Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of Calidi and its wholly owned subsidiaries, Calidi Nevada, StemVac, Calidi Australia and Redtail Biopharma.

Variable interest entities (“VIEs”) are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of equity investment at risk lack the ability to direct the entity’s activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.

For all VIEs in which the Company is involved, it assesses whether it is the primary beneficiary on an ongoing basis. In circumstances where the Company has both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, the Company would conclude that it is the primary beneficiary of the VIE, and the Company consolidates the VIE. In situations where the Company is not deemed to be the primary beneficiary of the VIE, it does not consolidate the VIE and only recognizes the Company’s interests in the VIE.

In May 2024, the Company established and incorporated a wholly owned subsidiary, Nova Cell, Inc. (“Nova Cell”), which was incorporated in the state of Nevada. Nova Cell’s primary operating activities were expanding potential uses of the Company’s AAA stem cell programs from oncology to other fields that require regenerative medical applications, such as cosmetics, orthopedics, auto-immune diseases, and various other therapies. Prior to October 27, 2025, the Company owned 75% of Nova Cell’s fully-diluted capitalization, with the remaining 25% owned by a related party investor (see Note 8). Under the rules of determining whether an entity was a VIE, the Company had a controlling financial interest and was deemed to be the primary beneficiary of Nova Cell and therefore consolidated Nova Cell’s financial statements. Since the Company owned less than 100% of Nova Cell, the Company recorded net loss attributable to noncontrolling interest in its consolidated statements of operations equal to the percentage of the economic or ownership interests retained in Nova Cell by the noncontrolling party.

On October 27, 2025, the Company entered into a Stock Repurchase Agreement (the “SRA”) and Material Purchase Agreement (the “MPA” and together with the SRA, the “Agreements”), with Nova Cell, pursuant to which the Company sold and transferred its investment in Nova Cell, as further detailed in Note 8. Following the closing of the transactions contemplated by the Agreements, Nova Cell ceased to be a subsidiary of the Company.

The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. All material intercompany accounts and transactions have been eliminated in consolidation.

Reclassification

Reclassification

Certain prior year financial statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.

Machinery and Equipment

Machinery and Equipment

Machinery and equipment are stated at cost, less accumulated depreciation, and includes assets purchased under financing leases. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally over a period of 3 to 5 years. For equipment purchased under financing leases, the Company depreciates the equipment based on the shorter of the useful life of the equipment or the term of the lease, ranging from 3 to 5 years, depending on the nature and classification of the financing lease. Maintenance and repairs are expensed as incurred whereas significant renewals and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is reflected in the Company’s unaudited condensed consolidated statements of operations.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company assesses the impairment of long-lived assets, which consist primarily of right-of-use assets for operating leases and machinery and equipment, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded in the Company’s unaudited condensed consolidated statements of operations.

Derivative Financial Instruments

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. The Company values its derivatives using the Black-Scholes option-pricing model (“Black-Scholes model”) or other acceptable valuation models, as applicable, with the assistance of valuation specialists, which includes Level 3 inputs. Derivative instruments accounted for as liabilities are valued at inception and subsequent valuation dates for each reporting period the derivative instrument remains outstanding. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is reassessed at each reporting period.

The Company evaluates equity or liability classification for common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and accounts for common stock warrants as liabilities if the warrant requires net cash settlement, or gives the holder the option of net cash settlement, or it otherwise does not meet other equity classification criteria. The Company accounts for common stock warrants as equity if the contract requires physical settlement or net physical settlement, or if the Company has the option of physical settlement or net physical settlement and the warrants meet the requirements to be classified as equity. Warrants that meet the definition of a derivative financial instrument and the equity scope exception in ASC 815-10-15-74(a) are classified as equity, are initially measured at fair value on the grant date, and are not subject to remeasurement provided that the Company continues to meet the criteria for equity classification. Warrants that are classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration, or modification that results in equity classification. Any change in the fair value of liability-classified warrants is recorded and presented under change in fair value of other liabilities and derivatives or change in fair value of other liabilities and derivatives – related party, as applicable, in the unaudited condensed consolidated statements of operations.

Research and Development Expenses

Research and Development Expenses

Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including compensation-related expenses for research and development personnel, preclinical and clinical activities, costs of manufacturing, overhead expenses including facilities and laboratory expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation and amortization.

Upfront and annual license payments related to acquired technologies or technology licenses which have not yet reached technological feasibility and have no alternative future use are also included in research and development expense in the period in which they are incurred.

Foreign Currency Translation Adjustments and Other Comprehensive Income or Loss

Foreign Currency Translation Adjustments and Other Comprehensive Income or Loss

StemVac is located and operates in Germany, and its functional currency is the Euro. Calidi Australia is located and operates in Australia, and its functional currency is the Australian Dollar (“AUD”). Accordingly, StemVac’s and Calidi Australia’s assets and liabilities are translated using respective published exchange rates in effect at the unaudited condensed consolidated balance sheet date. Expenses and cash flows are translated using respective approximate weighted average exchange rates for the reporting period. Resulting foreign currency translation adjustments are recorded as other comprehensive income or loss, net of tax, in the unaudited condensed consolidated statements of comprehensive income or loss and included as a component of accumulated other comprehensive income or loss on the unaudited condensed consolidated balance sheets. For the three and six months ended June 30, 2026 and 2025, comprehensive loss includes such foreign currency translation adjustments and was insignificant for all periods presented.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes compensation expense related to employee option grants and restricted stock grants, if any, in accordance with ASC 718, Compensation — Stock Compensation.

The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is recognized in the period of the forfeiture. Generally, and unless otherwise specified, the Company grants stock options with service-based only vesting conditions and records the expense for these awards using the straight-line method over the requisite service period.

The Company classifies stock-based compensation expense in its unaudited condensed consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option grant is estimated using the Black-Scholes model. The Company estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options provided under Staff Accounting Bulletin, Topic 14, or SAB Topic 14, as necessary. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Segments

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (or CODM), the Executive Management Team, consisting of the following individuals:

	●	Chief Executive Officer
	●	Chief Financial Officer
	●	Chief Scientific Officer and Head of Technical Operations

The Company views its operations and manages its business as a 1single reportable segment whose operations include the research, development and commercialization efforts of cell-based platforms to potentiate oncolytic virus therapies on a consolidated basis, as further described in Note 1. The Company manages its Research and Development (“R&D”) activities on a consolidated basis. The Company expects to generate future income from a combination of license fees and other upfront payments, funded R&D agreements, milestone payments, product sales, government and other third-party funding, and royalties, which depend on the results, regulatory approval, and timing of the successful commercialization of the Company’s products.

Net loss is the measure of segment profit or loss used by CODM in making decisions regarding resource allocation and evaluating financial performance, which is also reported on the unaudited condensed consolidated statements of operations and comprehensive loss. The CODM does not evaluate its reportable segment using asset or liability information.

The following table presents selected financial information with respect to the Company’s single operating segment for the three and six months ended June 30, 2026 and 2025:

Schedule of Operating Segment

	2026			2025			2026			2025
	Three Months Ended June 30,						Six Months Ended June 30,
	2026			2025			2026			2025
OPERATING EXPENSES
Salaries and benefits	$	1,654		$	2,957		$	3,354		$	5,147
Insurance		186			238			367			474
Legal		155			350			419			649
Consulting		355			592			639			1,211
Rent and Maintenance		245			610			812			1,175
Clinical & research and development		1,028			427			1,802			890
Depreciation expense		89			96			176			187
Other operating expense ⁽¹⁾		438			394			768			993
Total operating expenses		4,150			5,664			8,337			10,726
Loss from operations		(4,150	)		(5,664	)		(8,337	)		(10,726	)
OTHER INCOME (EXPENSE), NET
Change in fair value of other liabilities and derivatives		(1	)		(19	)		47			16
Other non-operating income (expense),net ⁽²⁾		(4	)		(74	)		31			(106	)
Income tax provision		(5	)		(4	)		(9	)		(7	)
NET LOSS	$	(4,160	)	$	(5,761	)	$	(8,268	)	$	(10,823	)

	⁽¹⁾	Other operating expense includes office expenses and marketing expenses.
	⁽²⁾	Other non-operating income (expense), net includes interest expense, grant income and other income (expense), net.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement and in January 2025, issued ASU 2025-01 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date to clarify the effective date of ASU 2024-03. ASU 2024-03 requires the disaggregation of certain costs and expenses in the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. The ASU is effective for annual periods beginning after December 15, 2026 and for interim reporting periods within annual reporting periods beginning after December 15, 2027. The guidance may be applied on a prospective or retrospective basis and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.

In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This ASU establishes guidance on the recognition, measurement, presentation, and disclosure of government grants received by business entities, including guidance for grants related to an asset and grants related to income. The new guidance leverages the principles in the accounting framework for government assistance in International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance, makes certain targeted improvements, and modifies certain of the existing disclosure requirements in ASC 832, Government Assistance. Specifically, the ASU defines the criteria that need to be met in order to recognize government grant proceeds and prescribes that a business entity present a grant related to income and a grant related to an asset for which the deferred income approach is elected as part of earnings either (1) separately under a general heading such as other income or (2) deducted from the related expense. ASU 2025-10 is effective for annual periods beginning after December 15, 2028, including interim reporting periods within those annual periods, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2025-10.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which is intended to improve the navigability of the guidance in ASC 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.