QNCX 10-K & 10-Q changes, risk factors and insider trading

Our lead drug candidate, eDSP, did not meet primary or secondary endpoints in the NEAT clinical trial and we do not have resources to pursue further operations. Therefore, we have limited operations and the only opportunity for a return on an investment in our common stock is based on our ability to execute a reverse merger transaction.

We recently completed our NEAT clinical trial for our lead drug candidate, eDSP, which did not meet primary or secondary endpoints. Based on the results of the NEAT clinical trial, eDSP does not appear to be an effective treatment for A-T and we will be unable to continue development of eDSP in A-T or other therapeutic indications. We have no other current product candidates and do not have sufficient resources to pursue further research and development activities. Therefore, we have limited operations and the only opportunity for a return on an investment in our common stock is based on our ability to execute a reverse merger transaction.

While we have engaged a financial advisor to support our Board of Directors in exploring strategic transactions, there can be no assurance that we will be able to engage in a strategic alternative transaction, including a reverse merger, or even if we do so, that any such transaction will result in favorable terms and conditions for us or our shareholders. If we are unsuccessful in engaging in a reverse merger, we will need to liquidate our business and you will not realize any return on an investment in our common stock.

In the event of a reverse merger transaction, your ability to realize a return on an investment in our common stock will depend on, among other things, the terms of such reverse merger transaction and the future performance of the target company in such transaction. There can be no guarantee that you will realize any benefit even if we are able to execute a reverse merger transaction.

Nasdaq may delist our securities from its exchange, which could adversely affect our ability to execute a strategic transaction and limit our stockholders’ liquidity.

Our common stock is currently listed on the Nasdaq Global Select Market, which has qualitative and quantitative listing criteria. However, we cannot assure you that our common stock will continue to be listed on Nasdaq in the future. In order to continue listing our common stock on Nasdaq, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our common stock, a $1.00 minimum bid price per share for our common stock, and certain governance requirements relating to the composition of the committees of our Board of Directors.

In March 2026, we received notices from Nasdaq indicating that we are no longer in compliance with Nasdaq’s continued listing requirements relating to maintaining (i) a minimum bid price of our common stock equal to $1.00 per share pursuant to Nasdaq Listing Rule 5550(a)(2) and (ii) a minimum market value of listed securities equal to $50,000,000. While we have an initial period of 180 days, until September 14, 2026, to regain compliance with such requirements, there is no guarantee that we will be able to regain compliance. In addition, as of December 31, 2025, our total stockholders’ deficit was approximately $35.7 million.

If we are unable to comply with Nasdaq continued listing requirements, our common stock may be subject to delisting. If Nasdaq delists our common stock from trading on its exchange or if we decide to voluntarily delist from Nasdaq and/or deregister our common stock under the federal securities laws, we could face significant material adverse consequences, including but not limited to (i) a limited availability of market quotations for our common stock; (ii) reduced liquidity for our common stock; (iii) a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; (iv) a limited amount of news and analyst coverage, and in the event of deregistration of our common stock, less public disclosure about us; and (v) a decreased ability to issue additional securities or obtain additional financing in the future. In addition, if our common stock is delisted from Nasdaq our ability to execute a reverse merger transaction will be adversely affected.

If we are unable to execute a strategic transaction, may be required to pursue a reorganization proceeding under applicable bankruptcy or insolvency laws, including under Chapters 7 or 11 of the U.S. Bankruptcy Code.

Under the EIB Loan, the occurrence of a Material Adverse Change (as defined in the EIB Loan) gives the Bank (as defined in the EIB Loan) the right to declare amounts outstanding under the EIB Loan immediately due and payable. The Bank has not purported that a Material Adverse Change has occurred at this time. However, there can be no guarantee that the Bank will not invoke such provision in the future, or that we will not experience other Material Adverse Changes, or otherwise breach our financial or other covenants under the EIB Loan, that could give rise to an acceleration of our obligations under the EIB Loan.

If we are unable to execute a strategic transaction in a way that resolves our outstanding liabilities, we will be required to pursue a reorganization proceeding under applicable bankruptcy or insolvency laws, including protection (“Bankruptcy Protection”) under Chapters 7 or 11 of the U.S. Bankruptcy Code. Holders of our common stock will likely not receive any value or payments in a restructuring or similar scenario.

Under Chapter 7 of the United States Bankruptcy Code, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the United States Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern.

Since our inception, we have used substantial amounts of cash to fund our operations. As of December 31, 2025, we had $17.8 million in cash, cash equivalents and short-term investments. Following December 31, 2025, and through the issuance of these financial statements, we raised net proceeds of approximately $20.4 million by issuing 105,285,000 shares of common stock under the ATM program, with approximately $47.5 million remaining available for issuance. Based on our available cash resources and current operating plan, there is substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that our financial statements for the year ended December 31, 2025 are issued.

We may become a “shell company” in the future, which would significantly limit our flexibility to raise capital, reduce the liquidity of our securities, and adversely affect our stockholders.

We are in the process of evaluating strategic alternatives, including the disposition of operating assets, restructuring activities, or other transactions that could significantly reduce or eliminate our ongoing business operations. As a result of such actions, we could in the future be deemed a “shell company” under applicable rules of the SEC.

If we were to become a shell company, we would be subject to significant regulatory restrictions that could materially impair our ability to operate as a public company and pursue strategic transactions. In particular, our ability to raise capital would be significantly constrained, the resale of our securities would be more restricted, and we would also face limitations on our ability to use equity-based compensation, which could hinder our ability to attract and retain key personnel. Our status as a shell company could also negatively affect investor confidence, reduce analyst coverage, and increase volatility in our stock price.

Moreover, if we were to seek to combine with an operating business in the future, including through a reverse merger or similar transaction, we would be required to provide extensive disclosure comparable to that required in a Form 10 registration statement. This would increase the cost, complexity and time required to complete such a transaction and could discourage potential counterparties.

In addition, our potential transition to a shell company could heighten the risk that we fail to meet the continued listing requirements of The Nasdaq Stock Market, which could result in the delisting of our common stock. Any such delisting would likely have a material adverse effect on the liquidity and market value of our securities.

The determination of whether we are a shell company requires significant judgment and is based on the particular facts and circumstances at the time. Accordingly, there can be no assurance as to when or if we may be deemed a shell company. If we are deemed to be a shell company, the foregoing risks, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations, and the value of our securities.

In the NEAT study, our pivotal Phase 3 international, multicenter, randomized, double-blind, placebo-controlled study (n=105), the primary endpoint, which measured the change from baseline to last efficacy visit at month six using the Rescored modified International Cooperative Ataxia Rating Scale (RmICARS) compared to placebo, did not reach statistical significance. The mean change from baseline to month six was 0.94 in the active arm compared to 2.24 in the placebo arm (difference -1.30) with a p-value of 0.0851. Furthermore, the study did not meet its key secondary endpoint of improvement in Clinical Global Impression of Severity (CGI-S) measured from baseline to month six with a p-value of 0.522. eDSP was generally well tolerated and there were no clinically meaningful safety concerns identified. The most common adverse events reported in the eDSP arm included pruritis and pyrexia. Based on the results of the NEAT clinical trial, eDSP does not appear to be an effective treatment for A-T and we will be unable to continue development of eDSP in this or other therapeutic indications. We have no other current product candidates and do not have sufficient resources to pursue further research and development activities at this time. We are currently focused on preserving cash while we evaluate available strategic alternatives.

Recent Development

Strategic Alternatives

On February 9, 2026, we engaged LifeSci Capital as our exclusive financial advisor to assist in restructuring activities and an evaluation of strategic alternatives aimed at maximizing shareholder value. Based on our initial evaluation, we plan to focus our efforts with respect to strategic alternatives, including effecting a reverse merger. We do not currently have any agreements or commitments to effect any such transactions and may not be able to execute such transactions on terms favorable to us and our stockholders, or at all. While we may also sell assets relating to our previous product candidates, we do not expect to receive any meaningful consideration from such sale, if any.

In order to fund our current efforts to pursue strategic alternatives, including a reverse merger, we intend to obtain additional funding through available financing sources, which may include additional public offerings of common stock, including sales of common stock, under a Controlled Equity OfferingSM Sales Agreement, dated December 18, 2024, with Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC, or private financing of debt or equity. If we are successful in obtaining any such additional funding, we may use all or a portion of the net proceeds to repay outstanding indebtedness, as well as for general corporate purposes and to support our activities with respect to strategic alternatives, including effecting a reverse merger. There can be no guarantee that we will be able to obtain such additional funding on terms favorable to the Company or our stockholders, or at all.

We recently completed our NEAT clinical trial for our lead drug candidate, eDSP, which did not meet primary or secondary endpoints. Based on the results of the NEAT clinical trial, eDSP does not appear to be an effective treatment for A-T and we will be unable to continue development of eDSP in this or other therapeutic indications. We have no other current product candidates and do not have sufficient resources to pursue further research and development activities. With cash, cash equivalents, and short-term investments of $17.8 million as of December 31, 2025 and net proceeds of approximately $20.4 million by issuing 105,285,000 shares of common stock under the ATM program that we raised after December 31, 2025, we expect to fund operations into the second quarter of 2026, or into the second half of 2026 if common warrants from the Company’s financing in June 2025 are exercised in full for cash. However, there can be no guarantee as to when such warrants may be exercised, if at all.

Fair Value Adjustment for Warrants

We record fair value adjustment for warrant liability calculated using the Black-Scholes option pricing model, adjustments are due to changes in the Company’s stock price, the expected term, volatility, risk-free interest rate, and expected dividends.

Warrant Issuance Costs

Warrant issuance costs consist of expenses incurred in connection with the offering of our private placement warrants, which are classified as liabilities.

Warrant Liability

Income Taxes

The determination of the fair value of IPR&D assets requires management to exercise judgment and make estimates and assumptions regarding the future development and commercialization of the underlying assets. These estimates involve inherent uncertainties and are based on factors such as the status and expected timing of development efforts and other considerations relevant to the associated research and development activities.

The significant inputs used in the impairment assessment are not observable in the market and therefore represent Level 3 fair value measurements as defined in ASC Topic 820, Fair Value Measurement. Changes in these assumptions could have a material impact on the estimated fair value of the assets and the amount of any impairment charge. Significant increases or decreases in these inputs in isolation would result in a significantly higher or lower fair value measurement and could result in the recognition of an impairment charge in future periods.

In addition to the other information set forth below and elsewhere in this report, you should carefully consider the risks described below, as well as general economic and business risks and the other information herein. The occurrence of any of the events or circumstances described below or other adverse events could have a material adverse effect on our business, results of operations and financial condition and could cause the trading price of our common stock to decline. Additional risks or uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

SUMMARY OF RISK FACTORS

The risk factors summarized below could materially harm our business, operating results, and/or financial condition, impair our future prospects, and/or cause the price of our common stock to decline. These risks are discussed more fully below. Material risks that may affect our business, financial condition, results of operations, and trading price of our common stock include the following:

We have a limited operating history, have incurred net losses since our inception, and anticipate that we will incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, may not be able to sustain it.

If we are unable to raise additional capital when needed, we may be forced to delay, reduce or eliminate our product development programs or other operations.

We need substantial additional funding to complete the development of our product candidates. A failure to obtain this necessary capital when needed could force us to further delay, limit, reduce or terminate our product development or commercialization efforts.

We have incurred significant losses every year since our inception. We expect to continue to incur losses over the next several years and may never achieve or maintain profitability.

Our development efforts are in the early stages. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

Our business is highly dependent on the success of LAM-001. LAM-001 will require additional clinical and manufacturing development before we may be able to seek regulatory approval for and launch a product commercially and we may not be successful in our efforts.

If the clinical trials of any of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Interim data from our clinical trials that we announce or publish from time to time may change as more patients are enrolled and additional data become available.

We will depend on timely enrollment of patients in our clinical trials for our product candidates. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Clinical trials are difficult to design and implement, can be lengthy and expensive, involve uncertain outcomes and may not ultimately be successful.

We rely, and expect to continue to rely, on third parties to conduct the preclinical and clinical trials for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with applicable regulatory requirements.

If the FDA does not conclude that LAM-001 satisfies the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements under Section 505(b)(2) are not as we expect, the approval pathway for LAM-001 will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated and may not be successful.

If we are unable to establish sales, marketing and distribution capabilities for our product candidates, or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing our product candidates, if approved.

We operate in a rapidly changing industry and face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

The success of our product candidates will depend on several factors, including obtaining and maintaining patent and trade secret protection and/or regulatory exclusivity for our product candidates.

If we are unable to obtain and maintain patent protection for our technologies and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be impaired.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could significantly harm our business.

There is no guarantee that the Acquisition will increase stockholder value.

Pursuant to the terms of the Acquisition and related 2026 Private Placement, we are required to recommend that our stockholders approve the conversion of all outstanding shares of our Series C Preferred Stock into shares of our common stock. We must also obtain stockholder approval of an amendment to our certificate of incorporation to increase the number of shares we are authorized to issue. We cannot guarantee that our stockholders will approve these matters, and if they fail to do so we may be required to settle such shares in cash and our operations would be materially harmed.

Our failure or perceived failure to comply with data privacy and security obligations including our experiencing security incidents could harm our business. Compliance or the actual or perceived failure to comply with such obligations could increase our costs and otherwise negatively affect our operating results and business.

The failure to successfully integrate the businesses of Quince and Orphai in the expected timeframe could adversely affect our results of operations, financial condition, and future results.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and have a history of significant losses since our inception. We may incur losses over the next several years and may never achieve or maintain profitability.

We are a clinical-stage biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business to date and to assess the future viability of our business prospects. Our operations to date have been limited to business planning, including the Acquisition, organizing and staffing our company, raising capital, identifying potential product candidates, conducting clinical trials and preclinical studies for our development programs, entering into licensing agreements, establishing and enhancing our intellectual property portfolio, and providing general and administrative support for these operations.

We have a history of significant net losses since our inception. Our net loss was $39.6 million and $31.1 million for six months ended June 30, 2026 and 2025, respectively, and $84.0 million and $56.8 million for the years ended December 31, 2025 and 2024, respectively. As of June 30, 2026 and as of December 31, 2025, we had an accumulated deficit of $500.0 million and $460.5 million, respectively. We have funded our operations to date primarily with proceeds from the sale of our equity securities and borrowings of convertible debt.

We have no products approved for commercial sale, have not generated any revenue from commercial sales of our product candidates, and are devoting substantially all of our financial resources and efforts to the research and development of LAM-001. Investment in clinical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and/or become commercially viable.

We expect that it will take at least several years until any of our product candidates receive marketing approval and are commercialized, and we may never be successful in obtaining marketing approval and commercializing product candidates. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. These net losses will adversely impact our stockholders’ equity and net assets and may fluctuate significantly from quarter to quarter and year to year.

To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. Achievement will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, obtaining regulatory approval, manufacturing, marketing and selling any products for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with the development and commercialization of therapeutic product candidates, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve and maintain profitability. If we are required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation and completion of our clinical trials or the development of any of our product candidates, our expenses could increase and profitability could be further delayed.

Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our common stock and could impair our ability to raise capital, expand our business, maintain our research and development efforts or continue our operations. A decline in the value of our common stock could also cause you to lose all or part of your investment.

Our operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

As an organization, we have not demonstrated an ability to successfully complete clinical trials, obtain regulatory approvals, manufacture our product candidates at commercial scale or arrange for a third party to do so on our behalf, conduct sales and marketing activities necessary for successful commercialization, or obtain reimbursement in the countries of sale. We may encounter unforeseen expenses, difficulties, complications, and delays in achieving our business objectives. Our operating history makes any assessment of our future success or viability subject to significant uncertainty, particularly with respect to the Acquisition. If we do not address these risks successfully or are unable to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities, then our business will suffer.

We will need substantial additional funding to complete the development of our product candidates. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Since our inception, we have used substantial amounts of capital to fund the development of our product candidates and operations. We expect our research and development expenses to increase in connection with our ongoing activities, particularly as our product candidates enter and advance through preclinical studies and clinical trials. We will require substantial additional funding to meet our financial needs and to pursue our business objectives. We will require significant additional capital to, among other things:

complete our ongoing and planned clinical trials, preclinical studies and IND-enabling activities;

initiate, enroll, and complete additional clinical trials for our product candidates;

seek and obtain regulatory approvals for our product candidates;

build and maintain our manufacturing capabilities or enter into third-party manufacturing arrangements;

expand and protect our intellectual property portfolio; and fund our general and administrative operations.

In addition, if we obtain marketing approval for any of our product candidates, we will incur significant commercialization expenses related to marketing, sales, administration and manufacturing and distribution.

Failure to raise capital as and when needed would have a negative impact on our financial condition and ability to develop our product candidates. Furthermore, we cannot be certain that additional funding will be available on acceptable terms. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or other research and development initiatives, and any of our current or future license agreements may be terminated if we are unable to meet the payment or other obligations under the agreements.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, research and development activities and costs associated with operating a public company. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through any or a combination of securities offerings, debt financings, license and collaboration agreements and research grants. If we raise capital through securities offerings, such sales are likely to result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock.

To the extent that we raise additional capital through the sale of equity, warrants to purchase equity, and/or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if available, could result in fixed payment obligations, and we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.

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 to grant licenses on terms that may not be favorable to us. In addition, we could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable. If we raise funds through research grants, we may be subject to certain requirements, which may limit our ability to use the funds or require us to share information from our research and development. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to a third party to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Raising additional capital through any of these or other means could adversely affect our business and the holdings or rights of our stockholders, and may cause the market price of our common stock to decline.

In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional funds through collaboration and licensing arrangements with third parties, we may have to relinquish some rights to our technologies or our product candidates on terms that are not favorable to us. Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates, if approved. If we are unable to raise capital when needed or on attractive terms, we could be forced to further delay, reduce or altogether cease our research and development programs or future commercialization efforts.

Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises such as pandemics, political crises, geopolitical events, or other macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including, among other things, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, increases in inflation rates, higher interest rates and uncertainty about economic stability, due to reasons including, among other things, geopolitical conflicts, political changes and trends such as protectionism, economic nationalism resulting in government actions impacting international trade agreements or imposing trade restrictions such as tariffs and retaliatory counter measures.

A widespread public health crisis such as a pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or market correction resulting from the effects of public health crises could materially affect our business and the value of our common stock. It may have further negative impacts, such as (a) a global or U.S. recession or other economic crisis; (b) credit and capital markets volatility (and access to these markets, including by our suppliers and customers); (c) manufacturing supply disruption due to travel restrictions or other government actions; (d) disruptions in raw material supply, our manufacturing operations, or in our distribution and supply chain; and (e) our ability to conduct planned clinical trials and commercialization activities. The ultimate impact of a public health crisis is highly uncertain.

Fluctuating interest rates, coupled with reduced government spending and volatility in financial markets, may increase economic uncertainty and affect consumer spending. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

Our financial results have been in the past and may in the future be adversely affected by impairment charges from the recording of goodwill and intangible assets.

Our financial results have been in the past and may in the future be adversely affected by impairment charges from the recording of goodwill and intangible assets incurred in connection with acquisitions. For example, during the quarter ended June 30, 2024, we incurred a $17.1 million goodwill impairment charge in connection with the EryDel Acquisition. Further, our failure to identify or accurately assess the magnitude of necessary technology investments we assumed as a result of the EryDel Acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. We recognized a total impairment charge of $67.8 million for indefinite and finite-lived intangible assets for the six months ended June 30, 2026 related to the negative outcome of the NEAT study.

Our failure to maintain certain tax benefits applicable to Italian biotechnology companies may adversely affect our results of operations, our cash flows and our financial condition.

We have benefited from certain tax advantages related to our Italian biotechnology subsidiary, including, for example, the R&D tax credit, which is an Italian tax credit aimed at stimulating research and development. The R&D tax credit can offset payments of certain taxes and contributions (e.g., social contributions, VAT payables, registration fees, income and withholding taxes and all other tax-related items that companies usually pay monthly). For eligible research and development activities, the tax credits were equal to 20% of the costs incurred in fiscal years 2022 and 2021, with a maximum annual amount of $4.4 million (4 million euros). In 2023 the general R&D tax credit rate was decreased to 10% of the eligible expenses for certain activities, and the annual ceiling of the credit increased to $5.5 million (5 million euros). In 2023 to 2025, we generated R&D tax credit under Article 31 of Decree-Law No. 73/2021, for Pharmaceutical/Vaccine R&D tax credit, which has tax credits equal to 20% of cost incurred in the fiscal year and annual ceiling of the credit of $23.4 million (20 million euros). Expenses incurred for years ended December 31, 2025, 2024, and 2023 generated a total tax credit amounting to $1.9 million (1.7 million euros), $1.7 million (1.6 million euros), and $0.9 million (0.8 million euros), respectively. The Italian tax authorities may audit each research and development program in respect of which a R&D tax credit has been claimed and assess whether such program qualifies in its view for the R&D tax credit. The Italian tax authorities may challenge our eligibility for, or our calculation of, certain tax reductions or deductions in respect of our research and development activities. Should the Italian tax authorities be successful, the R&D tax credit, may be reduced, which would have a negative impact on our results of operations and future cash flows. We believe, due to the nature of our business operations, that we will continue to be eligible to receive the R&D tax credit. However, if the Italian government decides to eliminate, or to reduce the scope or the rate of, the R&D tax credit, either of which it could decide to do at any time, our results of operations could be adversely affected.

Risks Related to the Development of our Product Candidates

Our development efforts are in the early stages. If we are unable to advance LAM-001 or any other product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

Unless otherwise indicated, all share and per share information has been retroactively adjusted to reflect the 1-for-10 reverse stock split of our common stock that became effective on April 10, 2026 (the “April 2026 Reverse Stock Split”) and the 1-for-20 reverse stock split of our common stock that became effective on June 29, 2026 (the “June 2026 Reverse Stock Split” and, together with the April 2026 Reverse Stock Split, the “Reverse Stock Splits”).

We are a clinical-stage biopharmaceutical company developing a novel disease modifying therapeutic to address the significant unmet medical need associated with pulmonary disorders with few, if any, treatment options available.

On May 18, 2026, we completed the acquisition of Orphai Therapeutics, LLC, a clinical-stage biotechnology company developing a novel disease modifying therapeutic to address the significant unmet medical need associated with pulmonary disorders with few, if any, treatment options available, in accordance with the terms of the Agreement and Plan of Merger, dated May 17, 2026 (the “Merger Agreement”), by and among the Company, Orphai, and the other parties thereto (the “Orphai Acquisition”). The acquisition brought into our pipeline Orphai’s lead asset, LAM-001, a proprietary investigational inhaled dry powder formulation of rapamycin whose differentiated characteristics may permit treatment of pulmonary conditions associated with dysfunctional mammalian target of rapamycin activity.

Under the terms of the Merger Agreement, we assumed options to purchase Orphai common stock and were converted into options to purchase an aggregate of 1,308,804 shares of common stock, which options are subject to exercise restrictions prior to obtaining approval during a special meeting of stockholders. In addition, we issued to holders of Orphai warrants (the "Acquisition Warrants") to purchase an aggregate of 10,964.505 shares of Series C Preferred Stock (or 570,169 shares on an as-converted-to-common basis, and without giving effect to any beneficial ownership limitations), at an exercise price of $996.90 per share of Series C Preferred Stock (or $19.17 per share on an as-converted-to-common basis, as adjusted for the June 2026 Reverse Stock Split).

On May 18, 2026, concurrent with the Orphai Acquisition, we entered into a securities purchase agreement (the “May 2026 Securities Purchase Agreement”) for a private placement financing with new and returning investors to raise up to $187.0 million in gross proceeds, which includes $115.0 million in gross upfront proceeds, net of $11.4 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of $103.6 million and up to an additional approximately $72.0 million upon exercise of accompanying warrants (with an additional up to $11.0 million in gross proceeds available upon the exercise of warrants issued to former Orphai stockholders), in which the investors were issued approximately 144,200.633 shares of our Series C non-voting convertible preferred stock (the “Series C Preferred Stock”) (convertible into an aggregate of 7,498,447 shares of common stock, without giving effect to any beneficial ownership limitations) at a price of $797.50 per share and accompanying warrants (the “Financing Warrants”) to purchase up to 72,100.322 shares of Series C Preferred Stock (or 3,749,231 shares on an as-converted-to-common basis and without giving effect to any beneficial ownership limitations) at an exercise price of $996.90 per share (or $19.17 per share on an as-converted-to-common basis, as adjusted for the June 2026 Reverse Stock Split) (the “May 2026 Financing”). For additional information on the Orphai Acquisition and the May 2026 Financing, see Note 3 to our unaudited condensed consolidated financial statements.

Following the acquisition, our lead product candidate is LAM-001. We are currently evaluating the use of LAM-001 as a treatment for patients with pulmonary hypertension associated with interstitial lung disease (“PH-ILD”) and for patients with bronchiolitis obliterans syndrome post lung transplant (“BOS”), both severe, progressive and often life-threatening indications with few therapeutic alternatives of significant clinical benefit. In our recently completed Phase 2a trial, which enrolled patients with pulmonary arterial hypertension as well as patients with PH-ILD and sarcoidosis associated pulmonary hypertension (“SAPH”), LAM-001 achieved clinically relevant improvement across multiple established endpoints, including pulmonary vascular resistance, six-minute walking distance and functional class. A Phase 2b trial of LAM-001 is ongoing, evaluating 75 patients with PH-ILD, with data expected in the first quarter of 2028. A fully enrolled Phase 2 trial of LAM-001 in BOS is currently ongoing, with results anticipated in the first quarter of 2027. In addition, we expect to initiate a Phase 2 trial to evaluate the use of LAM-001 as a treatment for sarcoidosis-associated pulmonary hypertension in late 2026, with data expected in the fourth quarter of 2028.

Prior to the Orphai Acquisition, our business was focused on developing our proprietary Autologous Intracellular Drug Encapsulation (“AIDE”) technology for the treatment of Ataxia-Telangiectasia (“A-T”) through our encapsulated dexamethasone sodium phosphate encapsulated in patient's own red blood cells (“eDSP”) product candidate. In January 2026, we completed our pivotal Phase 3 NEAT clinical trial of eDSP for the treatment of A-T. As previously disclosed, the primary endpoints of the NEAT trial did not reach statistical significance. Based on the results of the NEAT trial, we determined that we would no longer continue development of eDSP in this or other therapeutic indications, and we are currently considering next steps for the eDSP program and our other assets.

We have incurred net losses from operations since our inception. As of June 30, 2026, we had an accumulated deficit of $500.0 million. While we generated a net income in the three months ended March 31, 2026, we do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to continue to incur significant costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

We anticipate that our research and development expenses will increase from current levels due to the Orphai Acquisition and the increase in headcount as the size of our business and research and development operations grows to support additional research and development activities.

We anticipate that our general and administrative expenses will increase from current levels due to the Orphai Acquisition and the increase in headcount as the size of our business and research and development operations grows to support additional research and development activities.

Acquired in-process research and development expense consists of the fair value of in-process research and development ("IPR&D") acquired in connection with the Orphai Acquisition. As the acquired in-process research and development was determined to have no alternative future use, it was expensed on the acquisition date, in accordance with ASC 730. We do not expect to recognize acquired in-process research and development expense in future periods unless we complete additional acquisitions.

Gain on Orphai Acquisition represents the excess of the fair value of the net assets acquired, including IPR&D acquired, and net liabilities assumed in connection with the Orphai Acquisition over the fair value of consideration transferred, recognized as of the acquisition date.

Warrant Issuance Costs

Warrant issuance costs consist of expenses incurred in connection with the Financing Warrants, which are classified as liabilities.

Business Combination

Our personnel related costs increased by $3.6 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, mainly as a result of an increase of $2.7 million in allocated stock-based compensation costs and a $0.9 million increase in other personnel related expenses, including costs related to Orphai Acquisition and severance costs related to personnel separation.

Fair Value Adjustment for Contingent Consideration

For the three months ended June 30, 2026, the fair value adjustment for contingent consideration decreased by $0.5 million as we recorded a fair value adjustment for contingent consideration as a result of the clinical readout of the Phase 3 NEAT study in January 2026.

Fair Value Adjustment for Debt

For the three months ended June 30, 2026, the fair value adjustment for the debt decreased by $0.5 million primarily due to the settlement of the loan with the EIB in March 2026.

Fair Value Adjustment for Warrants

For the three months ended June 30, 2026, we recorded an increase of $9.0 million fair value adjustment for warrants primarily due to the issuance of the Acquisition and Financing Warrants, exercise of the Pre-Funded Warrants, cancellation of the Common warrants, and changes in the price of the underlying stock.

Interest Income

Interest income increased by $0.3 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The change was due to increased yields on our investment portfolio and increased average balances.

Other Expense, net

Other income (expense), net increased by $0.2 million for the three months ended June 30, 2026 primarily due to unrealized gains from foreign currency translation.

Income Tax Expense

We recorded a tax expense of $75 thousand and $67 thousand for the three months ended June 30, 2026 and 2025, respectively. The tax expense was primarily due to the current-period Italian income tax expense.

Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025

The following sets forth our results of operations for the six months ended June 30, 2026 and 2025 (in thousands, except for percentages):

Research and Development Expenses (in thousands, except for percentages):

Research and development expenses were $12.3 million for the six months ended June 30, 2026, compared to $14.7 million for the six months ended June 30, 2025, a decrease of $2.4 million.

The costs for eDSP development decreased by $7.9 million compared to the same period from the prior year due to the ramping down related to our Phase 3 NEAT clinical trial and OLE as well as a gain on the settlement of accounts payable. This decrease was primarily due to a gain on settlement of accounts payable of $3.7 million as well as a decrease in clinical trial costs of $5.3 million, a decrease in eDSP consulting of $1.5 million, and a decrease in manufacturing costs of $0.6 million, offset by an increase of R&D expenses of $3.2 million related to the reserve and adjustment for R&D tax credits.

The costs for LAM-001 development increased by $0.8 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to the Orphai Acquisition as a result of the start-up costs of LAM-001.

Personnel related costs increased by $4.3 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, mainly as a result of an increase of $2.9 million in allocated stock-based compensation costs and a $1.4 million increase in other personnel related expenses, including costs related to Orphai Acquisition and severance costs related to personnel separation.

General and Administrative Expenses

General and administrative expenses increased by $12.8 million to $20.9 million for the six months ended June 30, 2026, from $8.1 million for the six months ended June 30, 2025. The increase in general and administrative expenses was primarily due to $8.5 million in allocated stock-based compensation and personnel related expenses primarily due to the assumptions of the Orphai historical options upon acquisition, and an increase of $4.3 million in consulting and professional costs related to the restructuring activities.