Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report and with our audited financial statements and related notes and other financial information appearing in our Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report and in the Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company focused on developing and commercializing fibroblast-based therapies for patients suffering from chronic diseases with significant unmet medical needs, including wound healing, multiple sclerosis, degenerative disc disease, psoriasis, certain cancers, and potential human longevity applications including thymic involution reversal using a thymic organoid. Our most advanced product candidates are CYWC628, CYPS317, CYMS101 and CybroCell™.

We have completed our IND-enabling pre-clinical studies for the development of CYWC628 as a topically administered allogeneic fibroblast cell-based therapy for wound healing. Our pre-clinical studies focused on utilizing single cell fibroblasts, fibroblast spheroids, and fibroblast-derived materials to treat wounds in diabetic mice. We completed pre-clinical studies investigating (i) multiple administrations of CYWC628 spheroids on a chemically induced chronic wound NONcNZO10/LtJ and BKS.Cg-Dock7m +/+ LepRdb/J mouse model, (ii) dose titration to provide information on the proposed dose range of CYWC628, and (iii) acute and chronic toxicity. The results of our studies have shown statistically significant acceleration in the rate of wound closure, and statistically significant improvement in the quality of the healed wounds in comparison with both a marketed wound care product and control. Based upon our results, we are progressing a twelve-week Phase 1/2 clinical trial in Australia for treatment of diabetic foot ulcers.

CYPS317 is our allogeneic intravenously administered fibroblast spheroid cell-based investigational therapeutic for the treatment of psoriasis. We have completed preliminary IND-enabling pre-clinical studies utilizing chronic and acute psoriasis mouse models to assess the potential use of intravenous administration of fibroblast spheroids for the treatment of psoriasis. We also completed IND-enabling animal model studies to determine the optimal efficacious dose range and the durability of treatment for mild to moderate, and moderate to severe psoriasis. On December 30, 2025, we filed a Phase 1/2 Investigational New Drug (IND) application with the U.S. Food and Drug Administration (FDA) seeking regulatory clearance to initiate clinical trials of CYPS317.

We are developing CYMS101 as an intravenously administered allogeneic fibroblast single cell, and fibroblast spheroid, cell-based therapy to treat multiple sclerosis ("MS"). After completing animal studies using CYMS101, we received approval from a U.S.-based IRB to conduct clinical investigations in Mexico using the fibroblast cell composition for patients with MS, and completed a Phase 1 study. The study was conducted in five participants. The primary objective of the study was to assess safety, and the secondary objective was to assess efficacy. The primary objective was achieved as we saw no adverse events related to the treatment - no adverse events during intravenous injection of the tolerogenic fibroblasts, no short or long-impact in complete blood count tests during the 16-week monitoring period, and no short or long impact in electrocardiogram results during the 16-week monitoring period. In addition, the study assessed clinical activity using a standard set of neurological assessments routinely used to assess MS. We are currently conducting further research to more fully characterize the mode of action of fibroblasts in oligodendrocyte expansion. We plan to file an IND application for a Phase 1/2 clinical trial relating to MS in the United States in 2026 after we receive FDA clearance for our IND relating to CYPS317. We expect to seek a strategic partner to collaborate with us on the development of CYMS101 either before initiating the Phase 1/2 study, or after its completion, if successful, and prior to commencing a potential Phase 3 clinical trial.

CybroCell™ is an investigational intradiscal administered allogeneic fibroblast cell-based therapy in development for degenerative disc disease and is being designed as an alternative method for repairing the cartilage of the intervertebral disc (or any other articular cartilage). We have completed two animal studies in rabbit models. The results from the studies were positive and supported our IND application to run a "first in human" trial. We received IND clearance from the FDA in 2018, conditional upon approval of our master cell bank, to evaluate this candidate in a planned clinical trial. A timeline for the trial will be determined in connection with discussions with the FDA.

We also have human longevity, certain cancer, and artificial pancreatic organoid research programs in the very early stages of research and development. We plan to accelerate such programs as funding allows.

The manufacturing of our master cell bank and working cell bank for CYWC628 is now complete and both are certified as released by our CDMO. This CDMO will also manufacture CYWC628 for use in our twelve-week Phase 1/2 clinical trial for treatment of diabetic foot ulcers that we will conduct in Australia.

We successfully carried out experiments that demonstrated the ability to use the CYWC628 spheroid master cell bank for the manufacturing of a modified CybroCell™ drug product for the treatment of degenerative disc disease. We also supported animal trials confirming that the therapeutic effects of the fibroblast-derived chondrocyte spheroids derived from the CYWC628 master cell bank are significantly better to those of single-cell fibroblasts, which supported our IND clearance with the FDA for the planned Phase I clinical trial for degenerative disc disease. Based on these results, we will work to amend the IND clearance with the FDA to replace single-cell fibroblasts, CybroCell™, with fibroblast-derived chondrocyte spheroids derived from the CYWC628 master cell bank. A timeline for the trial will be determined in connection with discussions with the FDA. If any of our product candidates receive marketing approval, we expect to evaluate the feasibility of building our own cGMP manufacturing facility or continuing

to outsource manufacturing to a CDMO for clinical testing and commercial supply. We expect to rely on third parties for our cell therapy manufacturing process for the foreseeable future.

Since our April 2021 separation from FibroGenesis, our activities have consisted primarily of (i) corporate and strategic planning, (ii) recruiting and retaining personnel, (iii) financing our operations, (iv) prosecuting, maintaining and expanding our intellectual property portfolio, and (v) conducting preclinical and other research and development related to our product candidates. These activities allow us to continue building our fibroblast cell-based therapy platform..

We have incurred net losses since inception and expect to incur losses in the future as we continue our research and development activities. To date, we have funded our operations primarily through debt issuances and equity raises.

As of March 31, 2026, we had cash and cash equivalents of $1.5 million. Since our inception, we have incurred significant operating losses. We incurred net losses of $5.0 million and $5.0 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $59.2 million.

We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:

Due to the numerous risks and uncertainties associated with biopharmaceutical product development and the economic and developmental uncertainty, we may be unable to accurately predict the timing or magnitude of all expenses. Our ability to ultimately generate revenue to achieve profitability will depend heavily on the development, approval, and subsequent commercialization of our product candidates. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As a result, we will need substantial additional funding to our support short-term and long-term continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we will have to significantly delay, reduce, or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

General Trends and Outlook

Recent Developments

CYWC628

We have manufactured two batches of the CYWC628 drug product in accordance with FDA's Good Manufacturing Practices (CGMP). The batches will be released after they successfully pass all required safety and quality testing. We expect to begin manufacturing the third batch of CYWC628 in May 2026. We also completed site onboarding as outlined in the protocol for the DFU clinical trial in Australia and will activate additional sites if needed to support recruitment objectives. Based upon our progress to date, we expect to begin screening, enrolling and dosing patients in the second quarter of 2026. We will report six-week interim safety and primary efficacy data of the clinical trial once 28 patients from each of the three arms of the study have completed at least 6 weeks of treatment, which we expect will occur in the third quarter of 2026. We will report the final primary safety and efficacy data of the study once all the continuously enrolled patients that remain in all arms of the study have completed at least 12 weeks of treatment, which we expect will occur in the fourth quarter of 2026. Secondary outcome results of the study, which include monitoring for wound recurrence at the same site, will be reported once all the patients in each arm of the study that remain in the study have been assessed for a 6-month follow-up. For the second period of the clinical trial, patients enrolled in the standard of care arm of the study whose wounds did not heal, and still

meet the inclusion/exclusion criteria of the study, will be provided the option of receiving the dose of CYWC628 with the highest efficacy from the first part of the study for up to 12 weeks to generate additional secondary outcome results. We expect to release the final report of the study, which will include all the primary and secondary outcomes outlined in the clinical trial, in the third quarter of 2027. These timelines have been extended as we resolve issues that arise during the manufacturing process. Please see "Risk Factors - Risks Related to Manufacturing" in our Annual Report and "Item 1A. Risk Factors - Risks Related to Manufacturing" in this Quarterly Report.

CYPS317

We have completed preliminary IND-enabling pre-clinical studies utilizing chronic and acute psoriasis mouse models to assess the potential use of intravenous administration of fibroblast spheroids for the treatment of psoriasis. We also completed IND-enabling animal model studies to determine the optimal efficacious dose range and the durability of treatment for mild to moderate, and moderate to severe psoriasis. On December 30, 2025, we filed a Phase 1/2 Investigational New Drug (IND) application with the U.S. Food and Drug Administration (FDA) seeking regulatory clearance to initiate clinical trials of CYPS317. We are in the process of updating our submission to the FDA based on feedback received.

Components of Results of Operations

Revenue

We have completed preliminary IND-enabling pre-clinical studies utilizing chronic and acute psoriasis mouse models to assess the potential use of intravenous administration of fibroblast spheroids for the treatment of psoriasis. We also completed IND-enabling animal model studies to determine the optimal efficacious dose range and the durability of treatment for mild to moderate, and moderate to severe psoriasis. On December 30, 2025, we filed a Phase 1/2 Investigational New Drug (IND) application with the U.S. Food and Drug Administration (FDA) seeking regulatory clearance to initiate clinical trials of CYPS317. We are in the process of updating our submission to the FDA based on feedback received.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in connection with the development of our product candidates and include:

We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates as they advance into later stages of clinical development and our other product candidates in preclinical development as they advance into clinical development. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. This is due to the numerous risks and uncertainties associated with developing product candidates, including uncertainty related to:

A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing and viability associated with the development and/or regulatory approval of such programs or product candidates.

General, Administrative and Other Expenses

Our general, administrative, and other expenses consist primarily of personnel costs, allocated facilities costs, and other expenses for outside professional services, including legal, marketing, investor relations, human resources services, and accounting services. Personnel costs consist of salaries, benefits, and stock-based compensation for our general and administrative personnel. We expect to continue incurring additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, insurance, investor relations activities and other administrative and professional services. We also expect to increase the size of our administrative function to support the growth of our business.

Interest Expense

Our interest expense consists primarily of accrued interest expense, interest on short-term borrowing to finance D&O insurance premiums, and amortization of discount on our convertible notes.

Statements of Operations

Results of Operations

Comparison of Three Months Ended March 31, 2026 and 2025

The following tables set forth our results of operations for the three months ended March 31, 2026 and 2025.

Research and Development Expenses

Research and development expenses were $3.0 million and $1.8 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $1.2 million was primarily due to:

Research and development expenses are not tracked by product candidate.

General, Administrative and Other Expenses

General, administrative and other expenses were $2.1 million and $2.8 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $0.6 million was primarily due to:

Change in fair value of SEPA put option liability

The change in fair value of the SEPA put option liability was a gain of $0.1 million during the three months ended March 31, 2026 and resulted primarily from changes in stock price and other assumptions used in the valuation model.

Change in fair value of convertible debt

We received advances in the form of convertible notes pursuant to the SEPA in December 2024 and June 2025 and elected to account for the short-term convertible notes under the fair value option. Under the fair value option, all costs associated with raising the funds were expensed immediately. The convertible notes were fully paid off in November 2025.

Other income/(expense)

There is $2,000 of other expense for the three months ended March 31, 2026 for foreign currency exchange rate and none in other income for the three months ended March 31, 2025.

Interest income

Interest income was approximately $20,000 and $0.1 million for the three months ended March 31, 2026 and 2025, respectively. Interest income is comprised of interest income and unrealized gain/losses on cash equivalents.

Interest expense

Interest expense was approximately $4,000 and $0 for the three months ended March 31, 2026 and 2025, respectively.

Income taxes

The effective income tax rate was 0.0% for all periods. Currently, we have recorded a full valuation allowance against our net deferred tax assets.

Liquidity and Capital Resources

Overview

Through March 31, 2026, we have financed our operations primarily with various borrowings and stock offerings. As of March 31, 2026, we had cash and cash equivalents of $1.5 million and an accumulated deficit of $59.2 million.

Cash Flows

The following table sets forth a summary of our cash flows for the three months ended March 31, 2026 and 2025.

Cash Flows from Operating Activities

Net cash used in operating activities was $4.4 million and $5.3 million for the three months ended March 31, 2026 and 2025, respectively, and consisted primarily of net losses of $5.0 million and $5.0 million, respectively. Noncash expenses consisting of stock-based compensation expense of $0.7 million, and amortization of operating lease right-of-use asset of $0.2 million partially offset the net loss, while a decrease in prepaid expenses of $0.4 million, a decrease in accounts payable and accrued expenses of $0.1 million, and a decrease in operating lease liability of $0.2 million added to the cash used in operations in the three months ended March 31, 2026. In addition, we issued a note receivable of $0.4 million. For the three months ended March 31, 2025, noncash expenses consisting of change in fair value of convertible debt of $0.3 million, change in fair value of SEPA put option liability of $0.1 million, net loss on issuance of Common Stock in exchange for convertible debt of $0.2 million, stock-based compensation expense of $0.6 million, and amortization of operating lease right-of-use asset of $0.1 million partially offset the net loss, while an increase in prepaid expenses of $0.4 million, a decrease in accounts payable and accrued expenses of $1.0 million, and a decrease in operating lease liability of $0.1 million added to the cash used in operations.

Cash Flows from Investing Activities

Net cash used in investing activities was $0.0 million and approximately $43,000 for the three months ended March 31, 2026 and 2025, respectively, and consisted primarily of laboratory equipment purchases.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.0 million and $0.0 million for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, the Company issued stock from its SEPA for $0.8 million. In addition, the company received proceeds from a loan for D&O costs of $0.3 million and repaid $0.1 million.

Funding Requirements

We have incurred operating losses since our formation and expect such losses to continue in the future as we build infrastructure, develop intellectual property and conduct research and development activities. Moreover, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. We do not have any products approved for sale, and we have never generated any revenue from product sales. We have primarily relied on a combination of angel investors, private debt placements, convertible debt issuances, and sales of equity to fund our operations. As of March 31, 2026, we had an accumulated deficit of $59.2 million and cash and cash equivalents of $1.5 million. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current or future product candidates and we do not know when, or if, that will occur. Unless and until such time that revenue and net income are generated, we will need to continue to raise additional capital. These factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements included in this Quarterly Report. The financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Our ability to continue as a going concern is dependent on our ability to raise additional capital. We believe we will be able to obtain additional capital through equity financings or other arrangements to fund operations; however, there can be no assurance that such additional financing, if available, can be obtained on acceptable terms. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our preclinical studies, clinical trials, research and development programs or commercialization efforts. During the three months ended March 31, 2026, we have implemented measures to reduce operating expenses including delaying certain research and development project spend while prioritizing near term pipeline projects, limiting finance, legal and administrative costs, and pursuing options to limit spend on office space. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, and other licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.

Our future funding requirements will depend on many factors, including, but not limited to:

We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.

Contractual Obligations and Commitments

We have material cash requirements and other contractual obligations related to our office and lab rent (as described in Note 10, "Leases, Commitments and Contingencies" to the financial statements in this Quarterly Report).

Critical Accounting Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting estimates as those under GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies and estimates, please see the disclosures in Part II, Item 7 of the Annual Report.