually or in the aggregate, on its financial position, results of operations or cash flows.

Contractual Obligations

Contractual obligations represent the Company's future cash commitments and liabilities under agreements with third party clinical trial service providers. Apart from contracts with one third-party clinical trial service provider, such agreements are cancellable upon written notice by the Company. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contracts may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of December 31, 2025, the Company's estimated non-cancellable commitment was $7.0 million.

NOTE 14: STOCK BASED COMPENSATION

On May 15, 2020, the stockholders of the Company approved the 2020 Stock Incentive Plan (the 2020 Plan) to provide for the grants of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. No awards may be granted under the 2020 Plan after June 27, 2034. An aggregate of 2,000,000 shares of common stock is reserved for issuance in connection with awards granted under the 2020 Plan. As of December 31, 2025,679,462 shares were available for future grants under the 2020 Plan.

The Company granted 344,548 and 313,419 options to purchase shares of common stock to employees and directors during the years ended December 31, 2025 and 2024, respectively. The weighted average grant date fair value of options granted during the years ended December 31, 2025 and 2024 was $14.72 and $13.20, respectively. No options were exercised during the year ended December 31, 2025. There were 22,933 options exercised during the year ended December 31, 2024.

The fair values of stock options granted were calculated using the Black-Scholes option-pricing model applying the following assumptions:

The Company recognized stock-based compensation expense in the Consolidated Statements of Operations as follows (in thousands):

The following table shows a summary of all stock option activity for the year ended December 31, 2025:

As of December 31, 2025, there were 239,196 unvested options outstanding, and the related unrecognized total compensation cost associated with these options was $2.2 million. This expense is expected to be recognized over a weighted-average period of 1.74 years.

NOTE 15: DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan to which employees of the Company may defer contributions for income tax purposes. Participants are eligible to receive employer matching contributions up to 6% of deferrals. Employees may also be eligible for a discretionary match over 6%. Defined contribution plan employer matching contributions for the years ended December 31, 2025 and 2024 were $0.4 million and $0.3 million, respectively.

NOTE 16: SEGMENTS

The Company operates as asingle segment. Operating segments are identified as the components of an enterprise of which separate discrete financial information is available for evaluation by the Chief Operating Decision Maker (the CODM) in making decisions regarding resource allocation and in assessing performance. To date, the Company's CODM has made such decisions and assessed performance at the Company-level as a single segment using information at the consolidated financial statement level.

The CODM is Steven C. Quay, M.D., Ph D. Chairman, President and CEO. The CODM utilizes Net Loss from the Consolidated Statement of Operations for the measure of segment profit or loss.

NOTE 17: SUBSEQUENT EVENT

On February 20, 2026, the Company entered into the At the Market Offering Agreement (the Sales Agreement), with Rodman & Renshaw LLC (the Sales Agent), pursuant to which the Company may offer and sell from time to timeup to $50,000,000 of shares of the Company’s common stock, par value $0.18 per share (the Shares), through the Sales Agent as agent or principal. On February 19, 2026, the Company delivered written notice to Jefferies LLC indicating that it was terminating the Open Market Sale Agreement SM (the Prior Agreement) by and between the Company and Jefferies LLC, dated November 19, 2024, effective as of February 19, 2026. The Company is not subject to any termination penalties related to the termination of the Prior Agreement. The Company did not undertake any sales of its common stock pursuant to the Prior Agreement.

EXHIBIT INDEX