NOTE 5. STOCKHOLDERS’ EQUITY

Common Stock, Preferred Stock, and Warrants

Common Stock

The Company’s Certificate of Incorporation, as amended, authorizes the issuance of 400,000,000 shares of $0.0001 par value common stock. As of September 30, 2026 and December 31, 2025, there were 45,536,448 and 9,314,130 shares of common stock issued and outstanding, respectively.

Preferred Stock

Under the Company’s Certificate of Incorporation, as amended, the Board is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock, par value $0.0001 per share, in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. Of the potential 10,000,000 shares of preferred stock, 5,181,346 are designated as Series A Stock and 4,818,654 remain undesignated. As of September 30, 2026 and December 31, 2025, there were 210 shares of Series A Stock outstanding, convertible in the aggregate into one share of common stock.

Common Stock and Warrants

March 2025 Private Placement Financing (the “March 2025 Offering”)

On March 4, 2025, the Company entered into a securities purchase agreement with certain accredited investors for the purchase and sale, in a private placement financing by the Company, of (i) an aggregate of 378,346 shares of its common stock, and pre-funded warrants to purchase an aggregate of 3,760,726 shares of common stock at an offering price of $6.04 per share of common stock and $6.03 per pre-funded warrant, resulting in gross proceeds of $25.0 million. The pre-funded warrants do not expire and have an exercise price of $0.01. The net proceeds of the March 2025 Offering, after deducting placement agent fees and direct offering expenses were $23.2 million. The relative fair value allocated to the common stock and pre-funded warrants was $2.3 million and $22.7 million, respectively.

Also, on March 5, 2025 and in connection with the March 2025 Offering, the Company entered into a registration rights agreement (the “March 2025 Registration Rights Agreement”) with the purchasers, pursuant to which the Company agreed to register for resale the shares of common stock issued in the March 2025 Offering and the shares of common stock issuable upon exercise of the pre-funded warrants issued in the March 2025 Offering within 45 days of the closing date. Pursuant to the March 2025 Registration Rights Agreement, on April 15, 2025, the Company filed a resale registration statement on Form S-3 with the SEC, which went effective on April 23, 2025.

The March 2025 Registration Rights Agreement includes liquidated damages provisions that meet the definition of a registration payment arrangement that is within the scope of ASC 825-20. The Company determined at the initial issuance of the pre-funded warrants that it is not probable that a payment would be required as it has both the intent and ability to satisfy the March 2025 Registration Rights Agreement. Therefore, the Company did not record a liability at inception but will evaluate the contingency at each reporting period. As of September 30, 2026, no events had occurred that would change the Company's initial assessment of this provision.

Warrant Activity

August 2024 Warrants

As part of the Company’s private placement in August 2024, the Company issued unregistered common warrants to purchase 16,666,666 shares of its common stock at an exercise price of $4.50 per share (the “August 2024 Warrants”) and pre-funded warrants to purchase an aggregate of 31,882,671 shares of common stock. The August 2024 Warrants expired on September 22, 2026, which was 30 trading days following the date of the Company’s initial public announcement of topline data from its Phase 3 LEVEL trial. At September 30, 2026, none of the August 2024 Warrants were outstanding.

February 2024 Warrants

As part of the Company’s registered public offering in February 2024, the Company issued registered warrants to purchase 3,200,000 shares of its common stock at an exercise price of $5.65 per share and contractual term of five years. At September 30, 2026, 223,880 of the February 2024 Warrants remained outstanding.

Stock-Based Compensation

Summary of Stock Option and Restricted Stock Unit (RSU) Activity

Stock Incentive Plans

In June 2022, the Company adopted the 2022 Stock Incentive Plan, as amended on June 7, 2024 and October 25, 2024, (the “2022 Plan”), with the outstanding shares available for future grants under prior plans, as well as outstanding awards under prior plans that subsequently expire, terminate or are surrendered or forfeited, generally being assumed by the 2022 Plan. Unexpired awards granted under certain prior plans may be subject to the terms of such prior plans.

Under the 2022 Plan, with the approval of the Board’s Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash-based awards or other stock-based awards. Stock options granted under the 2022 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to employees. NSOs may be granted to employees, consultants and directors. Stock options under the 2022 Plan may be granted with a term of up to ten years and at prices no less than fair market value at the time of grant. Stock options granted generally vest over one to four years.

A total of 330,664 shares remained available for issuance under the 2022 Plan as of September 30, 2026.

The Company recorded compensation expense for stock options granted under Company stock incentive plans of $2.4 million and $8.0 million for the three and nine months ended September 30, 2026, respectively, and $5.5 million and $14.0 million for the three and nine months ended September 30, 2025, respectively.

As of September 30, 2026, there were unrecognized compensation costs of $22.9 million related to non-vested stock option awards that will be recognized on a straight-line basis over the weighted average remaining vesting period of 2.92 years.

Inducement Awards

Transactions during the nine months ended September 30, 2026 related to inducement stock options and an inducement RSU award granted to new employees. The inducement awards were granted in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and were therefore not granted pursuant to the 2022 Plan.

Inducement Stock Options

Inducement stock option compensation expense totaled $1.1 million and $1.6 million for the three and nine months ended September 30, 2026, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2025, respectively.

As of September 30, 2026, there was $13.5 million of remaining unrecognized compensation expense related to inducement stock options that will be recognized on a straight-line basis over the weighted average remaining vesting period of 3.56 years.

Inducement Restricted Stock Units

The Company granted an inducement RSU award to a new employee for 10,000 shares of common stock on May 11, 2026. One quarter of the RSU award (2,500 shares) vested 10 days after issuance. Of the remaining 7,500 shares, one third vested on the four-month anniversary of issuance, and the remainder will vest in two equal installments on the eight-month and twelve-month anniversaries of issuance.

Inducement RSU compensation expense totaled $24,000 and $64,000 for the three and nine months ended September 30, 2026, respectively. No RSU compensation expense was recorded in the corresponding periods of 2025. As of September 30, 2026, there was $55,000 of remaining unrecognized compensation expense related to inducement RSUs that will be recognized on a straight-line basis through May 2027.