{"url_path":"/sec/eq/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1746466/0001193125-26-221625-index.html","accession_number":"0001193125-26-221625","cik":"0001746466","ticker":"EQ","issuer_name":"Equillium, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1746466/0001193125-26-221625-index.html","primary_entity_key":"0001746466","primary_entity_name":"Equillium, Inc."},"word_count":5818,"has_tables":true,"body_markdown":"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\nThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2025 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 25, 2026. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Equillium, Inc.\n\nForward-Looking Statements\n\nThe information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.\n\n \n\nOverview\n\n \n\nWe are a biotechnology innovator developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. Our primary goal is to advance EQ504, our novel aryl hydrocarbon receptor, or AhR, modulator, into and through clinical development.\n\nAs of March 31, 2026, we had $61.3 million in cash and cash equivalents. From inception through March 31, 2026, substantially all of our efforts have been focused on research, development and the advancement of our clinical and preclinical product candidates. We have not yet generated product sales and as a result have incurred significant operating losses and negative cash flows from operations. As a result, we had an accumulated deficit of $221.5 million as of March 31, 2026. We expect to incur additional losses in the future to conduct research and development for which we will need to raise additional capital to implement.\n\nOn March 11, 2026, we entered into a Securities Purchase Agreement, the March 2026 Purchase Agreement, with a certain institutional and accredited investor, the March Investor, pursuant to which we agreed to sell and issue shares of our common stock, and a pre-funded warrant to purchase shares of common stock, the March 2026 Private Placement. The closing of the March 2026 Private Placement occurred on March 13, 2026. At the closing, we issued and sold 1,179,508 shares of common stock at a purchase price of $1.854 per share and a pre-funded warrant to purchase up to 17,698,593 shares at a purchase price of $1.8539 per warrant share to the March Investor for gross proceeds to us of approximately $35.0 million.\n\nOn August 10, 2025, we entered into a Securities Purchase Agreement, the August 2025 Purchase Agreement, with certain institutional and accredited investors, the Investors, pursuant to which we agreed to sell and issue shares of our common stock, and pre-funded warrants to purchase shares of common stock, in up to two closings in a private placement transaction, the August 2025 Private Placement. The initial closing of the August 2025 Private Placement occurred on August 12, 2025. At the Initial Closing, we issued and sold 21,814,874 shares of common stock at a purchase price of $0.57 per share and pre-funded warrants to purchase up to 30,816,705 shares of common stock at a purchase price of $0.5699 per warrant share, the Warrant Price, to the Investors for gross proceeds to us of approximately $30.0 million. The August 2025 Purchase Agreement also provides for a potential second closing for up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof.\n\nFor additional information on the March 2026 Private Placement and the August 2025 Private Placement, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.\n\nWe intend to commence a Phase 1 proof-of-mechanism study for EQ504, a preclinical stage, novel AhR modulator, in mid-2026, with data expected to follow approximately six months thereafter; provided, however, we cannot provide any assurances that we will be able to obtain data within those time frames or that the data which may be obtained will be favorable to the further clinical development of EQ504. Modulation of AhR, in multiple translational models, has been shown to have a therapeutically beneficial impact inducing anti-inflammatory cells and cytokines while reducing proinflammatory cells and cytokines and improving intestinal\n\n10\n\n \n\nbarrier function and repair. We initially intend to develop EQ504 for the treatment of ulcerative colitis, or UC, and other gastrointestinal, or GI, diseases with potential indication expansion opportunities for the treatment of inflammatory lung diseases. We acquired the exclusive worldwide rights to EQ504 through the acquisition of Ariagen, Inc., or Ariagen, in October 2024.\n\n \n\nWe acquired the exclusive worldwide rights to EQ302 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates, such as EQ302, through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. That product discovery platform can be leveraged to design novel peptides to target and inhibit multiple cytokines that are involved in validated biological and disease pathways.\n\n \n\nEQ302 is a preclinical-stage, first-in-class, selective, bi-specific inhibitor of IL-15 and IL-21 formulated for oral delivery. Inhibiting IL-15 and IL-21 is believed to be an effective treatment approach for certain GI indications, including celiac disease. Preclinical and translational data has shown that EQ302 is a potent inhibitor of those two cytokines and is stable and permeable in the gut. Based on the unique mechanism of action of EQ302 and its product profile, including the advantage of oral delivery, we believe that EQ302 has the potential to be an attractive therapeutic option for GI diseases, such as celiac disease. We are evaluating further advancement of EQ302, including product manufacturing and toxicology studies capable of supporting a potential IND filing and a first-in-human clinical study.\n\n \n\nSince our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing product rights, conducting preclinical development, filing INDs, conducting clinical development, conducting CMC and formulation development activities, conducting business development activities and the general and administrative activities associated with operating a public biotech company focused on advancing novel therapeutics. From 2022 to 2024, we generated revenue from an upfront payment and development funding related to an asset purchase agreement with a collaboration partner. We have not generated any revenue from product sales, milestone payments or royalties. Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the aforementioned asset purchase agreement.\n\nWe have incurred losses since our inception. For the three months ended March 31, 2026 and 2025, our net losses were $5.3 million and $8.7 million, respectively. As of March 31, 2026, we had an accumulated deficit of $221.5 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, preclinical and clinical activities and general and administrative costs associated with our operations.\n\nWe expect to continue to incur significant expenses and operating losses into the foreseeable future. We anticipate our expenses will increase substantially as we advance our research and development activities for EQ504, potentially pursue any future development of EQ302, potentially expand the indications for which we conduct clinical development of our product candidates, potentially acquire or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property, and incur general corporate costs. We expect that our existing cash and cash equivalents as of March 31, 2026 will enable us to fund our operations into 2029.\n\nWe do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for EQ504, EQ302, or any future product candidate, which is unlikely to happen within the next 12 months, if ever. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. However, we may not be able to secure additional financing or enter into such other arrangements in a timely manner or on favorable terms, if at all. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including from diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, reduce or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.\n\n \n\nFinancial Overview\n\n \n\nResearch and Development Expenses\n\nResearch and development expenses primarily consist of costs associated with our nonclinical research and clinical development of our product candidates. Our research and development expenses include:\n\n11\n\n \n\n•\nsalaries and other related costs, including stock-based compensation and benefits, for personnel in research and development functions;\n\n•\nexternal research and development expenses related to nonclinical pharmacology and toxicology studies:\n\n•\nexternal research and development expenses incurred under arrangements with third parties, such as consultants and advisors for research and development;\n\n•\ncosts of services performed by third parties, such as contract research organizations, or CROs, that conduct research and development activities on our behalf;\n\n•\ncosts related to preparing regulatory submissions with the FDA and other regulatory agencies;\n\n•\npharmacovigilance costs related to global drug safety monitoring and reporting;\n\n•\nper patient clinical study costs;\n\n•\nexternal expenses related to CMC and supply of drug product; and\n\n•\ncosts related to general overhead expenses such as travel, insurance, rent expenses, lab supplies and equipment associated with our research and development activities.\n\nWe expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.\n\nOur direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our nonclinical research and clinical development.\n\nEquillium Australia Pty Ltd, or Equillium Australia, a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program, or the Tax Incentive, to obtain a cash refund from the Australian Taxation Office, or ATO, for eligible research and development expenditures. The cash refund is received by Equillium Australia, upon filing of a claim in connection with Equillium Australia’s annual income tax return. The Tax Incentive is a self-assess program whereby Equillium Australia must assess its eligibility each year to determine (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures. The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.\n\nWe plan to continue to incur substantial research and development expenses for the foreseeable future as we advance the development of EQ504, and potentially EQ302, potentially expand the number of indications for which we are developing those product candidates, and potentially acquire or develop new product candidates. The successful development of EQ504 and EQ302 is highly uncertain. At this time, due to the inherently unpredictable nature of preclinical and clinical development, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our product candidates or the period, if any, in which material net cash inflows from the sales from our product candidates may commence. Clinical development timelines, the probability of success, and development costs can differ materially from expectations.\n\nCompletion of planned or future clinical studies may take several years or more, and the length of time generally varies according to the type, complexity, novelty, and intended use of a product candidate. The cost of planned or future clinical studies may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:\n\n•\nper patient clinical study costs;\n\n•\nthe number of planned or future clinical studies required for approval;\n\n•\nthe number of sites and the number of countries included in our planned or future clinical studies;\n\n•\nthe length of time required to enroll suitable patients;\n\n•\nthe inefficiencies and additional costs related to any delays and potential restarts of planned or future clinical studies;\n\n12\n\n \n\n•\nthe number of doses that patients receive;\n\n•\nthe number of patients that participate in our planned or future clinical studies;\n\n•\nthe drop-out or discontinuation rates of patients in our planned or future clinical studies;\n\n•\nthe duration of patient follow-up;\n\n•\npotential additional safety monitoring or other studies requested by regulatory agencies;\n\n•\nthe number and complexity of procedures, analyses and tests performed during our planned or future clinical studies;\n\n•\nthe costs of procuring drug product for our planned or future clinical studies;\n\n•\nthe phase of development of the product candidate; and\n\n•\nthe efficacy and safety profile of the product candidate.\n\nGeneral and Administrative Expenses\n\n \n\nGeneral and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation and benefits, and consulting fees for executive, human resources, investor relations, finance, and accounting functions. Other significant costs include legal fees relating to patent and corporate matters, insurance, travel, board expenses, facility costs and taxes.\n\n \n\nWe anticipate that our general and administrative expenses will increase in future periods, reflecting an expanding infrastructure, increased legal, audit, tax and other professional fees associated with being a public company and maintaining compliance with stock exchange listing and SEC requirements, director and officer insurance premiums associated with being a public company, and accounting and investor relations costs. In addition, if we obtain regulatory approval for any product candidate, we expect to incur expenses associated with building the infrastructure and capabilities to commercialize such product. However, the timing of any such approval is highly uncertain, and it may be several years, if ever, that we receive any such regulatory approval.\n\nInterest Income\n\nInterest income consists primarily of interest income earned on cash, cash equivalents and short-term investments, and is recognized when earned.\n\nOther (Expense) Income, net\n\nOther (expense) income, net consists primarily of net foreign currency transaction gains and losses related to our Australian subsidiary.\n\nResults of Operations\n\nComparison of the Three Months Ended March 31, 2026 and 2025\n\n \n\nThe following table sets forth our results of operations for the three months ended March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\n \n\nThree Months Ended\nMarch 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\nChange\n\n \n\nResearch and development\n\n \n\n \n\n2,991\n\n \n\n \n\n \n\n5,924\n\n \n\n \n\n \n\n(2,933\n\n)\n\nGeneral and administrative\n\n \n\n \n\n2,619\n\n \n\n \n\n \n\n2,946\n\n \n\n \n\n \n\n(327\n\n)\n\nInterest income\n\n \n\n \n\n309\n\n \n\n \n\n \n\n173\n\n \n\n \n\n \n\n136\n\n \n\nOther (expense) income, net\n\n \n\n \n\n(10\n\n)\n\n \n\n \n\n43\n\n \n\n \n\n \n\n(53\n\n)\n\n \n\nResearch and Development Expenses\n\n \n\n13\n\n \n\n \n\n \n\n \n\nThree months ended\nMarch 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\nChange\n\n \n\nDirect external expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nEQ504\n\n \n\n \n\n$\n\n1,864\n\n \n\n \n\n$\n\n445\n\n \n\n \n\n$\n\n1,419\n\n \n\nEQ302\n\n \n\n \n\n \n\n-\n\n \n\n \n\n \n\n36\n\n \n\n \n\n \n\n(36\n\n)\n\nItolizumab (EQ001) - EQUATOR\n\n \n\n \n\n \n\n14\n\n \n\n \n\n \n\n3,368\n\n \n\n \n\n \n\n(3,354\n\n)\n\nItolizumab (EQ001) - EQUALISE\n\n \n\n \n\n \n\n-\n\n \n\n \n\n \n\n33\n\n \n\n \n\n \n\n(33\n\n)\n\nItolizumab - ulcerative colitis study\n\n \n\n \n\n \n\n-\n\n \n\n \n\n \n\n91\n\n \n\n \n\n \n\n(91\n\n)\n\nEQ101\n\n \n\n \n\n \n\n7\n\n \n\n \n\n \n\n100\n\n \n\n \n\n \n\n(93\n\n)\n\nEQ102\n\n \n\n \n\n \n\n-\n\n \n\n \n\n \n\n13\n\n \n\n \n\n \n\n(13\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nIndirect expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nEmployee compensation and benefits (including stock-based compensation)\n\n \n\n \n\n \n\n861\n\n \n\n \n\n \n\n1,544\n\n \n\n \n\n \n\n(683\n\n)\n\nOverhead\n\n \n\n \n\n \n\n245\n\n \n\n \n\n \n\n294\n\n \n\n \n\n \n\n(49\n\n)\n\nTotal research and development\n\n \n\n \n\n$\n\n2,991\n\n \n\n \n\n$\n\n5,924\n\n \n\n \n\n$\n\n(2,933\n\n)\n\n \n\nResearch and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We separate our research and development costs into two broad categories: direct and indirect. Additionally, with respect to direct research and development expenses, we further divide expenses into the following product candidate categories: EQ504, EQ302, Itolizumab (EQ001), EQ101 and EQ102. Itolizumab (EQ001) includes sub-categories for the clinical studies associated with itolizumab (EQ001) including our EQUATOR, EQUALISE and ulcerative colitis study. For direct research and development expenses, we track specific project research and development expenses that are directly attributable to our preclinical and clinical development product candidates that have been selected for further development. Such direct research and development expenses include nonclinical and clinical trial activities, external expenses related to CMC and supply of drug product and consulting expenses.\n\n \n\nAll remaining research and development expenses are categorized as indirect research and development expenses. Such indirect research and development expenses include employee compensation and benefits (including stock-based compensation expenses) and general overhead costs such as costs associated with our facilities and lab supplies. These expenses are not directly tied to any individual product candidate or clinical study and are generally deployed across multiple studies. As such, we do not maintain information regarding those costs incurred on an individual product candidate or clinical study basis.\n\n \n\nResearch and development expenses were $3.0 million for the three months ended March 31, 2026, compared to $5.9 million for the three months ended March 31, 2025.\n\n \n\nResearch and development expenses decreased by $2.9 million for the three months ended March 31, 2026. Direct external expenses decreased significantly for the three months ended March 31, 2026 compared to the same period in 2025 due to the wind down of our clinical studies in 2025 including lower clinical development and CMC expenses as well as lower consulting expenses primarily related to the wind down of our EQUATOR study. Indirect expenses decreased for the three months ended March 31, 2026 compared to the same period in 2025 driven by lower employee compensation and benefits due to lower headcount caused by the wind down of our clinical studies.\n\n \n\nWe expect research and development expenses in future periods to increase primarily due to the advancement of EQ504, our novel AhR modulator, into and through clinical development.\n\nGeneral and Administrative Expenses\n\nGeneral and administrative expenses were $2.6 million and $2.9 million for the three month periods ended March 31, 2026 and 2025, respectively. The decrease of $0.3 million in general and administrative expenses was primarily due to a decrease in outside legal and other professional fees during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.\n\nInterest Income\n\nInterest income was $0.3 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively. The increase in interest income was primarily due to higher average cash and cash equivalents balances during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.\n\n14\n\n \n\nOther (Expense) Income, net\n\nOther (expense) income, net was expense of $10,000 for the three months ended March 31, 2026, compared to income of $43,000 for the three months ended March 31, 2025. The change relates primarily to an increase in net foreign currency transaction unrealized losses during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.\n\nLiquidity and Capital Resources\n\nFrom inception through March 31, 2026, we have financed our operations primarily through the sale of equity and debt securities and income generated from an asset purchase agreement that terminated in 2024. As of March 31, 2026, we had an accumulated deficit of $221.5 million and anticipate that we will continue to incur net losses for the foreseeable future. As of March 31, 2026, we had $61.3 million in cash and cash equivalents.\n\nSources of Liquidity\n\nMarch 2026 and August 2025 Purchase Agreements\n\n \n\nIn March 2026, we received gross proceeds of approximately $35.0 million related to the March 2026 Purchase Agreement. In August 2025, we received gross proceeds of $30.0 million related to the August 2025 Purchase Agreement.\n\n \n\nThe August 2025 Purchase Agreement also provides for a potential of up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof. There can be no assurance that the specified milestones will be met or that the investors will purchase additional shares of common stock or pre-funded warrants in a second closing.\n\n \n\nFor additional information on both the March 2026 Private Placement and the August 2025 Private Placement, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.\n\n \n\n2023 ATM Facility\n\n \n\nIn October 2023, we entered into an at-the-market facility with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $21.95 million from time to time through Jefferies acting as our sales agent, or the 2023 ATM Facility. On August 3, 2025, we entered into Amendment No. 1 to the 2023 ATM Facility pursuant to which Jefferies was replaced by LifeSci Capital LLC as the sales agent under the 2023 ATM Facility. On September 19, 2025, we filed a prospectus supplement with the SEC under which we may offer and sell shares of our common stock having an aggregate offering price of up to $75.0 million, pursuant to the 2023 ATM Facility, as amended.\n\nThere were no sales under the 2023 ATM Facility for the three months ended March 31, 2026. During the three months ended March 31, 2025, we sold an aggregate of 109,410 shares of common stock under the 2023 ATM Facility for gross proceeds of approximately $55,000. For the inception-to-date period ended March 31, 2026, we sold a total of 1,719,485 shares of common stock under the 2023 ATM Facility for gross proceeds of $1.0 million and net proceeds totaling $0.3 million, after deducting for issuance costs incurred inception-to-date of $0.7 million.\n\nSince March 31, 2026 and through the date of the filing of this Quarterly Report on Form 10-Q, there have been no sales of our stock under the 2023 ATM Facility. We have $75.0 million available to sell under the 2023 ATM Facility.\n\nFunding Requirements\n\n \n\nWe expect our expenses to increase substantially as we advance our research and development activities, including continued development of our preclinical asset, EQ504, including potential expansion into additional indications and potentially resuming development of EQ302. We expect that our primary uses of capital will be for nonclinical research, clinical development, formulation development, CMC activities, product supply, potential acquisition of new products, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.\n\n \n\nWe believe that our cash and cash equivalents as of March 31, 2026 can fund operations into 2029. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Furthermore, our operating plans may change, and we may need additional funds sooner than planned. Additionally, the process of testing product candidates in clinical studies is costly, and the timing of progress in these studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ504 and EQ302, or any of our other product candidates or whether, or when, we may achieve profitability.\n\n15\n\n \n\nOur future capital requirements will depend on many factors, including:\n\n•\nthe initiation, progress, timing, costs and results of our planned or future nonclinical and clinical studies of EQ504 and EQ302 and other future product candidates, including as such activities may be adversely impacted by public health epidemics or outbreaks, the evolving conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, tariffs and inflationary pressures on the economy;\n\n•\nthe advancement and cost of preclinical research of EQ504, EQ302 and other novel preclinical drug candidates;\n\n•\nthe number and scope of indications we decide to pursue for the development of our product candidates;\n\n•\nthe cost, timing and outcome of regulatory review of any New Drug Application, or NDA, we may submit for our product candidates;\n\n•\nthe costs and timing of manufacturing EQ504 and other product candidates;\n\n•\nthe costs of drug formulation research and device development;\n\n•\nthe costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;\n\n•\nour efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates;\n\n•\nthe costs associated with being a public company;\n\n•\nour ability to enter into partnerships or otherwise monetize our pipeline through strategic transactions on a timely basis, on terms that are favorable to us, or at all;\n\n•\nthe terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;\n\n•\nthe extent to which we acquire or in-license other product candidates and technologies or engage in in-house discovery and preclinical research of new product candidates;\n\n•\nthe legal and other transactional costs associated with our business development activities; and\n\n•\nthe cost associated with commercializing EQ504 or any of our other product candidates, if approved for commercial sale.\n\n \n\nUntil such time as we can generate product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. The sale of additional equity or convertible debt could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we raise additional funds through collaboration or license agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or other operations. Any of these actions could have a material effect on our business, financial condition and results of operations. We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $221.5 million as of March 31, 2026. We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ504, EQ302 and any of our other product candidates.\n\n \n\nMaterial Cash Requirements\n\nOur expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Note 6 and 10 of the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K filed with the SEC on March 25, 2026. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments upon the achievement by us of regulatory and commercial\n\n16\n\n \n\nmilestones that we may be required to make under the terms of the merger agreement pursuant to which we acquired Bioniz or potential contingent payments upon the achievement by us of regulatory milestones that we may be required to make under the terms of our stock purchase agreement with Ariagen, nor do they include potential contingent payments upon the achievement by us of regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we may enter into with various entities.\n\nThese condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2026.\n\n \n\nCash Flows\n\nThe following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands):\n\n \n\n \n\n \n\nThree Months Ended\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nNet cash provided by (used in):\n\n \n\n \n\n \n\n \n\n \n\n \n\nOperating activities\n\n \n\n$\n\n(4,301\n\n)\n\n \n\n$\n\n(8,169\n\n)\n\nInvesting activities\n\n \n\n \n\n(3\n\n)\n\n \n\n \n\n4,496\n\n \n\nFinancing activities\n\n \n\n \n\n35,346\n\n \n\n \n\n \n\n91\n\n \n\nEffect of exchange rate changes on cash\n\n \n\n \n\n3\n\n \n\n \n\n \n\n(1\n\n)\n\nNet increase (decrease) in cash and cash equivalents\n\n \n\n$\n\n31,045\n\n \n\n \n\n$\n\n(3,583\n\n)\n\n \n\nOperating Activities\n\n \n\nDuring the three months ended March 31, 2026, cash used in operating activities was $4.3 million compared to $8.2 million during the three months ended March 31, 2025. Cash used in operating activities during the three months ended March 31, 2026 primarily related to our net loss of $5.3 million, adjusted for non-cash items of $1.0 million, primarily consisting of non-cash stock-based compensation expenses. Cash used in operating activities during three months ended March 31, 2025 primarily related to our net loss of $8.7 million, adjusted for non-cash items of $0.6 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in other operating assets and liabilities of $0.1 million.\n\nInvesting Activities\n\nNet cash used in investing activities was approximately $3,000 during the three months ended March 31, 2026 related to purchases of property and equipment.\n\n \n\nNet cash provided by investing activities was $4.5 million during the three months ended March 31, 2025 and primarily consisted of maturities of our short-term investments.\n\nFinancing Activities\n\n \n\nNet cash provided by financing activities totaled $35.3 million during the three months ended March 31, 2026 and primarily consisted of net proceeds from the sale of shares under the March 2026 Private Placement transaction totaling $34.9 million and proceeds totaling $0.4 million from the exercise of stock options.\n\n \n\nNet cash provided by financing activities totaled $0.1 million during the three months ended March 31, 2025. We received net proceeds from the sale of shares under our 2023 ATM Facility totaling approximately $53,000. There were no sales of shares under the 2023 ATM Facility until March 2025. During the three months ended March 31, 2025, we received proceeds totaling $38,000 from the exercise of stock options.\n\n \n\nOff-Balance Sheet Arrangements\n\nWe did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, and similarly did not and do not have any holdings in variable interest entities. We do have certain contingent consideration liabilities in the form of potential milestone payments that are included in our merger agreement with Bioniz and our stock purchase agreement with Ariagen which are not reflected in our balance sheet. However, based on our current operating plans and our assessment of the probability and potential timing of such payments, we believe those payments, if any, are remote and highly unlikely to come due within the next 12 months.\n\n17\n\n \n\n \n\nCritical Accounting Policies and Estimates\n\n \n\nOur condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.\n\n \n\nThere have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 25, 2026, that have had a material impact on our condensed consolidated financial statements and related notes.\n\n \n\nRecent Accounting Pronouncements\n\n \n\nSee Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information concerning recent accounting pronouncements."}