Entrada Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Nature of the Business

Organization

Entrada Therapeutics, Inc. ("Entrada" or the "Company") is a clinical-stage biopharmaceutical company aiming to transform the lives of patients by establishing a new class of medicines which engage intracellular targets that have long been considered inaccessible. The Company’s Endosomal Escape Vehicle ("EEV™")-therapeutics are designed to enable the efficient delivery of a wide range of therapeutics into a variety of organs and tissues, resulting in an improved therapeutic index. The Company was incorporated in Delaware on September 22, 2016, and its principal offices are located in Boston, Massachusetts.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its proprietary, highly versatile and modular EEV platform ("EEV Platform"), advancing development of its portfolio of programs and general and administrative support for these operations, including raising capital. The Company is subject to risks and uncertainties common to earlier stage companies in the biotechnology industry, including, but not limited to, technical risks associated with the successful research, development and manufacturing of therapeutic candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and the ability to secure additional capital to fund operations. Therapeutic candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. Since its inception, the Company has incurred significant net losses. As of June 30, 2025, the Company had an accumulated deficit of $189.8 million. To date, the Company has funded its operations primarily through the sale of equity securities and collaboration payments. Other than the recognition of revenue related to collaboration payments, the Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities of $354.0 million as of June 30, 2025 will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its business strategy and may pursue additional cash resources through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing, or other arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed or on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

In June 2024, the Company entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering (the “June 2024 Offering”) of 3,367,003 shares of the Company’s common stock at a purchase price of $14.85 per share and, in lieu of common stock to certain investors who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of Common Stock at a purchase price of $14.8499 per Pre-Funded Warrant, which represents the price per share at which the shares of common stock were sold to the investors in the June 2024 Offering, minus $0.0001, which is the exercise price of each Pre-Funded Warrant. The June 2024 Offering was made pursuant to the shelf registration statement on Form S-3 (File No. 333-268099) previously filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 and declared effective by the SEC on November 7, 2022. The aggregate net proceeds from the sale of common stock and Pre-Funded Warrants in the June 2024 Offering were approximately $99.6 million, after deducting offering expenses payable by the Company. The Company will receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.

2. Summary of Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements as of and for the three and six months ended June 30, 2025 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the Securities and Exchange Commission (the "SEC") on February 27, 2025 (the "Annual Report"), except as described below.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). The condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted, as is permitted by GAAP. These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2025 and December 31, 2024, and results of operations for the interim periods ended June 30, 2025 and 2024.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the years ended December 31, 2024 and 2023, and the notes thereto, included in the Annual Report.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as noted below, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. In particular, the standard will require more detailed information in the income tax rate reconciliation, as well as the disclosure of income taxes paid disaggregated by jurisdiction, among other enhancements. The standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. We anticipate that the adoption of this ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. The ASU requires a public business entity to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes.

3. Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. At June 30, 2025 and December 31, 2024, cash and cash equivalents include standard checking accounts and money market account funds that invest primarily in U.S. government-backed securities and treasuries.

As of June 30, 2025 and December 31, 2024, restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities located at One Design Center Place, Boston, Massachusetts. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the statement of cash flows is as follows (in thousands):

4. Marketable Securities

The following are summaries of the Company's marketable securities at June 30, 2025 and December 31, 2024 (in thousands).

As of June 30, 2025, the Company had 12 marketable securities with a total fair market value of $82.0 million in an unrealized loss position. All of the Company’s investments are classified as available-for-sale and are carried at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income (loss). The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities as available for sale.

The Company believes that any unrealized losses associated with the decline in value of its securities are temporary and believes that it is more likely than not that it will be able to hold its debt securities to maturity and that there was no material change in the credit risk of the above instruments since January 1, 2025. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity andno allowance for credit losses was recognized.

As of June 30, 2025 and December 31, 2024,$2.2 million and$1.8 million, respectively, of accrued interest receivable was included inprepaid expenses and other current assets.

5. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):

(1)The cash equivalent amounts above do not include $0.5 million of cash related to checking accounts included in cash and cash equivalents as of June 30, 2025 and December 31, 2024. These amounts are excluded as no valuation is needed for cash in checking accounts.

Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The Company measures its debt securities at fair value on a recurring basis using inputs that are observable or can be corroborated by observable market data and classifies those instruments within Level 2 of the fair value hierarchy.

6. Property and Equipment, Net

Property and equipment, net consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

Depreciation expense for the three months ended June 30, 2025 and 2024 was $1.1 million and $0.9 million, respectively. Depreciation expense for the six months ended June 30, 2025 and 2024 was $2.0 million and $1.8 million, respectively.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):

8. Common Stock and Preferred Stock

Common Stock

As of June 30, 2025 and December 31, 2024, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 150,000,000 shares of common stock, par value $0.0001 per share.

In September 2023, the Company entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC, acting as the Company's agent and/or principal (the "Sales Agent"), with respect to an "at the market offering" program under which the Company may, from time to time, at its sole discretion, issue and sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. During the six months ended June 30, 2025, there have beenno sales of common stock pursuant to the Sales Agreement.

In June 2024, the Company entered into a securities purchase agreement with a limited number of investors relating to a registered direct offering (the “June 2024 Offering”) of 3,367,003 shares of the Company’s common stock at a purchase price of $14.85 per share and, in lieu of common stock to certain investors who so chose, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 3,367,003 shares of Common Stock at a purchase price of $14.8499 per Pre-Funded Warrant, which represents the price per share at which the shares of common stock were sold to the investors in the June 2024 Offering, minus $0.0001, which is the exercise price of each Pre-Funded Warrant. The June 2024 Offering was made pursuant to the shelf registration statement on Form S-3 (File No. 333-268099) previously filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 and declared effective by the SEC on November 7, 2022. The aggregate net proceeds from the sale of common stock and Pre-Funded Warrants in the June 2024

Offering were approximately $99.6 million, after deducting offering expenses payable by the Company. The Company will receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.

The Pre-Funded Warrants were evaluated pursuant to ASC 480 and ASC 815. The Company classified the Pre-Funded Warrants as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date at fair value.

Shares Reserved for Future Issuance

The Company has reserved the following shares of common stock for future issuance as of:

Preferred Stock

As of June 30, 2025 and December 31, 2024, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, par value$0.0001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof. As of June 30, 2025 and December 31, 2024, there wereno shares of undesignated preferred stock issued or outstanding.

9. Stock-Based Compensation

2021 Stock Option and Incentive Plan

The total remaining shares of common stock authorized for issuance under the 2021 Stock Option and Incentive Plan (the "2021 Plan") increased from 7,230,834 as of December 31, 2024 to 8,361,873 as of June 30, 2025 primarily due to the automatic annual increase provision of the 2021 Plan.

2016 Stock Incentive Plan

The total remaining shares of common stock authorized for issuance under the 2016 Stock Incentive Plan as of June 30, 2025 and December 31, 2024 were 1,741,365 shares and 1,776,694 shares, respectively.

2021 Employee Stock Purchase Plan

The total remaining shares of common stock authorized for issuance under the 2021 Employee Stock Purchase Plan (the "2021 ESPP") increased from 1,128,095 as of December 31, 2024 to 1,453,439 as of June 30, 2025 primarily due to the automatic annual increase provision of the 2021 ESPP.

2025 Inducement Equity Plan

In March 2025, the Company's board of directors adopted the Entrada Therapeutics, Inc. 2025 Inducement Equity Plan (the "2025 Inducement Plan"). The 2025 Inducement Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, and dividend equivalent rights with respect to an aggregate of 270,000 shares of Common Stock (subject to adjustment as provided in the 2025 Inducement Plan). Awards under the 2025 Inducement Plan may only be granted to new employees who were not previously employed by the Company or its affiliates, as an inducement material to such new employees' entry into employment with the Company or its affiliates, in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4). As of June 30, 2025,270,000 shares remained authorized for issuance under the 2025 Inducement Plan.

Stock-Based Compensation

Stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Stock Option Valuation

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted during the six months ended June 30, 2025 and 2024:

Early Exercise of Unvested Stock Options

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in current liabilities on the condensed consolidated balance sheet. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. Vesting can occur in the year of exercise and thereafter. There wereno unvested shares and 1,676 unvested shares related to early exercises of stock options as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025, there wasno liability associated with the unvested early exercise of stock options. As of December 31, 2024, the liability associated with the unvested early exercise of stock options was less than $0.1 million.

Stock Options

The following table summarizes the Company’s stock option activity during the six months ended June 30, 2025:

(1)This represents the number of vested and unvested options exercisable as of June 30, 2025.

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2025 and 2024 was $7.90 per share and $9.62 per share, respectively. As of June 30, 2025, there was $14.8 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.4 years.

Restricted Stock Units

During the six months ended June 30, 2025, restricted stock units ("RSUs") were granted to employees with vesting conditions based on continued service over time. Accordingly, stock-based compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company's common stock on the date of grant.

A summary of restricted stock activity during the six months ended June 30, 2025 is as follows:

As of June 30, 2025, there was $28.4 million of unrecognized stock-based compensation expense related to restricted stock that is expected to vest. These costs are expected to be recognized over a weighted-average remaining vesting period of 2.9 years.

Performance Stock Units

As of both June 30, 2025 and December 31, 2024, there were 438,500 PSUs outstanding. The PSUs will vest upon achievement of certain clinical milestones and continued employment thereafter.

As of June 30, 2025, no PSUs were vested andno stock-based compensation expense was recognized as the performance conditions were not deemed probable. As of June 30, 2025, there was $6.5 million of unrecognized stock-based compensation expense related to unvested PSUs.

10. Income Taxes

In accordance with ASC 740, "Income Taxes" interim reporting guidance, the Company records income tax expense in any interim period based on the estimated effective tax rate for the fiscal year for those tax jurisdictions in which the Company can reliably estimate the effective tax rate. The calculation of the estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction as well as total tax expense for the fiscal year. Accordingly, the annual estimated effective tax rate is subject to adjustment if there are changes to the initial estimates of total tax expense or pre-tax income.

The Company recorded income tax expense of $0.2 million for both the three and six months ended June 30, 2025. The Company recorded income tax expense of $2.8 million for the three months ended June 30, 2024 and $4.6 million for the six months ended June 30, 2024. For both thethree and six months ended June 30, 2024, the income tax provision recorded was driven largely by the$75 million clinical advancement milestone achieved in the first quarter of 2024.

Despite the collaboration revenue, the Company continues to maintain a valuation allowance against all remaining deferred tax assets. The Company believes that it is more likely than not that it will not realize a future tax benefit of these attributes as the Company expects to continue to generate operating losses. Ultimate realization of any deferred tax asset is dependent on the Company’s ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any.

The Company recognizes interest and penalties owed to taxing authorities as part of the provision for income taxes. As of June 30, 2025, the Company had no unrecognized tax benefits. The Company currently anticipates that there will be no change in its unrecognized tax benefits in the next twelve months.

11. Commitments and Contingencies

The Company's commitments, including significant license agreements, are disclosed in Note 10 Commitments and Contingencies in the audited financial statements for the year ended December 31, 2024, and notes thereto, included in the Annual Report. Since the date of those financial statements, there have been no material changes to its commitments, other than as noted below.

Reduction in Force

On April 29, 2025, the Company's board of directors approved a strategic plan, designed to increase the focus of the Company’s resources on its expanding portfolio of clinical candidates in Duchenne muscular dystrophy (“DMD”) and key preclinical programs. In connection with the new strategic plan, the Company reduced its workforce by approximately 20% (the "Reduction"). The Reduction was substantially completed during the second quarter of 2025.

As a result of the Reduction, the Company incurred a total charge of $1.9 million, primarily consisting of one-time severance payments and employee termination-related benefits, during the three months ended June 30, 2025. $1.7 million of the charge was recorded as research and development expenses and $0.2 million of the charge was recorded as general and administrative expenses. The Company does not expect to incur additional charges related to the Reduction. As of June 30, 2025, $1.6 million of the costs associated with the Reduction were paid and the remaining $0.3 million were accrued for and recorded in accrued expenses and other current liabilities.

12. Collaboration and License Agreements

Vertex Agreement

The Company and Vertex closed their Strategic Collaboration and License Agreement in February 2023, as amended in October 2023 (the "Vertex Agreement"), pursuant to which the Company granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, the Company’s intracellular EEV-based therapeutic candidate for the treatment of myotonic dystrophy type 1 ("DM1"), as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of DM1 in the course of the parties’ global research collaboration.

The Vertex Agreement provides for afour-year global research collaboration under which Entrada will continue to perform preclinical development of the Company's partnered candidate VX-670, as well as work on additional EEV-based therapeutic candidates for the potential treatment of DM1 (the "Research Plan"). Vertex is obligated to reimburse the Company’s research expenses incurred in performing activities under the Research Plan.

The Company determined that the Vertex Agreement contains two performance obligations: (1) the combination of the exclusive license and the performance of the research activities for VX-670 (“Performance Obligation One”) and (2) research activities performed on additional EEV-based therapeutic candidates for the potential treatment of DM1 (“Performance Obligation Two”).

During the three months ended June 30, 2025, the Company recognized $2.0 million in revenue under the Vertex Agreement, including $1.2 million of cost reimbursements and $0.8 million from amounts that were recorded in deferred revenue as of March 31, 2025. During the six months ended June 30, 2025, the Company recognized $22.5 million in revenue under the Vertex Agreement, including $2.8 million of cost reimbursements and $19.7 million from amounts that were recorded in deferred revenue as of December 31, 2024. In connection with nearing completion of its research activities for VX-670 under the Research Plan, during the first quarter of 2025, the Company revised its forecasted costs for Performance Obligation One. Accordingly, the Company recorded a cumulative catch-up adjustment of $12.3 million during the six months ended June 30, 2025.

During the three months ended June 30, 2024, the Company recognized $94.7 million of revenue under the Vertex Agreement, including $7.5 million of cost reimbursements and $87.2 million from amounts recorded in deferred revenue as of March 31, 2024. During the six months ended June 30, 2024, the Company recognized $152.8 million in revenue under the Vertex Agreement, including $9.6 million of cost reimbursements, $17.4 million related to a cumulative catch-up adjustment for the milestone achieved in the first quarter of 2024, and $125.8 million from amounts that were recorded in deferred revenue as of December 31, 2023.

The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations recorded in deferred revenue at June 30, 2025 is $0.9 million. The Company will recognize the deferred revenue related to the research and development services based on a cost input method, over the remaining term of the Research Plan.

13. Net (Loss) Income per Share

The computation of basic net income (loss) per share is based on the weighted-average number of the Company's common shares outstanding. The weighted-average common shares outstanding used in the basic and diluted net loss per share calculation includes the Pre-Funded Warrants issued in connection with the Company’s registered direct offering in June 2024 as the Pre-Funded Warrants are exercisable for nominal cash consideration.

The computation of diluted net income (loss) per share is based on the weighted-average number of the Company's common shares outstanding and potential dilutive common shares outstanding during the period as determined by using the treasury stock method.

The following table illustrates the determination of basic and diluted net income (loss) per share for each period presented (in thousands, except share and per share amounts):

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

14. Segment Information

The Company manages its operations as a single segment. The Company’s Chief Operating Decision Maker ("CODM"), its Chief Executive Officer, manages the Company's operations on a consolidated basis for the purposes of assessing performance and making operating decisions. The segment measure of profit or loss is consolidated net (loss) income.

The following table presents selected financial information with respect to the Company’s single operating segment for the years ended:

Assets regularly provided to the CODM are consistent with those reported on the condensed consolidated balance sheets with particular emphasis on the Company's available liquidity, including its cash, cash equivalents and marketable securities balances. All of the Company's tangible assets are held in the United States.

15. Subsequent Events

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act of 2025 ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including, among others, 100% bonus depreciation and domestic research cost expensing. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended September 30, 2025, the Company will reflect any changes required to its financial statements as a result of the OBBBA. The Company is currently assessing the impact of the OBBBA, and an estimate of the financial impact cannot be made at this time.