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ABEONA THERAPEUTICS INC. (ABEO)

CIK: 0000318306. SIC: 2834 Pharmaceutical Preparations. Latest 10-K as of: 2026-03-17.

SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2834 Pharmaceutical Preparations

SEC company page: https://www.sec.gov/edgar/browse/?CIK=318306. Latest filing source: 0001493152-26-010413.

Selected Fundamentals

MetricValueUnitFYFiled
Net income71,183,000USD20252026-03-17
Assets219,570,000USD20252026-03-17

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-17. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000318306.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Metric2012201320142016201720182019202020212022202320242025
Net income-21,873,000-27,319,000-56,671,000-76,282,000-84,234,000-84,936,000-39,696,000-54,188,000-63,734,00071,183,000
Operating income-23,881,000-27,836,000-58,166,000-77,090,000-81,420,000-89,836,000-50,915,000-47,135,000-64,211,000-89,448,000
Diluted EPS-0.523.04-15.26-5.53-2.53-1.551.01
Operating cash flow-13,014,000-22,655,000-39,111,000-62,820,000-35,019,000-65,665,000-43,483,000-37,009,000-56,015,000-76,326,000
Capital expenditures519,000860,0009,243,0006,309,0001,336,0004,151,000130,000331,0002,446,0007,975,000
Assets111,058,000178,766,000174,399,000223,382,000151,198,00079,586,00064,214,00064,002,000108,931,000219,570,000
Liabilities11,960,0008,668,00040,354,00044,952,00048,647,00037,218,00037,453,00049,176,00064,900,00060,354,000
Stockholders' equity99,098,000170,098,000134,045,000178,430,000102,551,00042,368,00026,761,00014,826,00044,031,000159,216,000
Cash and cash equivalents69,142,000137,750,00018,750,000129,258,00012,596,00032,938,00014,217,00014,473,00023,357,00078,437,000
Free cash flow-13,533,000-23,515,000-48,354,000-69,129,000-36,355,000-69,816,000-43,613,000-37,340,000-58,461,000-84,301,000

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Metric2012201320142016201720182019202020212022202320242025
Return on equity-22.07%-16.06%-42.28%-42.75%-82.14%-200.47%-148.34%-365.49%-144.75%44.71%
Return on assets-19.70%-15.28%-32.50%-34.15%-55.71%-106.72%-61.82%-84.67%-58.51%32.42%
Liabilities / equity0.120.050.300.250.470.881.403.321.470.38
Current ratio8.3725.074.373.422.333.396.834.156.086.93

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000318306.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2014-Q12014-03-31-0.03reported discrete quarter
2014-Q22014-06-30-0.51reported discrete quarter
2014-Q32014-09-30-4.15reported discrete quarter
2020-Q32020-09-307,000,000reported discrete quarter
2020-Q42020-12-313,000,000derived Q4 = FY annual - nine-month YTD
2022-Q12022-03-31346,000reported discrete quarter
2022-Q22022-06-301,000,000reported discrete quarter
2022-Q42022-12-3168,000derived Q4 = FY annual - nine-month YTD
2023-Q22023-06-303,500,000-16,654,0000.92reported discrete quarter
2023-Q32023-09-30-11,836,000-0.48reported discrete quarter
2023-Q42023-12-310.00-16,591,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-03-31-31,578,000-1.16reported discrete quarter
2024-Q22024-06-307,406,000-0.26reported discrete quarter
2024-Q32024-09-30-30,269,000-0.63reported discrete quarter
2024-Q42024-12-31-9,293,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-31-12,029,000-0.24reported discrete quarter
2025-Q22025-06-30400,000108,833,0001.71reported discrete quarter
2025-Q32025-09-30-5,161,000-0.10reported discrete quarter
2025-Q42025-12-315,420,000-20,460,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-318,720,000-17,075,000-0.30reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001493152-26-022614.

Extracted from Part I Item 2 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-05-13. Report date: 2026-03-31.

ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You
should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and accompanying
notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”). This discussion and analysis contains forward-looking
statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Forward-Looking
Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual
results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We
are a commercial-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. On April 28, 2025,
the FDA approved ZEVASKYN® (prademagene zamikeracel) gene-modified cellular sheets, as the first and only autologous cell-based
gene therapy for the treatment of wounds in adult and pediatric patients with RDEB, a serious and debilitating genetic skin disease.
There is no cure for RDEB, and ZEVASKYN® is the only FDA-approved product to treat RDEB wounds with a single application.
ZEVASKYN® was granted Orphan Drug and Rare Pediatric Disease designations by the FDA.

ZEVASKYN®
is manufactured at our cGMP manufacturing facility in Cleveland, Ohio, and is made available through ZEVASKYN® qualified
treatment centers.

Recent
Developments

Qualified
Treatment Center Activations

On
April 2, 2026, we announced activation of NewYork-Presbyterian/Columbia University Irving Medical Center in New York City as another
qualified treatment center for the administration of ZEVASKYN®.

On May 11, 2026, we announced activation of Children’s
Hospital of Philadelphia as the newest qualified treatment center for the administration of ZEVASKYN®. This represents
the sixth available qualified treatment center for the administration of ZEVASKYN®.

Pipeline
Update

Building on our proven end-to-end competency in engineered
cell therapy, we will focus our development efforts on the development of ABO-701, a recently licensed radically novel engineered T-cell
therapy, targeting Prostate-Specific Membrane Antigen (“PSMA”) to treat prostate cancer. PSMA is a validated target for advanced
prostate cancer, which is a leading cause of cancer mortality, with more than 30,000 deaths annually in the U.S. despite multiple approved
therapies and recent advances in the field.

ABO-701 is an autologous engineered T-cell product that carries a Synthetic
Immune Receptor (“SIR-T™”) designed to overcome the limitations of CAR and TCR approaches. The SIR-T™ platform
underlying ABO-701 was developed in the laboratory of Preet M. Chaudhary, M.D., Ph.D., Professor of Medicine and Chief of Jane Ann Nohl Division of Hematology and Center for the Study of Blood
Diseases at University of Southern California (“USC”) Keck School of Medicine and Director of USC Blood and Marrow Transplant
and Cell Therapy Program.
The patents covering the SIR-T™ platform are owned by Angeles Therapeutics, Inc. In pre-clinical studies, ABO-701 has demonstrated
durable tumor control in mouse models and modest levels of cytokine release – a profile that has been elusive to other engineered
cell therapies in the solid tumors.

We expect to file an Investigational New Drug (“IND”)
application and commence first-in-human studies with ABO-701 in the second half of 2027 while engaging a contract development and manufacturing
organization for supply readiness in the meantime. This development plan and timing allow us to maintain our focus on commercializing
ZEVASKYN®.

As part of our portfolio optimization,
we have deprioritized our in-house ophthalmology programs.

29

RESULTS
OF OPERATIONS

Comparison
of Three Months Ended March 31, 2026 and March 31, 2025

For
the three months ended

March
31,

Change

($
in thousands)

2026

2025

$

%

Revenues:

Product
revenue, net

$

8,720

$

—

$

8,720

100

%

Costs and expenses:

Cost of sales

2,696

—

2,696

100

%

Research and development

9,555

9,941

(386

)

(4

)%

Selling,
general and administrative

19,502

9,786

9,716

99

%

Total
costs and expenses

31,753

19,727

12,026

61

%

Loss from operations

(23,033

)

(19,727

)

(3,306

)

17

%

Interest income

1,354

1,310

44

3

%

Interest expense

(830

)

(998

)

168

(17

)%

Change in fair value
of warrant liabilities

5,386

7,245

(1,859

)

(26

)%

Other
income, net

50

141

(91

)

(65

)%

Loss before income taxes

(17,073

)

(12,029

)

(5,044

)

42

%

Income
tax expense

2

—

2

100

%

Net loss

$

(17,075

)

$

(12,029

)

$

(5,046

)

42

%

Product
revenue, net

Product
revenue, net, resulting from the sale of ZEVASKYN®, for the three months ended March 31, 2026 was $8.7 million. There
was no product revenue for the three months ended March 31, 2025 as the approval by the FDA for ZEVASKYN® did not occur
until April of 2025.

Cost
of sales

Cost
of sales during the three months ended March 31, 2026 was $2.7 million and primarily includes costs associated with the commercial
sale of ZEVASKYN® including royalties due to our licensor, Stanford. There was no cost of sales in the same period of 2025, as ZEVASKYN® was approved
by the FDA in April 2025.

Research
and development

Research
and development expenses include, but are not limited to, payroll and personnel expenses, preclinical lab supplies, preclinical and development
costs, clinical trial costs, preclinical manufacturing and manufacturing facility costs, costs associated with regulatory approvals,
preclinical depreciation on lab supplies and manufacturing facilities, and preclinical consultant-related expenses.

30

Total
research and development spending for the three months ended March 31, 2026 was $9.6 million, as compared to $9.9 million for the same
period of 2025, a decrease of $0.3 million. In March 2026, we entered a license and joint development agreement related to PSMA SIR-T™
which included an upfront payment of $7.0 million that was included in research and development expenses. Excluding this transaction,
research and development spending decreased $7.4 million. The reduction in expenses was primarily due to costs capitalized into inventory
and engineering runs and other production costs that are no longer considered research and development due to FDA approval of ZEVASKYN®
in April of 2025.

We
expect our research and development activities to increase as we work towards advancing other product candidates towards potential regulatory
approval, reflecting costs associated with the following:

●

employee
and consultant-related expenses;

●

preclinical
and developmental costs;

●

clinical
trial costs;

●

development and regulatory milestones associated with licensing agreements;

●

the
cost of acquiring and manufacturing clinical trial materials; and

●

costs
associated with regulatory approvals.

Selling,
general and administrative

Selling,
general and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public company reporting
related costs, professional fees (e.g., legal expenses), selling and commercialization costs and other general operating expenses
not otherwise included in research and development expenses. We expect our selling, general, and administrative costs to continue to
increase as we expand our commercialization of ZEVASKYN® and pursue development of other product candidates.

Total
selling, general and administrative expenses were $19.5 million for the three months ended March 31, 2026, as compared to $9.8 million
for the same period of 2025, an increase of $9.7 million. The increase in expenses was primarily due to increases in salaries and stock-based
compensation of $5.4 million due to new hires, $1.9 million of costs related to engineering runs with the remainder due to other
commercial costs related to our continued commercialization efforts upon FDA approval in April of 2025.

Interest
income

Interest
income was $1.4 million for the three months ended March 31, 2026, as compared to $1.3 million in the same period of 2025. The increase
resulted from higher earnings on short-term investments driven by increased average short-term investment balances.

Interest
expense

Interest
expense was $0.8 million for the three months ended March 31, 2026 compared to $1.0 million in the same period of 2025. Interest expense
was due to the credit facility entered into by the Company in January 2024 and decreased as a result of the July 2025 Loan Agreement
Amendment plus a reduction of the principal loan amount due to payments made in 2026.

Change
in fair value of warrant liabilities

The
change in fair value of warrant liabilities was a gain of $5.4 million for the three months ended March 31, 2026. We issued stock purchase
warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The gain in the
fair value of warrant liabilities was primarily due to the decrease in our stock price over the quarter and a shorter term of the outstanding
warrants.

The
change in fair value of warrant liabilities was a gain of $7.2 million for the three months ended March 31, 2025. The gain in the fair
value of warrant liabilities was primarily due to the decrease in our stock price year over the year and a shorter term.

31

Other
income, net

Other
income, net was $50,000 for the three months ended March 31, 2026, as compared to $141,000 in the same period of 2025. The decrease was
primarily a result of realized losses on foreign currency related to various vendors that we pay in foreign currency during the three
months ended March 31, 2026.

Income
tax expense

We
recorded a current income tax expense of $2,000 for the three months ended March 31, 2026. We did not record an income tax expense for
the three months ended March 31, 2025 as we generated sufficient tax losses, after consideration of discrete items.

LIQUIDITY
AND CAPITAL RESOURCES

Cash
Flows for the Three Months Ended March 31, 2026 and 2025

For
the three months ended March 31,

($ in thousands)

2026

2025

Total cash, cash equivalents and restricted
cash (used in) provided by:

Operating activities

$

(19,804

)

$

(18,402

)

Investing activities

4,963

4,213

Financing
activities

(2,222

)

6,768

Net decrease in cash,
cash equivalents and restricted cash

$

(17,063

)

$

(7,421

)

Operating
activities

Net
cash used in operating activities was $19.8 million for the three months ended March 31, 2026, primarily comprised of our net loss of
$17.1 million and decreases in operating assets and liabilities of $1.4 million and net non-cash charges of $1.3 million. Non-cash charges
consisted primarily of $5.4 million of gain as a result of the change in fair value of warrant liabilities, $3.0 million of stock-based
compensation and $0.7 million of depreciation and amortization.

Net
cash used in operating activities was $18.4 million for the three months ended March 31, 2025, primarily comprised of our net loss of
$12.0 million and decreases in operating assets and liabilities of $3.4 million and net non-cash charges of $3.0 million. Non-cash charges
consisted primarily of $7.2 million of gain as a result of the change in fair value of warrant liabilities, $2.7 million of stock-based
compensation and $0.5 million of depreciation and amortization.

Investing
activities

Net
cash provided by investing activities was $5.0 million for the three months ended March 31, 2026, primarily comprised of proceeds from
maturities of short-term investments of $24.9 million, offset by purchases of short-term investments of $19.0 million and capital expenditures
of $0.9 million.

Net
cash provided by investing activiti

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-03-17. Report date: 2025-12-31.

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You
should read the following discussion and analysis together with our consolidated financial statements and related notes included in this
Form 10-K. This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many
factors, such as those described under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this Form
10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We
are a commercial-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. On April 28, 2025,
the FDA approved ZEVASKYN® (prademagene zamikeracel) gene-modified cellular sheets, also known as ZEVASKYN®,
as the first and only autologous cell-based gene therapy for the treatment of wounds in adult and pediatric patients with RDEB, a serious
and debilitating genetic skin disease. There is no cure for RDEB, and ZEVASKYN® is the only FDA-approved product to treat
RDEB wounds with a single application. ZEVASKYN® was granted Orphan Drug and Rare Pediatric Disease designations by the
FDA.

ZEVASKYN®
is manufactured at our current cGMP manufacturing facility in Cleveland, Ohio, and is made available through ZEVASKYN®
qualified treatment centers.

Our
development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases
with high unmet need using novel AIM™ capsids. Abeona’s novel, next-generation AAV capsids are being evaluated to improve
tropism profiles for a variety of devastating diseases.

57

Preclinical
Pipeline

Our
preclinical programs are investigating the use of novel AAV capsids in AAV-based therapies for serious genetic eye diseases, including
ABO-504 for Stargardt disease, ABO-503 for X-linked retinoschisis (“XLRS”) and ABO-505 for autosomal dominant optic atrophy
(“ADOA”). We completed pre-Investigational New Drug Application (“pre-IND”) meetings with the FDA regarding the
preclinical development plans and regulatory requirements to support first-in-human trials.

Recent
Developments

Since we resumed manufacturing operations in mid-January
after a planned facility shutdown, a patient treatment has been completed, multiple biopsies have been collected for scheduled ZEVASKYN®
treatments in the coming weeks, and additional biopsies are scheduled.

RESULTS
OF OPERATIONS

Comparison
of Years Ended December 31, 2025 and December 31, 2024

For the year ended December 31,

Change

($ in thousands)

2025

2024

$

%

Revenues:

Product revenue, net

$

2,420

$

—

$

2,420

100

%

License and other revenues

3,400

—

3,400

100

%

Total revenues

5,820

—

5,820

100

%

Costs and expenses:

Cost of sales

1,532

—

1,532

100

%

Royalties

1,893

—

1,893

100

%

Research and development

26,812

34,360

(7,548

)

(22

)%

Selling, general and administrative

65,031

29,851

35,180

118

%

Total costs and expenses

95,268

64,211

31,057

48

%

Loss from operations

(89,448

)

(64,211

)

(25,237

)

39

%

Interest income

5,556

4,246

1,310

31

%

Interest expense

(3,740

)

(4,208

)

468

(11

)%

Change in fair value of warrant and derivative liabilities

6,139

(755

)

6,894

(913

)%

Gain from sale of priority review voucher, net

152,366

—

152,366

100

%

Other income, net

410

1,194

(784

)

(66

)%

Income (loss) before income taxes

71,283

(63,734

)

135,017

(212

)%

Income tax expense

100

—

100

100

%

Net income (loss)

$

71,183

$

(63,734

)

$

134,917

(212

)%

58

Product
revenue, net

On
April 28, 2025, the FDA approved ZEVASKYN® as the first and only autologous cell-based gene therapy for the treatment
of wounds in adult and pediatric patients with RDEB. Product revenue, net, resulting from the sale of ZEVASKYN®, for the
year ended December 31, 2025 was $2.4 million. On December 8, 2025, we announced the first commercial patient treatment with FDA-approved
ZEVASKYN® at Lucile Packard Children’s Hospital Stanford in Palo Alto, CA. There was no product revenue for the
year ended December 31, 2024 as the approval by the FDA for ZEVASKYN® did not occur until 2025.

License
and other revenues

License
and other revenues for the year ended December 31, 2025 was $3.4 million as compared to nil for the same period of 2024. The revenue
in 2025 consists primarily of revenue resulting from achieving a clinical development milestone under a sublicense agreement
we entered into with Taysha in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome. Additionally
in 2025, we also recorded $0.4 million resulting from a third party exercising its option to license certain of our AAV capsids. There
was no license or other revenue in 2024 as no clinical development milestones were met in 2024.

Cost
of sales

Cost
of sales during the year ended December 31, 2025 was $1.5 million and primarily includes costs associated with the first commercial
patient treatment with FDA-approved ZEVASKYN® in December of 2025 and costs associated with the August 2025
production of a full batch of ZEVASKYN® that could not be released due to technical issues that arose in implementing
the rapid sterility lot release assay that was mandated by the FDA during BLA review. There was no cost of sales in the same period
of 2024, as ZEVASKYN® was approved by the FDA in April 2025.

Royalties

Total
royalty expenses were $1.9 million for the year ended December 31, 2025, as compared to nil for the same period of 2024. The increase
in was primarily due to royalties owed to our licensors resulting from the milestone due from Taysha related to Rett syndrome.

Research
and development

Research
and development expenses include, but are not limited to, payroll and personnel expenses, preclinical lab supplies, preclinical and development
costs, clinical trial costs, preclinical manufacturing and manufacturing facility costs, costs associated with regulatory approvals,
preclinical depreciation on lab supplies and manufacturing facilities, and preclinical consultant-related expenses.

Total
research and development spending for the year ended December 31, 2025 was $26.8 million, as compared to $34.4 million for the same period
of 2024, a decrease of $7.6 million. The reduction in expenses was primarily due to costs capitalized into inventory and engineering
runs and other production costs that are no longer considered research and development due to FDA approval of ZEVASKYN® in
April of 2025.

We
expect our research and development activities to continue as we work towards advancing our product candidates towards potential regulatory
approval, reflecting costs associated with the following:

●

employee
and consultant-related expenses;

●

preclinical
and developmental costs;

●

clinical
trial costs;

●

the
cost of acquiring and manufacturing clinical trial materials; and

●

costs
associated with regulatory approvals.

59

Selling,
general and administrative

Selling,
general and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public reporting
company related costs, professional fees (e.g., legal expenses), selling and other costs for commercial launch and other general
operating expenses not otherwise included in research and development expenses. We expect our selling, general, and administrative
costs to continue to increase as we expand our commercialization of ZEVASKYN® and advance other product candidates
toward potential regulatory approval.

Total
selling, general and administrative expenses were $65.0 million for the year ended December 31, 2025, as compared to $29.9 million
for the same period of 2024, an increase of $35.1 million. The increase in expenses was primarily due to increases in commercial
costs of $2.3 million, related to our continued commercialization efforts, increases in salaries and stock-based compensation of
$18.6 million due to new hires, and $4.8 million of costs related to engineering runs with the remainder due to other
commercial costs upon FDA approval in April of 2025.

Interest
income

Interest
income was $5.6 million for the year ended December 31, 2025, as compared to $4.2 million in the same period of 2024. The increase resulted
from higher earnings on short-term investments driven by increased average short-term investment balances.

Interest
expense

Interest
expense was $3.7 million for the year ended December 31, 2025, as compared to $4.2 million in the same period of 2024. Interest expense
was due to the credit facility we entered into in January 2024 and decreased as a result of the July 2025 amendment to the credit facility
reducing the interest rate for the senior secured term loan thereunder from 13.5% to 11.75%.

Change
in fair value of warrant and derivative liabilities

We
issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period.
In addition, the conversion feature in our loan agreement is required to be classified as a liability and valued at fair market value
at each reporting period.

The
change in fair value of warrant liabilities resulted in a gain of $6.1 million for the year ended December 31, 2025. The gain in the fair value
of warrant liabilities was primarily due to the decrease in our stock price as of December 31, 2025 compared to December 31, 2024 and
to the shorter expected term period over period.

The
change in fair value of warrant and derivative liabilities was a loss of $0.8 million for the year ended December 31, 2024. The loss
on the fair value of warrant and derivative liabilities was primarily due to the increase in our stock price year over the year offset
by a reduced term of each of the warrants and derivative liabilities. At September 30, 2024, the conversion feature in our loan agreement
no longer met the criteria of a derivative liability, and the derivative liability was reclassified to equity.

Gain
from sale of priority review voucher, net

In
May 2025, we sold our PRV awarded to us following the FDA approval of ZEVASKYN®. We received gross proceeds of $155.0
million during the year ended December 31, 2025 and recognized a gain from the PRV sale of $152.4 million, net of transaction costs of
$2.6 million, as it did not have a carrying value at the time of sale.

Other
income, net

Other
income, net was $0.4 million for the year ended December 31, 2025, as compared to $1.2 million in the same period of 2024. The change
was primarily a result of the refundable job creation tax credit of $0.5 million received in 2024 that was not received in 2025.

60

Income
tax expense

We
recorded a current income tax expense of $0.1 million for the year ended December 31, 2025. We did not record an income tax expense for
the year ended December 31, 2024 as we generated sufficient tax losses, after consideration of discrete items. The current income tax
expense for the year ended December 31, 2025 was primarily driven by pre-tax income from the gain on sale of the PRV.

LIQUIDITY
AND CAPITAL RESOURCES

Cash
Flows for the Years Ended December 31, 2025 and 2024

For the year ended December 31,

($ in thousands)

2025

2024

Total cash, cash equivalents and restricted cash (used in) provided by:

Operating activities

$

(76,326

)

$

(56,015

)

Investing activities

105,028

(39,240

)

Financing activities

26,040

104,139

Net increase in cash, cash equivalents and restricted cash

$

54,742

$

8,884

Operating
activities

Net
cash used in operating activities was $76.3 million for the year ended December 31, 2025, primarily comprised of our net income of $71.2
million, offset by decreases in operating assets and liabilities of $5.4 million, the $152.4 million gain on sale of priority review voucher for which the cash proceeds are recorded in investing
activities, and net non-cash charges of $10.2 million. Non-cash
charges consisted primarily of $6.1 million of gain as a result of the change in fair value of warrant and derivative liabilities, $10.8 million of stock-based
compensation and $2.5 million of depreciation and amortization.

Net
cash used in operating activities was $56.0 million for the year ended December 31, 2024, primarily comprised of our net loss of $63.7
million and decreases in operating assets and liabilities of $4.4 million, partially offset by net non-cash charges of $12.1 million.
Non-cash charges consisted primarily of $0.8 million of the change in fair value of warrant and derivative liabilities, $6.6 million
of stock-based compensation, $1.5 million of non-cash interest expense and $2.0 million of depreciation and amortization.

Investing
activities

Net
cash provided by investing activities was $105.0 million for the year ended December 31, 2025, primarily comprised of net proceeds from
sale of priority review voucher of $152.4 million, proceeds from maturities of short-term investments of $167.3 million, offset by purchases
of short-term investments of $206.6 million and capital expenditures of $8.0 million.

Net
cash used in investing activities was $39.2 million for the year ended December 31, 2024, primarily comprised of purchases of short-term
investments of $157.0 million and capital expenditures of $2.4 million, partially offset by proceeds from maturities of short-term investments
of $120.2 million.

Financing
activities

Net
cash provided by financing activities was $26.0 million for the year ended December 31, 2025, primarily comprised of proceeds of $17.3
million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and proceeds of $8.8 million from the
exercise of stock purchase warrants.

Net
cash provided by financing activities was $104.1 million for the year ended December 31, 2024, primarily comprised of proceeds of $70.2
million in net proceeds from our May 2024 underwritten offering, $15.5 million from open market sales of common stock pursuant to the
ATM Agreement (as defined below) and net proceeds of $19.0 million from our credit facility entered into in January 2024.

61

We
have historically funded our operations primarily through our sale of equity securities, our most recent gain on sale of our PRV, and
strategic collaboration arrangements.

Our
principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our
cash resources. As of December 31, 2025, our cash resources were $191.4 million. We believe that our current cash and cash equivalents,
restricted cash and short-term investments are sufficient to fund operations through at least the next 12 months from the date of this
annual report on Form 10-K. We may need to secure additional funding to carry out all of our planned research and development and potential
commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity
and sufficient capital resources could have a material adverse effect on our future prospects.

We
have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which we may sell from
time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $75.0 million. Any sales of shares
pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and
has been declared effective by the SEC. We sold 3,510,889 shares of our common stock under the ATM Agreement and received $17.3 million
of net proceeds during the year ended December 31, 2025. We sold 2,825,954 shares of our common stock under the ATM Agreement and received
$15.5 million of net proceeds during the year ended December 31, 2024. Under the ATM Agreement and as of December 31, 2025, we have remaining
shares of our common stock for an aggregate sales price of up to $51.5 million.

Since
our inception and excluding the gain on sale of our priority review voucher, we have incurred negative cash flows from operations and
have expended, and expect to continue to expend, substantial funds to complete our planned product development and commercialization
efforts. Excluding the gain on sale of our priority review voucher, we have not been profitable since inception and to date have received
limited revenues from the sale of products or licenses. As a result, we have incurred significant operating losses and negative cash
flows from operations since our inception and anticipate such losses and negative cash flows will continue until ZEVASKYN® can
provide sufficient revenue for us to be profitable and generate positive cash flow.

We
may incur losses for the next several years as we continue to invest in commercialization, product research and development, preclinical
studies, clinical trials, and regulatory compliance and cannot provide assurance that we will ever be able to generate sufficient product
sales or royalty revenue to achieve profitability on a sustained basis, or at all.

If
we raise additional funds by selling additional equity securities, the relative equity ownership of our existing investors will be diluted,
and the new investors could obtain terms more favorable than previous investors. If we raise additional funds through collaborations,
strategic alliances, or licensing arrangements with third parties, 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. If we are unable
to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, or terminate our product
development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties
that we would otherwise prefer to develop and market ourselves.

Our
future capital requirements and adequacy of available funds depend on many factors, including:

●

the
successful commercialization of ZEVASKYN®;

●

the
successful development, regulatory approval and commercialization of our cell and gene therapy and other product candidates;

●

the
ability to establish and maintain collaborative arrangements with corporate partners for the research, development, and commercialization
of products;

●

continued
scientific progress in our research and development programs;

●

the
magnitude, scope and results of preclinical testing and clinical trials;

●

the
costs involved in filing, prosecuting, and enforcing patent claims;

●

the
costs involved in conducting clinical trials;

●

competing
technological developments;

●

the
cost of manufacturing and scale-up;

●

the
ability to establish and maintain effective commercialization arrangements and activities; and

●

the
successful outcome of our regulatory filings.

62

Due
to uncertainties and certain of the risks described above, our ability to successfully commercialize our product candidates, our ability
to obtain applicable regulatory approval to market our product candidates, our ability to obtain necessary additional capital to fund
operations in the future, our ability to successfully manufacture our products and our product candidates in clinical quantities or for
commercial purposes, government regulation to which we are subject, the uncertainty associated with preclinical and clinical testing,
intense competition that we face, the potential necessity of licensing technology from third parties and protection of our intellectual
property, it is not possible to reliably predict future spending or time to completion by project or product category or the period in
which material net cash inflows from significant projects are expected to commence. If we are unable to timely complete a particular
project, our research and development efforts could be delayed or reduced, our business could suffer depending on the significance of
the project and we might need to raise additional capital to fund operations, as discussed in the risks above.

We
plan to continue our policy of investing any available funds in suitable certificates of deposit, money market funds, government securities
and investment-grade, interest-bearing securities. We do not invest in derivative financial instruments.

Contractual
Obligations

We
enter into agreements in the normal course of business with clinical research organizations for clinical trials and clinical manufacturing
organizations for supply manufacturing and with vendors for preclinical research studies and other services and products for operating
purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor.

Operating
lease amounts represent future minimum lease payments under our non-cancelable operating lease agreements. The total future payments
for our operating lease obligations that had commenced as of December 31, 2025 were $6.2 million, of which $1.0 million is due in the
next twelve months and the remaining payments are due over the terms of the respective leases. The minimum lease payments above do not
include any related common area maintenance charges or real estate taxes.

In
addition, we are also party to other license agreements that include contingent payments. However, contingent payments related to these
license agreements are not disclosed as the satisfaction of these contingent payments is uncertain as of December 31, 2025 and, if satisfied,
the timing of payment for these amounts was not reasonably estimable as of December 31, 2025. Commitments related to the license agreements
include contingent payments that will become payable if and when certain development, regulatory and commercial milestones are achieved.
During the next 12 months, certain contingent payments could become due upon sales of ZEVASKYN® or any other developmental
milestones for sub-licensed products related to such license agreements.

Critical
Accounting Estimates

The
preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management
considers an accounting estimate to be critical if:

●

it
requires assumptions to be made that were uncertain at the time the estimate was made, and

●

changes
in the estimate or different estimates that could have been selected could have a material impact in our results of operations or
financial condition.

While
we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances,
actual results could differ from those estimates and the differences could be material.

While
our significant accounting policies are described in greater detail in Note 2 to our consolidated financial statements appearing elsewhere
in this Annual Report, we believe that the following accounting policies are the most critical to the judgements and estimates used in
the preparation of our consolidated financial statements.

Revenue
Recognition

Product
Revenue

After
FDA approval of ZEVASKYN® in April 2025, we began commercial marketing and made our first product sale in Q4 2025. ASC
606, Revenue from Contracts with Customers, (“ASC 606”) requires us to make estimates of variable consideration, including
in our contracts, to be included in the transaction price. Revenue from product sales is recognized at the point in time that the customer
obtains control of the product, which is typically upon the completion of a final quality inspection of the product at the qualified
treatment centers. There is no obligation for the qualified treatment centers to use ZEVASKYN®, and we have no contractual
right to receive payment until the final quality inspection of the product at the qualified treatment centers, and transfer of control
is completed.

Revenue
from product sales is reduced at the time of recognition for payor rebates, co-payment assistance and prompt pay discounts, which are
attributed to various commercial arrangements and government programs. Our contracts can include the right to receive an outcomes-based rebate and a subsequent treatment discount of ZEVASKYN®
under certain conditions. We have determined that the rebate and discount create a material right and we allocate the transaction
consideration to ZEVASKYN® and the material right on a relative standalone selling price basis. Transaction consideration
allocated to the material right is deferred and recognized when either (a) the subsequent purchase of ZEVASKYN® occurs,
or (b) the time period during which a subsequent purchase of ZEVASKYN® is made, expires.

As of December 31, 2025, our sales contained no material estimates
as the applicable government rebate was known at the time of revenue recognition and no other material rights were present.

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License
and other revenues

We
enter into license agreements that are within the scope of ASC 606, under which it may exclusively license rights to research, develop,
manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payments of
one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development,
regulatory and commercial milestone payments; and royalties on net sales of licensed products.

If
the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement,
we recognize revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the
customer is able to use and benefit from the license. In assessing whether a performance obligation is distinct from the other performance
obligations, we consider factors such as the research, development, manufacturing and commercialization capabilities of the collaboration
partner and the availability of the associated expertise in the general marketplace. In addition, we consider whether the collaboration
partner can benefit from a performance obligation for its intended purpose without the receipt of the remaining performance obligation,
whether the value of the performance obligation is dependent on the unsatisfied performance obligation, whether there are other vendors
that could provide the remaining performance obligation, and whether it is separately identifiable from the remaining performance obligation.
For licenses that are combined with other performance obligations, we utilize judgment to assess the nature of the combined performance
obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period
and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and thereby periods over
which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development
and licensing agreement. Such a change could have a material impact on the amount of revenue we record in future periods.

Milestone
Payments

At
the inception of each arrangement that includes research or development milestone payments, we evaluate whether the milestones are considered
probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it
is probable that a significant cumulative revenue reversal would not occur, the associated milestone value is included in the transaction
price. An output method is generally used to measure progress toward complete satisfaction of a milestone. Milestone payments that are
not within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals
are received. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to
achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable
that a significant cumulative revenue reversal would not occur. At the end of each subsequent reporting period, we re-evaluate the probability
of achievement of all milestones subject to constraint and, if necessary, adjust our estimate of the overall transaction price. Any such
adjustments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.

Collaborative
Arrangements

We
analyze our collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that
are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such
activities and therefore within the scope of ASC 808, Collaborative Arrangements (“ASC 808”). This assessment is performed
throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration
arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed
to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore
within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition
method is determined and applied consistently, generally by analogy to ASC 606. Amounts that are owed to collaboration partners are recognized
as an offset to collaboration revenue as such amounts are incurred by the collaboration partner. For those elements of the arrangement
that are accounted for pursuant to ASC 606, the Company applies the five-step model described above under ASC 606.

64

Accrued
Expenses

As
part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. This process
involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed
on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been
invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed
on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our
accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us
at that time. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual
or amount of prepaid expense accordingly. To date, we have not made any material adjustments to our prior estimates of accrued expenses.

Share-Based
Compensation Expense

We
have applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification, or ASC,
Topic 718, Compensation—Stock Compensation (“ASC 718”), to account for stock-based compensation. We recognize
compensation costs related to stock-based awards granted based on the estimated fair value of the awards on the date of grant.

ASC
718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the consolidated statements
of operations and comprehensive income based on their grant-date fair values. Compensation expense for stock options, restricted stock
awards and restricted stock units is recognized on a straight-line basis based on the grant-date fair value over the associated service
period of the award, which is generally the vesting term.

Determining
the amount of stock-based compensation to be recorded requires us to develop estimates of the fair value of stock-based awards as of
their measurement date. We recognize stock-based compensation expense over the requisite service period, which is the vesting period
of the award. Calculating the fair value of stock-based awards requires that we make assumptions. We estimate the fair value of its stock
options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including: (i) the expected
stock price volatility; (ii) the expected term of the award; (iii) the risk-free interest rate; and (iv) expected dividends.

We
estimate the expected term of stock options using the “simplified” method as prescribed by SEC Staff Accounting Bulletin
No. 107, Share-Based Payments, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual
term of the option. The risk-free interest rates are based on US Treasury securities with a maturity date commensurate with the expected
term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company
accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for
which service conditions are expected to be satisfied.

Stock
option-based compensation expense recognized for the years ended December 31, 2025 and 2024 was $0.3 million and $1.1 million, respectively.
Restricted stock-based compensation expense recognized for the years ended December 31, 2025 and 2024 was $10.5 million and $5.6 million,
respectively.

65

Warrants

We
determine the accounting and value of any issued warrants in accordance with ASC 480, Distinguishing Liabilities from Equity and
ASC 815, Derivatives and Hedging. We measure the value of any liability classified warrants on their issuance date based on their
fair value using the Black-Scholes pricing model. Inputs used in the model include assumptions for expected volatility, risk-free interest
rate, dividend yield and estimated expected term. Certain inputs used in this Black-Scholes pricing model may fluctuate in future periods
based upon factors that are outside of our control, including a potential change in control. A significant change in one or more of these
inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liabilities, which could
also result in material non-cash gains or losses being reported in the Company’s statement of operations and comprehensive income
(loss). In addition, the inputs we utilized to value our warrant liabilities are highly subjective. The assumptions used in calculating
the fair value of our warrant liabilities represent our best estimates, but these estimates involve inherent uncertainties and the application
of management judgment. As a result, if factors change and we use different assumptions, the fair value of the warrant liabilities may
be materially different in the future.

The
change in fair value of warrant liability recognized for the years ended December 31, 2025 and 2024 resulted in a gain of $6.1 million
and a loss of $0.8 million, respectively.