1. Organization, Restructuring, Going Concern and Basis of Presentation

Lyra Therapeutics, Inc. (the “Company”) is a clinical-stage biotechnology company focused on the development and commercialization of therapies for the localized treatment of patients with chronic rhinosinusitis, or CRS. The Company’s proprietary technology is designed to consistently deliver medicines directly to the affected tissue for sustained periods with a single administration. The Company’s product candidates, LYR-210 and LYR-220, are bioabsorbable nasal implants designed to be administered in a simple, in-office procedure and intended to deliver six months of continuous anti-inflammatory drug therapy to the sinonasal passages for the treatment of CRS. The Company was incorporated as a Delaware corporation on November 21, 2005 and is located in Watertown, Massachusetts. On July 16, 2018, the Company formerly changed its name from 480 Biomedical, Inc. to Lyra Therapeutics, Inc.

The Company is subject to risks common to companies in the therapeutics and pharmaceutical industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, reliance on third party manufacturers, ability to transition from pilot-scale manufacturing to large-scale production of products and the need to obtain adequate additional financing to fund the development of its product candidates.

Restructuring

On May 16, 2024, the Company reported that topline results from the Company’s Phase 3 ENLIGHTEN 1 trial evaluating LYR-210, a bioabsorbable sinonasal implant (7500µg mometasone furoate), as a six-month treatment of chronic rhinosinusitis (CRS). ENLIGHTEN 1 did not meet its primary endpoint of demonstrating statistically significant improvement compared to sham control in the composite score of the three cardinal symptoms (3CS) of CRS (nasal obstruction, nasal discharge, facial pain/pressure) at 24 weeks. ENLIGHTEN 1 is one of two Phase 3 clinical trials evaluating LYR-210. The 52-week extension stage of the ENLIGHTEN 1 trial was completed in the fourth quarter of 2024. Safety data for LYR-210 in the extension phase was generally consistent with the 24-week primary treatment phase, including for those patients who received a repeat dosing resulting in a 12-month treatment period. In the extension stage, LYR-210 was generally well tolerated, with no product-related serious AEs. The most commonly reported extension stage AEs in the study population were chronic sinusitis, nasal odor, epistaxis, sinusitis, and nasopharyngitis. The Company expects to report results in the second quarter of 2025.

In connection with the ENLIGHTEN 1 trial failing to meet its primary endpoint, on May 16, 2024, the Board of Directors of the Company (the “Board of Directors”) approved a reduction in the Company’s workforce impacting 87 employees, which occurred during May and June 2024. In connection with the reduction in force, the Company stopped commercialization efforts for LYR-210, as well as development efforts for LYR-220 in an effort to reduce operating expenses. The Company also paused manufacturing of its product candidates. Furthermore, the Company is currently in the process of marketing all three of its leased properties for sub-leasing arrangements.

The Company recorded a restructuring charge in the amount of $10.9 million in 2024 as well as an additional $0.9 million recorded in the three months ended March 31, 2025, primarily related to severance and retention costs as further discussed in Note 4. The Company had recorded an impairment charge in 2024 for the write-down of property and equipment of $1.9 million and right-of-use assets in the amount of $22.8 million as further discussed in Notes 5 and 6.

Going Concern

The failure of the Company’s Phase 3 ENLIGHTEN 1 trial to meet its primary endpoint, which resulted in the Company’s restructuring during the second quarter of 2024, provides significant uncertainty regarding the Company’s ability to meet its business plans and conduct its future operations. The Company has incurred recurring net operating losses every year since inception and has an accumulated deficit of approximately $413.3 million at March 31, 2025. The Company expects to continue to generate operating losses for the foreseeable future. At March 31, 2025, the Company had approximately $31.7 million of cash and cash equivalents. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these condensed consolidated financial statements are issued.

In July 2024, the Company received notice from Nasdaq that it was not in compliance with the $1.00 minimum bid price requirement. Although the Company was granted an additional 180-day compliance period through July 14, 2025 to regain

compliance, failure to maintain a bid price above $0.10 could result in delisting. The Company intends to seek stockholder approval for a reverse stock split at its May 2025 annual meeting to regain compliance, but there is no assurance that such approval will be obtained or that compliance will be regained.

From inception through March 31, 2025, the Company has raised an aggregate of $424.8 million to fund its operations, primarily from the issuance of equity securities and to a lesser extent, government contracts and a license agreement.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) assuming the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company continues to consider various operational and strategic options in light of the failure of the ENLIGHTEN 1 trial to meet its primary endpoint, including additional clinical trials, the sale of assets, or a strategic business combination. The Board of Directors has not decided on a specific plan other than to reduce operating expenses in order to manage its cash position. The Company is attempting to sublease all of its leased locations, and, may also seek to negotiate an early termination of its leases with its landlords. The Company may be unable to sublease its locations on favorable terms or at all. In addition, the Company may not be able to obtain an early termination of its leases with its landlords on favorable terms or at all.

The Company will continue to evaluate its headcount of employees and may further reduce its workforce, which will result in additional severance and retention costs, which may impact the Company’s ability to meet objectives. If the Company decides to pursue any form of growth strategy in the future, it will need additional financing to support its continuing operations. Until the Company can generate significant revenue from product sales, if ever, it plans to finance its operations through a combination of equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to obtain funding as and when needed would have a negative impact on the Company’s financial condition and ability to pursue its business strategies. If the Company is unable to obtain funding when needed, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The Company will need to generate significant revenue to achieve profitability, and it may never do so.