PALVELLA THERAPEUTICS, INC.

Previous wording

We are a clinical-stage biopharmaceutical company whose vision is to become the leading rare disease biopharmaceutical company focused on developing and, if approved, commercializing novel therapies to treat patients suffering from serious, rare genetic skin diseases for which there are no FDA-approved therapies. We intend to leverage our versatile QTORIN platform to treat these patients. The QTORIN platform is designed to generate potential new therapies that penetrate the deep layers of the skin to locally treat a broad spectrum of rare genetic skin diseases. Our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is currently in clinical development for microcystic lymphatic malformations (“microcystic LMs”) and cutaneous venous malformations (“cutaneous VMs”). QTORIN rapamycin contains the API rapamycin, also known as sirolimus, which is an inhibitor of mTOR, a kinase that has been known to play a key role in cell growth and proliferation.

Current wording

We are a clinical-stage biopharmaceutical company whose vision is to become the leading rare disease biopharmaceutical company focused on developing and, if approved, commercializing novel therapies to treat patients suffering from serious, rare skin diseases and vascular malformations for which there are no FDA-approved therapies. We envision a future treatment paradigm in which individuals suffering from serious, rare skin diseases and vascular malformations, and the physicians treating those diseases, have significantly improved treatment options which address the underlying causes of those diseases. We intend to leverage our versatile QTORIN platform to minimize the challenges and timelines typically associated with generating novel topical product candidates. The QTORIN platform is specifically designed to reproducibly generate novel topical product candidates that penetrate the deep layers of the skin to locally treat a broad spectrum of rare skin diseases and vascular malformations. Our lead product candidate, QTORIN 3.9% rapamycin anhydrous gel (“QTORIN rapamycin”), is currently in clinical development for microcystic lymphatic malformations (“microcystic LMs”) and cutaneous venous malformations (“cutaneous VMs”). QTORIN rapamycin contains the active pharmaceutical ingredient (“API”) rapamycin, also known as sirolimus, which is an inhibitor of mTOR, a kinase that has been known to play a key role in cell growth and proliferation.

Previous wording

We currently have two ongoing clinical trials: (i) SELVA, a Phase 3, single-arm, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of microcystic LMs in patients 3 years and older and (ii) TOIVA, a Phase 2, single-arm, open-label, baseline-controlled study evaluating the safety and efficacy of QTORIN rapamycin for the treatment of cutaneous VMs in patients 6 years and older. We also have additional preclinical research programs based on our QTORIN platform for the treatment of serious, rare genetic skin diseases for which we believe there are significant unmet needs. As we plan to expand our pipeline into additional rare skin diseases, we plan to generate new product candidates with our QTORIN platform.

Current wording

QTORIN rapamycin for the treatment of microcystic LMs

Previous wording

We have received Breakthrough Therapy Designation, Fast Track Designation, and Orphan Drug Designation from the FDA for QTORIN rapamycin for the treatment of microcystic LMs. In addition, we have been awarded an FDA Products Clinical Trial Grant for up to $2.6 million supporting the SELVA program. We have also received Fast Track Designation from the FDA for our venous malformations program.

Current wording

We have received Fast Track Designation from the FDA for our cutaneous VMs program.

Previous wording

On December 13, 2024, immediately prior to closing of the Merger, we entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with a rights agent, pursuant to which our pre-Merger capital stockholders received one contingent value right (each, a “CVR”) for each outstanding share of our common stock held by such stockholder, or share of common stock underlying preferred stock held by such stockholder, on such date. Each CVR represents the contractual right to receive payments upon the receipt of payments by us or any of its affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which we may be entitled to milestones and royalties in the future and other out-licensing agreements for certain of Pieris’ legacy assets, and upon the receipt of certain research and development tax credits in favor of us or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement. There can be no assurance that holders of CVRs will receive any amounts with respect thereto.

Current wording

On December 13, 2024, immediately prior to closing of the Merger, we entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with a rights agent, pursuant to which our pre-Merger capital stockholders received one contingent value right (each, a “CVR”) for each outstanding share of our Common Stock held by such stockholder, or share of Common Stock underlying preferred stock held by such stockholder, on such date. Each CVR represents the contractual right to receive payments upon the receipt of payments by us or any of its affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which we may be entitled to milestones and royalties in the future and other out-licensing agreements for certain of Pieris’ legacy assets, and upon the receipt of certain research and development tax credits in favor of us or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement. In January 2026, the Company paid out approximately $2.0 million to holders of CVRs related to receipt of certain research and development tax credits.

Previous wording

In December 2018, Legacy Palvella entered into the Original Ligand Agreement, whereby Ligand made a one-time payment of $10.0 million to fund the development of QTORIN rapamycin. In November 2023, pursuant to the Amended Ligand Agreement, Ligand made an additional one-time payment of $5.0 million to fund the development of QTORIN rapamycin. Under the Amended Ligand Agreement, Ligand is entitled to receive up to $8.0 million in milestone payments upon the achievement of certain milestones by us related to QTORIN rapamycin for the treatment of any and all indications, of which $5.0 million of potential future milestone payments remain under the arrangement. In addition, we agreed to pay to Ligand tiered royalties from 8.0% to 9.8% based on any aggregate annual worldwide net product sales of any products based on QTORIN rapamycin. The Amended Ligand Agreement includes an option for Ligand to purchase additional product revenue participation rights from us over a certain period of time (as set forth in the Amended Ligand Agreement). The option allows Ligand, for each product developed on the QTORIN platform that completes the first human clinical trial in the United States, the opportunity to make an upfront payment (as set forth in the Amended Ligand Agreement) to us in return for a royalty rate (as set forth in the Amended Ligand Agreement). See Note 5 of the accompanying notes to the consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

Current wording

We are party to a Development Funding and Royalties Agreement with Ligand Pharmaceuticals, Inc. (“Ligand”), dated December 13, 2018, as amended May 22, 2020 and November 28, 2023 (the “Ligand Agreement”). Under the Ligand Agreement, Ligand has made payments totaling $15.0 million to fund the development of QTORIN rapamycin. As partial consideration for the funding received, we granted Ligand the right to receive up to $8.0 million in milestone payments upon achievement of certain corporate, financing and regulatory milestones by us related to QTORIN rapamycin for the treatment of any and all indications, of which $5.0 million of potential future milestone payments remain under the arrangement. In addition, we agreed to pay to Ligand tiered royalties ranging from 8.0% to 9.8% of any aggregate annual worldwide net product sales of any products based on QTORIN rapamycin. See Note 5 of the accompanying notes to the consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

Previous wording

Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including increases in inflation and geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, and supply chain disruptions. While our management is closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, including the impacts on its participants in its Phase 3 clinical trials, employees, suppliers, vendors and business partners, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. Management will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see Part I, Item 1A “Risk Factors”.

Current wording

Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including increases in inflation and geopolitical factors, including increases in inflation, increased U.S. trade tariffs and retaliatory tariffs, interest rate and currency rate fluctuations, new laws and regulations enacted by the Trump administration, including, but not limited to, the One Big Beautiful Bill Act, economic slowdown or recession, banking instability, monetary policy changes, and geopolitical factors, including the ongoing conflict between Russia and Ukraine, the current conflicts in Venezuela and the Middle East (including any escalation or expansion) and increasing tensions between China and Taiwan, rapid changes in our regulatory landscape in the United States, including significant staffing reductions and unexpected shifts in leadership of certain federal agencies, and an uncertain legislative environment and supply chain disruptions. While our management is closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, including the impacts on its participants in its clinical trials, employees, suppliers, vendors and business partners, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. Management will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see Part I, Item 1A “Risk Factors.”

Previous wording

We expect to continue to incur significant operating losses for the foreseeable future and to incur increased expenses as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that Legacy Palvella did not incur as a private company. If we receive regulatory approval for QTORIN rapamycin for treatment of Microcystic LM, venous malformations or any future product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Our losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Current wording

We expect to continue to incur significant operating losses for the foreseeable future and to incur increased expenses as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that Legacy Palvella did not incur as a private company. If we receive regulatory approval for QTORIN rapamycin for treatment of microcystic LM, cutaneous VM, clinically significant angiokeratomas, QTORIN pitavastatin for the treatment of disseminated superficial actinic porokeratosis or any future product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Our losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Previous wording

Our research and development expenses consist primarily of costs incurred for the development of its product candidates, which include:

Current wording

Our research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

Previous wording

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates, if any, or experienced by competitors who are developing topical rapamycin products or who are targeting the same indications in the rare genetic skin diseases space;

Current wording

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates, if any, or experienced by competitors who are developing topical rapamycin products or who are targeting the same indications in the rare skin diseases space;

Previous wording

Our other (expense) income for the years ended December 31, 2024 and 2023 primarily consists of: (i) non-cash interest (expense) income related to our obligation to make future royalty payments pursuant to the Ligand Agreements, which was determined to be a debt instrument; (ii) interest expense related to the Convertible Notes; (iii) fair value adjustments related to our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability; (iv) fair value adjustments related to the Convertible Notes, which were accounted for at fair value; (v) fair value adjustments related to the CVRs, which met the definition of a derivative, (vi) a non-cash gain on the extinguishment of the Original Ligand Agreement, and (vii) income related to a German R&D tax credit receivable.

Current wording

Our other (expense) income for the years ended December 31, 2025 and 2024 primarily consists of: (i) non-cash interest expense related to our obligation to make future royalty payments pursuant to the Amended Ligand Agreement, which was determined to be a debt instrument; (ii) interest expense related to the Convertible Notes; (iii) fair value adjustments related to our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability; (iv) fair value adjustments related to the Convertible Notes, which were accounted for at fair value; (v) fair value adjustments related to the CVRs, which met the definition of a derivative, (vi) income related to a German R&D tax credit receivable, and (vii) interest income, net.

Previous wording

We had no provision for income taxes for the years ended December 31, 2024 and 2023. As of December 31, 2024, we had federal and state NOL carryforwards in the amount of $97.4 million and $97.8 million, respectively, which may be available to offset future taxable income. Federal tax loss carryforwards that were created prior to December 31, 2017 expire through 2037 and federal losses created after that date do not expire. State loss carryforwards expire starting in 2035.

Current wording

We had no provision for income taxes for the years ended December 31, 2025 and 2024. As of December 31, 2025, we had federal and state NOL carryforwards in the amount of $129.4 million and $113.3 million, respectively, which may be available to offset future taxable income. Federal tax loss carryforwards that were created prior to December 31, 2017 expire through 2037 and federal losses created after that date do not expire. State loss carryforwards expire starting in 2035.

Previous wording

As of December 31, 2024, we had German corporate income tax and trade tax net operating loss carryforwards of approximately $210.3 million and $205.9 million respectively. Under current German laws, tax loss carryforwards may only be used to offset any relevant later assessment period (calendar year) of $1.2 million plus 60% of the exceeding taxable income and trade profit of such period and do not expire. In addition, certain transactions, including transfers of shares or interest in the loss holding entity, may result in the partial or total forfeiture of tax losses existing at that date. Partial or total forfeiture of tax losses may further occur in corporate reorganizations of the loss holding entity.

Current wording

As of December 31, 2025, we had German corporate income tax and trade tax net operating loss carryforwards of approximately $219.4 million and $215.1 million, respectively. Under current German laws, tax loss carryforwards may only be used to offset any relevant later assessment period (calendar year) of $1.2 million plus 60% of the exceeding taxable income and trade profit of such period and do not expire. In addition, certain transactions, including transfers of shares or interest in the loss holding entity, may result in the partial or total forfeiture of tax losses existing at that date. Partial or total forfeiture of tax losses may further occur in corporate reorganizations of the loss holding entity.

Previous wording

Research and development expenses for the year ended December 31, 2024 were $8.2 million compared to $8.8 million for the year ended December 31, 2023. The decrease in research and development expenses during the year ended December 31, 2024 was primarily due to decreased expenses incurred related to the clinical development of QTORIN rapamycin for the treatment of Pachyonychia Congenita (“PC”) and for the prevention of Basal Cell Carcinomas in Gorlin Syndrome (“GS”) following the discontinuation of these programs in 2023, offset partially by increased spending on the clinical development of QTORIN rapamycin for the treatment of microcystic LMs, including the planning and initiation of our Phase 3 trial, SELVA (PALV-09) which was initiated in the third quarter of 2024, as well as increased CMC costs across all programs.

Current wording

Research and development expenses for the year ended December 31, 2025 were $22.8 million, as compared to $8.2 million for the year ended December 31, 2024. The increase in research and development expenses during the year ended December 31, 2025 was primarily due to increased spending on the clinical development of QTORIN rapamycin for the treatment of microcystic LMs and cutaneous venous malformations, including conducting our Phase 3 SELVA and Phase 2 TOIVA trials, which were initiated in 2024. Additional increases include CMC costs for all programs and costs as a result of increased headcount in 2025.

Previous wording

For the year ended December 31, 2024, general and administrative expenses were $5.9 million, compared to $3.1 million for the year ended December 31, 2023. The increase in general and administrative expenses during the year ended December 31, 2024, as compared to the year ended December 31, 2023 is attributable to increased employee compensation expense due to headcount, as well as increased professional services as a result of the Merger and operating as a publicly-traded company.

Current wording

General and administrative expenses for the year ended December 31, 2025 were $15.8 million, as compared to $5.9 million for the year ended December 31, 2024. The increase in general and administrative expenses during the year ended December 31, 2025, as compared to the year ended December 31, 2024 was primarily due to increased headcount in 2025, as well as increased professional services related to operating as a publicly-traded company.

Previous wording

Total other (expense) income, net for the year ended December 31, 2024 was $3.3 million of expense, as compared to $30.6 million of income for the year ended December 31, 2023. The significant components of other (expense) income are more fully described below.

Current wording

Total other (expense) income, net for the year ended December 31, 2025 was $3.1 million of expense, as compared to $3.3 million of expense for the year ended December 31, 2024. The significant components of other (expense) income are more fully described below.

Previous wording

During the year ended December 31, 2024, we recorded interest expense of approximately $3.9 million, compared to interest income of approximately $6.3 million for the year ended December 31, 2023, related to the change in fair value of our royalty agreement liability. During 2023, the Company received data from certain of its clinical trials that reduced the projected net product sales related to QTORIN rapamycin and the corresponding probabilities of successful commercialization, resulting in a significant reduction in the expected future royalty payments and a corresponding reduction in the royalty agreement liability.

Current wording

During the year ended December 31, 2025, we recorded interest expense of approximately $5.8 million, as compared to interest expense of approximately $3.9 million for the year ended December 31, 2024, related to the change in fair value of our royalty agreement liability.

Previous wording

During the year ended December 31, 2024, we recorded a non-cash loss of approximately $0.6 million, compared to a non-cash gain of approximately $0.5 million for the year ended December 31, 2023, related to the change in fair value of our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability. During 2023, the Company received data from certain of its clinical trials that reduced the probabilities of successful commercialization and a corresponding reduction in the derivative liability.

Current wording

During the year ended December 31, 2025, we recorded a non-cash loss of approximately $0.4 million, as compared to a non-cash loss of approximately $0.6 million for the year ended December 31, 2024. The non-cash loss related to the change in fair value of our obligation to make future milestone payments under the Amended Ligand Agreement, which was determined to be a derivative liability.

Previous wording

During the year ended December 31, 2024, we recorded $2.0 million of non-cash expense related to fair value adjustments related to the CVRs which were issued in 2024 in connection with the Business Combination and determined to be derivative liabilities. On the Closing Date, management concluded that there was no value associated with the CVRs as the likelihood of any payments received in connection with Pieris’ legacy assets was remote. Subsequent to the Closing Date and as of December 31, 2024, a $2.0 million German research and development tax credit receivable was recorded by Pieris Pharmaceuticals GmbH resulting in a corresponding increase to the contingent value rights liability.

Current wording

During the year ended December 31, 2025, we recorded a non-cash expense of approximately $0.2 million as compared to a non-cash expense of approximately $2.0 million from the year ended December 31, 2024, related to fair value adjustments related to the CVRs which were issued in 2024 in connection with the Business Combination and determined to be derivative liabilities. On the Closing Date, management concluded that there was no value associated with the CVRs as the likelihood of any payments received in connection with Pieris’ legacy assets was remote. Subsequent to the Closing Date and as of December 31, 2024, a $2.0 million German research and development tax credit receivable was recorded by Pieris Pharmaceuticals GmbH resulting in a corresponding increase to the contingent value rights liability.

Previous wording

As a result of the factors discussed above, our net loss applicable to common stockholders for the years ended December 31, 2024 and 2023 was $17.4 million and $17.9 million, respectively.

Current wording

As a result of the factors discussed above, our net loss for the years ended December 31, 2025 and 2024 was $41.7 million and $17.4 million, respectively.

Previous wording

Since inception, we have incurred substantial losses, and have primarily funded our operations with proceeds from the Ligand Agreements and the sale of debt and equity securities, including common stock, convertible preferred stock and convertible notes. During the year ended December 31, 2024, we incurred a net loss of $17.4 million and reported net cash used in operating activities of $10.8 million. As of December 31, 2024, we had an accumulated deficit of $93.7 million and cash and cash equivalents of $83.6 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and, to a lesser extent, general and administrative expenditures.

Current wording

Since inception, we have incurred substantial losses, and have primarily funded our operations with proceeds from the Amended Ligand Agreement and the sale of debt and equity securities, including common stock, convertible preferred stock and convertible notes. During the year ended December 31, 2025, we incurred a net loss of $41.7 million and reported net cash used in operating activities of $25.0 million. As of December 31, 2025, we had an accumulated deficit of $135.5 million and cash and cash equivalents of $58.0 million. As discussed below, in February 2026, we completed an underwritten public offering of common stock resulting in net proceeds of approximately $215.8 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and, to a lesser extent, general and administrative expenditures.

Previous wording

We do not expect to generate commercial revenue or operating cash flows for at least the next several years. Our ability to continue as a going concern in the near term is largely dependent on our existing cash balance and our ability to obtain additional sources of financing in order to fund operating expenses, complete development of our product candidates, obtain regulatory approvals, launch, and commercialize our product candidates, and continue research and development programs.

Current wording

We do not expect to generate commercial revenue or operating cash flows in the near-term, including the next two years. Our ability to continue as a going concern in the near term is largely dependent on our existing cash balance and our ability to obtain additional sources of financing in order to fund operating expenses, complete development of our product candidates, obtain regulatory approvals, launch, and commercialize our product candidates, and continue research and development programs.

Previous wording

We have not generated product revenue or achieved profitability since our inception and expect to continue to incur net losses for the foreseeable future. As of December 31, 2024, we had approximately $83.6 million in cash and cash equivalents. Based on our current business plans, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the one year period following the date of the filing of this Form 10-K. Moreover, we expect our losses to increase as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates, which may not be currently contemplated in our planned operations. Furthermore, following the closing of the Merger, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, license payments or milestone obligations that may arise, manufacturing costs, legal and other regulatory expenses and general overhead costs.

Current wording

We have not generated product revenue or achieved profitability since our inception and expect to continue to incur net losses for the foreseeable future. As of December 31, 2025, we had approximately $58.0 million in cash and cash equivalents. In February 2026, we completed a public offering of common stock resulting in net proceeds of approximately $215.8 million. Based on our current business plans, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the one year period following the date of the filing of this Form 10-K. Moreover, we expect our losses to increase as we continue to advance our product candidates through clinical trials and regulatory submissions. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates, which may not be currently contemplated in our planned operations. Furthermore, following the closing of the Merger, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical research, manufacturing and development services, license payments or milestone obligations that may arise, manufacturing costs, legal and other regulatory expenses and general overhead costs.

Previous wording

Based upon our current operating plan, we believe that our cash and cash equivalents on hand as of December 31, 2024 will be sufficient to fund our operating expenses into the second half of 2027. To continue to finance our operations beyond that point, we may need to raise additional capital, the success of which cannot be assured. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we currently expect. If we receive regulatory approval for QTORIN rapamycin for the treatment of microcystic LM, or any of our future product candidates, we expect to incur significant commercialization expenses related to manufacturing, sales, marketing, and distribution, or from any out-licensing of the product. We are also responsible for up to $5.0 million in milestone payments to Ligand under the Amended Ligand Agreement upon the achievement of certain regulatory milestones by us related to QTORIN rapamycin, which may be triggered prior to the commercialization of any of our product candidates and ability to generate revenue.

Current wording

Based upon our current operating plan, we believe that our cash and cash equivalents on hand as of December 31, 2025 will be sufficient to fund our operating expenses for at least the next twelve months from the date of this Annual Report on Form 10-K. To continue to finance our operations beyond that point, we may need to raise additional capital, the success of which cannot be assured. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we currently expect. If we receive regulatory approval for QTORIN rapamycin for the treatment of microcystic LM, cutaneous VMs, clinically significant angiokeratomas, QTORIN pitavastatin for the treatment of disseminated superficial actinic porokeratosis, or any of our future product candidates, we expect to incur significant commercialization expenses related to manufacturing, sales, marketing, and distribution, or from any out-licensing of the product. We are also responsible for up to $5.0 million in milestone payments to Ligand under the Amended Ligand Agreement upon the achievement of certain regulatory milestones by us related to QTORIN rapamycin, which may be triggered prior to the commercialization of any of our product candidates and ability to generate revenue.

Previous wording

To the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences detrimental to the rights of our common stockholders. Any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we has sufficient funds for our current or future operating plans.

Current wording

To the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences detrimental to the rights of our common stockholders. Any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Previous wording

the cost of commercialization and manufacturing activities with respect to QTORIN rapamycin and our ability to successfully commercialize this product candidate, if approved;

Current wording

the cost of commercialization and manufacturing activities with respect to QTORIN rapamycin, QTORIN pitavastatin and our ability to successfully commercialize this product candidate, if approved;

Previous wording

the potential size of the markets for our approved products, if any;

Current wording

the potential size of the markets, degree of market acceptance, as well as the pricing and reimbursement for our approved products, if any;

Previous wording

Net cash used in operating activities for the years ended December 31, 2024 and December 31, 2023 consisted of net (loss) income for the period adjusted for non-cash items and changes in components of operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates, including general and administrative support, which decreased due to lower research and development efforts in 2024 as well as the timing of payments and increase in accounts payable.

Current wording

Net cash used in operating activities for the years ended December 31, 2025 and 2024 consisted of net loss for the period adjusted for non-cash items and changes in components of operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates, including general and administrative support, which increased due to greater research and development efforts in 2025, increased costs to operate as a public company, as well as the timing of payments and increase in accounts payable.

Previous wording

For the years ended December 31, 2024 and December 31, 2023, net cash provided by financing activities was $87.1 million and $5.0 million, respectively. For the year ended December 31, 2024, cash flows from financing activities was primarily attributable to $13.8 million of cash acquired in connection with the Business Combination, $60.0 million in gross proceeds from the PIPE Financing, and $18.4 million in gross proceeds from the issuance of the Convertible Notes, partially offset by payment of transaction costs in connection with Business Combination of $2.5 million, payments of transaction costs associated with PIPE Financing of $2.5 million, and payments of transaction costs to issue the Convertible Notes of $0.1 million. For the year ended December 31, 2023 cash flows from financing activities consisted of $5.0 million in proceeds from the Amended Ligand Agreement.

Current wording

For the year ended December 31, 2024, net cash provided by financing activities was $87.1 million, which was primarily attributable to $13.8 million of cash acquired in connection with the Business Combination, $60.0 million in gross proceeds from the PIPE Financing, and $18.4 million in gross proceeds from the issuance of the Convertible Notes, partially offset by payment of transaction costs in connection with Business Combination of $2.5 million, payments of transaction costs associated with PIPE Financing of $2.5 million, and payments of transaction costs to issue the Convertible Notes of $0.1 million.

Previous wording

We lease office space in Wayne, Pennsylvania. Our future lease payments for these facilities is $0.1 million for the remaining term, which automatically renewed in October 2024.

Current wording

We lease office space in Wayne, Pennsylvania. Our future lease payments for these facilities are $0.7 million for the remaining term.

Previous wording

Royalty payments will be recorded as debt service payments on the royalty agreement liability. Interest expense is determined using the effective interest method based upon risk adjusted cash flow estimates of our expected future royalty payments, yielding an effective interest rate of 39.9% and 38.9% as of December 31, 2024 and 2023, respectively. The effective interest rate is estimated at each balance sheet date based on the rate that would enable the liability to be repaid in full over the anticipated life of the arrangement. This effective interest rate will likely be subject to variability as we continue the development and commercialization of our products. The derivative liabilities — royalty agreement is classified as long term on our balance sheet according to the estimated timing of the occurrence of potential payments.

Current wording

Royalty payments will be recorded as debt service payments on the royalty agreement liability. Interest expense is determined using the effective interest method based upon risk adjusted cash flow estimates of our expected future royalty payments, yielding an effective interest rate of 44.9% and 39.9% as of December 31, 2025 and 2024, respectively. The effective interest rate is estimated at each balance sheet date based on the rate that would enable the liability to be repaid in full over the anticipated life of the arrangement. This effective interest rate will likely be subject to variability as we continue the development and commercialization of our products. The derivative liabilities — royalty agreement is classified as long term on our balance sheet according to the estimated timing of the occurrence of potential payments.

Previous wording

The fair value of the derivative liabilities — royalty agreement with respect to the potential milestone payments is determined based upon the estimated probabilities and timing of the achievement of milestones, discounted to present value using our estimated weighted average cost of capital. The assumptions used to determine the fair value of the derivative liabilities — royalty agreement at December 31, 2024 and 2023 were (a) weighted cost of capital of 20% and 25%; and (b) 56.6% and 50.0% probability of achieving regulatory approval of a product by the FDA with a term of 2.5 and 3.5 years, respectively. Gains and losses arising from changes in fair value of the derivative liabilities — royalty agreement are recognized within our statements of operations as fair value adjustments on the derivative liabilities — royalty agreement and in the balance sheet as a non-current liability for each financial reporting period.

Current wording

The fair value of the derivative liabilities — royalty agreement with respect to the potential milestone payments is determined based upon the estimated probabilities and timing of the achievement of milestones, discounted to present value using our estimated weighted average cost of capital. The assumptions used to determine the fair value of the derivative liabilities — royalty agreement at December 31, 2025 and 2024 were (a) weighted cost of capital of 18.0% and 20.0%; and (b) 56.6% and 56.6% probability of achieving regulatory approval of a product by the FDA with a term of 1.50 years and 2.50 years, respectively. Gains and losses arising from changes in fair value of the derivative liabilities — royalty agreement are recognized within our statements of operations as fair value adjustments on the derivative liabilities — royalty agreement and in the balance sheet as a non-current liability for each financial reporting period.

Previous wording

Under the terms of the CVR Agreement, legacy Pieris stockholder’s have the right toreceive payments upon the receipt of payments by the us or any of our affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which we may be entitled to milestones and royalties in the future and other out-licensing agreements for certain of Pieris’s legacy assets, and upon the receipt of certain research and development tax credits in favor of us or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement.

Current wording

Under the terms of the CVR Agreement, legacy Pieris stockholder’s have the right to receive payments upon the receipt of payments by the us or any of our affiliates under certain strategic partner agreements, including existing collaboration agreements pursuant to which we may be entitled to milestones and royalties in the future and other out-licensing agreements for certain of Pieris’s legacy assets, and upon the receipt of certain research and development tax credits in favor of us or any of its affiliates, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement.

Previous wording

As of the Closing Date, management concluded that there was no value associated with the CVRs as the likelihood of any payments received in connection with Pieris’ legacy assets was remote. As of December 31, 2024, management recorded a contingent rights value liability of approximately $2.0 million due to a receivable for research and development tax credits by Pieris Pharmaceuticals GmbH at December 31, 2024.

Current wording

As of the Closing Date, management concluded that there was no value associated with the CVRs as the likelihood of any payments received in connection with Pieris’ legacy assets was remote. As of December 31, 2025, management recorded a contingent rights value liability of approximately $2.2 million due to a receivable for research and development tax credits by Pieris Pharmaceuticals GmbH at December 31, 2025. In January 2026, the Company paid out approximately $2.0 million to holders of CVRs related to receipt of certain research and development tax credits.