FRACTYL HEALTH, INC.

Previous wording

There have been no material changes to the components of our results of operations described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 3, 2025 (our “Annual Report”), except as stated below.

Current wording

There have been no material changes to the components of our results of operations described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report, except as stated below.

Previous wording

The following table reflects our research and development expense, including direct program-specific expense summarized by program, indirect expenses, and personnel-related expenses recognized during each period presented:

Current wording

The following table reflects our research and development expenses, including direct program-specific expenses summarized by program, indirect expenses, and personnel-related expenses recognized during each period presented:

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Previous wording

Our significant accounting policies are described in more detail in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q as well as Note 2 to our audited financial statements as of and for the year ended December 31, 2024 included in our Annual Report. Our critical accounting estimates related to warrant liabilities, as described below, have been updated from what we disclosed in the “Critical Accounting Policies and Significant Estimates” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operation in our Annual Report. For a complete discussion of our updated critical accounting estimates related to warrant liabilities, see Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Our significant accounting policies are described in more detail in Note 2 – “Significant Accounting Policies” to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q as well as Note 2 – “Significant Accounting Policies” to our audited financial statements as of and for the year ended December 31, 2025 included in our Annual Report.

Previous wording

Research and development expenses decreased by $1.5 million, or 8.1%, during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily due to reduced spending on the REVITALIZE-1 study as a result of our Strategic Reprioritization and a decrease in stock-based compensation expense.

Current wording

Research and development expenses decreased by $3.8 million, or 19.7%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily related to reduced spending on our Revita and Rejuva programs, as well as lower personnel-related expenses.

Previous wording

Other expense, net, of $22.9 million during the three months ended September 30, 2025 was primarily attributable to a $21.2 million loss from the change in fair value of warrant liabilities and a $1.9 million loss from the change in fair value of the 2023 Notes, partially offset by $0.2 million of net interest income. Other income, net, of $0.6 million during the three months ended September 30, 2024 was primarily attributable to a $2.3 million gain from the change in fair value of warrant liabilities and $0.9 million of net interest income, partially offset by a $2.6 million loss from the change in fair value of the 2023 Notes.

Current wording

Other income, net, of $30.0 million during the three months ended March 31, 2026 was primarily attributable to a $30.1 million gain from the change in fair value of our warrant liabilities and $0.6 million of net interest income, partially offset by a $0.6 million loss from the change in fair value of the 2023 Notes. Other income, net, of $1.0 million during the three months ended March 31, 2025 was primarily attributable to a $0.8 million gain from the change in fair value of our warrant liabilities and $0.5 million of net interest income, partially offset by a $0.3 million loss from the change in fair value of the 2023 Notes.

Previous wording

On September 7, 2023, we entered into a credit agreement, as amended from time to time (the “Credit Agreement”), with Symbiotic Capital Opportunities Holding, L.P. and Catalio Structured Opportunities AIV I LP (the “2023 Lenders”) that provided for term loans up to an aggregate principal amount of $45.0 million (the “2023 Notes”) in two tranches. The first tranche, with a principal amount of $30.0 million, was extended on September 7, 2023, resulting in net proceeds of approximately $28.4 million. The second tranche, with a principal amount of $15.0 million, would have been extended upon our achievement of certain operating and funding milestones as defined in the Credit Agreement, by July 31, 2024. The Credit Agreement also provides for a third tranche with an uncommitted principal amount of $20.0 million that may be extended to us, subject to the 2023 Lenders’ prior written consent in their sole discretion. Due to a shift in business strategy expansion to include the weight maintenance study, we decided not to pursue the milestones required to access the second tranche. As a result, the second tranche was not extended.

Current wording

On September 7, 2023, we entered into a credit agreement, as amended from time to time (the “Credit Agreement”), with Symbiotic Capital Opportunities Holding, L.P. and Catalio Structured Opportunities AIV I LP (the “2023 Lenders”) that provided for term loans up to an aggregate principal amount of $45.0 million (the “2023 Notes”) in two tranches. The first tranche, with a principal amount of $30.0 million, was extended on September 7, 2023, resulting in net proceeds of approximately $28.4 million. The second tranche, with a principal amount of $15.0 million, would have been extended upon our achievement of certain operating and funding milestones as defined in the Credit Agreement, by July 31, 2024. Due to a shift in business strategy expansion to include the weight maintenance study, we decided not to pursue the milestones required to access the second tranche. As a result, the second tranche was not extended.

Previous wording

The Credit Agreement, as amended, contains financial covenants a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions. As of September 30, 2025, we were in compliance with the minimum liquidity covenant and other terms of the arrangement.

Current wording

The Credit Agreement, as amended, contains financial covenants, including a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions. As of March 31, 2026, we were in compliance with the minimum liquidity covenant and other terms of the arrangement.

Previous wording

The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. Under the terms of the Credit Agreement, the first principal payment date may be extended to September 30, 2027, at our election, if certain financing milestones as defined in the Credit Agreement are achieved on or prior to September 30, 2026. During 2024, we achieved the defined milestones and elected to extend the first principal payment date to September 30, 2027. In addition, upon any principal payment, we are required to make an additional payment to the 2023 Lenders of a 6.0% fee (the “Exit Fee”), over the principal and accrued PIK interest paid. The aggregate Exit Fee of the 2023 Notes should equal to 6.0% of the total commitment of $45.0 million plus all accrued PIK interest. All remaining outstanding principal balance, accrued interest and Exit Fee on the 2023 Notes shall be due and payable on the maturity date of September 7, 2028.

Current wording

The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. Under the terms of the Credit Agreement, the first principal payment date may be extended to September 30, 2027, at our election, if certain financing milestones as defined in the Credit Agreement are achieved on or prior to

Previous wording

As of September 30, 2025, the balance of the 2023 Notes was carried at its fair value of $30.8 million.

Current wording

As of March 31, 2026, the balance of the 2023 Notes was carried at its fair value of $30.1 million.

Previous wording

Statement”). The S-3 Registration Statement became effective on March 18, 2025. It contains a base prospectus, which covers the offering, issuance and sale of up to $300.0 million in the aggregate of the securities from time to time in one or more offerings.

Current wording

On March 3, 2025, we filed a Registration Statement on Form S-3 with the SEC, which was subsequently amended on March 13, 2025 (as amended, the “S-3 Registration Statement”). The S-3 Registration Statement became effective on March 18, 2025. It contains a base prospectus, which covers the offering, issuance and sale of up to $300.0 million in the aggregate of the securities from time to time in one or more offerings.

Previous wording

Concurrently with the filing of the S-3 Registration Statement, we filed a sales agreement prospectus supplement under an at-the-market offering (the “ATM Offering”) covering the offering, issuance and sale by us of up to a maximum aggregate offering price of $100.0 million of our common stock that may be offered, issued and sold from time to time. During the nine months ended September 30, 2025, we issued and sold 1,368,627 shares of our common stock under the ATM Offering at a weighted average price of $1.66 per share resulting in net proceeds of approximately $2.1 million, after deducting underwriting discounts and commissions as well as related offering expenses. In October 2025, we issued and sold an additional 3,333,333 shares of our common stock under the ATM Offering at a weighted average price of $1.47 per share, resulting in net proceeds of approximately $4.8 million, after deducting underwriting discounts and commissions.

Current wording

On March 3, 2025, concurrently with the filing of the S-3 Registration Statement, we entered into a sales agreement with Jefferies LLC as sales agent (the “Sales Agreement”) and filed a prospectus supplement under an at-the-market offering (the “ATM Offering”) covering the offering, issuance and sale by us of up to a maximum aggregate offering price of $100.0 million of our common stock. During the term of the ATM Offering, we issued and sold 4,701,960 shares of our common stock at a weighted average price of $1.53 per share, resulting in net proceeds of approximately $6.8 million, after deducting commissions and offering expenses. On March 23, 2026, we notified Jefferies LLC of our intention to terminate the Sales Agreement pursuant to its terms. As a result, the Sales Agreement was terminated effective April 6, 2026 and no further sales will be made thereunder after such date.

Previous wording

Our future success is dependent on our ability to develop product candidates, generate significant revenue, and ultimately upon our ability to attain profitable operations. We are subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital with favorable terms, development by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates requires substantial capital which may not be available to us on favorable terms or not at all.

Current wording

Our future success is dependent on our ability to develop product candidates, generate significant revenue, and upon our ability to attain profitable operations. We are subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital with favorable terms, development by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates requires substantial capital which may not be available to us on favorable terms or not at all.

Previous wording

To date, we have financed our operations primarily through our equity and debt financings. We have a history of operating losses and had an accumulated deficit of $512.5 million as of September 30, 2025. Based on our current business plans, we believe that our available cash and cash equivalents of $77.7 million as of September 30, 2025, combined with subsequent proceeds received to date from common stock issued under the ATM Offering and warrant exercises, will be sufficient to fund our operating expenses and capital expenditure requirements into early 2027, through multiple key clinical and regulatory milestones. Our estimate as to how long we expect our existing cash and cash equivalents will be able to continue to fund our operating expenses and capital expenditure requirement is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. In addition, without additional financing, we may not be able to comply with the minimum liquidity covenant related to our 2023 Notes by the end of 2026. Given the inherent risk and uncertainty of future cash flow estimates as well as the minimum liquidity covenant requirement, we have concluded that substantial doubt exists about our ability to continue as a going concern for at least one year after the date that these financial statements are issued. The accompanying unaudited interim condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited interim condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Current wording

To date, we have financed our operations primarily through our equity and debt financings. We have a history of operating losses and had an accumulated deficit of $547.0 million as of March 31, 2026. Based on our current business plans, we believe that our available cash and cash equivalents of $63.2 million as of March 31, 2026, will be sufficient to fund our operating expenses and capital expenditure requirements into early 2027, through multiple key clinical and regulatory milestones. Our estimate as to how long we expect our existing cash and cash equivalents will be able to continue to fund our operating expenses and capital expenditure requirement is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. However, we believe our existing cash resources will not be sufficient to fund our current operating plan for at least twelve months from the issuance date of this Quarterly Report on Form 10-Q. As a result, we have concluded that substantial doubt exists about our ability to continue as a going concern for at least one year after the date that these financial statements are issued. The accompanying unaudited interim condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited interim condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Previous wording

For additional information on risks associated with our substantial capital requirements, please see Part II. Item 1A. Risk Factors—Risks Related to Financial Condition and Capital Requirements.

Current wording

For additional information on risks associated with our substantial capital requirements, please see the section titled “Risk Factors” in our Annual Report.

Previous wording

We will require substantial additional capital beyond the proceeds from our IPO, ATMt Offering, August 2025 Offering and September 2025 Offering and subsequent offerings to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and development programs or future commercialization efforts.

Current wording

We will require substantial additional capital beyond the proceeds from our prior financings to fund our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and development programs or future commercialization efforts.

Previous wording

Cash used in operating activities of $69.0 million for the nine months ended September 30, 2025 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $97.2 million adjusted for net non-cash expense of $28.4 million, primarily consisting of $20.7 million non-cash loss from the change in fair value of warrant liabilities, $0.6 million non-cash loss from the change in fair value of notes payable, $4.8 million in stock-based compensation, $1.2 million non-cash operating lease expense, $0.9 million depreciation and $0.2 million non-cash interest expense. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of 0.2 million.

Current wording

Cash used in operating activities of $22.5 million for the three months ended March 31, 2026 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research and clinical readiness activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net income of $9.2 million adjusted for net non-cash expense of $27.2 million, primarily consisting of a $30.1 million non-cash gain from the change in fair value of warrant liabilities, a $0.5 million non-cash gain from the change in fair value of notes payable, $2.5 million in stock-based compensation expense, $0.4 million non-cash operating lease expense, and $0.3 million depreciation expense. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $4.5 million.

Previous wording

Cash used in operating activities of $48.5 million for the nine months ended September 30, 2024 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $43.7 million adjusted for net non-cash income of $9.4 million, primarily consisting of a $17.4 million gain from change in fair value of warrant liabilities and $5.7 million gain from change in fair value of notes payable (non-cash portion), offset by $11.5 million in stock-based compensation, a $1.5 million non-cash operating lease expense, a $0.5 million depreciation and a $0.3 million non-cash interest expense. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $4.6 million.

Current wording

Cash used in operating activities of $25.1 million for the three months ended March 31, 2025 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $23.7 million adjusted for net non-cash expense of $0.6 million, primarily consisting of $1.4 million in stock-based compensation, $0.4 million non-cash operating lease expense and $0.3 million depreciation, offset by $0.8 million non-cash gain from the change in fair value of warrant liabilities and $0.8 million non-cash gain from the change in fair value of notes payable. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $1.9 million.

Previous wording

Cash provided by financing activities of $79.7 million for the nine months ended September 30, 2025 was primarily driven by net proceeds of $79.8 million from the issuance of common stock in connection with the August 2025 Offering and the September 2025 Offering and our ATM offering and $0.3 million from stock option exercises, partially offset by $0.3 million of principal payments made on finance lease obligations.

Current wording

Cash provided by financing activities of $4.1 million for the three months ended March 31, 2026 was related to proceeds received in January 2025 from Tranche A warrants that were exercised in December 2025. Cash provided by financing activities of $0.2 million for the three months ended March 31, 2025 was primarily driven by the proceeds of $0.3 million from stock option exercises, partially offset by $0.1 million of principal payments made on finance lease obligations.

Previous wording

As of September 30, 2025, our lease commitments reflect payments due for our operating and finance leases. The operating leases include our corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of September 30, 2025, our future contractual commitments for our leases were $53.8 million, of which $52.8 million were related to our operating leases. For additional information on our leases and timing of future payments, please see Note 7— “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.

Current wording

As of March 31, 2026, our lease commitments reflect payments due for our operating and finance leases. The operating leases include our corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of March 31, 2026, our future contractual commitments for our leases were $50.8 million, of which $50.1 million were related to our operating leases. For additional information on our leases and timing of future payments, please see Note 7— “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.

Previous wording

We are an “emerging growth company” within the meaning of the Jumpstart Our Business Act of 2012 (“JOBS Act”). Section 107(b) of the JOBS Act provides that an emerging growth company can leverage the extended transition period, provided in Section 102(b) of the JOBS Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We have also elected to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

Current wording

We are an “emerging growth company” within the meaning of the JOBS Act. Section 107(b) of the JOBS Act provides that an emerging growth company can leverage the extended transition period, provided in Section 102(b) of the JOBS Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We have also elected to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.