Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This discussion and analysis contains information related to historical and prospective events intended to enable you to assess our financial condition and results of operations. The information contained in this discussion and analysis should be read in conjunction with our unaudited condensed consolidated interim financial statements and the related notes contained elsewhere in this Quarterly Report, as well as the risks and uncertainties discussed under the headings, "Part II - Item 1A - Risk Factors" and "Note Regarding Forward-Looking Statements."

Overview

We are a clinical-stage biotechnology company developing treatments for age-related brain disorders. Our lead drug candidate, neflamapimod, is an oral, small molecule targeting critical disease processes underlying degenerative disorders of the brain by inhibiting a key enzyme involved in neuroinflammation and neurodegeneration. We recently completed our RewinD-LB Trial, a Phase 2b study of neflamapimod in patients with DLB funded primarily by a $21.3 million grant from the NIA.

Our novel approach focuses on reducing the impact of inflammation in the brain, or neuroinflammation, which we believe is a key factor in the manifestation of degenerative diseases of the brain, including DLB. Chronic activation of the enzyme p38α in the brains of people with certain neurodegenerative diseases is believed to impair how neurons communicate through synapses. This impairment, termed synaptic dysfunction, leads to deterioration of cognitive and motor abilities. Left untreated, synaptic dysfunction can result in irreversible neuronal loss that leads to devastating disabilities, significant reliance on a caretaker, long term care living, and, ultimately, death. However, before neuronal loss commences, disease progression in many major neurodegenerative disorders, including DLB, initially involves a protracted period of reversible functional loss, particularly with respect to the synapses. We believe that inhibiting p38α activity in the brain, by interfering with key pathogenic drivers of disease, has the potential to reverse the clinical progression observed in the early-stages of certain neurodegenerative diseases, as well as slow further progression by delaying permanent synaptic dysfunction and neuron death.

Neflamapimod in DLB

We believe we are a leader in the industry in developing a treatment for DLB, as neflamapimod is the only clinical drug candidate of which we are aware that has shown statistically significant improvements compared to placebo in a Phase 2a clinical trial (our AscenD-LB Trial) and improved outcomes (p < 0.001) on the trial's primary endpoint in a Phase 2b evaluation (16-week Extension data from our RewinD-LB Trial). We are also the only company of which we are aware that is specifically targeting the treatment of DLB patients who do not have AD-related co-pathology. Compared to patients with "Pure" DLB - who may represent up to 50% of the total diagnosed DLB patient population at any given time - DLB patients with AD co-pathology have significant, irreversible neuronal loss in the hippocampus, which may be assessed via imaging or biomarker evidence of amyloid and/or tau pathology. DLB without AD co-pathology, however, is primarily a disease of reversible synaptic dysfunction in the BFC system and, based on available preclinical and clinical data, we believe if neflamapimod is given in the early stages of certain degenerative diseases of the brain, it may reverse synaptic dysfunction, improve neuron health and function, and slow further progression by delaying synaptic dysfunction and neuronal death. We believe this approach enhances the alignment of our development path with neflamapimod's mechanism of action, reduces the heterogeneity of our target patient population, and thereby has the potential to improve outcomes for patients.

Our recently completed RewinD-LB Trial is a Phase 2b study in 159 participants with DLB funded primarily by a $21.3 million grant from the NIA. Patients with AD co-pathology, as assessed by plasma ptau181 levels at screening, were excluded from the trial. Intended to confirm the efficacy findings from the AscenD-LB Trial, we announced 16-week results from the Extension Phase of the RewinD-LB Trial in March 2025. In the first 16 weeks of the Extension, treatment with Batch B led to increased plasma drug concentrations and demonstrated improvement on the trial's primary outcome measure, change from baseline in CDR-SB (p<0.001 vs. Batch A; p=0.003 vs. placebo), and ADCS-CGIC, a secondary outcome measure in the trial (p=0.035 vs. Batch A; p=0.035 vs. placebo). We believe these results demonstrate proof-of-concept for neflamapimod as a potential treatment for DLB, and support our hypothesis that the failure of neflamapimod during the Initial Phase was the result of Batch A delivering lower than expected plasma drug concentrations and effectively underdosing participants. Additional data from the Extension were presented at the 19th International Conference on Alzheimer's and Parkinson's Disease and Related Neurologic Disorders in April 2025, including that neflamapimod demonstrated improvements on endpoints measuring cognitive fluctuations and working memory.

In July 2025, we reported 32-week data from the Extension showing a 54% risk reduction in clinically significant worsening (≥ 1.5-point increase in CDR-SB) compared to control at Week 32 of Batch B neflamapimod treatment (p=0.0037). This risk reduction improved to 64% (p=0.0001) among patients who have minimal evidence of AD co-pathology (plasma ptau181 ≥ 21.0 pg/mL at screening). In addition, we also reported a statistically significant reduction (p<0.0001) from baseline (i.e., start of extension) in plasma levels of the neurodegenerative disease activity marker GFAP in patients who received Batch B for all 32 weeks, with a mean change of -18.4±4.0 pg/mL in all participants (N=107) and -21.2±4.4 pg/mL in participants with minimal evidence of AD co-pathology (plasma ptau181 ≥ 21.0 pg/mL at screening; N=91). GFAP is an established plasma marker of neurodegeneration in patients with DLB. In October 2025, we reported additional data from the RewinD-LB Trial, including significant improvement relative to placebo on CDR-SB and GFAP over 16 weeks in a within-subject analysis of patients who receive Batch B, as well as a subset analysis of participants who have minimal evidence of AD co-pathology based on the recently validated, high-sensitivity cutoff for detecting AD co-pathology via plasma ptau181 levels that we expect to use in our planned Phase 3 trial in DLB (plasma ptau181 ≥ 21.0 pg/mL at screening). We believe these data further demonstrate neflamapimod's potential as a treatment for DLB, showing a durable, meaningful slowing of clinical progression over 32 weeks of treatment with neflamapimod when target drug plasma concentrations were achieved.

In November 2025, we announced alignment with the FDA on key aspects of our proposed Phase 3 clinical trial of neflamapimod for the treatment of DLB. Based on FDA feedback, we plan to initiate a single, global, randomized, double-blind, placebo-controlled Phase 3 clinical trial evaluating the efficacy and safety of neflamapimod in approximately 300 patients with DLB by consensus clinical criteria in the second half of 2026. The trial will exclude patients who have historical evidence of AD co-pathology by brain imaging scan or cerebrospinal fluid sampling. In addition, the trial will be further enriched for patients who do not have AD co-pathology by excluding patients via a validated blood plasma test (plasma ptau181 ≥ 21.0 pg/mL at screening). Participants will be randomized 1:1 to receive either oral neflamapimod or placebo for 32 weeks, followed by a neflamapimod only extension for 48 weeks. Worsening of global cognition and function as measured by change CDR-SB - the same primary endpoint as in our recently completed RewinD-LB Trial - will be the primary endpoint for the planned Phase 3 trial. Secondary endpoints will include the percentage of participants who have a greater than 1.5-point increase in CDR-SB and other well-established measures of cognitive and motor function. The trial will also include assessments of key biomarkers of the neurodegenerative process, such as glial fibrillary acidic protein, to further support regulatory review and clinical interpretation. CervoMed expects feedback from other global regulators in the coming months and to announce additional details regarding the planned Phase 3 trial design in early 2026 following these interactions.

Neflamapimod's Potential in Additional Neurologic Indications

In addition to neflamapimod's potential to treat DLB, we believe the benefit of targeting neuroinflammation-induced synaptic dysfunction in the BFC system can be applied to other neurologic indications in which treatment of BFC dysfunction and degeneration would be expected to be clinically beneficial, including as treatment for certain forms of FTD - for which the FDA granted neflamapimod Orphan Drug Designation in November 2024 - and promoting recovery after ischemic stroke. Based upon this potential, we have commenced our ongoing RESTORE Trial, a Phase 2 trial evaluating neflamapimod in up to 90 participants recovering from ischemic stroke, from which we expect topline data in the second half of 2026, and our Phase 2a trial evaluating neflamapimod in up to 20 participants with the nonfluent/agrammatic variant of PPA, a subtype of FTD, from which we expect initial biomarker data in mid-2026.

Planned Manufacturing Improvements

Our investigations into the cause of the failure of Batch A to achieve expected plasma drug concentrations identified a mixture of polymorphic forms of neflamapimod's active drug ingredient contained in the current drug product, with a time-dependent change in relative amounts of the individual forms. As the individual polymorphic forms have different physical chemistry properties, including solubility, and the Batch A capsules were more than three years out from their manufacture date at the time of administration during the RewinD-LB Trial, we believe this time-dependent change (i.e., aging) accounts for the reduced performance of Batch A. To mitigate the potential for this reduction in performance over time, we have now identified the most stable polymorphic form, as well as a means to manufacture drug product that contains this form, and currently plan to utilize drug product that only or predominantly includes this stable polymorphic form in our planned Phase 3 clinical trial in DLB, and we are in the process of implementing associated manufacturing improvements.

Financial Summary

As of September 30, 2025, we had cash and cash equivalents and marketable securities of approximately $27.3 million. To date, we have not had any products approved for sale and have not generated any revenue from product sales, and our ability to do so in the future will depend on the successful development and eventual commercialization of neflamapimod (or another product candidate that we could acquire or develop in the future). We do not expect to generate revenue from product sales until such time, if ever.

Our accumulated deficit as of September 30, 2025 was $89.6 million. We have never been profitable, and we will continue to require additional capital to develop neflamapimod and fund operations for the foreseeable future. We have historically incurred net losses in each year since inception. Our net loss was $18.9 million and $9.6 million in the nine months ended September 30, 2025 and 2024, respectively. Our net loss was $7.7 million and $4.8 million in the three months ended September 30, 2025 and 2024, respectively. We expect our expenses will increase in connection with our ongoing activities, as we:

	●	advance neflamapimod through clinical trials, including a potential Phase 3 trial in DLB;
	●	manufacture supplies for our preclinical studies and clinical trials;
	●	obtain, maintain, expand, and protect our intellectual property portfolio;
	●	hire additional personnel to support our operations and growth; and
	●	continue to operate as a public company.

Based on our current operating plan, we do not believe our existing cash and cash equivalents and marketable securities on hand as of September 30, 2025, will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the issuance of the unaudited condensed consolidated interim financial statements included in this Quarterly Report. Accordingly, the unaudited interim condensed consolidated financial statements appearing elsewhere in this Quarterly Report have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited interim condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and we do not expect to do so in the near future. In January 2023, we were awarded our $21.0 million NIA Grant and, in August 2024, we were awarded an additional $0.3 million under our NIA Grant. Funding from the NIA Grant is recognized as grant revenue as the qualifying expenses related thereto are incurred. For the nine months ended September 30, 2025 and 2024, $4.0 million and $7.6 million of grant funding was recognized, respectively. For the three months ended September 30, 2025 and 2024, $0.3 million and $1.9 million of grant funding was recognized, respectively.

Research and Development Expenses

Research and development expenses account for a significant portion of our operating expenses and primarily consist of costs incurred for the discovery and development of our product candidates, including:

	●	expenses incurred under agreements with CROs, preclinical testing organizations, consultants, and other third-party vendors, collaborators and service providers;
	●	costs related to production of clinical materials, including fees paid to CDMOs;
	●	vendor expenses related to the execution of preclinical studies and clinical trials;
	●	personnel-related expenses, including salaries, benefits, and stock-based compensation for personnel engaged in research and development functions;
	●	costs related to the preparation of regulatory submissions;
	●	third-party license fees; and
	●	expenses for rent and other supplies.

We recognize research and development expenses as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators, and third-party service providers. Non-refundable advance payments made by us for future research and development activities are capitalized and expensed as the related goods are delivered and as services are performed.

Specific program expenses include expenses associated with the development of our lead product candidate, neflamapimod. Personnel and other operating expenses incurred for our research and development programs primarily relate to salaries and benefits, stock-based compensation, and facility expenses.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, neflamapimod, or for any other product candidates that we may develop or acquire. 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 neflamapimod such as conducting larger clinical trials, seeking regulatory approval and incurring expenses associated with hiring personnel to support other research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of product candidates, including neflamapimod, is highly uncertain.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including stock-based compensation for our personnel in executive, finance and accounting, and other administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, consulting, and tax services, insurance costs, and facility costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development activities and as we continue development activities pursuant to the NIA Grant. We also anticipate that we will incur increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of any national securities exchange on which our securities are traded, legal, auditing, additional insurance expenses, investor relations activities, and other administrative and professional services.

Interest Income

Interest income consists of interest earned on our marketable securities and on our cash and cash equivalent balances held with financial institutions.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations:

		Three Months Ended September 30,
		2025				2024				$ Change				% Change
Grant revenue		$	322,569			$	1,939,751			$	(1,617,182	)			(83	)%
Operating expenses:
Research and development			6,040,442				5,125,097				915,345				18	%
General and administrative			2,326,326				2,210,927				115,399				5	%
Total operating expenses			8,366,768				7,336,024				1,030,744				14	%
Loss from operations			(8,044,199	)			(5,396,273	)			(2,647,926	)			49	%
Other income (expense):
Other expense			(1,227	)			(3,440	)			2,213				(64	)%
Interest income			318,787				646,172				(327,385	)			(51	)%
Total other income, net			317,560				642,732				(325,172	)			(51	)%
Net loss		$	(7,726,639	)		$	(4,753,541	)		$	(2,973,098	)			63	%

Grant Revenue

Grant revenue was $0.3 million and $1.9 million for the three months ended September 30, 2025 and 2024, respectively. The decrease of $1.6 million is due to the completion of the Initial Phase of the RewinD-LB Trial and transitioning to the Extension Phase in late 2024, followed by the subsequent completion of the Extension Phase in mid-2025.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2025 and 2024:

		Three Months Ended September 30,
		2025				2024				$ Change				% Change
Dementia with Lewy bodies		$	1,680,922			$	3,317,345			$	(1,636,423	)			(49	)%
Frontotemporal dementia			313,438				2,581				310,857			(a		)
Recovery after stroke			396,635				112,759				283,876				252	%
Other clinical* and preclinical			485,586				541,125				(55,539	)			(10	)%
Personnel costs, excluding stock-based compensation			1,767,086				643,024				1,124,062				175	%
Stock-based compensation			133,169				42,224				90,945				215	%
Other research and development expenses, including CMC			1,263,606				466,039				797,567				171	%
Total research and development expenses		$	6,040,442			$	5,125,097			$	915,345				18	%

* Includes early-stage clinical studies that are not indication-specific and related costs.

(a) De minimis expenses in prior year period. Year-over-year change not meaningful.

Research and development expenses were $6.0 million for the three months ended September 30, 2025, compared to $5.1 million for the three months ended September 30, 2024. The aggregate $0.9 million increase in research and development expenses was primarily due to an increase of $1.1 million in personnel costs, driven by higher headcount and outsourced consulting costs, and an increase of $0.8 million in other research and development costs, driven by increased CMC activities to evaluate, analyze and address the drug product issue identified in December 2024, and an aggregate increase of $0.6 million in costs related to our recovery after stroke and FTD programs, as our RESTORE Trial and Phase 2a trial in a sub-type of FTD were both recently initiated. These increases were offset by a net decrease in costs related to our neflamapimod clinical programs, primarily driven by a $1.6 million decrease in costs related to our DLB program - including our recently completed RewinD-LB Trial and $0.1 million decrease for the other clinical and preclinical costs.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended September 30, 2025 and 2024:

		Three Months Ended September 30,
		2025				2024				$ Change				% Change
Personnel costs, excluding stock-based compensation		$	1,087,467			$	1,168,151			$	(80,684	)			(7	)%
Stock-based compensation			158,548				22,050				136,498			(a)
Professional fees			711,307				707,725				3,582				1	%
Insurance, taxes and similar fees			258,032				241,123				16,909				7	%
Other general and administrative expenses, including IT, facilities, supplies and similar costs			110,972				71,878				39,094				54	%
Total general and administrative expenses		$	2,326,326			$	2,210,927			$	115,399				5	%

*(a) De minimis expenses in prior year period. Year-over-year change not meaningful.

General and administrative expenses were $2.3 million for the three months ended September 30, 2025, compared to $2.2 million for the three months ended September 30, 2024. The aggregate increase of $0.1 million was primarily due to a $0.1 million increase in stock-based compensation relating to more stock option grants outstanding through September 30, 2025 versus September 30, 2024.

Other Expense

There was a de minimis amount of other expenses for the three months ended September 30, 2025 and 2024.

Interest income

Interest income was $0.3 million for the three months ended September 30, 2025, compared to $0.6 million three months ended September 30, 2024. The decrease was primarily due to change in returns on investments driven by a lower investment balance due to cash used for operations.

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations:

		Nine Months Ended September 30,
		2025				2024				$ Change				% Change
Grant revenue		$	3,997,784			$	7,575,972			$	(3,578,188	)			(47	)%
Operating expenses:
Research and development			15,986,865				11,711,746				4,275,119				37	%
General and administrative			7,974,277				6,850,536				1,123,741				16	%
Total operating expenses			23,961,142				18,562,282				5,398,860				29	%
Loss from operations			(19,963,358	)			(10,986,310	)			(8,977,048	)			82	%
Other income (expense):
Other expense			(11,618	)			(3,717	)			(7,901	)		(a)
Interest income			1,095,899				1,405,246				(309,347	)			(22	)%
Total other income, net			1,084,281				1,401,529				(317,248	)			(23	)%
Net loss		$	(18,879,077	)		$	(9,584,781	)		$	(9,294,296	)			97	%

*(a) De minimis expenses in prior year period. Year-over-year change not meaningful.

Grant Revenue

Grant revenue was $4.0 million and $7.6 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $3.6 million is due to the completion of the Initial Phase of the RewinD-LB Trial and transitioning to the Extension Phase in late 2024, followed by the subsequent completion of the Extension Phase in mid-2025.

Research and Development Expenses

The following table summarizes our research and development expenses by functional area for the nine months ended September 30, 2025 and 2024:

		Nine Months Ended September 30,
		2025				2024				$ Change				% Change
Dementia with Lewy bodies		$	5,866,430			$	8,753,991			$	(2,887,561	)			(33	)%
Frontotemporal dementia			846,664				2,581				844,083			(a		)
Recovery after stroke			952,338				112,759				839,579			(a		)
Other clinical* and preclinical			1,505,726				542,932				962,794				177	%
Personnel costs, excluding stock-based compensation			4,060,722				1,235,556				2,825,166				229	%
Stock-based compensation			378,029				146,358				231,671				158	%
Other research and development expenses, including CMC			2,376,956				917,569				1,459,387				159	%
Total research and development expenses		$	15,986,865			$	11,711,746			$	4,275,119				37	%

* Includes early-stage clinical studies that are not indication-specific and related costs.

(a) De minimis expenses in prior year period. Year-over-year change not meaningful.

Research and development expenses were $16.0 million for the nine months ended September 30, 2025, compared to $11.7 million for the nine months ended September 30, 2024. The increase of $4.3 million was primarily due to the increase of $1.5 million in costs related to CMC activities and other research and development expenses, increased other clinical and nonclinical studies of $1.0 million, increased personnel costs of $2.8 million, increase in stock-based compensation of $0.2 million and an aggregate increase of $1.7 million related to clinical work for neflamapimod, including costs related to our RESTORE Trial and Phase 2a trial in a sub-type of FTD, which were both recently initiated. This was offset by a decrease of $2.9 million due to the completion of the Initial Phase of the RewinD-LB Trial and transitioning to the Extension Phase in December 2024, followed by the subsequent completion of the Extension Phase in mid-2025.

General and Administrative Expenses

The following table summarizes our general and administrative expenses by functional area for the nine months ended September 30, 2025 and 2024:

		Nine Months Ended September 30,
		2025				2024				$ Change				% Change
Personnel costs, excluding stock-based compensation		$	3,797,765			$	2,968,276			$	829,489				28	%
Stock-based compensation			771,869				921,653				(149,784	)			(16	)%
Professional fees			2,053,984				2,049,828				4,156				0	%
Insurance, taxes and similar fees			917,616				709,178				208,438				29	%
Other general and administrative expenses, including IT, facilities, supplies and similar costs			433,043				201,601				231,442				115	%
Total general and administrative expenses		$	7,974,277			$	6,850,536			$	1,123,741				16	%

General and administrative expenses were $8.0 million for the nine months ended September 30, 2025, compared to $6.9 million for the nine months ended September 30, 2024. The increase of $1.1 million was primarily due to the increase of $0.8 million in personnel costs, the increase of $0.2 million in insurance and taxes, and the increase of $0.2 million in other general and administrative expenses, partially offset by a decrease of $0.1 million in stock-based compensation.

Other Expense

There was a de minimis amount of other expense for the nine months ended September 30, 2025 and 2024.

Interest income

Interest income was $1.1 million for the nine months ended September 30, 2025 as compared to $1.4 million for the nine months ended September 30, 2024. The decrease was primarily due to change in returns on investments driven by a lower investment balance due to cash used for operations.

Liquidity and Capital Resources

Capital Requirements

From the date of our inception through September 30, 2025, our operations have primarily been financed through the issuance of common stock, convertible preferred stock and convertible debt financings. As of September 30, 2025, we had approximately $27.3 million of cash and cash equivalents and marketable securities. We have not generated positive cash flows from operations and as of September 30, 2025, we had an accumulated deficit of approximately $89.6 million. In January 2023, we were awarded a $21.0 million grant from the NIA to support the RewinD-LB Trial, which is expected to be received over a three-year period. In August 2024, we received an additional $0.3 million from the NIA. As of September 30, 2025, total cash funding of $19.5 million had been received from the NIA Grant and approximately $1.6 million in funding is remaining (or $1.8 million if the final 2% of current year funding mentioned below is received). In March 2025, the Company received access to 90% of the current year funding and in June 2025, the Company received access to additional funds for an aggregate of 98% of the current year funding provided for in the NIA Grant, due to current NIA policy as a result of the U.S. government currently being funded on the basis of a continuing resolution. The timing of our receipt of the remaining 2% of the grant of current year funding, if any, is dependent upon and subject to U.S. congressional approval of a final appropriations bill, which remains subject to ongoing uncertainty. Accordingly, as of September 30, 2025, we determined that the receipt of the remaining 2% of funding is not probable and we will not account for the remaining 2% of funding unless and until received.

On April 1, 2024, pursuant to and in accordance with the terms of a securities purchase agreement with certain purchasers named therein, we completed the 2024 Private Placement of an aggregate of 2,532,285 units, each comprised of (i) (A) one share of common stock or (B) one Pre-Funded Warrant and (ii) one Series A Warrant. The aggregate upfront gross proceeds from the 2024 Private Placement were approximately $50.0 million, before deducting offering fees and expenses, and additional gross proceeds of up to approximately $99.4 million may be received if the Series A Warrants are exercised in full for cash.

On May 21, 2025, the Company entered into the Sales Agreement with Leerink Partners, LLC, as sales agent, pursuant to which the Company may offer and sell shares of common stock from time-to-time with an aggregate offering price of up to $50.0 million under an "at-the-market" offering program. During the nine months ended September 30, 2025, the Company sold 550,000 shares of common stock to an institutional investor in a block sale for proceeds of $4.7 million, net of $0.1 million of issuance costs.

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Any product candidates we may develop may never achieve commercialization, and we anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In addition, we expect to incur costs associated with operating as a public company. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. Our primary uses of capital are, and we expect will continue to be, costs related to clinical research, manufacturing and development services; compensation and related expenses; costs relating to the build-out of our headquarters, other offices and laboratories; license payments or milestone obligations that may arise; laboratory expenses and costs for related supplies; manufacturing costs; legal and other regulatory expenses and general overhead costs.

Based on our current operating plan, we do not believe our existing cash and cash equivalents and marketable securities on hand as of September 30, 2025, will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the issuance of the unaudited condensed consolidated interim financial statements included in this Quarterly Report. Accordingly, substantial doubt exists about our ability to continue as a going concern within one year after the date the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report are issued. The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited interim condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through a 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. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we may need to delay, reduce or terminate planned activities to reduce costs, including our development or commercialization activities for neflamapimod. We might also be required to seek funds through arrangements with third parties that require us to relinquish certain of our rights to neflamapimod or otherwise agree to terms unfavorable to us.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:

	●	the enrollment, progress, timing, costs and results of our clinical trials and other development activities for neflamapimod;
	●	the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
	●	our ability to reach certain milestone events set forth in our collaboration agreements and the timing of such achievements, triggering our obligation to make applicable payments;
	●	the hiring of additional clinical, scientific and commercial personnel to pursue our development plans, as well the increased costs of internal and external resources as to support our operations as a public reporting company;
	●	the cost and timing of securing manufacturing arrangements for clinical or commercial production;
	●	the cost of establishing, either internally or in collaboration with others, sales, marketing and distribution capabilities to commercialize neflamapimod, if approved;
	●	the cost of filing, prosecuting, enforcing, and defending our patent claims and other intellectual property rights, including defending against any patent infringement actions brought by third parties against us;
	●	the ability to receive additional non-dilutive funding, including grants from organizations and foundations;
	●	our ability to establish strategic collaborations, licensing or other arrangements with other parties on favorable terms, if at all; and
	●	the extent to which we may in-license or acquire other product candidates or technologies.

A change in the outcome of any of these or other variables could significantly alter the costs and timing associated with the development of neflamapimod. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(16,874,264	)		$	(8,479,909	)
Net cash provided by (used in) investing activities			12,723,481				(37,967,876	)
Net cash provided by financing activities			4,588,687				46,398,606
Net increase (decrease) in cash and cash equivalents		$	437,904			$	(49,179	)

Operating Activities

For the nine months ended September 30, 2025, cash used in operating activities was $16.9 million. The net cash outflow from operations primarily resulted from net loss of $18.9 million and accretion of discount on marketable securities of $0.7 million, partially offset by changes in operating assets and liabilities of $1.6 million and by a non-cash expense of $1.1 million for stock-based compensation.

For the nine months ended September 30, 2024, cash used in operating activities was $8.5 million. The net cash outflow from operations primarily resulted from net loss of $9.6 million and accretion of discount on marketable securities of $0.8 million, partially offset by changes in operating assets and liabilities of $0.9 million and by a non-cash expense of $1.1 million for stock-based compensation.

Investing Activities

For the nine months ended September 30, 2025, cash used in investing activities was $12.7 million due to the purchase of marketable securities, offset by the maturities of marketable securities.

For the nine months ended September 30, 2024, cash used in investing activities was $38.0 million due to the purchase of marketable securities following completion of the 2024 Private Placement, offset by the maturities of marketable securities.

Financing Activities

For the nine months ended September 30, 2025, cash provided by financing activities was $4.6 million due to proceeds from the sale of common stock for $4.6 million, net of offering costs, pursuant to the Sales Agreement.

For the nine months ended September 30, 2024, cash provided by financing activities was $46.4 million due to proceeds from the 2024 Private Placement partially offset by the payment of issuance costs in connection therewith.

Contractual Obligations and Other Commitments

We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, preclinical studies and manufacturing, and other services for operating purposes. The amount and timing of contractual obligations may vary based on the timing of services. We can generally elect to discontinue the work under these agreements at any time. In the future, we could also enter into additional collaborative research, contract research, manufacturing and supplier agreements which may require upfront payments or long-term commitments of cash.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by the rules and regulations of the SEC that have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

Critical Accounting Policies and Estimates

During the nine months ended September 30, 2025, there were no material changes to our critical accounting policies and estimates from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.

Recently Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3, Summary of Significant Accounting Policies, in the notes accompanying the unaudited condensed consolidated interim financial statements included in Part I, Item 1 of this Quarterly Report.