eXoZymes: $7.49M loss and going-concern warning
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
eXoZymes Inc. reported no operating income and a net loss of $7,487,389 for the nine months ended September 30, 2026, compared with $6,503,698 a year earlier. Operating costs were $8,387,313, including research and development costs of $4,176,128, up 60.9% from the prior-year period. Net cash used in operations was $5,386,342, versus $4,528,240.
The June 2026 underwritten public and registered direct offerings generated $5,861,147 in net proceeds; eXoZymes issued 732,260 common shares and 366,130 investor warrants. Cash and cash equivalents were $3,258,901 at September 30, 2026. In a 100-liter pilot run by an independent manufacturing partner, the company reports 99% feedstock conversion and 99.6% NCT purity.
Management said working capital was insufficient to fund operations for 12 months from issuance of the financial statements and that substantial doubt exists about the company’s ability to continue as a going concern. Disclosure controls and procedures were ineffective as of September 30, 2026, and remediation of a previously identified material weakness remains ongoing.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- None.
Negative
- Major point. Forward-looking: it has not happened yet and may not happen.Working capital cannot fund 12 months of operations, management said.
- Major pointDisclosure controls were ineffective as of September 30, 2026.
- Moderate pointNine-month net loss rose 15.1% to $7,487,389 year over year.
Key Figures
Key Terms
going concern financial
warrant liability financial
down-round feature financial
cell-free reaction technical
IND-exempt study medical
GRAS determination regulatory
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did EXOZ lose in the first nine months of 2026?
How much net proceeds did EXOZ’s June 2026 offerings generate?
When are EXOZ’s NCT safety and pharmacokinetic milestones targeted?
How many EXOZ common shares were outstanding on November 13, 2026?
Why does EXOZ say substantial doubt exists about its ability to continue as a going concern?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR
THE QUARTERLY PERIOD ENDED
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As
of November 13, 2026, the number of outstanding shares of Common Stock was
TABLE OF CONTENTS
Page Number | |||
| PART I | FINANCIAL INFORMATION | 3 | |
| Item 1 - Condensed Unaudited Consolidated Financial Statements | 3 | ||
| Condensed Unaudited Consolidated Balance Sheets – September 30, 2026 and December 31, 2025 | 3 | ||
| Condensed Unaudited Consolidated Statements of Operations – Three months and Nine months ended September 30, 2026 and 2025 | 4 | ||
| Condensed Unaudited Consolidated Statements of Changes in Stockholders’ Equity – Three months and Nine months ended September 30, 2026 and 2025 | 5 | ||
| Condensed Unaudited Consolidated Statements of Cash Flows – Nine months ended September 30, 2026 and 2025 | 6 | ||
| Notes to Condensed Unaudited Consolidated Financial Statements | 7 | ||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 31 | |
| Item 4 | Controls and Procedures | 31 | |
| PART II | OTHER INFORMATION | 33 | |
| Item 1 | Legal Proceedings | 33 | |
| Item 1A | Risk Factors | 33 | |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 34 | |
| Item 3 | Defaults upon Senior Securities | 34 | |
| Item 4 | Mine Safety Disclosures | 34 | |
| Item 5 | Other Information | 34 | |
| Item 6 | Exhibits | 34 | |
In this Quarterly Report, unless otherwise indicated, the “Company”, “eXoZymes,” “we”, “us” or “our” refer to eXoZymes Inc. and, where appropriate, together with its wholly owned subsidiaries.
| 2 |
PART I – FINANCIAL INFORMATION
CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 2026 (Unaudited) | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Grants receivable | ||||||||
| Other receivable | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Finance lease right-of-use asset, net | ||||||||
| Tax Receivable | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Due to affiliates | ||||||||
| Operating lease liabilities – Current | ||||||||
| Finance lease liabilities – Current | ||||||||
| Total current Liabilities | ||||||||
| Deferred grant reimbursement | ||||||||
| Warrant Liability | - | |||||||
| Operating lease liabilities - Long term | ||||||||
| Finance lease liabilities - Long term | ||||||||
| Total liabilities | $ | $ | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | - | - | ||||||
| Common shares, | ||||||||
| Additional Paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 3 |
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Total operating income | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Information technology | ||||||||||||||||
| General and administrative-other | ||||||||||||||||
| Total general and administrative costs | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total operating costs | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expense): | ||||||||||||||||
| Interest income, net | ||||||||||||||||
| Offering costs | - | - | ( | ) | - | |||||||||||
| Change in fair value of derivative instruments | - | - | ||||||||||||||
| Other income | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average of common shares outstanding – basic and diluted | ||||||||||||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 4 |
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2026
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Common Stock | Additional
Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||
| Issuance of common stock due to vesting of RSU | - | - | - | - | ||||||||||||||||
| Issuance of Common stock for exercise of options | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, March 31, 2026 | ( | ) | ||||||||||||||||||
| Issuance of common stock in public offering | - | |||||||||||||||||||
| Issuance of common stock in registered direct offering | - | - | ||||||||||||||||||
| Issuance of common stock for compensation | - | |||||||||||||||||||
| Issuance of common stock for exercise of options | - | - | - | - | ||||||||||||||||
| Issuance of common stock due to vesting of RSU | - | - | - | - | ||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, June 30, 2026 | ( | ) | ||||||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||
| Issuance of common stock due to vesting of RSU | - | - | - | - | ||||||||||||||||
| Issuance of common stock for compensation | - | - | ||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Three and Nine Months Ended September 30, 2025
| Additional | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, March 31, 2025 | ( | ) | ||||||||||||||||||
| Stock options | - | - | - | |||||||||||||||||
| Issuance of common stock for compensation | - | |||||||||||||||||||
| Related Party Debt Forgiveness | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, June 30, 2025 | ( | ) | ||||||||||||||||||
| Stock options | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 5 |
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2026 | 2025 | |||||||
| Nine Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of Deferred Grant Reimbursement | ( | ) | ( | ) | ||||
| Depreciation of property and equipment | ||||||||
| Change in fair value of derivative instruments | ( | ) | - | |||||
| Non-cash lease expense and related adjustments | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | - | |||||||
| Grants receivable | ||||||||
| Other receivable | ( | ) | - | |||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Tax receivable | - | ( | ) | |||||
| Increase (decrease) in - | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Due to related party | ( | ) | ||||||
| Net cash (used in) operating activities | $ | ( | ) | ( | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Deferred grant reimbursement | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | $ | ( | ) | ( | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from issuance of common stock and warrants | - | |||||||
| Payments on finance lease obligations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | $ | ( | ) | |||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Forgiveness of debt | - | |||||||
See accompanying notes to condensed unaudited consolidated financial statements.
| 6 |
EXOZYMES INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three and Nine Months Ended September 30, 2026 and 2025
1. Organization and Description of Business
eXoZymes
Inc., formerly known as Invizyne Technologies Inc., was formed in Nevada in 2019 and its wholly owned subsidiary eXoZymes (CA) Inc.,
formerly known as Invizyne Technologies Inc., was formed in California in 2014, together (“eXoZymes”) eXoZymes was formed
with the vision of taking nature’s building blocks to make molecules of interest, effectively simplifying nature. eXoZymes’
technology is a differentiated and unique synthetic biology platform which would enable the scalable exploration of large number of molecules
and properties found in nature. eXoZymes was a majority owned technology development subsidiary of MDB Capital Holdings, LLC (“MDB”)
until the November 2024 initial public offering, when the holdings by MDB were diluted to a current
On May 5, 2025, the Company established a wholly owned subsidiary NCTx LLC, a Delaware Limited Liability Company. NCTx LLC is a special purpose subsidiary company focused on the development and production of N-trans-caffeoyltyramine - a very rare, plant-derived compound with emerging relevance in the areas of metabolic health, gut integrity, and liver function. The entity has had no business activities to date.
Going Concern
These
condensed unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will
continue to realize its assets and discharge its liabilities in the normal course of business. The Company incurred net losses of $
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q, and the rules and regulations of the Securities and Exchange Commission. All intercompany accounts and transactions have been eliminated in consolidation. Accordingly, these interim financial statements do not include all disclosures required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying condensed unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of September 30, 2026, and its results of operations, cash flows, and changes in stockholders’ equity for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year ending December 31, 2026.
These condensed unaudited consolidated financial statements and other information presented in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC.
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the calculation of right-of-use asset and lease liabilities, the estimated useful lives of property and equipment used in calculating depreciation, accruals for potential liabilities and stock-based compensation.
| 7 |
Recent Accounting Pronouncements
ASU 2024-03
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE) (ASU 2024-03), which requires disclosure of certain categories of expenses such as the purchase of inventory, employee compensation, depreciation, and intangible asset amortization that are components of existing expense captions presented on the face of the income statement. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of ASU 2024-03 on our disclosures.
Emerging Growth Company
The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such choice to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.
Concentration of Risk
The
Department of Energy has contributed
Revenue Recognition
The Company expects to generate revenues primarily from its strategic alliances. The strategic alliances with strategic collaborators typically contain multiple elements, including research and other licenses, research and development services, obligations to develop and manufacture pre-commercial and commercial material, and options to obtain additional research and development services. Such arrangements provide for various types of payments to us, including upfront fees, and funding of research and development services. Such payments are often not commensurate with the timing of revenue recognition and therefore result in deferral of revenue recognition.
The Company analyzes the collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808) to determine 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 that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and the collaboration partner are within the scope of other accounting literature. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606. If the Company concludes that some or all aspects of the arrangement are within the scope of ASC 808 and do not represent a transaction with a customer, the Company recognizes its allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. Pursuant to ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied. ASC 606 requires significant judgment and estimates and results in changes to, but not limited to: (i) the determination of the transaction price, including estimates of variable consideration, (ii) the allocation of the transaction price, including the determination of estimated selling price, and (iii) the pattern of recognition, including the application of proportional performance as a measure of progress on service-related promises and application of point-in-time recognition for supply-related promises.
| 8 |
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents.
The
Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured
by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”).
The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $
The
Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments.
On September 30, 2026, the Company had approximately $
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025:
Schedule of Financial Instruments Measured at Fair Value on Recurring Basis
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash and cash equivalents | - | - | ||||||||||||||
| Total Assets | - | - | ||||||||||||||
| Warrant liabilities | - | - | ||||||||||||||
| Total liabilities | - | - | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash and cash equivalents | - | - | ||||||||||||||
| Total fair value | - | - | ||||||||||||||
| Warrant liabilities | - | - | - | - | ||||||||||||
| Total liabilities | - | - | - | - | ||||||||||||
| 9 |
The fair value of certain assets and liabilities of the Company, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed unaudited consolidated balance sheets. The fair values of cash and cash equivalents, prepaid expenses and other, accounts payable and accrued expenses, and due to related party are estimated to approximate the carrying values as of September 30, 2026 and December 31, 2025.
Property and Equipment
Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statement of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:
Schedule of Property and Equipment Estimated Useful Lives
| Laboratory equipment | ||
| Furniture and fixtures | ||
| Leasehold improvements | Lesser of the lease duration or the life of the improvements |
Property and equipment consist of the following as of September 30, 2026 and December 31, 2025, respectively:
Schedule of Property and Equipment
| September 30, 2026 | December 31, 2025 | |||||||
| Laboratory equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
| 10 |
Research Grants
eXoZymes receives grant reimbursements from the Federal government, which are offset against research and development expenses in the consolidated statements of operations. In addition to actual reimbursements, eXoZymes also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the consolidated balance sheet.
Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of the nine months ended September 30, 2026 and 2025, respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables on September 30, 2026 and 2025, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying condensed unaudited consolidated financial statements.
Summary of grants receivable activity for the nine months ended September 30, 2026 and 2025, is presented below:
Schedule of Grants Receivable Activity
| 2026 | 2025 | |||||||
| Nine Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Grant costs expensed | ||||||||
| Grants for equipment purchased | ||||||||
| Grant fees | ||||||||
| Grant funds received | ( | ) | ( | ) | ||||
| Balance at end of period | $ | $ | ||||||
eXoZymes has two active grants, one from the National Institutes of Health (NIH) and one from the National Science Foundation (NSF). The NIH grant was awarded on July 1, 2026, and expires on June 30, 2028. The NSF grant was awarded on July 1, 2025, and expires on June 30, 2028. Both grants can be extended, or new phases can be granted, extending the expiration of the grant. None of the grants has commitments made by the parties, provisions for recapture, or any other contingencies, beyond complying with the terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how eXoZymes conducts its research activities, and eXoZymes is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. eXoZymes is permitted to draw down the research grants after incurring the related expenses.
On
July 1, 2025, the Company was awarded a key industrial partnership, with a $
Amounts
received under research grants are offset against the related research and development costs in the consolidated statements of operations.
For the nine months ended September 30, 2026 and 2025, grants amounting to $
For
the three months ended September 30, 2026 and 2025, grants amounting to $
Research and Development Costs
Research
and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to
consultants, and other expenses relating to the development of eXoZymes’s technology. For the nine months ended September 30, 2026
and 2025, research and development costs prior to offset of the grants amounted to $
For
the three months ended September 30, 2026 and 2025, research and development costs prior to offset of the grants amounted to $
| 11 |
Patent and Licensing Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts of the Company and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.
Patent
and licensing legal and filing fees and costs were $
Related Party and Due to Affiliates Expenses
The
Company had outstanding payables to MDB Capital Holdings, LLC of $
Segment Reporting
We
manage and operate the business as a single reportable operating segment, with the Company’s sole focus on the research and
commercialization of exozyme biosolutions. Our business is led by our chief executive officer, who is our Chief Operating Decision Maker
(“CODM”). The Company is required to apply the guidance in ASC 280 and identify significant segment expenses and other segment
items for its single reportable segment. The CODM manages the business on a consolidated basis and uses consolidated net
income, balance sheet and cashflow statement as reported to allocate resources and assess performance. In accordance with ASC 280, eXoZymes
concludes that consolidated net income is the measure of segment profit or loss that is required to be reported because it is the measure
determined in accordance with measurement principles most consistent with GAAP. We do not prepare discrete financial information with
respect to separate products. Accordingly, we view our business as
3. Equity
Equity
In
April 2022, pursuant to an equity subscription agreement the Company sold a total of
| 12 |
In
November 2024, the Company completed a private placement (“Concurrent Private Offering”) concurrently with the IPO, the Company
sold to accredited investors an aggregate of
In
November 2024, the Company issued warrants to underwriters in connection with the IPO. The Company issued
In
June 2026, under its shelf registration statement on Form S-3, the Company completed an underwritten public offering and a concurrent
registered direct offering of units at a price of $
The
warrants issued in the offerings (the “Warrants”) have an exercise price of $
The warrants outstanding, issued, exercised, and expired, along with their respective exercise prices and expiration dates, as of December 31, 2025, and for the nine months ended September 30, 2026, are presented below:
Schedule of Warrant Outstanding Issued Exercised and Expired
| Description | Number of Warrants | Exercise Price | Expiration Date | |||||||||
| Balance at 12/31/2025 | Various ( | |||||||||||
| Issued | ||||||||||||
| Exercised | 0 | - | ||||||||||
| Expired | 0 | - | ||||||||||
| Balance at 09/30/2026 | $ | Various ( | ||||||||||
4. Stock-Based Compensation
eXoZymes’
2020 Equity Incentive Plan (the “2020 Plan”), which was approved by the eXoZymes shareholders, permits grants to its officers,
directors, and employees for up to
eXoZymes
stock-based compensation was $
| 13 |
The Company measures the fair value of stock option awards using the Black-Scholes model, which requires the use of certain subjective assumptions, including expected term, expected volatility, and risk-free interest rate. These inputs are based on historical data and market conditions at the time of grant. The assumptions used for stock option grants during the periods presented are summarized in the table below:
Schedule of Stock Option Grants
| Grant Date | Shares Granted | Exercise Price ($) | Vesting Term | Expected Life (Years) | Risk-Free Rate | Expected Volatility | ||||||||||||||||
| 07/01/25 | % | % | ||||||||||||||||||||
| 07/30/25 | % | % | ||||||||||||||||||||
| 10/30/25 | % | % | ||||||||||||||||||||
| 01/14/26 | % | % | ||||||||||||||||||||
Note:
Contractual term (
On
November 15, 2025, an option holder exercised
During
the nine months ended September 30, 2026, option holders exercised a total of
As
of September 30, 2026, stock options to purchase
A summary of stock option activity for the nine months ended September 30, 2026, is presented below:
Schedule of Stock Options Activity
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | ||||||||||
| Stock options outstanding on December 31, 2025 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Expired | - | $ | - | - | ||||||||
| Forfeited / Cancelled | ( | ) | $ | |||||||||
| Stock options outstanding on September 30, 2026 | $ | |||||||||||
| Stock options exercisable on September 30, 2025 | $ | |||||||||||
| Stock options exercisable on September 30, 2026 | $ | |||||||||||
| 14 |
On
July 19, 2021, eXoZymes granted
On
March 28, 2022, eXoZymes granted
On
May 1, 2023, eXoZymes granted
On
July 1, 2025, eXoZymes granted
On
November 10, 2025, eXoZymes extended the lock up period for current employees that had unvested RSU’s. The Lock Up Agreement extended
the lock up period to April 1, 2026, as to all of the Common Shares (the “RSU Shares”), and thereafter one-twelfth (1/12)
of the RSU shares will be permanently released from the provisions of the Lock Up Agreement on the first of each month, starting as of
April 1, 2026, and continuing until the last release date of March 1, 2027. The extension of the Lock Up Agreement was voluntary and
of the
On
January 14, 2026, eXoZymes granted
During
the nine months ended September 30, 2026, an aggregate of
Schedule of Restricted Stock Units Activity
Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (in Years) | ||||||||||
| Restricted stock units outstanding on December 31, 2025 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Forfeited | - | - | - | |||||||||
| Restricted stock units outstanding on September 30, 2026 | $ | |||||||||||
| Vested Restricted stock units on September 30, 2025 | $ | |||||||||||
| Vested Restricted stock units on September 30, 2026 | $ | |||||||||||
| 15 |
5. Earnings Per Share
The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to holders of the Common Stockholders divided by the weighted average of the common shares outstanding for the period. Diluted EPS is like basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss
per common share is calculated by dividing net loss by the weighted-average number of shares of Common Stock outstanding during the period.
Basic and diluted net loss per common share are the same for all periods presented because the effect of warrants, stock options, and
restricted stock units was anti-dilutive. Potentially dilutive securities excluded from the computation totaled
Basic and fully diluted earnings (loss) per share is calculated as follows for the nine months ended September 30, 2026 and 2025:
Schedule of Basic and Diluted Earnings (Loss) Per Share
September 30, 2026 Common shares | September 30, 2025 Common shares | |||||||
| Net loss | $ | (7,487,389 | ) | $ | (6,503,698 | ) | ||
| Weighted average shares outstanding – basic and diluted | ||||||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | ||
The following financial instruments were not included in the diluted loss per share calculations as of the nine months ended September 30, 2026 and 2025 because their effect was anti-dilutive:
Schedule of Anti-dilutive Loss Per Share
| September 30, 2026 | September 30, 2025 | |||||||
| Warrants to purchase common stock | ||||||||
| Options | ||||||||
| Restricted stock awards units | ||||||||
| Total | ||||||||
| 16 |
6. Commitments and Contingencies
Legal Claims
The Company may be subject to legal claims and actions from time to time as part of its business activities. As of September 30, 2026 and 2025, the Company was not subject to any pending or threatened legal claims or actions.
External Risks Associated with the Company’s Business Activities
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.
Supply Chain Issues. As of September 30, 2026, the Company continues to monitor changes in tariffs and indirect trade restraints and the effects of the Persian Gulf conflict, and it does not believe they will have a significant impact on its business activities currently or in the near future.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Also, there is possible economic instability due to the possibility of tariffs and other economic changes due to government policy of the United States and other countries. Although unclear at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
7. Employee Benefit Plans
eXoZymes
sponsors an individual 401(k) defined contribution plan for the benefit of employees when eligible. The plan allows eligible employees
to contribute a portion of their annual compensation, not to exceed annual limits for the employee as established by the Department of
Treasury. eXoZymes makes matching contributions for participating employees up to a certain percentage of the employee contributions;
matching contributions were funded for the nine months ended September 30, 2026 and 2025. Benefits under this plan were available to
all employees, and employees become fully vested in the employer’s contribution upon receipt. A total of $
eXoZymes also provides health and related benefit plans for eligible employees.
8. Exclusive License Agreement (eXoZymes)
On April 19, 2019, eXoZymes entered into a license agreement (the “License Agreement”) with The Regents of the University of California (“The Regents”) for patent rights and associated technology relating to the biosynthetic platform being developed by the Company. Certain individuals named as inventors of the patent rights are also the founding stockholders of eXoZymes. One of the founders of eXoZymes was the head of the laboratory which was used in the research and development of patents and associated technology subject to the agreement with The Regents.
Under the License Agreement, eXoZymes holds an exclusive license of the patent rights and a non-exclusive license for the associated technology to make, have made, use, have used, sell, have sold, offer for sale, and import licensed products in the field of use. Under the License Agreement, eXoZymes paid an initial license fee and is to pay an annual license fee and royalties on net sales, a minimum annual royalty that is credited against the royalties on net sales, and a percentage of any sublicensing income. The net income royalty commences after the first commercial sale of a licensed product. As of September 30, 2026, there were no accrued royalties recorded.
Under the License Agreement, eXoZymes is required to achieve certain development milestones. eXoZymes is obligated to make payments upon achievement of certain sales thresholds, as defined in the License Agreement. As of September 30, 2026, the development milestones have been met.
| 17 |
The following net sales milestone payments have not yet been incurred. The net sales milestones do not have a deadline and are listed below as of September 30, 2026.
| ● | A payment of $ | |
| ● | A payment of $ |
The Regents have the right terminate the License Agreement for breaches of the License Agreement by eXoZymes
eXoZymes may terminate the License Agreement, in whole or in part as to a particular patent right, at any time by providing notice of termination to The Regents as defined in the License Agreement.
The
payments made to the Regents in connection with our license agreement with the Regents, from 2019 to September 30, 2026, have aggregated
$
Under
the License Agreement, the Company also issued
eXoZymes
accounts for the costs incurred in connection with the License Agreement in accordance with ASC Topic 730, Research and Development.
The Company paid license fees of $
9. Leases
For
operating leases, the Company records right-of-use assets and corresponding lease liabilities in the consolidated balance sheets for
all leases with terms longer than twelve months. The Company has
On
April 3, 2023, the Company executed a lease for office space next to the existing space at eXoZymes in the Los Angeles, California metropolitan
area.
In
April 2023, eXoZymes made changes to an existing lease agreement, which resulted in an
On
October 30, 2023,
| 18 |
eXoZymes entered into a 36-month equipment lease with Thermo Fisher Scientific in December 2024 for medical equipment to be used in research and development. The Company took possession of the equipment in May 2025. The lease agreement provides for a purchase option at the end of the lease term for a purchase value of the then fair market value of the equipment.
Discussions with management indicate that it is unlikely that the purchase option will be exercised at the end of the lease term. Some contributing factors to this decision include the uncertainty of the purchase price and the possible changes in technology over the next three years. Accordingly, an assumed purchase option is not included in the calculation of the total lease liability.
The
fair value of the equipment is documented in the lease agreement as $
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.
Schedule of Operating Leases
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Operating leases: | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | - | $ | - | ||||
| Finance leases: | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Finance lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
| Amortization of assets under finance lease | $ | $ | ||||||
| Interest | $ | |||||||
| 19 |
For
the nine months ended September 30, 2026 and 2025, the Company recognized operating lease expenses of $
As of September 30, 2026, the future minimum lease payments under non-cancelable operating and finance leases are as follows:
Schedule of Future Payments Due Under Operating and Finance Leases
| Year | Operating Lease | Financial Lease | ||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Total | $ | |||||||
| Less effects of discounting | ( | ) | ( | ) | ||||
| Total lease liabilities | $ | |||||||
10. Income Taxes
eXoZymes Inc. is a corporation for U.S. federal income tax purposes, incorporated in the State of Nevada. The Company wholly owns eXoZymes (CA) Inc., a corporation for U.S. federal income tax purposes incorporated in the State of California, and NCTx LLC, a limited liability company organized in the State of Delaware.
The
Company recognized income-tax expense of $0 for both the nine months ended September 30, 2026 and 2025, respectively. The effective tax
rates for the nine months ended September 30, 2026 and 2025, were
During
the third quarter of 2025, the Company recognized a discrete income-tax benefit of $
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of September 30, 2026 and December 31, 2025, the Company was in a cumulative loss position, based on losses incurred over the current and prior periods. Considering these cumulative losses and projections of future taxable income for the periods in which the deferred tax assets are deductible, the Company recorded a valuation allowance against all its net deferred tax assets as of the nine months ended September 30, 2026 and December 31, 2025. The Company intends to maintain a full valuation allowance on its net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of deferred tax assets considered realizable could materially increase in the future, and the amount of valuation allowance recorded could materially decrease if estimates of future taxable income are increased.
11. Stockholders’ Equity: Equity Offerings and Warrants
During the nine months ended September 30, 2026, the Company completed two equity offerings under its effective shelf registration statement on Form S-3 (Registration Statement No. 333-292781), as described below. Public Ventures LLC (doing business as MDB Capital) acted as underwriter for the underwritten public offering and as placement agent for the registered direct offering. The summary of the offerings is presented in the table below:
Schedule of Offerings
| Offering | Common shares | Investor warrants | Gross proceeds | Net proceeds | ||||||||||||
| Underwritten public offering (incl. over-allotment) | $ | $ | ||||||||||||||
| Registered direct offering | $ | $ | ||||||||||||||
| Total | $ | $ | ||||||||||||||
| 20 |
Underwritten public offering
On
June 9, 2026, the Company closed an underwritten public offering of units at a public offering price of $
Registered direct offering
On
June 30, 2026, the Company closed a registered direct offering of
Warrant terms
Investor Warrants.
The
Investor Warrants have an exercise price of $
Compensation Warrants.
The
Compensation Warrants have an exercise price of $
Classification and accounting
The Company evaluated the Investor Warrants and the Compensation Warrants under ASC 480 and ASC 815-40. The Investor Warrants were determined to be liability-classified because, upon the occurrence of certain Fundamental Transactions, the holders may require the Company or a successor entity to purchase the Warrants for cash based on their Black-Scholes Value. Accordingly, the Investor Warrants are recognized as warrant liabilities at fair value and are remeasured at fair value at each reporting date, with changes in fair value recognized in the statements of operations.
The Compensation Warrants were determined to be equity-classified and are recorded within stockholders’ equity. The gross proceeds from each offering were allocated between the Common Stock and the Investor Warrants based on their relative fair values.
The
fair value of the Investor Warrants was estimated using the Black-Scholes option-pricing model with the following assumptions: expected
volatility of approximately
The Company measures the Investor Warrant liability at fair value on a recurring basis. The following tables present its classification within the fair value hierarchy, the Level 3 inputs used to measure it, and a reconciliation of its beginning and ending fair value (ASC 820-10-50).
The following table summarizes the Company’s fair value hierarchy for the Investor Warrant liability, its only recurring fair value measurement, as of the dates presented:
Schedule of Fair Value Hierarchy for Investor Warrant Liability Recurring Fair Value Measurement
| Item | Level | At issuance | At September 30, 2026 | |||||||
| Investor Warrant liability | Level 3 | $ | $ | |||||||
The Company estimated the fair value of the Investor Warrants using the Black-Scholes option-pricing model at issuance, using the following Level 3 inputs:
Fair Value Measurement Inputs and Valuation Techniques
| Assumption | Underwritten Public Offering (Base Close & Over-Allotment) | Registered Direct (6/30/26) | ||||||
| Volatility | % | |||||||
| Risk-free rate | % | % | ||||||
| Remaining term | ||||||||
| Dividend yield | % | % | ||||||
| 21 |
The Company remeasured the Investor Warrant liability as of September 30, 2026 using the following Level 3 inputs:
| Assumption | September 30, 2026 (all outstanding Investor Warrants) | |||
| Volatility | % | |||
| Risk-free rate | % | |||
| Remaining term | ||||
| Dividend yield | % | |||
The following table provides a roll-forward of the fair value of the Investor Warrant liability for the period:
Schedule of fair value of Investor Warrant liability
| Total | ||||
| Beginning balance, December 31, 2025 | $ | - | ||
| Issuance | ||||
| Change in fair value | ( | ) | ||
| Ending balance, September 30, 2026 | $ | |||
Down-round feature
The Investor Warrants contain a down-round feature (the exercise-price reset described above). Because the Investor Warrants are classified as a liability and remeasured to fair value each reporting period, the reset is a contractual term of the fair-valued instrument, and its effect is reflected automatically in each period’s Black-Scholes remeasurement rather than through a separate analysis under ASU 2017-11 or a deemed-dividend calculation under ASC 260 (that framework applies only to equity-classified warrants). No qualifying issuance occurred during the period.
Subsequent measurement of the Investor Warrant liability
The
Investor Warrant liability is remeasured to fair value at each reporting date, with the change in fair value recognized in earnings.
The Investor Warrants issued in the underwritten public offering (base close, June 9, 2026, and over-allotment, June 17, 2026) and in
the registered direct offering (June 30, 2026) were outstanding at the Company’s September 30, 2026 balance sheet date and were
remeasured as of that date using the Black-Scholes pricing model. As a result of this remeasurement, the warrant liability was $
12. Subsequent Events
The Company has evaluated subsequent events through November 13, 2026, the date on which these financial statements were issued. Based on this evaluation, except as described below, the Company has determined that no subsequent events have occurred that would require recognition or disclosure in these financial statements.
On
October 1, 2026, the Company granted stock options to purchase an aggregate of
Subsequent to September 30, 2026, restricted stock units that had vested under the Company’s 2020 eXoZymes Equity Incentive Plan and 2025
Equity Incentive Plan were delivered, resulting in the issuance of
| 22 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Our platform uses exozymes that our scientists engineer with the help of AI-enhanced tools to run outside living cells and convert abundant feedstocks into valuable molecules at high purity.
We believe our cell-free approach removes a bottleneck that has limited cell-based synthetic biology. A living cell must stay alive, divert resources to growth and tolerate the product it makes, which limits yield, purity and economics. For example, we took N-trans-caffeoyltyramine (“NCT”), our lead program, from idea to a 100-liter pilot run by an independent manufacturing partner in under a year. That pilot run showed that our NCT biosolution can convert 99% of the feedstock into end product, at 99.6% purity, in hours rather than days. We believe this level of biosolution performance could enable new markets and business opportunities and provide us with a competitive advantage.
We believe the Powered by eXoZymes platform can eventually make many of the molecules synthetic biology set out to make. We are starting where we believe the economics are strongest: rare, high-value molecules, beginning with those that can contribute to human health, healthy aging, and wellness.
We apply the platform through a repeatable playbook:
| 1. | Molecule Prospecting. Using expert human review supported by artificial intelligence (AI) tools, we evaluate 100+ candidate molecules using multiple criteria. For instance, we assess each molecule’s potential use case(s), market size, technical fit with our cell-free platform, and our ability to establish intellectual property and other competitive barriers. We generally try to prioritize molecules whose value others have already demonstrated but whose commercialization has been limited by a manufacturing or supply bottleneck that we believe our platform may be able to address. | |
| 2. | Molecule Incubator. For promising candidate molecules, we initiate a proof-of-concept program to assess the advantages our platform may offer for production of the molecule (for example, whether we can develop a biosolution for it) and the technical challenges we would need to overcome. We discontinue programs at this stage that we determine to be too difficult or uneconomical. | |
| 3. | Product Accelerator. Programs that graduate from the Incubator become product line candidates. For a promising product line candidate, we seek to develop a biosolution capable of producing the molecule as a single, pure compound and with potential to be deployed at commercial scale and at a commercially viable cost. The intended output at this stage is a Tech Transfer Package that we may sell, license, contribute to a joint venture, or use for our own production. Where appropriate, we also develop a Product Transfer Package covering the formulation and application work required to turn the molecule into end products for its target markets. | |
| 4. | Commercialization. For each molecule, we intend to pursue a fast-to-market launch first and then pharmaceutical opportunities: | |
| (a) Fast-to-market. We seek to identify a use case that permits early market entry and revenue, and to bring the pure molecule to market through the fastest available route. Often the route will be as a supplement supported by a GRAS (Generally Recognized as Safe) determination, for products such as a skin care active ingredient, cosmetic, or fragrance. | ||
| (b) Pharmaceutical potential through engineered analogs. We intend to create new-to-nature analogs of molecules produced in the Accelerator that could become patentable drug candidates or improved products, and to develop them with partners. We expect to apply this strategy to NCT and to most other compounds in our portfolio. Any drug candidate would require substantial further development and regulatory approval. We will therefore aim to license these opportunities out to biotech and pharmaceutical companies. |
NCT is our lead program and the first we are taking through the full playbook. We selected NCT because we believe it represents an attractive standalone business opportunity and a strong demonstration of our platform’s capability to enable highly valuable molecules with accessibility challenges.
Our Platform
Our cell-free exozyme platform removes the living cell from the production process, and with it the constraints described above. Without a cell to keep alive, yields are not capped by growth or side-products, scale-up is more predictable, and each pathway can be tuned for a single target molecule.
| 23 |
We make each enzyme and then run the enzymes together in a cell-free reaction, typically as a single “one-pot” enzyme cascade, which we believe lowers capital needs. The process has three steps:
| 1. | Enzyme production. We produce our engineered enzymes (i.e., exozymes) in industrial microbial hosts such as E. coli (bacteria) or P. pastoris (yeast). | |
| 2. | Cell-free reaction. The exozymes convert a feedstock into the target molecule in a multi-step cascade, together with cofactors and other proprietary elements required to make the desired product. | |
| 3. | Harvest molecule. We isolate the target molecule. We believe our isolation and purification efforts are often much easier and lower cost compared to competing methods, as we can produce at very high purity and without the many co-products and impurities typical of fermentation or extraction from natural sources. |
We have built a library of thousands of engineered exozymes and acquired significant know-how in cell-free multi-enzyme systems, cofactor regeneration and downstream integration.
We believe our approach offers at least three advantages, each of which still has to be proven at commercial scale and over time:
| ● | Speed and cost. NCT reached pilot scale in under a year, which we attribute to our core platform design and capabilities, including the enzyme libraries and process know-how built on our earlier programs. Within one year of initiating our NCT program, Cayman Chemical, an independent partner, ran the full NCT biosolution process and achieved results consistent with, and in some cases better than, our internal runs. | |
| ● | Access to rare molecules. We can make compounds that are scarce in nature and, in some cases, better and new-to-nature analogs that we believe cannot be easily or cost-effectively made in any other way. | |
| ● | Repeatable pathway design. Enzymes and know-how built for one product can be reused for related molecules, which could shorten development of later products and result in high return on investment from our platform. |
AI-Enhanced Development
Building enzymes that work outside the cell, and that remain stable, active and compatible with one another in multi-step pathways, historically required years of trial and error. Our scientists use AI-enhanced tools to support the design, stabilization and screening of enzyme variants before laboratory work begins, which we believe has shortened the time needed to assemble a multi-step pathway from years to months.
In July 2026, we were selected for the U.S. Department of Energy’s Genesis Mission to extend our capability beyond enzyme design by building AI-powered digital twins of cell-free biomanufacturing to help streamline overall cascade design and optimization with Lawrence Berkeley National Laboratory. We believe these same capabilities will also allow our platform to physically produce analogs of naturally occurring molecules designed with computational tools faster, and with increased efficiency, which are often difficult to manufacture by other means.
NCT: Our Lead Program
A well-studied biological target with no approved therapy
NCT is a rare plant compound found in black peppercorns and other plants at less than 15 parts per million. NCT has been identified as the first potent, selective activator of HNF4α (Lee, Veeriah & Levine, Cell Death Dis 12:603 (2021)), a promising biological target with no approved therapy. HNF4α is a nuclear receptor that regulates genes controlling mitochondrial function, fat metabolism and gut barrier integrity, and is often described as the body’s “master metabolic switch.” It regulates thousands of genes central to liver, pancreas and gut function.
Regulatory Path
We intend to market NCT as a dietary supplement ingredient, using the trademark Tyferyn™. Claims will be limited to structure/function statements, with no disease claims at any stage, and are expected to expand in tiers as supporting evidence matures such as the data elements listed below:
| 1. | GRAS. A safety evaluation by an independent expert panel, built on published toxicology, to support a self-affirmed GRAS determination for market entry, targeted for the second quarter of 2027. | |
| 2. | Single-dose human PK study. An IND-exempt study in healthy adults, targeted for the first quarter of 2027, to confirm absorption and set the dose for future studies. | |
| 3. | Formulation and claims studies. Absorption-enhancing formulations and targeted studies to substantiate additional structure/function claims. |
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Statements about NCT have not been evaluated by the Food and Drug Administration. NCT is not intended to diagnose, treat, cure, or prevent any disease. Pre-clinical findings are from animal models and may not translate to humans.
Commercialization of NCT
We intend to commercialize NCT, using the trademark Tyferyn, through one or more of these three channels:
| ● | Ingredient sales. Supplying NCT/Tyferyn as an ingredient to supplement brands and formulators, including through offtake agreements. | |
| ● | A direct-to-consumer brand. Launching our own NCT/Tyferyn consumer brand, initially direct to consumers. We may also launch this brand through a joint venture or another co-owned structure. | |
| ● | Marketing alliances. Building partnerships that support NCT/Tyferyn across multiple sales channels, including online and retail once sales velocity is established. |
We are in the process of registering the trademark “Tyferyn™” for use in connection with our NCT products and branding.
Biosolution Pipeline
Supplements. We pursue two paths to market for products made with our cell-free biomanufacturing platform. Our first path to market, and our near-term focus, is dietary supplements, which we believe offer the fastest route to revenue. Each supplement program has a gemstone codename and a molecule identification number in the format EXOZ###. Our lead supplement program, AMBER, is based on N-trans-caffeoyltyramine (NCT) (EXOZ001), under the brand name Tyferyn, and supports gut and liver metabolism. AMBER has completed discovery and proof of concept. We are now running scale-up, establishing Generally Recognized as Safe (GRAS) status and conducting clinical studies in parallel. Two more supplement programs have completed proof of concept: SAPPHIRE (EXOZ003) for joint comfort, which has begun scale-up, and AMETHYST (EXOZ004) for mental stress, focus and energy. We are also evaluating a women’s health program focused on menopause support (EXOZ005), and we have screened and scored more than 50 additional molecules as potential supplement and cosmetic candidates.
Pharmaceutical Candidates. Our second path to market is pharmaceutical candidates based on analogs of natural products. Each candidate is identified by the number of its parent molecule followed by a letter, so EXOZ001a, for example, is an analog of NCT (EXOZ001). We intend to advance these candidates and then seek partnering or other exit opportunities, generally between IND-enabling studies and Phase 2 clinical trials. Current candidates include NCT analogs (EXOZ001a–c) for inflammatory bowel disease, MASH/NAFLD and obesity (as a potential adjunct to GLP-1 therapies); NIH grant-funded cannabinoid analogs (EXOZ002a–b) for undisclosed indications; and earlier-stage analogs of our SAPPHIRE and AMETHYST molecules for a potential non-addictive pain treatment (EXOZ003a) and a stress-related indication (EXOZ004a). All of our pharmaceutical candidates are in discovery or lead optimization, and none has begun IND-enabling studies or clinical trials.
We cannot guarantee that any of our programs will be successfully developed, obtain any required regulatory clearances or achieve commercial success.
Intellectual Property
We protect our technology through multiple layers of intellectual property via both trade secrets and patents. Across our platform, processes and products, we hold more than 30 issued patents and more than 40 pending patents covering methods to make natural compounds, composition of matter on new-to-nature molecules, and composition of matter on our engineered enzymes. As of November 11, 2026, we owned or exclusively licensed 14 patent families comprising 29 issued patents, 3 allowed patent applications, and 49 pending patent applications in the United States, Europe and 13 other countries and territories. Our issued patents cover processes for regulating and balancing the cofactors that power cell-free enzymatic reactions, which are foundational to our platform; processes for the cell-free production of cannabinoids and other prenylated compounds using engineered enzymes; and engineered prenyltransferase enzymes with increased thermostability. Our pending applications extend this protection to lower-cost processes for producing cofactors; cell-free processes for making N-trans-caffeoyltyramine (NCT), cannflavins and other prenylflavonoids; engineered berberine bridge enzymes for producing cyclized cannabinoids; and new-to-nature cannabinoids, including cyclized, deuterated and other non-natural analogs, for potential pharmaceutical use.
Results of Operations
The Company has determined its reporting units in accordance with ASC (Accounting Standards Codification) 280, Segment Reporting. The Company has one reportable segment for eXoZymes as a whole. A single management team that reports to the Chief Executive Officer comprehensively manages the business. Accordingly, the Company does not have separate reportable segments.
The Company’s consolidated statements of operations as discussed herein are presented below.
Consolidated Results of Operations for Nine months Ended September 30, 2026 and 2025
Nine Months ended September 30, | ||||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||||
| Total operating income | $ | - | $ | - | - | 0.0 | % | |||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 2,884,827 | 2,527,936 | 356,891 | 14.1 | % | |||||||||||
| Professional fees | 771,774 | 1,139,083 | (367,309 | ) | -32.2 | % | ||||||||||
| Information technology | 36,783 | 75,327 | (38,544 | ) | -51.2 | % | ||||||||||
| General and administrative-other | 517,801 | 683,870 | (166,069 | ) | -24.3 | % | ||||||||||
| Total general and administrative costs | 4,211,185 | 4,426,216 | (215,031 | ) | -4.9 | % | ||||||||||
| Research and development costs | 4,176,128 | 2,594,765 | 1,581,363 | 60.9 | % | |||||||||||
| Total operating costs | 8,387,313 | 7,020,981 | 1,366,332 | 19.5 | % | |||||||||||
| Net operating loss | (8,387,313 | ) | (7,020,981 | ) | (1,366,332 | ) | 19.5 | % | ||||||||
| Other income/(expense): | ||||||||||||||||
| Interest income, net | 37,287 | 231,742 | (194,455 | ) | -83.9 | % | ||||||||||
| Offering costs | (201,784 | ) | - | (201,784 | ) | -100.0 | % | |||||||||
| Change in fair value of derivative instruments | 946,386 | - | 946,386 | 100.0 | % | |||||||||||
| Other income | 118,035 | 285,541 | (167,506 | ) | -58.7 | % | ||||||||||
| Loss before income taxes | (7,487,389 | ) | (6,503,698 | ) | (983,691 | ) | 15.1 | % | ||||||||
| Income tax expense | - | - | - | 0.0 | % | |||||||||||
| Net loss | $ | (7,487,389 | ) | $ | (6,503,698 | ) | (983,691 | ) | 15.1 | % | ||||||
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General and Administrative Costs.
For the nine months ended September 30, 2026 and 2025, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The increase in compensation expenses for the nine months ended September 30, 2026, was primarily driven by higher stock-based compensation. | |
| ● | Professional Fees: The decrease in professional fees over the prior period was mainly due to lower consulting expenses related to business operations, as well as lower legal and financial audits expenses. | |
| ● | Information Technology Costs: The decrease in IT expenses during the nine months ended September 30, 2026, was associated with lower technology initiatives in the period. | |
| ● | Other General and Administrative Costs: The decrease for the nine months ended September 30, 2026, was primarily due to lower conference and travel expenses compared to the prior-year period. |
Research and Development Costs.
For the nine months ended September 30, 2026, research and development costs increased compared to the same period in 2025, primarily due to higher salary, bonus accruals, stock-based compensation, as well as a reduction in grant funding. It is important to note that the decrease in grant funding was not attributable to any specific event.
Other Income/(Expense):
For the nine months ended September 30, 2026 and 2025, respectively, other income/(expense) consisted of the following:
| ● | Interest Income, Net: The decrease in interest income, net for the nine months ended September 30, 2026, was primarily due to lower interest earned on cash balances compared to the prior-year period. | |
| ● | Offering Costs: The offering costs for the nine months ended September 30, 2026, represent costs from the Company’s June 2026 offering. No such costs were incurred in the prior-year period. | |
| ● | Change in Fair Value of Derivative Instruments: The gain for the nine months ended September 30, 2026, reflects the remeasurement of the warrant liability as of September 30, 2026. There were no derivative instruments outstanding in the prior-year period. | |
| ● | Other Income: The decrease in other income for the nine months ended September 30, 2026, was primarily due to non-recurring other non-operating income recognized in the prior-year period, partially offset by unrealized gains on investments and dividend income in the current period. |
Consolidated Results of Operations for three months Ended September 30, 2026 and 2025
Three Months ended September 30, | ||||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||||
| Total operating income | $ | - | $ | - | - | 0.0 | % | |||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 926,435 | 845,174 | 81,261 | 9.6 | % | |||||||||||
| Professional fees | 279,211 | 237,916 | 41,295 | 17.4 | % | |||||||||||
| Information technology | 14,719 | 8,175 | 6,544 | 80.0 | % | |||||||||||
| General and administrative-other | 209,121 | 214,181 | (5,060 | ) | -2.4 | % | ||||||||||
| Total general and administrative costs | 1,429,486 | 1,305,446 | 124,040 | 9.5 | % | |||||||||||
| Research and development costs | 1,616,962 | 1,216,762 | 400,200 | 32.9 | % | |||||||||||
| Total operating costs | 3,046,448 | 2,522,208 | 524,240 | 20.8 | % | |||||||||||
| Net operating loss | (3,046,448 | ) | (2,522,208 | ) | (524,240 | ) | 20.8 | % | ||||||||
| Other income/(expense): | ||||||||||||||||
| Interest income, net | 21,731 | 59,185 | (37,454 | ) | -63.3 | % | ||||||||||
| Offering costs | - | - | - | 0.0 | % | |||||||||||
| Change in fair value of derivative instruments | 773,527 | - | 773,527 | 100.0 | % | |||||||||||
| Other income | 12,662 | 176,032 | (163,370 | ) | -92.8 | % | ||||||||||
| Loss before income taxes | (2,238,528 | ) | (2,286,991 | ) | 48,463 | -2.1 | % | |||||||||
| Income tax expense | - | - | - | 0.0 | % | |||||||||||
| Net loss | $ | (2,238,528 | ) | $ | (2,286,991 | ) | 48,463 | -2.1 | % | |||||||
General and Administrative Costs.
For the three months ended September 30, 2026 and 2025, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The increase in compensation expenses for the three months ended September 30, 2026, was primarily driven by the hiring of new employees not funded by grants. | |
| ● | Professional Fees: The increase in professional fees over the prior period was mainly due to higher consulting expenses related to business operations and corporate legal fees. | |
| ● | Information Technology Costs: The increase in IT expenses during the three months ended September 30, 2026, was associated with higher software costs in the period. | |
| ● | Other General and Administrative Costs: The decrease for the three months ended September 30, 2026, was primarily due to lower conference expenses compared to the prior-year period. |
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Research and Development Costs.
For the three months ended September 30, 2026, research and development costs increased compared to the same period in 2025, primarily due to higher salary, bonus accruals, stock-based compensation and laboratory expenses, as well as a reduction in grant funding. It is important to note that the decrease in grant funding was not attributable to any specific event.
Other Income/(Expense):
For the three months ended September 30, 2026 and 2025, respectively, other income/(expense) consisted of the following:
| ● | Interest Income, Net: The decrease in interest income, net for the three months ended September 30, 2026, was primarily due to lower interest earned on cash balances compared to the prior-year period. | |
| ● | Change in Fair Value of Derivative Instruments: The gain for the three months ended September 30, 2026, reflects the remeasurement of the warrant liability as of September 30, 2026. There were no derivative instruments outstanding in the prior-year period. | |
| ● | Other Income: The decrease in other income for the three months ended September 30, 2026, was primarily due to non-recurring other non-operating income recognized in the prior-year period, as well as realized and unrealized losses on investments in the current period, partially offset by dividend income. |
Consolidated Balance Sheet as of September 30, 2026 and December 31, 2025
| September 30, 2026 | December 31, 2025 | $ Change | % Change | |||||||||||||
| ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 3,258,901 | $ | 3,039,343 | 219,558 | 7.2 | % | |||||||||
| Grants receivable | 216,923 | 517,359 | (300,436 | ) | -58.1 | % | ||||||||||
| Other receivable | 32,000 | - | 32,000 | 100.0 | % | |||||||||||
| Prepaid expenses and other current assets | 398,903 | 382,886 | 16,017 | 4.2 | % | |||||||||||
| Total current assets | 3,906,727 | 3,939,588 | (32,861 | ) | -0.8 | % | ||||||||||
| Property and equipment, net | 895,929 | 764,401 | 131,528 | 17.2 | % | |||||||||||
| Operating lease right-of-use asset, net | 882,839 | 1,053,641 | (170,802 | ) | -16.2 | % | ||||||||||
| Finance lease right-of-use asset, net | 71,984 | 108,682 | (36,698 | ) | -33.8 | % | ||||||||||
| Tax receivable | 105,205 | 105,205 | - | 0.0 | % | |||||||||||
| Total assets | $ | 5,862,684 | $ | 5,971,517 | (108,833 | ) | -1.8 | % | ||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Accounts payable | $ | 1,330,404 | $ | 1,235,337 | 95,067 | 7.7 | % | |||||||||
| Due to affiliates | 13,224 | 5,330 | 7,894 | 148.1 | % | |||||||||||
| Operating lease liabilities – Current | 305,943 | 281,979 | 23,964 | 8.5 | % | |||||||||||
| Finance lease liabilities – Current | 46,822 | 44,255 | 2,567 | 5.8 | % | |||||||||||
| Total current Liabilities | 1,696,393 | 1,566,901 | 129,492 | 8.3 | % | |||||||||||
| Deferred grant reimbursement | 196,136 | 90,365 | 105,771 | 117.0 | % | |||||||||||
| Warrant Liability | 1,129,085 | - | 1,129,085 | 100.0 | % | |||||||||||
| Operating lease liabilities - Long term | 620,644 | 852,575 | (231,931 | ) | -27.2 | % | ||||||||||
| Finance lease liabilities - Long term | 28,983 | 64,427 | (35,444 | ) | -55.0 | % | ||||||||||
| Total liabilities | $ | 3,671,241 | $ | 2,574,268 | 1,096,973 | 42.6 | % | |||||||||
| Stockholders’ Equity: | ||||||||||||||||
| Preferred stock | - | - | - | 0.0 | % | |||||||||||
| Common shares | 9 | 8 | 1 | 12.5 | % | |||||||||||
| Additional Paid-in-capital | 30,783,515 | 24,501,933 | 6,281,582 | 25.6 | % | |||||||||||
| Accumulated deficit | (28,592,081 | ) | (21,104,692 | ) | (7,487,389 | ) | 35.5 | % | ||||||||
| Total equity | 2,191,443 | 3,397,249 | (1,205,806 | ) | -35.5 | % | ||||||||||
| Total liabilities and equity | $ | 5,862,684 | $ | 5,971,517 | (108,833 | ) | -1.8 | % | ||||||||
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Financial Condition:
The decrease in total assets was due to changes in several asset classes, primarily a decrease in grants receivable, driven by completion of certain grants and timing of grant drawdowns; a decrease in operating lease right-of-use assets, resulting from the amortization of the right-of-use assets during the period; and a decrease in finance lease right-of-use assets of $36,698 , resulting from the periodic amortization of the asset. These decreases were partially offset by an increase in cash and cash equivalents, reflecting the net proceeds of the June 2026 offerings; an increase in property and equipment, mostly explained by purchases of laboratory equipment, net of depreciation for the period; and an increase in prepaid expenses, mainly related to software prepayments.
Total liabilities increased for the nine months ended September 30, 2026, primarily due to the recognition of a warrant liability related to the warrants issued in connection with the Company’s June 2026 offerings, as well as increases in deferred grant reimbursement, accounts payable, and amounts due to affiliates. These increases were partially offset by reductions in long-term operating lease liabilities and finance lease liabilities.
The equity decrease was due to the net loss generated by operations, partially offset by the net proceeds of the June 2026 offerings and stock-based compensation recognized during the period.
Liquidity and Capital Resources – September 30, 2026 and 2025
The Company’s consolidated statements of cash flows as discussed herein are presented below:
Nine Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) operating activities | $ | (5,386,342 | ) | (4,528,240 | ) | |||
| Net cash (used in) investing activities | (222,368 | ) | (75,228 | ) | ||||
| Net cash provided by (used in) financing activities | 5,828,268 | (17,155 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | $ | 219,558 | (4,620,623 | ) | ||||
On September 30, 2026, the Company had working capital of $2,210,334 as compared to working capital of $2,372,687 on December 31, 2025, reflecting a decrease in working capital of $162,353. This decrease in working capital was primarily the result of a $300,436 decrease in grants receivable and a $129,492 increase in current liabilities, mainly accounts payable, partially offset by a $219,558 increase in cash and cash equivalents, as the net proceeds of the June 2026 offerings exceeded the cash used to fund operations. On September 30, 2026, the Company had cash of $3,258,901 available to fund its operations.
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In March 2025, the Company received an additional grant in the amount of $283,805 from the National Institutes of Health (NIH) BioClick. The BioClick grant focuses on a cell-free high-throughput platform for engineering of enzymatic group transfer reactions. The Company intends to pursue additional grants from time to time, which if granted to the Company will further improve its working capital position.
On July 1, 2025, the Company was awarded a key industrial partnership, with a $3 million share of a $9.2 million grant. U.S. National Science Foundation (NSF) funded the project under the CFIRE program aimed at transforming the scalability and accessibility of cell-free systems to expand real-world applications. The grant is led by Georgia Tech with a coalition of top academic and industry groups.
On June 9, 2026, the Company closed an underwritten public offering of units and, on June 30, 2026, a concurrent registered direct offering of units under its shelf registration statement, for aggregate net proceeds of $5,861,147.
Given the Company’s current operating cash burn, its existing working capital as of September 30, 2026, is not sufficient to fund operations for twelve months from the date these condensed unaudited consolidated financial statements are issued. Accordingly, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern one year from the date that these unaudited condensed consolidated financial statements are issued. Beyond the offerings completed in June 2026, the Company will continue to pursue non-dilutive funding opportunities, including grants, and may seek additional offerings under its shelf registration statement, institutional or bank financing, and the sale or licensing of intellectual property. The Company does not have any committed sources of additional financing, and there is no assurance that such funding will be available on commercially reasonable terms, if at all. The Company’s ability to continue its operations and meet its long-term obligations will depend on securing additional financial resources or ultimately achieving profitable operations.
Operating Activities.
For the nine months ended September 30, 2026 and 2025, operating activities utilized cash of $5,386,342 and $4,528,240, respectively. The increase in cash used in operations was primarily driven by increased research and development activity, partially offset by lower general and administrative costs.
Investing Activities.
For the nine months ended September 30, 2026 and 2025, investing activities used net cash of $222,368 and $75,228, respectively, primarily related to purchases of laboratory equipment of $367,583 and $94,929, respectively, partially offset by deferred grant reimbursements for equipment of $145,215 and $19,701, respectively.
Financing Activities.
For the nine months ended September 30, 2026, financing activities provided net cash of $5,828,268, consisting of net proceeds of $5,861,146 from the June 2026 underwritten public offering and registered direct offering, partially offset by cash payments of $32,878 related to the Company’s finance lease obligations.
For the nine months ended September 30, 2025, financing activities used net cash of $17,155, related to payments on the Company’s finance lease obligations.
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Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have identified certain accounting policies as being critical because they require us to make difficult, subjective, or complex judgments about matters that are uncertain. We believe that the judgment, estimates, and assumptions used in the preparation of our condensed unaudited consolidated financial statements are appropriate given the factual circumstances at the time. However, actual results could differ, and the use of other assumptions or estimates could result in material differences in our results of operations or financial condition. Our critical accounting estimates are:
Accounting for Research Grants
eXoZymes receives grant reimbursements, which are offset against research and development expenses in the consolidated statements of operations. In addition to actual reimbursements, eXoZymes also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the consolidated balance sheet.
Grants that operate on a reimbursement basis are recognized on the accrual basis and are recorded as offsets to expenses, to the extent of disbursements and commitments for allowable expenses incurred as of September 30, 2026, that are expected to be reimbursed in the subsequent period. Management considers the grants receivable as of September 30, 2026, to be fully collectible, based on historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on grants receivable was recorded in the accompanying condensed unaudited consolidated financial statements.
Research grants received from organizations are subject to the contract agreement as to how eXoZymes conducts its research activities, and eXoZymes is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. eXoZymes is permitted to draw down (a process of submitting expenses for reimbursement) the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the Company’s consolidated statement of operations.
Summary of Business Activities and Plans
In January 2026, eXoZymes established a shelf registration (Form S-3) to offer up to $50.0 million of securities including common stock, preferred stock, debt, warrants, subscription rights or units, in one or more future offerings.
Under the shelf registration statement, in June 2026 the Company completed an underwritten public offering and a concurrent registered direct offering of units, underwritten by Public Ventures, LLC (d/b/a MDB Capital), resulting in the issuance of 732,260 shares of common stock and 366,130 warrants for net proceeds of $5,861,147.
External Risks Associated with the Company’s Business Activities
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.
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Supply Chain Issues. The Company continues to monitor changes in tariffs and indirect trade restraints and the results of the conflict in the Persian Gulf. The Company does not currently expect that supply chain issues will have a significant impact on its business activities.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Also, there is possible economic instability due to the possibility of tariffs and other economic changes due to government policy of the United States and other countries. Although unclear at this time, an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
Technology. The Company’s endeavors to create and bring new technologies to the market may never come to fruition or might not reach a level of development sufficient for commercial viability. Even if they do achieve a commercial level of development, the acceptance of these technologies within the marketplace is uncertain. There’s a possibility that the technologies they develop may not gain widespread or timely acceptance. Moreover, technologies from our Company that undergo regulatory scrutiny, testing, and approval may ultimately fail to receive the necessary approvals from relevant regulatory bodies.
Trends, Events and Uncertainties
Other than as discussed above, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company, with the participation of the Chief Executive Officer and VP of Finance, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in internal control over financial reporting described below, the Chief Executive Officer and VP of Finance concluded that, as of September 30, 2026, the disclosure controls and procedures were not effective at the reasonable assurance level. In light of this fact, the Company has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in the internal control over financial reporting, the condensed unaudited consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly state, in all material respects, the financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
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Ongoing Remediation of Previously Identified Material Weakness
The Company is implementing measures designed to ensure that control deficiencies contributing to the previously disclosed material weakness are remediated, such that these controls are designed, implemented, and operating effectively. These remediation actions are ongoing, and they include our expansion of our controls or control designs based on updated enhanced risk assessments. We have redesigned the financial reporting process, to remediate the previously identified material weakness. We expect these changes to materially improve our internal controls.
The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Other than the material weakness remediation efforts underway, there were no changes in the internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures
The Company’s management, including the Chief Executive Officer and VP of Finance, believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that the disclosure of controls and procedures or the internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. We believe that from time to time we will have commercial disputes arising in the ordinary course of our business.
Item 1A. Risk Factors
In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other registration statements, reports and periodic filings with the SEC that could materially and adversely affect our business, financial condition, and results of operations. The risk factors we have identified and discussed, however, do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.
Additional Risk Factors
Management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern.
Given the Company’s current operating cash burn, its existing working capital as of September 30, 2026, is not sufficient to fund operations for twelve months from the date these condensed unaudited consolidated financial statements are issued, and management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Beyond the offerings completed in June 2026, the Company will continue to pursue non-dilutive funding opportunities, including grants, and may seek additional offerings under its shelf registration statement, institutional or bank financing, and the sale or licensing of intellectual property. The Company does not have any committed sources of additional financing, and there is no assurance that such funding will be available on commercially reasonable terms, if at all. The Company’s ability to continue its operations and meet its long-term obligations will depend on securing additional financial resources or ultimately achieving profitable operations.
Changes to United States tariff and import/export regulations may have an adverse effect on our business, financial condition and results of operations.
The United States has enacted and continues to enact significant new tariffs, and President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy. There has been and are ongoing discussions and commentaries regarding potential significant changes to U.S. trade policies, treaties and tariffs. There exists significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global and domestic economic conditions, whether or not there will be a recession, and the stability of global and domestic financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. These actions and policies may adversely affect the ability of the Company and our subsidiaries to fund their operations, affect our ability to develop products and work with partner companies and generally carry on our respective businesses. Although it is not yet possible to assess their impact, any of these factors could depress economic activity and restrict access to suppliers or customers, hinder our ability to obtain funding from the government through grants and from investors, and have a material adverse effect on our overall business, financial condition and results of operations.
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Government Action on tariffs and research grants and other funding may impede our ability to conduct our research and to raise capital by and for our partner companies and other clients.
Early 2025 federal government actions to impose tariffs, to change trade policies, to change immigration policies, and to limit research grants and other forms of federal government funding, including direct government grants and the funding of universities and research enterprises. These government actions separately or together may cause disruption to our consolidated business activities based on their direct and indirect effect on our partner companies and our clients for our product solutions. Many of these government actions have been only recently implemented, others are being threatened, and many will be ongoing, changed or abandoned. Therefore, the full impact has yet to be realized by the Company and its partner companies and clients. Nonetheless, (i) tariffs are likely to increase the cost of doing business in the general economy and to make it more difficult to obtain items where imported equipment is required by our own activities and the activities of our partner companies and clients, (ii) ending or reducing research funding is likely to make it more difficult to find collaborative research partners to work with us and our partner companies as government funding is an indirect support for research and product development activities, and (iii) the curtailment of direct funding will have an immediate adverse impact on our partner companies and clients and their ability to continue their development work based on our solutions. We also believe that as these policies are implemented, it will make raising capital from private investors far more difficult, as they will want to know if the Company will be able to use the proceeds effectively and will be of sufficient amount.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Director and Officer Trading Arrangements
During
our quarter ended September 30, 2026, none of our directors or executive officers
Item 6. Exhibits
The documents listed in the Exhibit Index of this Form 10-Q are incorporated by reference or are filed with this Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in Monrovia, California, on its behalf by the undersigned, thereunto duly authorized.
| EXOZYMES INC. | ||
| (the “Registrant”) | ||
| November 13, 2026 | By: | /s/ Michael Heltzen |
| Michael Heltzen | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| November 13, 2026 | By: | /s/ Fouad Nawaz |
| Fouad Nawaz | ||
| VP of Finance (Principal Financial and Accounting Officer) | ||
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EXHIBIT INDEX
| Exhibit | ||
| Number | Description of Exhibit | |
| 31.1 * | Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 * | Certification of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1** | Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2** | Certification of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Schema | |
| 101.CAL* | Inline XBRL Taxonomy Calculation Linkbase | |
| 101.DEF* | Inline XBRL Taxonomy Definition Linkbase | |
| 101.LAB* | Inline XBRL Taxonomy Label Linkbase | |
| 101.PRE* | Inline XBRL Taxonomy Presentation Linkbase | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| ** | Furnished herewith. |
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