Cullgen $300M all-stock deal expands Gyre Therapeutics (Nasdaq: GYRE)
Gyre Therapeutics, Inc. filed Amendment No. 1 to a current report to add audited and interim financial statements for its newly acquired subsidiary Cullgen Inc. and unaudited pro forma condensed combined financials following their all-stock merger valuing Cullgen at approximately $300 million.
Cullgen generated $15,373 (in thousands) of collaboration revenue in 2025, primarily from an Astellas agreement, and recorded a net loss of $10,805 (in thousands), driven by research and development expenses of $19,330 (in thousands) and general and administrative expenses of $10,246 (in thousands). Year-end cash and cash equivalents were $12,122 (in thousands) with short-term investments of $28,085 (in thousands).
For the three months ended March 31, 2026, Cullgen reported collaboration revenue of $1,911 (in thousands) versus $8,513 (in thousands) a year earlier and a net loss of $8,719 (in thousands), leading to an accumulated deficit of $144,834 (in thousands). Management states that existing cash, cash equivalents and short-term investments are expected to fund operations for at least 12 months, while the company continues to anticipate ongoing operating losses.
Positive
- None.
Negative
- None.
Filing Explained
The acquisition is complete, but its equity consideration includes convertible preferred stock; conversion remains constrained by a 19.99% pre-approval cap.
The
The Cullgen merger closed on
Under the disclosed exchange terms, some Cullgen holders received Gyre Series B Convertible Preferred Stock and other holders received common stock; each Series B share is convertible into five common shares, subject to the stated conditions.
Before approval of the Conversion Proposal, Gyre may not issue more than
The Conversion Proposal is the named unresolved item that will determine whether conversion-related issuance can proceed beyond that pre-approval limit.
8-K Event Classification
2 items: 2.02, 9.01
2 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
2025 Collaboration Revenue: 15,373 (in thousands of $)
2025 Net Loss: -10,805 (in thousands of $)
Cash and Cash Equivalents: 12,122 (in thousands of $)
+5 more
8 metrics
2025 Collaboration Revenue
15,373 (in thousands of $)
Collaboration revenue for the year ended December 31, 2025
2025 Net Loss
-10,805 (in thousands of $)
Net loss for the year ended December 31, 2025
Cash and Cash Equivalents
12,122 (in thousands of $)
Balance at December 31, 2025
Short-term Investments
28,085 (in thousands of $)
Balance at December 31, 2025
Accumulated Deficit
144,834 (in thousands of $)
Accumulated deficit as of March 31, 2026
Q1 2026 Collaboration Revenue
1,911 (in thousands of $)
Collaboration revenue for the three months ended March 31, 2026
Q1 2026 Net Loss Attributable to Common Stockholders
-12,655 (in thousands of $)
Three months ended March 31, 2026, including preferred stock accretion
Cullgen Merger Valuation
approximately $300 million
Equity value of Cullgen in all-stock acquisition by Gyre
Key Terms
unaudited pro forma condensed combined balance sheet, redeemable convertible preferred stock, collaboration revenue, ASC 606, +2 more
6 terms
unaudited pro forma condensed combined balance sheet financial
"the unaudited pro forma condensed combined balance sheet of Gyre and Cullgen"
redeemable convertible preferred stock financial
"Redeemable convertible preferred stock, $0.0001 par value per share"
A redeemable convertible preferred stock is a special class of company shares that combines three features: it pays priority dividends like a safer, higher-ranking share; it can be converted into regular common shares so holders can join in upside; and it can be redeemed, meaning the company can buy it back for cash. For investors this matters because it offers a mix of downside protection and potential upside, but can change ownership stakes (dilution) and cash obligations depending on whether it’s converted or redeemed.
collaboration revenue financial
"Collaboration revenue $ 15,373"
Payments a company receives from business partners under joint development, commercialization, or licensing agreements—often including upfront fees, milestone payments and a share of product sales—earned as part of a formal collaboration. Investors care because this income can validate a company’s technology, boost cash flow and reduce the cost of bringing products to market, but it is often lumpy and contingent on future milestones and partner performance, so it affects revenue predictability and valuation.
ASC 606 financial
"accounts for those payments within the scope of ASC 606"
A U.S. accounting standard that sets consistent rules for when and how companies record revenue from contracts with customers, focusing on the transfer of promised goods or services. It matters to investors because it affects the timing and amount of reported sales and profit—like deciding whether a contractor can count payment when a job starts, progresses, or finishes—so it improves comparability and helps assess a company's true economic performance.
right-of-use assets financial
"Operating lease right-of-use assets 2,478"
Right-of-use assets are the rights a company gains to use a physical space or equipment under a lease agreement. They are recorded as assets on the company's balance sheet, reflecting the value of future benefits from the leased item. For investors, these assets provide a clearer picture of a company's obligations and resources related to leasing arrangements, helping to assess its financial health and operational commitments.
Section 382 financial
"Pursuant to Internal Revenue Code Sections 382 and 383"
Section 382 is a U.S. tax rule that limits how much of a company’s past tax losses and other tax attributes can be used to offset future taxable income after the company experiences an ownership change. For investors, it matters because a takeover or large shift in ownership can sharply reduce the tax value of those losses—think of it as a speed limit on how quickly a new owner can use prior losses to lower future taxes, which affects after‑tax earnings and company valuation.
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FAQ
What does Gyre Therapeutics (GYRE) disclose in this 8-K/A amendment about the Cullgen merger?
The amendment adds audited 2025 and Q1 2026 financials for Cullgen and unaudited pro forma combined statements, reflecting Gyre’s all-stock acquisition of Cullgen valued at approximately $300 million and making Cullgen a wholly owned subsidiary.
How did Cullgen perform financially in 2025 before joining Gyre Therapeutics (GYRE)?
Cullgen recorded $15,373 (in thousands) of collaboration revenue and a net loss of $10,805 (in thousands) for 2025. Expenses were led by research and development at $19,330 (in thousands) and general and administrative costs of $10,246 (in thousands).
What were Cullgen’s Q1 2026 results now reported by Gyre Therapeutics (GYRE)?
For the three months ended March 31, 2026, Cullgen posted collaboration revenue of $1,911 (in thousands) and a net loss of $8,719 (in thousands). Net loss attributable to common stockholders was $12,655 (in thousands), including preferred stock accretion.
What is Cullgen’s cash position as presented in Gyre Therapeutics’ (GYRE) amendment?
At December 31, 2025, Cullgen held $12,122 (in thousands) in cash and cash equivalents and $28,085 (in thousands) in short-term investments. Management expects these resources, plus cash equivalents, to fund operations for at least the next 12 months.
How large is Cullgen’s accumulated deficit according to Gyre Therapeutics (GYRE)?
Cullgen’s accumulated deficit was $132,179 (in thousands) at December 31, 2025 and increased to $144,834 (in thousands) by March 31, 2026, reflecting continued operating losses as the company advances its biopharmaceutical research pipeline.
What collaboration revenue sources for Cullgen are highlighted by Gyre Therapeutics (GYRE)?
Cullgen’s revenue comes from collaboration and license agreements, notably a June 2023 deal with Astellas that included a $35,000 (in thousands) upfront payment. 2025 collaboration revenue totaled $15,373 (in thousands), split between partners in the United States and China.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 4, 2026
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (858 ) 284-0115
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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The Nasdaq Capital Market
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
INTRODUCTORY NOTE
This Amendment No. 1 on Form 8-K/A (“Amendment No. 1”) amends the Current Report on Form 8-K of Gyre Therapeutics, Inc., a Delaware corporation (the “Company” or “Gyre”),
filed on May 4, 2026 (the “Original Report”), in which the Company reported, among other events, the closing of the Merger (as defined in the Original Report) with Cullgen Inc., a Delaware corporation (“Cullgen”), on May 4, 2026 (the “Closing Date”).
This Amendment No. 1 includes (i) the financial statements of Cullgen as of and for the three months ended March 31, 2026 and the year ended December 31, 2025, and (ii) the
unaudited pro forma condensed combined balance sheet of Gyre and Cullgen as of March 31, 2026 and the unaudited pro forma condensed combined statement of operations of Gyre and Cullgen for the three months ended March 31, 2026 and the year ended
December 31, 2025 and the related notes.
This Amendment No. 1 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or its
subsidiaries, including Cullgen, subsequent to the filing date of the Original Report. The information previously reported in or filed with the Original Report is hereby incorporated by reference to this Form 8-K/A.
| Item 2.02. |
Results of Operations and Financial Condition.
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This Amendment No. 1 includes (i) the financial statements of Cullgen as of and for the three months ended March 31, 2026 and the year ended December 31, 2025, and (ii) the
unaudited pro forma condensed combined balance sheet of Gyre and Cullgen as of March 31, 2026 and the unaudited pro forma condensed combined statement of operations of Gyre and Cullgen for the three months ended March 31, 2026 and the year ended
December 31, 2025 and the related notes.
The information set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.
| Item 9.01. |
Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired
The financial statements of Cullgen as of and for the three months ended March 31, 2026 and the year ended December 31, 2025, and the related notes thereto are attached as
Exhibit 99.1 and are incorporated herein by reference.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined balance sheet of Gyre and Cullgen as of March 31, 2026 and the unaudited pro forma condensed combined statement
of operations of Gyre and Cullgen for the three months ended March 31, 2026 and the year ended December 31, 2025 and 2024 and the related notes are attached as Exhibit 99.2 and are incorporated herein by reference.
(d) Exhibits
EXHIBIT INDEX
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Exhibit
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Description
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23.1
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Consent of Ernst & Young Hua Ming LLP, independent registered public accounting firm of Cullgen Inc.
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99.1
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Financial statements of Cullgen Inc. as of and for the three months ended March 31, 2026 and the year ended December 31, 2025.
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99.2
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Unaudited pro forma condensed combined balance sheet of Gyre Therapeutics, Inc. and Cullgen Inc. as of March 31, 2026 and the unaudited pro forma condensed
combined statement of operations for the three months ended March 31, 2026 and the years ended December 31, 2025 and 2024.
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104
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Cover Page Interactive Data File (formatted as Inline XBRL).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Gyre Therapeutics, Inc.
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Date: July 15, 2026
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By:
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/s/ Ying Luo
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Name:
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Ying Luo
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Title:
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Chief Executive Officer
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Exhibit 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Cullgen Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Cullgen Inc. (the Company) as of December 31, 2025, the related consolidated statements of comprehensive loss,
redeemable convertible preferred stock and stockholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting
principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we
are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young Hua Ming LLP
We have served as the Company’s auditor since 2025.
Shanghai, the People’s Republic of China
July 15, 2026
1
INDEX TO CULLGEN’S CONSOLIDATED FINANCIAL STATEMENTS
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Page
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Consolidated Balance Sheet as of December 31, 2025
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3
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Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2025
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4
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Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the
Year Ended December 31, 2025
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5
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Consolidated Statement of Cash Flows for the Year Ended December 31, 2025
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6
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Notes to audited Consolidated Financial Statement for the Year Ended December 31, 2025
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7
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2
Index
Cullgen Inc.
Consolidated Balance Sheet
(in thousands, except share and per share data)
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|
December 31,
2025
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|||
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Assets
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||||
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Current assets:
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||||
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Cash and cash equivalents
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$
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12,122
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Short-term investments
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28,085
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Prepaid expenses and other current assets
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6,786
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Amounts due from related parties
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-
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Total current assets
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46,993
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Non-current assets:
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Property and equipment, net
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3,951
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Operating lease right-of-use assets
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2,478
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Other non-current assets
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209
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Total non-current assets
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6,638
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Total assets
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$
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53,631
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Liabilities, redeemable convertible preferred stock, and stockholders’ deficit
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Current liabilities:
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Accounts payable
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$
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1,211
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Accrued expenses and other current liabilities
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2,633
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Operating lease liabilities, current
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483
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Deferred revenue, current
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1,170
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Total current liabilities
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5,497
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Non-current liabilities:
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Operating lease liabilities, non-current
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2,001
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Deferred revenue, non-current
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57
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Total non-current liabilities
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2,058
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Total liabilities
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7,555
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Commitments and contingencies (Note 15)
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Redeemable convertible preferred stock, $0.0001 par value per share, 57,821,355 shares authorized, 57,821,355 shares issued and outstanding as of
December 31, 2025; aggregate liquidation preference of $116,000 as of December 31, 2025.
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173,467
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Stockholders’ deficit:
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Common stock, $0.0001 par value per share, 143,329,269 shares authorized, 10,023,615 shares issued and outstanding as of December 31, 2025
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1
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Additional paid-in capital
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5,127
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Accumulated deficit
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(132,179
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)
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Accumulated other comprehensive loss
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(340
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)
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Total stockholders’ deficit
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(127,391
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)
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Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
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$
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53,631
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The accompanying footnotes are an integral part of these consolidated financial statements.
3
Index
Cullgen Inc.
Consolidated Statement of Comprehensive Loss
(in thousands, except share and per share data)
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Year Ended
December 31, 2025
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Collaboration revenue
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$
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15,373
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Operating expenses:
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Research and development expenses
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19,330
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General and administrative expenses
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10,246
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Total operating expenses
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29,576
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Other operating income, net
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403
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Loss from operations
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(13,800
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)
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Foreign currency exchange loss
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(198
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) |
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Interest income
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1,905
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Other income, net
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198
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Loss before income taxes
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(11,895
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) |
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Income tax benefit
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1,090
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Net loss
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$ | (10,805 | ) | |
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Accretion of redeemable convertible preferred stock
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(14,801
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)
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Net loss attributable to common stockholders
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(25,606
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)
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Net loss per share attributable to common stockholders - basic and diluted
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$
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(2.55
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)
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Weighted average common stocks outstanding - basic and diluted
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10,023,615
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Other comprehensive loss:
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Unrealized gains on short-term investments
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23 |
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Reclassification adjustment for gains included in net loss
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(10
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Foreign currency translation adjustment
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432
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Comprehensive loss
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(10,360
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)
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Comprehensive loss attributable to common stockholders
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(25,161
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)
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The accompanying footnotes are an integral part of these consolidated financial statements.
4
Index
Cullgen Inc.
Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share data)
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Redeemable convertible
preferred stock
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Common Stock
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Additional
Paid-in
Capital
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Accumulated Other
Comprehensive Loss
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Accumulated
Deficit
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Total
Stockholders’
Deficit
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||||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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||||||||||||||||||||||||||||
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Balance, January 1, 2025
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57,821,355
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$
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158,666
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10,023,615
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$
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1
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$
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4,190
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$
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(785
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)
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$
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(106,573
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)
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$
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(103,167
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)
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|||||||||||||||
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Stock-based compensation expense
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—
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—
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—
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—
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937
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—
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—
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937
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Accretion of redeemable convertible preferred stock
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—
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14,801
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—
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—
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—
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—
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(14,801
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)
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(14,801
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)
|
||||||||||||||||||||||
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Unrealized gains on short-term investments
|
—
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—
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—
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—
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—
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23
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—
|
23
|
||||||||||||||||||||||||
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Reclassification adjustment for gains included in net loss
|
—
|
—
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—
|
—
|
—
|
(10
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)
|
—
|
(10
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)
|
||||||||||||||||||||||
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Foreign currency translation adjustment
|
—
|
—
|
—
|
—
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—
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432
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—
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432
|
||||||||||||||||||||||||
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Net loss
|
—
|
—
|
—
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—
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—
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—
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(10,805
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)
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(10,805
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)
|
||||||||||||||||||||||
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Balance, December 31, 2025
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57,821,355
|
$
|
173,467
|
10,023,615
|
$
|
1
|
$
|
5,127
|
$
|
(340
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)
|
$
|
(132,179
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)
|
$
|
(127,391
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)
|
|||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
5
Index
Cullgen Inc.
Consolidated Statement of Cash Flows
(in thousands)
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Year Ended
December 31, 2025
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|||
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Cash flows from operating activities:
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||||
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Net loss
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$
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(10,805
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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||||
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Stock-based compensation expense
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937
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Non-cash operating lease expenses
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834
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Depreciation and amortization
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817
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Accretion of premium or discount on short-term investments
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(88
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)
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Foreign currency exchange gain
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(39
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)
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Others
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42
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Changes in operating assets and liabilities:
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||||
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Prepaid expense and other current assets
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(1,923
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) |
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Amounts due from related parties
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26
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Accounts payable
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(393
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)
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Amounts due to related parties
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—
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Deferred revenue
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(9,971
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)
|
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Accrued expenses and other current liabilities
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(1,136
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) |
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Operating lease liabilities
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660
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Net cash used in operating activities
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(21,039
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)
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Cash flows from investing activities:
|
||||
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Purchase of property and equipment
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(1,717
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)
|
||
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Purchase of available-for-sale securities
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(24,985
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)
|
||
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Purchase of time deposit investments
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(8,000
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)
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Proceeds of available-for-sale securities
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23,777
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|||
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Proceeds of time deposit investments
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19,000
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|||
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Proceeds from disposal of property, plant and equipment
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100
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|||
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Net cash provided by investing activities
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8,175
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|
||
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Cash flows from financing activities:
|
||||
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Payments of transaction costs
|
(2,573
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)
|
||
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Net cash used in financing activities
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(2,573
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)
|
||
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Effect of exchange rate changes on cash, cash equivalents
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$
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324
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||
|
Net decrease in cash and cash equivalents
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(15,113
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)
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||
|
Cash and cash equivalents at beginning of year
|
27,235
|
|||
|
Cash and cash equivalents at end of year
|
$
|
12,122
|
||
|
Supplemental disclosure of cash flow information:
|
||||
|
Income tax paid
|
(1,500
|
)
|
||
|
Supplemental disclosure of non-cash operating activities:
|
||||
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
1,542
|
|||
|
Derecognition of the right-of-use assets and operating lease liabilities due to lease termination
|
84
|
|||
|
Supplemental disclosure of non-cash investing and financing activities:
|
||||
|
Accretion of redeemable convertible preferred stock
|
14,801
|
|||
|
Unpaid transaction costs included in accrued expenses and other current liabilities
|
174
|
|||
The accompanying footnotes are an integral part of these consolidated financial statements.
6
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
1. Description of Business and Liquidity
Cullgen Inc., or together with its subsidiaries, the Company, was incorporated in the state of Delaware on January 12, 2018. The Company is a privately held
biopharmaceutical company dedicated to the development of medicines for the treatment of diseases lacking effective therapeutic approaches. The Company is headquartered in San Diego, California.
Risks and Uncertainties
The Company is subject to risks common to companies in the biopharmaceutical industry, including but not limited to, the need for additional capital, risks of failure of
preclinical studies and clinical trials, dependence on key personnel, protection of proprietary technology, and development of technological innovations by competitors.
Liquidity and Capital Resources
Since its inception, the Company’s primary activities have been focused on performing research and development activities, building the Company’s intellectual property,
recruiting personnel, and raising capital to support these activities. To date, the Company has funded its operations primarily with proceeds received from the issuances of redeemable convertible preferred stock and common stock, and through
its collaboration agreements.
The Company has incurred recurring losses since its inception. As of December 31, 2025, the Company had an accumulated deficit of $132,179. To
date, the Company has not generated any revenue from product sales as none of its product candidates has been approved for commercialization. The Company expects to continue to generate operating losses for the foreseeable future.
The Company currently expects that its existing cash, cash equivalents and short-term investments will be sufficient to fund operating expenses and capital requirements for
at least the next 12 months. However, the Company may potentially continue to have an ongoing need to raise additional cash from outside sources to fund its operations. The Company plans to continue to fund its operations through capital
raising, collaborations or partnerships with other companies.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of
the Company and its subsidiaries. All intercompany balances, transactions, and profits have been eliminated through the preparation of the consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant estimates
include revenue recognition, accruals for research and development expenses, valuation of stock-based compensation awards, fair value of preferred stock warrant liabilities, and estimating the incremental borrowing rate for leases. Actual
results may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Foreign Currency
The Company’s functional currency and reporting currency are the U.S. dollar (“$” or U.S. dollar). Transactions in subsidiaries are recorded in the functional currency of
the respective subsidiary. The determination of functional currency is based on the criteria of Accounting Standard Codification (“ASC”) 830, Foreign Currency Matters.
7
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
For subsidiaries whose functional currencies are not the U.S. dollar, the Company uses the average exchange rate for the period and the exchange rate at the balance sheet
date, to translate the operating results and financial position to U.S. dollar, the reporting currency, respectively. Translation differences are recorded in accumulated other comprehensive loss, a component of stockholders’ deficit.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are
remeasured at the exchange rates prevailing at the balance sheet date. Remeasurement exchange gains and losses are included in the consolidated statement of comprehensive loss.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the chief operating
decision maker (“CODM”), to allocate resources and assess performance. The Company’s CODM is its chief executive officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis. The Company has one
reportable segment.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with an original maturity of 90 days or less to be cash equivalents. The cash and cash equivalents balance on
December 31, 2025, represents cash in readily available checking accounts, money market funds, U.S. treasury securities and commercial paper with an original maturity of 90 days or less.
Short-Term Investments
The Company’s short-term investments including short-term time deposit with maturity within 1 year and marketable securities. The Company classifies its marketable
securities as available-for-sale securities, which include commercial paper, corporate debt securities and U.S. government agency securities. These securities recorded at fair value with the related unrealized gains and losses included in
accumulated other comprehensive loss. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment and are included in ‘interest income’ within the consolidated statement of comprehensive
loss. All the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all these securities as current assets even though the stated maturity of some individual
securities may be one year or more beyond the balance sheet date.
The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in ‘Net loss’ within the consolidated statement of
comprehensive loss. If any adjustment is required to reflect a decline in the value of the investment that the Company considers to be “other than temporary”, the Company recognizes a charge to the consolidated statement of comprehensive
loss. No such adjustments were necessary during the periods presented.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments
marketable. The Company maintains cash, cash equivalents, and short-term investments at accredited financial institutions and amounts may exceed federally insured limits. The Company has no off-balance sheet concentrations of credit risk,
such as foreign currency exchange contracts, option contracts, or other hedging arrangements.
For the year ended December 31, 2025, all revenue was generated from one customer as part of the collaboration agreement described in Note 8.
8
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Property and Equipment, Net
Property, plant and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives,
considering residual value, if any. The table below sets forth the estimated useful life and residual value:
|
Asset Category
|
|
Estimated Useful Lives
|
|
Furniture and fixtures
|
|
5-10 years
|
|
Equipment
|
|
5-10 years
|
|
Leasehold improvements
|
|
Shorter of estimated useful life or remaining lease term
|
Expenditures for maintenance and repairs are expensed as incurred. Upon retirement or sale, the cost of assets disposed of the related accumulated depreciation/amortization
are removed from the accounts and any resulting gain or loss is recognized in the consolidated statement of comprehensive loss.
Direct costs that are related to the construction of property and equipment, and incurred in connection with bringing the assets to their intended use are capitalized as
construction in progress. Construction in progress is transferred to specific property and equipment, and the depreciation of these assets commences when the assets are ready for their intended use.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not
be recoverable. When these events occur, the Company compares the carrying amount of the assets against the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. Long-lived
assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When the sum of the estimated undiscounted future cash flows
is less than the carrying value of the assets being evaluated, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over their fair value. Fair value is generally determined by discounting the cash
flows expected to be generated by the assets when the market prices are not readily available. The adjusted carrying amount of the assets is the new cost basis and is depreciated over the assets’ remaining useful lives. No impairment loss was
recognized for the year ended December 31, 2025.
Revenue Recognition
When the Company enters into collaboration agreements, it assesses whether the arrangements fall within the scope of ASC 808, Collaborative
Arrangements (“ASC 808”) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that
the arrangement falls within the scope of ASC 808, the Company assesses whether the payments between the Company and its collaboration partner fall within the scope of other accounting literature. If it concludes that payments from the
collaboration partner to the Company represent consideration from a customer, such as license fees and contract research and development activities, the Company accounts for those payments within the scope of Accounting Standards Update (ASU)
No. 2014-09 (Topic 606), Revenue from Contracts with Customers (“ASC 606”).
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity
expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the
contract(s) with a 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) the Company satisfies a performance obligation.
The Company has no products approved for commercial sales and has not generated any revenue from commercial product sales. The total revenue to date has been generated
principally from collaboration and license agreement.
9
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Collaboration Revenue: The Company derives revenue from collaboration arrangements, under which the Company may grant licenses to its collaboration partners to further
develop and commercialize its proprietary product candidates. The Company may also perform research and development activities under the collaboration agreements. Consideration under these contracts generally includes a nonrefundable upfront
payment, development, regulatory and commercial milestones and other contingent payments, and royalties.
The Company assesses which activities in the collaboration agreements are considered distinct performance obligations that should be accounted for separately.
At the inception of each agreement, the Company determines the arrangement transaction price, which includes variable considerations, based on the assessment of the
probability of achievement of future milestones and contingent payments and other potential considerations.
For arrangements that include multiple performance obligations, the Company allocates the transaction price to the identified performance obligations based on the
standalone selling price, or SSP, of each distinct performance obligation. In instances where SSP is not directly observable, the Company develops assumptions that require judgment to determine the SSP for each performance obligation
identified in the contract. These key assumptions may include full-time equivalent, or FTE, personnel effort, estimated costs, discount rates and probabilities of clinical development and regulatory success.
Upfront Payments: For collaboration arrangements that include a nonrefundable upfront payment, if the license fee and research and development services cannot be accounted
for as separate performance obligations, the transaction price is deferred and recognized as revenue over time by measuring its progress towards the complete satisfaction of the relevant performance obligation using an appropriate input or
output method based on the nature of the service promised to the customer. The Company uses judgement to assess the pattern of delivery of the performance obligation.
Research and Development Services: For amounts allocated to the Company’s research and development obligations in a collaboration arrangement, the Company recognizes
revenue over time as delivery or performance of such services occurred.
Milestone and Contingent Payments: At the inception of the arrangement and at each reporting date thereafter, the Company assesses whether it should include any milestone
and contingent payments or other forms of variable consideration in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the
uncertainty, the associated milestone value is included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of each milestone and any related constraint and, if
necessary, adjusts its estimate of the overall transaction price. Since milestone and contingent payments may become payable to the Company upon the initiation of a clinical study or filing for or receipt of regulatory approval, the Company
reviews the relevant facts and circumstances to determine when the Company should update the transaction price, which may occur before the triggering event. When the Company updates the transaction price for milestone and contingent payments,
the Company allocates the changes in the total transaction price to each performance obligation in the agreement on the same basis as the initial allocation. Any such adjustments are recorded on a cumulative catch-up basis in the period of
adjustment, which may result in recognizing revenue for previously satisfied performance obligations in such period. The Company’s collaborators generally pay milestones and contingent payments after the achievement of the triggering event.
Revenue subject to governmental withholding taxes is recognized on a gross basis with the withholding taxes recorded as a component of income tax expense.
10
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Research and Development Expenses
The Company records accrued expenses for estimated costs of the research and development activities conducted by third party service providers, which include outsourced
research and development expenses, stock-based compensation and professional services. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced,
and includes these costs in current liabilities and within research and development expense.
Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized and
recognized as an expense as the goods are delivered or the related services are performed.
For outsourced research and development expenses, such as professional fees payable to third parties for preclinical studies, clinical trials and research services and
other consulting costs, the Company estimates the expenses based on the services performed, pursuant to contracts with research institutions that conduct and manage preclinical studies, clinical trials and research services on the Company’s
behalf. The Company estimates these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services. If
the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the performance
of the related services by the third parties are recorded as prepaid expenses until the services are rendered.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for the Company’s executive, finance, legal, human resources, and administrative
personnel, including salaries, benefits, stock-based compensation, and bonuses; legal, accounting, and other professional service fees; other corporate expenses including employee business expenses, facilities expense as well as information
technology costs.
Fair Value of Financial Instruments
Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as an exit price representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 — This level consists of quoted prices in active markets for identical assets or liabilities.
Level 2 — This level consists of quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs
are observable, either directly or indirectly.
Level 3 — This level consists of unobservable inputs in situations where there is little or no market activity of the asset and liability, and the
reporting entity makes estimates of assumptions relating to the pricing of the asset or liability, including assumptions regarding risk.
The Company’s cash equivalents, short-term investments and preferred stock warrant liabilities are carried at fair value, determined according to the fair value hierarchy
described above. The carrying values reported in the Company’s consolidated balance sheet for cash, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.
11
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Leases
The Company accounts for leases under ASU 2016-02, Leases (Topic 842). The Company determines if an arrangement includes a lease
at inception. Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use asset includes any lease payments made on or
before the lease commencement date, less lease incentives received. The incremental borrowing rate is used in determining the present value of future payments. The Company utilizes its incremental borrowing rate, which is the rate incurred to
borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The determination of the Company’s incremental borrowing rate requires judgment, and the Company considers various
factors, including level of collateralization, estimated credit rating, and the currency in which the lease is denominated. The lease terms may include options to extend or terminate the lease. Lease expense for operating leases is recognized
on a straight-line basis over the non-cancelable lease term. Variable lease expense relates primarily to office lease common area maintenance, insurance, and property taxes, is expensed as incurred, and is excluded from the calculation of the
lease liability and right-of-use asset. The Company does not have any finance leases.
The Company has elected not to recognize a right-of-use asset and lease liability for short-term leases. A short-term lease is a lease with an expected lease term of 12
months or less and which does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Lease agreements that include lease and non-lease components are accounted for as a single lease
component.
Stock-Based Compensation
Employee share-based awards
The Company accounts for its share-based payments in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). The
Company determines whether an award should be classified and accounted for as a liability award or equity award. With the assistance of an independent third-party valuation firm, the Company determines the grant-date fair value of the
share-based awards to measure share-based compensation cost. In accordance with ASC 718, the Company recognizes share-based compensation cost for equity awards with a performance condition based on the probable outcome of that performance
condition. Compensation cost is only recognized if it is probable that the performance condition will be achieved and shall not be recognized if it is not probable that the performance condition will be achieved. The Company accounts for
forfeitures as they occur. For awards with graded vesting that vest based solely on a service condition, the Company uses the straight-line method to recognize compensation cost.
Cancellation of awards
A cancellation of an award that is not accompanied by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration shall be accounted for
as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost shall be recognized immediately at the cancellation date.
Modification of awards
A change in any of the terms or conditions of the awards is accounted for as a modification of the award. When the vesting conditions (or other terms) of the share-based
awards are modified, the Company first determines on the modification date whether the original vesting conditions were expected to be satisfied, regardless of the entity’s policy election for accounting for forfeitures. If the original
vesting conditions are expected to be satisfied, the Company will recognize the remaining unrecognized compensation cost for the original award over the remaining requisite service period based on the grant-date fair value of the original
award. If the original vesting conditions are not expected to be satisfied, the grant-date fair value of the original equity awards is ignored and the fair value of the equity award measured at the modification date is recognized if the
modified award ultimately vests.
Classification and Accretion of Redeemable Convertible Preferred Stock
The Company classified redeemable convertible preferred stock outside of stockholders’ deficit because the shares contained certain redemption features that were not solely within the control of the Company.
Costs incurred in connection with the issuance of each series of redeemable convertible preferred stock were recorded as a reduction of gross proceeds from issuance.
Long-lived assets consist of the following (in thousands):
12
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
The carrying value of the Series A, Series B, and Series C redeemable convertible preferred stock is accreted to redemption value from the date of issuance to the
earliest redemption date using the effective interest method. Adjustments to the carrying values of the redeemable convertible preferred stock at each reporting date resulted in an increase or decrease to net loss attributable to common
stockholders.
Income Taxes
The Company follows the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).
Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the
differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will
not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.
The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of income taxes are computed in
accordance with the applicable tax laws. The amount of interest expense is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to
be taken in a tax return. Interest and penalties recognized in accordance with ASC 740 are classified in the consolidated statement of comprehensive loss as income tax expense.
The Company recognizes income tax expense for basis differences related to global intangible low-taxed income (“GILTI”) as a period cost if and when incurred. GILTI is a
category of income that is earned abroad by U.S.-controlled foreign corporations (CFCs) and is subject to special treatment under the U.S. tax code.
Comprehensive Loss
Comprehensive loss is defined as the changes in equity of the Company during a period from transactions and other events and circumstances excluding transactions
resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current
accounting standards as components of comprehensive loss be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Company’s comprehensive loss
includes foreign currency translation differences and unrealized gain or loss from available for sale securities which is presented in the consolidated statement of comprehensive loss.
Government Subsidies
Government subsidies that involve no conditions or continuing performance obligations of the Company are recognized as ‘other income, net’ upon receipt. In the event
government grants or incentives involve continuing performance obligations, the Company will capitalize the payment as deferred revenue and recognize the same financial statement caption as the performance obligation relates over the
performance period.
The Company considers the nature of each government subsidy to determine whether the related income shall be recorded as “Other operating income, net” or “Other income,
net” in the consolidated statement of comprehensive loss.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding
for the period, without consideration for potential dilutive common shares, using the two-class method.
Under the two-class method, net income is allocated between common stock and participating securities based on dividends declared or accumulated and participating rights
in undistributed earnings as if all the earnings for the reporting period had been distributed.
The Company’s participating securities do not share in losses of the Company. Therefore, the basic net loss per share is the same as diluted net loss per share as the
inclusion of all potentially dilutive securities would have been anti-dilutive given the net loss of the Company for all the periods presented.
13
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires enhanced disclosure of specified categories of expenses included in certain expense captions presented on the face of the income
statement. This guidance will be effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. The Company is currently evaluating the new guidance to determine its adoption
approach and the impact on the presentation and disclosures of its consolidated statements of operations and comprehensive loss.
3. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis:
|
|
Fair Value Measurements as of December 31, 2025
|
|||||||||||||||
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash equivalents
|
||||||||||||||||
|
Money market funds
|
$
|
167
|
$
|
—
|
$
|
—
|
$
|
167
|
||||||||
|
Short-term investments
|
||||||||||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
— |
2,000
|
— |
2,000 |
||||||||||||
|
Corporate debt securities
|
— |
23,146
|
— |
23,146 | ||||||||||||
|
Commercial paper
|
— |
2,939
|
— |
2,939 | ||||||||||||
|
Total assets
|
$
|
167
|
$
|
28,085
|
$
|
—
|
$
|
28,252
|
||||||||
14
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Money market funds are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. treasury
securities, commercial paper, corporate debt securities and U.S. government agency securities are valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair
value hierarchy.
4. Short-Term Investments
The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s short-term investments by major security type as of December 31, 2025, are
summarized in the table below:
|
December 31, 2025
|
||||||||||||||||
|
Amortized
Cost Basis
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
|
Short-term investments:
|
||||||||||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
2,000
|
—
|
—
|
2,000
|
||||||||||||
|
Corporate debt securities
|
22,866
|
280
|
—
|
23,146
|
||||||||||||
|
Commercial paper
|
2,939
|
—
|
—
|
2,939
|
||||||||||||
|
Total
|
$
|
27,806
|
$
|
280
|
$
|
—
|
$
|
28,085
|
||||||||
15
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
5. Consolidated Balance Sheet Components
Prepaid Expenses and Other Current Assets
The prepaid expenses and other current assets are comprised of the following:
|
December 31,
2025
|
||||
|
Advances to research and development suppliers
|
$
|
615
|
||
|
Deferred issuance costs
|
3,831
|
|||
|
Income tax recoverable
|
1,069
|
|||
|
Other tax recoverable
|
880
|
|||
|
Advances to other suppliers
|
391
|
|||
|
Total prepaid expenses and other current assets
|
$
|
6,786
|
||
Property and Equipment, Net
Property, plant and equipment, net, consist of the following:
|
December 31,
2025
|
||||
|
Furniture and fixtures
|
$
|
66
|
||
|
Equipment
|
5,073
|
|||
|
Leasehold improvements
|
2,238
|
|||
|
Total property and equipment
|
7,377
|
|||
|
Less: Accumulated depreciation
|
(3,426
|
)
|
||
|
Total property and equipment, net
|
$
|
3,951
|
||
Depreciation expenses for the year ended December 31, 2025, were $814.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities included the following:
|
December 31,
2025
|
||||
|
Accrued compensation and benefits
|
$
|
1,333
|
||
|
Renovation service fee
|
15
|
|||
|
Accrued taxes
|
194
|
|||
|
Accrued expenses
|
1,039
|
|||
|
Others
|
52
|
|||
|
Total accrued expenses and other current liabilities
|
$
|
2,633
|
||
16
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
6. Leases
Operating Leases
The Company leases facilities under noncancelable operating leases maturing at various dates through February 2037.
The components of lease expense are as follows:
|
Year Ended
December 31,
2025
|
||||
|
Operating lease expense
|
$
|
834
|
||
The Company’s short-term lease expense for the year is immaterial to the financial statements. As of December 31, 2025, the Company had no significant lease contract that
has been entered into but not yet commenced.
The weighted average remaining lease term and discount rate related to the Company’s operating leases are as follows:
|
December 31,
2025
|
||||
|
Weighted-average lease term (in years)
|
9.95
|
|||
|
Weighted-average discount rate
|
9.42
|
%
|
||
The following information represents supplemental disclosure for the statement of cash flows related to the operating leases:
|
Year Ended
December 31,
2025
|
||||
|
Cash paid for amounts included in the measurement of lease liabilities
|
||||
|
Operating cash flows under operating leases
|
$
|
836
|
||
Future minimum lease payments under operating lease agreements as of December 31, 2025, are as follows:
|
Year Ending December 31,
|
Operating Leases
|
|||
|
2026
|
$
|
670
|
||
|
2027
|
668
|
|||
|
2028
|
533
|
|||
|
2029
|
190
|
|||
|
2030
|
190
|
|||
|
Thereafter
|
1,153
|
|||
|
Total minimum lease payments
|
3,404
|
|||
|
Less: imputed interest
|
920
|
|||
|
Total lease liability
|
$
|
2,484
|
||
17
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
7. Redeemable Convertible Preferred Stock, Warrant Liabilities, Common Stock, and Stockholders’ Deficit
The Company had authority to issue 201,150,624 shares of stock as of December 31, 2025, consisting of 143,329,269 shares of Common Stock,
$0.0001 par value, as of December 31, 2025; and 57,821,355 shares of Preferred Stock, $0.0001 par value, as of December 31, 2025.
Redeemable Convertible Preferred Stock
In April 2023, the Company sold and issued 13,329,269 shares of Series C redeemable convertible preferred stock at $2.63 per share, resulting in net proceeds of $34,321,
including 2,285,018 shares issued to GNI USA, Inc., an entity controlled by GNI Group Ltd., the Company’s ultimate parent company.
The redeemable convertible preferred stock is divided into series.
As of December 31, 2025, the Company’s redeemable convertible preferred stock consisted of the following:
|
December 31, 2025
|
||||||||||||||||||||||||
|
Shares
Authorized
|
Shares Issued
and
Outstanding
|
Issue Price
Per Share
|
Conversion
Price Per
Share
|
Net
Carrying
Value
|
Aggregate
Liquidation
Preference
|
|||||||||||||||||||
|
Series Seed-1*
|
10,000,000
|
10,000,000
|
$
|
1.00
|
$
|
1.00
|
$
|
8,560
|
$
|
10,000
|
||||||||||||||
|
Series Seed-2*
|
5,000,000
|
5,000,000
|
$
|
1.00
|
$
|
0.80
|
8,637
|
5,000
|
||||||||||||||||
|
Series A
|
9,411,765
|
9,411,765
|
$
|
1.70
|
$
|
1.70
|
30,606
|
16,000
|
||||||||||||||||
|
Series B*
|
20,080,321
|
20,080,321
|
$
|
2.49
|
$
|
2.49
|
80,790
|
50,000
|
||||||||||||||||
|
Series C*
|
13,329,269
|
13,329,269
|
$
|
2.63
|
$
|
2.63
|
44,874
|
35,000
|
||||||||||||||||
|
Total
|
57,821,355
|
57,821,355
|
|
|
173,467
|
$ |
116,000
|
|||||||||||||||||
| * |
As of December 31, 2025, all of the shares of Series Seed-I and Series Seed-2, 4,016,064 shares of Series B, and 2,285,018 shares of Series C, were issued to GNI USA, Inc.; and
4,819,278 shares of Series B were issued to GNI Group Ltd.
|
The rights, preferences and privileges of the redeemable convertible preferred stock are as follows:
Conversion Rights
Each share of redeemable convertible preferred stock is convertible, at the option of the holder, at any time after the date of issuance of such share, into such number
of fully paid and nonassessable shares of common stock as is determined by dividing the original issue price by the conversion price in effect at the time of conversion.
18
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Each share of Series C redeemable convertible preferred stock will automatically convert into shares of common stock at the then-effective conversion price upon the
consummation of a qualifying IPO or the vote or written consent of holders of at least 67% of the voting power of the Series C redeemable convertible preferred stock then outstanding. Each share of Series Seed-1, Series Seed-2, Series A and
B redeemable convertible preferred stock will automatically convert into shares of common stock at the then-effective conversion price upon the consummation of a qualifying IPO or the vote or written consent of holders of at least a
majority of the voting power of the redeemable convertible preferred stock then outstanding.
Redemption
Following the fifth anniversary of December 6, 2022, the date on which a share of Series C Preferred is first issued, or upon the submission of any redemption request by
the Series A or B Preferred stockholders, and in either cases elected by Series C Preferred lead investors, the Company will redeem all of the shares of the Series C Preferred then outstanding within 60 days, paying the original issue price
plus any unpaid dividends and a 10% annual compounded, noncumulative return on the original issue price for each year such shares were outstanding.
Following the fifth anniversary of April 8, 2019, the date on which a share of Series A redeemable convertible preferred stock is first issued, the holders of Series A
and Series B redeemable convertible preferred stock can request the company to redeem their shares. A 67% majority of holders of Series B redeemable convertible preferred stock or a simple majority of holders of Series A redeemable
convertible preferred stock can initiate such redemption. Upon such a redemption request, the Company is obligated to redeem all outstanding shares of the requested series within 60 days, paying the original issue price plus any unpaid
dividends and a 10% annual compounded return for each year such shares were outstanding.
The Company recognizes the initial carrying amount of preferred stock at its fair value at date of issue, net of issuance costs. The Company uses interest method to
accrete changes in the redemption value over the period from the date of issuance to the earliest redemption.
Voting
Each holder of shares of redeemable convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which shares held
by such holder are convertible. Each holder of shares of Series Seed-1 redeemable convertible preferred stock shall be entitled to two votes per share of Series Seed-1 redeemable convertible preferred stock. However, if a share of Series
Seed-1 redeemable convertible preferred stock is converted into common stock in accordance with the Company’s certificate of incorporation, such common stock shall be entitled to one vote per share.
Dividends
The holders of shares of each series of redeemable convertible preferred stock shall be entitled to non-cumulative dividends, when and if declared by the Company’s board
of directors.
The annual dividend rate in order of preference of dividend payments is (i) 8% of the original issue price for each share of Series C redeemable convertible preferred
stock, (ii) 8% of the original issue price for each share of Series B redeemable convertible preferred stock, (iii) $0.136 per annum for each share of Series A redeemable convertible preferred stock, and (iv) $0.08 per annum for each share
of Series Seed-1, and Series Seed-2 redeemable convertible preferred stock. These dividend rates are subject to adjustment if the Company undertakes any stock splits, stock dividends, combinations, recapitalization, or similar events. To
date, no dividends have been declared.
19
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Liquidation Preference
A “Liquidation Event” shall mean:
| (i) |
a liquidation, dissolution or winding up of the Company,
|
| (ii) |
an acquisition of the Company by another person or entity, or
|
| (iii) |
an acquisition of either Shanghai Cullgen Biotechnology Co., Ltd. (“Shanghai Cullgen”) or another subsidiary of the Company to the extent such other subsidiary holds all or
substantially all of the assets of the Company and its subsidiaries taken as a whole.
|
In the event of a Liquidation Event, the holders of redeemable convertible preferred stock shall be entitled to receive an amount equal to the original issue price, plus
all declared but unpaid dividends. Liquidation preference is as follows in sequence: Series C, Series B, Series A, Series Seed-1 and Series Seed-2 preferred stock. After payment of the liquidation preference amount distributable on the
redeemable convertible preferred stock, all remaining proceeds legally available for distribution to stockholders of the Company shall be distributed pro rata among the holders of the common stock and the holders of redeemable convertible
preferred stock on an as-converted basis.
Common Stock
The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers, and preferences of the holders of the
redeemable convertible preferred stock. The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders.
On March 2, 2026, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Gyre Therapeutics, Inc., (“Gyre”), and its
wholly owned subsidiary, Helix Merger Sub Corp (“Merger Sub”) (Note 16). On March 4, 2026, certain stockholders holding approximately 98% of the outstanding shares of the Company’s preferred and common stock entered into support agreements
with the Company pursuant to which such stockholders agreed not to exercise the redemption rights until the earlier of the termination of the Merger Agreement or the closing of the Merger is advisable and in the best interests of the
Company and the stockholders of the Company.
20
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
8. Collaborations
The Company has no products approved for commercial sales and has not generated any revenue from commercial product sales. The total revenue to date has been generated
principally from collaboration and license agreements.
Cullgen and Astellas Collaboration Arrangement
Agreement Terms
In June 2023, the Company entered into a Collaboration, Option and License Agreement with Astellas (the “Astellas Agreement”) to discover multiple innovative protein
degraders, including a cell cycle protein degrader, and a DNA Repair degrader.
Upon signing the Astellas Agreement, the Company received an up-front, nonrefundable payment totaling $35,000 and will also receive reimbursements for research and
development services performed by the Company for each research target, based on an agreed-upon level of FTE personnel effort, estimated costs and related reimbursement rate.
Astellas has the exclusive option to exclusively license the rights for preclinical & clinical development and commercialization to the compounds identified during
the research activities conducted under the Agreement (the “Astella Option”). The Company is eligible to receive further payments upon the exercise of Astellas Option, the achievement of regulatory milestones, the achievement of sales
milestones, and royalties on future sales of licensed compounds.
The Company evaluated the Astellas Agreement under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company
identified the following material components under the agreement: (l) pre-exercise research activities for Collaboration Cell Cycle and DNA Repair; (2) research license; and (3) Astellas Option. The Company determined that pre-exercise
research activities for Collaboration Cell Cycle and DNA Repair are each distinct performance obligations within the revenue contract due to being targeted to different stages and licensed fields. The research license components of the
revenue contract for Collaboration Cell Cycle and DNA Repair were determined not to be distinct within the context of the contract. Therefore, the research license has been combined with the pre-exercise research activities into a single
performance obligation for each of the collaboration targets, respectively. The Company further determined the Astellas Option is not a material right. Thus, two performance obligations were identified: pre-exercise research activities for
Collaboration Cell Cycle and DNA Repair.
The Company allocated the upfront payment to each performance obligation based on the relative SSP, which was determined using an expected cost plus margin approach, as
follows:
Cell Cycle: $27,000
DNA Repair: $8,000
Upfront non-refundable payments allocated to each collaboration target and the reimbursements are recognized as revenue over time based on the progress towards the
completion of performance obligations, which is measured by costs incurred as a percentage of estimated total cost to complete. Estimated costs to complete were reassessed on a periodic basis and accounted for prospectively.
The Company’s contract liabilities represent primarily up-front, nonrefundable payment received from the Astellas Agreement which was included in deferred revenue in the
consolidated balance sheet. Contract liabilities are released and revenues are recognized over time based on the progress towards the completion of performance obligations.
The following tables present changes in the Company’s contract liability balances:
|
|
December 31,
2025
|
|||
|
Contract liabilities
|
$
|
1,000
|
||
|
Revenue recognized in the year from the contract liability at the beginning of the year:
|
10,076
|
|||
21
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
9. Stock-Based Compensation
Stock Incentive Plan
On April 25, 2018, the Company approved the 2018 Stock Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the issuance of 7,500,000 shares of common stock to
officers, directors, employees, non-employee directors, and consultants of the Company through awards of stock options, restricted stock awards, restricted stock units, and other stock awards. On March 2, 2021, the board approved an
increase in the number of shares to 9,000,000.
The Company has granted stock options under the 2018 Plan, exercisable at various dates as determined upon grant, and will expire no more than ten years from their date
of grant. The term of an Incentive Stock Option (ISO) granted to a 10% stockholder shall not exceed five years from the date of grant. Stock options generally vest over a four-year term. The exercise price of each option shall be determined
by the board of directors.
Stock option activity
The following table summarizes the stock option activity:
|
Options
|
Weighted-
Average
Exercise Price
|
Weighted-
Average
Remaining
Contractual Term
(Years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
|
Outstanding, January 1, 2025
|
8,976,385
|
0.97
|
6.07
|
8,907
|
||||||||||||
|
Granted
|
||||||||||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
||||||||||||
|
Forfeited (unvested)
|
146,792
|
1.57
|
—
|
—
|
||||||||||||
|
Expired (vested)
|
210,000
|
0.96
|
—
|
—
|
||||||||||||
|
Outstanding, December 31, 2025
|
8,619,593
|
0.96
|
4.99
|
8,649
|
||||||||||||
|
Exercisable, December 31, 2025
|
7,566,094
|
0.73
|
4.46
|
8,559
|
||||||||||||
|
Vested and expected to vest, December 31, 2025
|
8,619,593
|
0.96
|
4.99
|
8,649
|
||||||||||||
The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the awards and the fair value
of the underlying common stock at each reporting date, for those awards that had exercise price below the estimated fair value of the relevant common stock. No options were granted during the year ended December 31, 2025. As of
December 31, 2025, unrecognized stock-based compensation cost related to unvested stock options was $1,827, which is expected to be recognized over a weighted-average period of 2.72 years. No stock options were exercised during the year
ended December 31, 2025.
Stock-Based Compensation
Stock-based compensation expense included in the Company’s consolidated statement of comprehensive loss is as follows:
|
Year Ended
December 31,
2025
|
||||
|
Research and development expenses
|
$
|
288
|
||
|
General and administrative expenses
|
649
|
|||
|
Total stock-based compensation expenses
|
$
|
937
|
||
22
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
10. Income Taxes
The Company is subject to taxation in the United States, California, China, and Australia. The Company is subject to income tax
examination by tax authorities in those jurisdictions for the years beginning in 2018 as the Company was incorporated on February 26, 2018. The Company is not currently under examination by any jurisdiction.
Income (loss) before income taxes was as follows:
|
Year Ended
December 31,
2025
|
||||
|
U.S. operations
|
$
|
(7,611
|
) |
|
|
Non-U.S. operations
|
(4,284
|
)
|
||
|
Loss before provision for income taxes
|
$
|
(11,895
|
) |
|
A federal current tax provision benefit of $1,090 has been recorded for the year ended December 31, 2025. The difference between the
Company’s 2025 effective tax rate of 9.3% and the U.S. federal statutory tax rate of 21% is largely due to the Company's net operating losses which are offset by the valuation allowance, and a $1,111 tax benefit as a result of the One
Big Beautiful Bill Act.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax
rate to the net loss is summarized as follows:
|
Year Ended
December 31,
2025
|
||||
|
Domestic statutory rate
|
21.0
|
%
|
||
|
Foreign rate differential
|
(6.8
|
%)
|
||
|
R&D Super Deduction
|
16.8
|
%
|
||
|
R&D Credits
|
0.7
|
%
|
||
|
GILTI/Subpart F Income*
|
0.0
|
% | ||
|
Section 250 Deduction
|
0.0
|
%
|
||
23
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
|
Year Ended
December 31,
2025
|
||||
|
Change in valuation allowance
|
(20.1
|
%)
|
||
| Stock Options |
(1.5
|
%)
|
||
|
Uncertain Tax Positions
|
(0.2
|
%)
|
||
| Prior Year True Ups |
(0.1
|
%)
|
||
|
Other Nondeductible
|
(0.4
|
%) | ||
|
Effective tax rate
Effective tax rate |
9.3
|
%
|
||
| * |
Global Intangible Low-Taxed Income, or GILTI
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025, are shown below. The Company has established a valuation
allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred assets. At such time as it is determined that it is more likely
than not that the deferred tax asset will be realized, the valuation allowance will be reduced.
|
December 31,
2025
|
||||
|
Deferred tax assets:
|
||||
|
Net Operating Losses
|
$
|
13,679
|
||
|
Capitalized R&D
|
3,047
|
|||
|
Research and Development Credits
|
265
|
|||
|
Deferred Revenue
|
191
|
|||
|
Stock Options
|
58
|
|||
|
Lease Liability
|
520
|
|||
|
Accruals
|
130
|
|||
|
Depreciation
|
33
|
|||
|
Total gross deferred tax assets
|
$
|
17,923
|
||
|
Less: Valuation allowance
|
(17,408
|
)
|
||
|
Deferred tax assets, net
|
515
|
|||
|
Deferred tax liabilities:
|
||||
|
Right of Use Asset
|
(515
|
)
|
||
|
Total gross deferred tax liabilities
|
(515
|
)
|
||
|
Net deferred tax assets
|
$
|
—
|
||
24
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
At December 31, 2025, a valuation allowance of $17,408 has been established to offset the deferred tax assets, as realization of such
assets is not more likely than not.
As of December 31, 2025, the Company has federal net operating loss carryforwards of $7,068. The Company has foreign net operating loss
carryforwards of $72,834 of which $72,830 were generated in China beginning in 2018 and have a carryforward period of 10 years and $4 were generated in Australia beginning in 2024 and have an unlimited carryforward period. The Company
had state loss carryforwards of $18,118, which will begin to expire in 2038, if not previously utilized.
The Company has $100 remaining federal research and development credit carryforwards beginning in 2019 and has a 20-year carryforward
period. The Company has state research and development credit carryforwards of approximately $326. The state research and development tax credit carryforwards may be carried forward indefinitely.
Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the Company’s net operating loss and research and development tax
credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. If eliminated, the related asset would be removed from the deferred tax asset schedule with a
corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate. The Company has completed a
Section 382 analysis to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation and determined the Company experience an ownership change. The ownership change
did not materially impact the Company’s deferred tax assets.
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained
upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits, and uncertain income tax positions must meet a more likely than not recognition threshold to be recognized. The
Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations. As of December 31, 2025, the Company accrued immaterial interest and
penalties.
The following table summarizes the changes to the Company’s gross unrecognized tax benefits:
|
Year Ended
December 31,
2025 |
||||
|
Balance at beginning of year
|
$
|
209
|
||
|
Reductions for tax positions - prior years
|
(31
|
) |
||
|
Additions for tax positions - current year
|
37
|
|||
|
Balance at the end of the year
|
$
|
215
|
||
25
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
11. Net Loss Per Share
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders:
|
Year Ended
December 31,
2025
|
||||
|
Numerator:
|
||||
|
Net loss
|
$
|
(10,805
|
) |
|
|
Accretion of redeemable convertible preferred stock
|
(14,801
|
)
|
||
|
Net loss attributable to common stockholders
|
$
|
(25,606
|
)
|
|
|
Denominator:
|
||||
|
Weighted-average common stock outstanding - basic and diluted
|
10,023,615
|
|||
|
Net loss per share attributable to common stockholders - basic and diluted
|
$
|
(2.55
|
)
|
|
For the year ended December 31, 2025, the effects of all outstanding redeemable convertible preferred stock and share options were excluded
from the computation of diluted loss per share as their effects would be anti-dilutive.
12. Employee Benefits
The Company has a defined contribution 401(k) plan for eligible employees. Eligible employees have the option to participate in the plan
beginning on their date of hire. Under the terms of the plan, employees may make voluntary contributions as a percentage of their compensation or a flat dollar amount. Contributions to the matching program totaled $137 for the year
ended December 31, 2025.
Full-time employees of the Company in the PRC are entitled to welfare benefits including pension insurance, medical insurance unemployment
insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan. Chinese labor regulations require that the Company makes contributions to the government
for these benefits based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions. Total contributions by
the Company for such employee benefits were $1,364 for the year ended December 31, 2025.
26
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
13. Segments Information
The primary measure of segment profitability for the Company’s operating segment is considered to be consolidated net loss which is used by
the CODMs to monitor budget versus actual results to make operating decisions, such as allocating resources to the research and development activities. Significant segment expenses reviewed by the CODM on a regular basis are research
and development expenses and general and administrative expenses. Other segment items include foreign currency exchange gain (loss), interest income, other operating income, net, other income, net and income tax expense.
The following table sets forth the Company’s segment information for revenue, segment net loss, and significant expenses:
|
Year Ended
December 31, 2025
|
||||
|
Collaboration revenue
|
$
|
15,373
|
||
|
Less (add):
|
||||
|
Research and development expenses
|
$
|
19,330
|
||
|
General and administrative expenses
|
10,246
|
|||
|
Other segment items
|
(3,511
|
)
|
||
|
Segment net loss
|
$
|
(10,692
|
)
|
|
|
Reconciliation of profit or loss
|
||||
|
Adjustments and reconciling items
|
—
|
|||
|
Consolidated net loss
|
$
|
(10,692
|
)
|
|
Geographic Information
Collaboration revenue consist of the following:
|
Year Ended
December 31,
2025
|
||||
|
Collaboration revenue
|
||||
|
- United States
|
$
|
7,305
|
||
|
- China
|
8,068
|
|||
|
Total
|
$
|
15,373
|
||
Long-lived assets consist of the following:
|
December 31,
2025
|
||||
|
Long-lived assets
|
||||
|
- United States
|
$
|
1,269
|
||
|
- China
|
5,369
|
|||
|
Total
|
$
|
6,638
|
||
27
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
14. Related Party Transactions
The related parties that had transactions or balances with the Company for the year ended December 31, 2025 are as follows:
|
Name of Related Party
|
|
Relationship with the Company
|
|
Shanghai Genomics Technology, Ltd.
|
|
Entity controlled by GNI Group Ltd.
|
|
Shanghai Genomics, Inc.
|
|
Entity controlled by GNI Group Ltd.
|
(a) Related party transactions
Research and development expenses for the related services received from related parties were as follows:
|
Year Ended
December 31,
2025
|
||||
|
Shanghai Genomics Technology, Ltd.
|
$
|
186
|
||
|
Shanghai Genomics, Inc.
|
112
|
|||
|
|
299
|
|||
Operating lease ROU assets and operating lease liabilities recognized for leases of offices from Shanghai Genomics, Inc. as of December 31,
2025 were as follows:
|
December 31,
2025
|
||||
|
Operating lease right-of-use assets
|
$
|
1,296
|
||
|
Operating lease liabilities, current
|
(69
|
)
|
||
|
Operating lease liabilities, non-current
|
(1,227
|
)
|
||
The related lease expense recognized from related parties included in “Research and development expenses” and “General and administrative
expenses” in the consolidated statement of comprehensive loss were as follows:
|
|
Year Ended
December 31,
2025
|
|||
|
Research and development expenses
|
|
$
|
122
|
|
|
General and administrative expenses
|
|
|
1
|
|
15. Commitments and Contingencies
The Company did not have any litigation, capital or other significant commitments, long-term obligations, or guarantees as of December 31,
2025 other than disclosed in these consolidated financial statements.
Although the Company is not currently subject to any litigation, and no litigation is currently threatened against it, the Company may be
subject to legal proceedings, claims, and litigations arising in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues amounts that it
believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss that is reasonably estimable.
28
Index
Cullgen Inc.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
16. Subsequent Events
The Company has evaluated subsequent events through July15, 2026, the date on which the accompanying financial statements are available
to be issued.
On February 28, 2026, the Company terminated the Agreement and Plan of Merger and Reorganization with Pulmatrix, Inc. dated as of
November 13, 2024 and as amended as of April 7, 2025, in accordance with the terms thereof, effectively canceling the proposed transaction and all related agreements thereunder.
On March 2, 2026, the Company entered into a Merger Agreement with Gyre and the Merger Sub, pursuant to which the Merger Sub will merge
with and into Cullgen, resulting in Cullgen becoming a wholly owned subsidiary of Gyre. The transaction is subject to customary closing conditions and will become effective upon the filing of the certificate of merger in the State of
Delaware.
On May 4, 2026, in accordance with the terms of the Merger Agreement, by and among Gyre, Merger Sub and the Company, Gyre acquired Cullgen. Pursuant to the Merger
Agreement, Merger Sub merged with and into Cullgen, with Cullgen continuing as a wholly owned subsidiary of Gyre and the surviving corporation of the Merger. The Merger is intended to qualify for federal income tax purposes as a
tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. The management evaluated the transaction and concluded that the merger did not impact the Company's income tax
provision for the three months ended March 31, 2026. The Company will continue to evaluate the tax effects of the transaction in subsequent reporting periods.
Under the terms of the Merger Agreement, Gyre acquired Cullgen in an all-stock transaction that valued Cullgen at approximately $300 million. At the effective time of the Merger (the “Effective Time”), each then outstanding share of Cullgen capital stock (the “Cullgen Capital Stock”), excluding shares of Cullgen Capital Stock held as treasury stock immediately prior to the Effective Time and any dissenting shares, converted into (1) with respect to shares of Cullgen Capital Stock held by certain designated holders, (i) for each share of Cullgen common stock (“Cullgen Common Stock”) held by such holders, a number of shares of Gyre's Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), equal to (x) 0.4753 (the “Exchange Ratio”) divided by five, and (ii) for each share of Cullgen preferred stock (“Cullgen Preferred Stock”) held by such designated holders, a number of shares of Series B Preferred Stock equal to (x) the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio, and divided by five, and (2) with respect to shares of Cullgen Capital Stock held by each other holder, (i) for each share of Cullgen Common Stock held by such holders, a number of shares of common stock equal to the Exchange Ratio, and (ii) for each share of Cullgen Preferred Stock held by such holders, a number of shares of common stock equal to the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio. Each share of Series B Preferred Stock received in the Merger is convertible into five shares of common stock, subject to certain conditions described below with respect to the Conversion Proposal (as defined below). Notwithstanding anything herein to the contrary, in no event will Gyre issue greater than 19.99% of its issued and outstanding common stock or its voting power prior to the approval of the Conversion Proposal.
In addition, at the Effective Time (1) each then-outstanding in-the-money option to purchase shares of Cullgen Common Stock that was outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, ceased to represent a right to acquire shares of Cullgen Common Stock and converted into and became an option to purchase shares of common stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement, (2) each then-outstanding option to purchase shares of Cullgen Common Stock that was not an in-the-money option and was outstanding and unexercised immediately prior to the Effective Time was cancelled at the Effective Time for no consideration, and (3) each Cullgen restricted stock unit will vest and be settled for Cullgen Common Stock and the holder thereof received a number of shares of common stock calculated in accordance with the Merger Agreement.
Under the terms of the Merger Agreement, Gyre acquired Cullgen in an all-stock transaction that valued Cullgen at approximately $300 million. At the effective time of the Merger (the “Effective Time”), each then outstanding share of Cullgen capital stock (the “Cullgen Capital Stock”), excluding shares of Cullgen Capital Stock held as treasury stock immediately prior to the Effective Time and any dissenting shares, converted into (1) with respect to shares of Cullgen Capital Stock held by certain designated holders, (i) for each share of Cullgen common stock (“Cullgen Common Stock”) held by such holders, a number of shares of Gyre's Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), equal to (x) 0.4753 (the “Exchange Ratio”) divided by five, and (ii) for each share of Cullgen preferred stock (“Cullgen Preferred Stock”) held by such designated holders, a number of shares of Series B Preferred Stock equal to (x) the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio, and divided by five, and (2) with respect to shares of Cullgen Capital Stock held by each other holder, (i) for each share of Cullgen Common Stock held by such holders, a number of shares of common stock equal to the Exchange Ratio, and (ii) for each share of Cullgen Preferred Stock held by such holders, a number of shares of common stock equal to the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio. Each share of Series B Preferred Stock received in the Merger is convertible into five shares of common stock, subject to certain conditions described below with respect to the Conversion Proposal (as defined below). Notwithstanding anything herein to the contrary, in no event will Gyre issue greater than 19.99% of its issued and outstanding common stock or its voting power prior to the approval of the Conversion Proposal.
In addition, at the Effective Time (1) each then-outstanding in-the-money option to purchase shares of Cullgen Common Stock that was outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, ceased to represent a right to acquire shares of Cullgen Common Stock and converted into and became an option to purchase shares of common stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement, (2) each then-outstanding option to purchase shares of Cullgen Common Stock that was not an in-the-money option and was outstanding and unexercised immediately prior to the Effective Time was cancelled at the Effective Time for no consideration, and (3) each Cullgen restricted stock unit will vest and be settled for Cullgen Common Stock and the holder thereof received a number of shares of common stock calculated in accordance with the Merger Agreement.
29
INDEX TO CULLGEN’S CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
Condensed Consolidated Balance Sheets as of December 31, 2025 and March 31, 2026
|
2
|
|
Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, 2025 and
2026
|
3
|
|
Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit for
the Three months ended March 31, 2025 and 2026
|
4
|
|
Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2025 and 2026
|
5
|
|
Notes to Consolidated Financial Statements for the Three months ended March 31, 2025 and 2026
|
6
|
1
Index
Cullgen Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
|
March 31,
|
December 31,
|
|||||||
|
2026
|
2025
|
|||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
13,322
|
$
|
12,122
|
||||
|
Short-term investments
|
21,998
|
28,085
|
||||||
|
Prepaid expenses and other receivables, net
|
2,442
|
6,786
|
||||||
|
Total current assets
|
37,762
|
46,993
|
||||||
|
Non-current assets:
|
||||||||
|
Property and equipment, net
|
3,879
|
3,951
|
||||||
|
Operating lease right-of-use assets
|
2,703
|
2,478
|
||||||
|
Other non-current assets
|
208
|
209
|
||||||
|
Total non-current assets
|
6,790
|
6,638
|
||||||
|
Total assets
|
$
|
44,552
|
$
|
53,631
|
||||
|
Liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$
|
1,538
|
$
|
1,211
|
||||
|
Accrued expenses and other current liabilities
|
2,417
|
2,633
|
||||||
|
Operating lease liabilities, current
|
548
|
483
|
||||||
|
Deferred revenue, current
|
69
|
1,170
|
||||||
|
Total current liabilities
|
4,572
|
5,497
|
||||||
|
Non-current liabilities:
|
||||||||
|
Operating lease liabilities, non-current
|
2,157
|
2,001
|
||||||
|
Deferred revenue, non-current
|
58
|
57
|
||||||
|
Total non-current liabilities
|
2,215
|
2,058
|
||||||
|
Total liabilities
|
6,787
|
7,555
|
||||||
|
Commitments and contingencies (Note 13)
|
||||||||
|
Redeemable convertible preferred stock, $0.0001 par value per share, 57,821,355 shares authorized as of March 31, 2026 and December 31,
2025; 57,821,355 shares issued and outstanding as of March 31, 2026 and December 31, 2025; aggregate liquidation preference of $116,000 as of March 31, 2026 and December 31, 2025
|
177,403
|
173,467
|
||||||
|
Stockholders’ deficit:
|
||||||||
|
Common stock, $0.0001 par value per share, 143,329,269 shares authorized as of March 31, 2026 and December 31, 2025; 10,023,615 shares
issued and outstanding as of March 31, 2026 and December 31, 2025
|
1
|
1
|
||||||
|
Additional paid-in capital
|
5,372
|
5,127
|
||||||
|
Accumulated deficit
|
(144,834
|
)
|
(132,179
|
)
|
||||
|
Accumulated other comprehensive loss
|
(177
|
)
|
(340
|
)
|
||||
|
Total stockholders’ deficit
|
(139,638
|
)
|
(127,391
|
)
|
||||
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
$
|
44,552
|
$
|
53,631
|
||||
The accompanying footnotes are an integral part of these consolidated financial statements.
2
Index
Cullgen Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Collaboration Revenue
|
$
|
1,911
|
$
|
8,513
|
||||
|
Operating expenses:
|
||||||||
|
Research and development expenses
|
(4,743
|
)
|
(4,996
|
)
|
||||
|
General and administrative expenses
|
(6,785
|
)
|
(3,249
|
)
|
||||
|
Total operating expenses
|
(11,528
|
)
|
(8,245
|
)
|
||||
|
Other operating income, net
|
335
|
288
|
||||||
|
(Loss) income from operations
|
(9,282
|
)
|
556
|
|||||
|
Foreign currency exchange gain
|
191
|
59
|
||||||
|
Interest income
|
285
|
587
|
||||||
|
Other income, net
|
16
|
2
|
||||||
|
(Loss) income before income taxes
|
(8,790
|
)
|
1,204
|
|||||
|
Income tax benefit
|
71
|
—
|
||||||
|
Net (loss) income
|
(8,719
|
)
|
1,204
|
|||||
|
Accretion of redeemable convertible preferred stock
|
(3,936
|
)
|
(3,565
|
)
|
||||
|
Net loss attributable to common stockholders
|
$
|
(12,655
|
)
|
$
|
(2,361
|
)
|
||
|
Net loss per share attributable to common stockholders - basic and diluted
|
$
|
(1.26
|
)
|
$
|
(0.24
|
)
|
||
|
Weighted average common stocks outstanding - basic and diluted
|
10,023,615
|
10,023,615
|
||||||
|
Other comprehensive (loss) income, net of tax:
|
||||||||
|
Unrealized gain (loss) on short-term investments
|
$
|
(51
|
)
|
$
|
18
|
|||
|
Reclassification adjustment for gains included in net loss
|
(8
|
)
|
(4
|
)
|
||||
|
Foreign currency translation adjustments, net of tax
|
222
|
28
|
||||||
|
Comprehensive (loss) income
|
(8,556
|
)
|
1,246
|
|||||
|
Comprehensive loss attributable to common stockholders
|
$
|
(12,492
|
)
|
$
|
(2,319
|
)
|
||
The accompanying footnotes are an integral part of these consolidated financial statements.
3
Index
Cullgen Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred
Stock and Stockholders’ Deficit
(In thousands, except share data)
(Unaudited)
|
Redeemable convertible
preferred stock
|
Common Stock
|
Additional
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Total
Stockholders’
Deficit
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||
|
Balance, January 1, 2025
|
57,821,355
|
$
|
158,666
|
10,023,615
|
$
|
1
|
$
|
4,190
|
$
|
(785
|
)
|
$
|
(106,573
|
)
|
$
|
(103,167
|
)
|
|||||||||||||||
|
Stock-based compensation expense
|
—
|
—
|
—
|
—
|
316
|
—
|
—
|
316
|
||||||||||||||||||||||||
|
Accretion of redeemable convertible preferred stock
|
—
|
3,565
|
—
|
—
|
—
|
—
|
(3,565
|
)
|
(3,565
|
)
|
||||||||||||||||||||||
|
Unrealized gains on short-term investments
|
—
|
—
|
—
|
—
|
—
|
18
|
—
|
18
|
||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
—
|
—
|
—
|
—
|
—
|
28
|
—
|
28
|
||||||||||||||||||||||||
|
Reclassification adjustment for gains included in net loss
|
—
|
—
|
—
|
—
|
—
|
(4
|
)
|
—
|
(4
|
)
|
||||||||||||||||||||||
|
Net income
|
—
|
—
|
—
|
—
|
—
|
—
|
1,204
|
1,204
|
||||||||||||||||||||||||
|
Balance, March 31, 2025
|
57,821,355
|
$
|
162,231
|
10,023,615
|
$
|
1
|
$
|
4,506
|
$
|
(743
|
)
|
$
|
(108,934
|
)
|
$
|
(105,170
|
)
|
|||||||||||||||
|
Balance, January 1, 2026
|
57,821,355
|
$
|
173,467
|
10,023,615
|
$
|
1
|
$
|
5,127
|
$
|
(340
|
)
|
$
|
(132,179
|
)
|
$
|
(127,391
|
)
|
|||||||||||||||
|
Stock-based compensation expense
|
—
|
—
|
—
|
—
|
245
|
—
|
—
|
245
|
||||||||||||||||||||||||
|
Accretion of redeemable convertible preferred stock
|
—
|
3,936
|
—
|
—
|
—
|
—
|
(3,936
|
)
|
(3,936
|
)
|
||||||||||||||||||||||
|
Unrealized loss on short-term investments
|
—
|
—
|
—
|
—
|
—
|
(51
|
)
|
—
|
(51
|
)
|
||||||||||||||||||||||
|
Reclassification adjustment for gains included in net loss
|
—
|
—
|
—
|
—
|
—
|
(8
|
)
|
—
|
(8
|
)
|
||||||||||||||||||||||
|
Foreign currency translation adjustment
|
—
|
—
|
—
|
—
|
—
|
222
|
—
|
222
|
||||||||||||||||||||||||
|
Net loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(8,719
|
)
|
(8,719
|
)
|
||||||||||||||||||||||
|
Balance, March 31, 2026
|
57,821,355
|
$
|
177,403
|
10,023,615
|
$
|
1
|
$
|
5,372
|
$
|
(177
|
)
|
$
|
(144,834
|
)
|
$
|
(139,638
|
)
|
|||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
4
Index
Cullgen Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net (loss) income
|
$
|
(8,719
|
)
|
$
|
1,204
|
|||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Stock-based compensation expense
|
245
|
316
|
||||||
|
Non-cash operating lease expenses
|
240
|
233
|
||||||
|
Depreciation and amortization
|
181
|
190
|
||||||
|
Accretion of premium or discount on short-term investments
|
13
|
(24
|
)
|
|||||
|
Foreign currency exchange gain
|
40
|
(2
|
)
|
|||||
|
Transaction costs
|
3,865
|
—
|
||||||
|
Others
|
75
|
16
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Prepaid expense and other current assets
|
512
|
(755
|
)
|
|||||
|
Amounts due from related parties
|
—
|
26
|
||||||
|
Accounts payable
|
327
|
895
|
||||||
|
Deferred revenue
|
(1,100
|
)
|
(6,251
|
)
|
||||
|
Accrued expenses and other current liabilities
|
(241
|
)
|
93
|
|||||
|
Operating lease liabilities
|
(222
|
)
|
(200
|
)
|
||||
|
Net cash used in operating activities
|
(4,784
|
)
|
(4,259
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of property and equipment
|
(55
|
)
|
(98
|
)
|
||||
|
Purchase of available-for-sale securities
|
(2,032
|
)
|
(4,548
|
)
|
||||
|
Purchase of time deposits
|
—
|
(3,000
|
)
|
|||||
|
Proceeds from disposal of property, plant and equipment
|
—
|
1
|
||||||
|
Proceeds of available-for-sale securities
|
7,991
|
5,747
|
||||||
|
Proceeds of time deposits
|
—
|
6,000
|
||||||
|
Net cash provided by investing activities
|
5,904
|
4,102
|
||||||
|
Cash flows from financing activities:
|
||||||||
|
Payments of transaction costs
|
—
|
(1,001
|
)
|
|||||
|
Net cash used in financing activities
|
—
|
(1,001
|
)
|
|||||
|
Effect of exchange rate changes on cash, cash equivalents
|
80
|
21
|
||||||
|
Net increase (decrease) in cash and cash equivalents
|
1,120
|
(1,158
|
)
|
|||||
|
Cash and cash equivalents at beginning of period
|
12,122
|
27,235
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
13,322
|
$
|
26,098
|
||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Income tax returned
|
1,110
|
177
|
||||||
|
Supplemental disclosure of non-cash operating activities:
|
||||||||
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
380
|
1,442
|
||||||
|
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
|
Accretion of redeemable convertible preferred stock
|
3,936
|
3,565
|
||||||
|
Unpaid transaction costs included in accrued expenses and other current liabilities
|
208
|
564
|
||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
5
Index
Cullgen Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Description of Business and Liquidity
Cullgen Inc., or together with its subsidiaries, the Company, was incorporated in the state of Delaware on January 12, 2018. The
Company is a biopharmaceutical company dedicated to the development of medicines for the treatment of diseases lacking effective therapeutic approaches. The Company is headquartered in San Diego, California.
On May 4, 2026 (the “Merger Closing Date”), the Company was acquired by Gyre Therapeutics, Inc., a Delaware corporation (“Gyre”), in
accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated March 2, 2026 (the “Merger Agreement”), by and among the Company, Gyre and Helix Merger Sub Corp., a Delaware corporation and wholly owned
subsidiary of Gyre (“Merger Sub”). Pursuant to the Merger Agreement, among other matters, Merger Sub merged with and into the Company, with the Company continuing as a wholly owned subsidiary of Gyre and the surviving corporation of the
merger (the “Merger”). See Note 14 — Subsequent Events.
Risks and Uncertainties
The Company is subject to risks common to companies in the biopharmaceutical industry, including but not limited to, the need for
additional capital, risks of failure of preclinical studies and clinical trials, dependence on key personnel, protection of proprietary technology, and development of technological innovations by competitors.
Liquidity and Capital Resources
Since its inception, the Company’s primary activities have been focused on performing research and development activities, building
the Company’s intellectual property, recruiting personnel, and raising capital to support these activities. To date, the Company has funded its operations primarily with proceeds received from the issuances of redeemable convertible
preferred stock and common stock, and through its collaboration agreements.
The Company has incurred recurring losses since its inception. As of March 31, 2026 and December 31, 2025, the Company had an
accumulated deficit of $144,834 and $132,179, respectively. To date, the Company has not generated any revenue from product sales as none of its product candidates has been approved for commercialization. The Company expects to continue
to generate operating losses for the foreseeable future.
The Company currently expects that its existing cash, cash equivalents and short-term investments will be sufficient to fund operating
expenses and capital requirements for at least the next 12 months. However, the Company may potentially continue to have an ongoing need to raise additional cash from outside sources to fund its operations. The Company plans to continue
to fund its operations through capital raising, collaborations or partnerships with other companies.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements of the Group are prepared in accordance with U.S generally accepted accounting
principles (“U.S. GAAP”) and include the accounts of the Company and its subsidiaries. All intercompany balances, transactions, and profits are eliminated through the preparation of the consolidated financial statements.
The interim condensed consolidated balance sheet as of March 31, 2026, the interim condensed consolidated statements of comprehensive
loss, changes in shareholders’ redeemable convertible preferred stock and stockholders’ deficit and cash flows for the three months ended March 31, 2025 and 2026, and the related footnote disclosures are unaudited. These unaudited
interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial statements using accounting policies that are consistent with those used in the preparation of the Company’s audited
consolidated financial statements for the year ended December 31, 2025. Accordingly, these unaudited interim condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for
annual financial statements. These financial statements should be read in conjunction with the Company’s consolidated financial statements and related footnotes for the year ended December 31, 2025. The results for the three months
ended March 31, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026 or any future period.
6
Index
Use of Estimates
The preparation of consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the
reporting period. The most significant estimates include revenue recognition, accruals for research and development expenses, valuation of stock-based compensation awards, and estimating the incremental borrowing rate for leases. Actual
results may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Fair Value of Financial Instruments
Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as an exit price representing the
amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
Level 1 — This level consists of quoted prices in active markets for identical assets or
liabilities.
Level 2 — This level consists of quoted prices in markets that are not considered to be active or
financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 — This level consists of unobservable inputs in situations where there is little or no
market activity of the asset and liability, and the reporting entity makes estimates of assumptions relating to the pricing of the asset or liability, including assumptions regarding risk.
The Company’s cash equivalents and short-term investments are carried at fair value, determined according to the fair value hierarchy
described above. The carrying values reported in the Company’s consolidated balance sheets for cash, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of
shares of common stock outstanding for the period, without consideration for potential dilutive common shares, using the two-class method.
Under the two-class method, net income is allocated between common stock and participating securities based on dividends declared or
accumulated and participating rights in undistributed earnings as if all the earnings for the reporting period had been distributed.
The Company’s participating securities do not share in losses of the Company. Therefore, the basic net loss per share is the same as
diluted net loss per share as the inclusion of all potentially dilutive securities would have been anti-dilutive given the net loss of the Company for all the periods presented.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive
Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires enhanced disclosure of specified categories of expenses included in certain expense
captions presented on the face of the income statement. This guidance will be effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. The Company is currently evaluating
the new guidance to determine its adoption approach and the impact on the presentation and disclosures of its consolidated statements of operations and comprehensive loss.
7
Index
3. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its
assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
Fair Value Measurements as of March 31, 2026
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash equivalents
|
||||||||||||||||
|
Money market funds
|
$
|
3,473
|
$
|
—
|
$
|
—
|
$
|
3,473
|
||||||||
|
Short-term investments
|
||||||||||||||||
|
Time deposit
|
||||||||||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
—
|
2,016
|
—
|
2,016
|
||||||||||||
|
Corporate debt securities
|
—
|
18,026
|
—
|
18,026
|
||||||||||||
|
Commercial paper
|
—
|
1,956
|
—
|
1,956
|
||||||||||||
|
Total assets
|
$
|
3,473
|
$
|
21,998
|
$
|
—
|
$
|
25,471
|
||||||||
|
Fair Value Measurements as of December 31, 2025
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash equivalents
|
||||||||||||||||
|
Money market funds
|
$
|
167
|
$
|
—
|
$
|
—
|
$
|
167
|
||||||||
|
Short-term investments
|
||||||||||||||||
|
Time deposit
|
||||||||||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
2,000 |
—
|
2,000 |
|||||||||||||
|
Corporate debt securities
|
23,146 |
—
|
23,146 |
|||||||||||||
|
Commercial paper
|
—
|
2,939
|
—
|
2,939
|
||||||||||||
|
Total assets
|
$
|
167
|
$
|
28,085
|
$
|
—
|
$
|
28,252
|
||||||||
Money market funds are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair
value hierarchy. U.S. government agency securities, corporate debt securities and U.S. commercial paper are valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within
the fair value hierarchy.
8
Index
4. Short-Term Investments
The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s short-term investments by major security
type as of March 31, 2026 and December 31, 2025, are summarized in the table below (in thousands):
|
March 31, 2026
|
||||||||||||||||
|
Amortized
Cost Basis
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
|
Short-term investments:
|
||||||||||||||||
|
Time deposit
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
2,000
|
16
|
—
|
2,016
|
||||||||||||
|
Corporate debt securities
|
17,864
|
162
|
—
|
18,026
|
||||||||||||
|
Commercial paper
|
1,959
|
(3
|
)
|
—
|
1,956
|
|||||||||||
|
Total
|
$
|
21,823
|
$
|
175
|
$
|
—
|
$
|
21,998
|
||||||||
|
December 31, 2025
|
||||||||||||||||
|
Amortized
Cost Basis
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
|
Short-term investments:
|
||||||||||||||||
|
Time deposit
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
Available-for-sale securities
|
||||||||||||||||
|
U.S. government agency securities
|
2,000
|
—
|
—
|
2,000
|
||||||||||||
|
Corporate debt securities
|
22,866
|
280
|
—
|
23,146
|
||||||||||||
|
Commercial paper
|
2,939
|
—
|
—
|
2,939
|
||||||||||||
|
Total
|
$
|
27,805
|
$
|
280
|
$
|
—
|
$
|
28,085
|
||||||||
5. Consolidated Balance Sheet Components
Prepaid Expenses and Other Current Assets
The prepaid expenses and other current assets are comprised of the following (in thousands):
|
March 31,
|
December 31,
|
|||||||
|
2026
|
2025
|
|||||||
|
Advances to research and development suppliers
|
$
|
821
|
$
|
615
|
||||
|
Advances to other suppliers
|
557
|
391
|
||||||
|
Deferred transaction costs
|
—
|
3,831
|
||||||
|
Income tax recoverable
|
—
|
1,069
|
||||||
|
Other tax recoverable
|
1,064
|
880
|
||||||
|
Total prepaid expenses and other current assets
|
$
|
2,442
|
$
|
6,786
|
||||
9
Index
Property and Equipment, Net
Property, plant and equipment, net, consist of the following (in thousands):
|
March 31,
|
December 31,
|
|||||||
|
2026
|
2025
|
|||||||
|
Furniture and fixtures
|
$
|
66
|
$
|
66
|
||||
|
Equipment
|
5,157
|
5,073
|
||||||
|
Leasehold improvements
|
2,313
|
2,238
|
||||||
|
Total property and equipment
|
7,536
|
7,377
|
||||||
|
Less: Accumulated depreciation
|
(3,657
|
)
|
(3,426
|
)
|
||||
|
Total property and equipment, net
|
$
|
3,879
|
$
|
3,951
|
||||
Depreciation expenses for the three months ended March 31, 2026 and 2025, were $180 and $140, respectively.
6. Leases
Operating Leases
The Company leases facilities under noncancelable operating leases maturing at various dates through February 2037.
The components of lease expense are as follows (in thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Operating lease expense
|
$
|
240
|
$
|
175
|
||||
The Company’s short-term lease expense for the year is immaterial to the financial statements. As of March 31, 2026 and 2025, the
Company had no significant lease contract that has been entered into but not yet commenced.
The weighted average remaining lease term and discount rate related to the Company’s operating leases are as follows:
|
March 31,
|
December 31,
|
|||||||
|
2026
|
2025
|
|||||||
|
Weighted-average lease term (in years)
|
9.75
|
9.95
|
||||||
|
Weighted-average discount rate
|
9.44
|
%
|
9.42
|
%
|
||||
The following information represents supplemental disclosure for the statement of cash flows related to the operating leases (in
thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Cash paid for amounts included in the measurement of lease liabilities
|
||||||||
|
Operating cash flows under operating leases
|
$
|
222
|
$
|
200
|
||||
Future minimum lease payments under operating lease agreements as of March 31, 2026, are as follows (in thousands):
|
Year Ending December 31,
|
Operating Leases
|
|||
|
2026 (remaining 9 months)
|
$
|
562
|
||
|
2027
|
804
|
|||
|
2028
|
669
|
|||
|
2029
|
217
|
|||
|
2030
|
193
|
|||
|
Thereafter
|
1,171
|
|||
|
Total minimum lease payments
|
3,616
|
|||
|
Less: imputed interest
|
911
|
|||
|
Total lease liability
|
$
|
2,705
|
||
10
Index
7. Redeemable Convertible Preferred Stock and Common Stock
The Company had authority to issue 201,150,624 shares of stock as of March 31, 2026 and December 31, 2025, consisting of 143,329,269
shares of Common Stock, $0.0001 par value, as of March 31, 2026 and December 31, 2025; and 57,821,355 shares of Preferred Stock, $0.0001 par value, as of March 31, 2026 and December 31, 2025.
As of March 31, 2026, the Company’s redeemable convertible preferred
stock consisted of the following (in thousands, except share and per
share data):
|
March 31, 2026
|
||||||||||||||||||||||||
|
Shares
Authorized
|
Shares Issued
and
Outstanding
|
Issue Price
Per Share
|
Conversion
Price Per
Share
|
Net
Carrying
Value
|
Aggregate
Liquidation
Preference
|
|||||||||||||||||||
|
Series Seed-1*
|
10,000,000
|
10,000,000
|
$
|
1.00
|
$
|
1.00
|
$
|
8,560
|
$
|
10,000
|
||||||||||||||
|
Series Seed-2*
|
5,000,000
|
5,000,000
|
$
|
1.00
|
$
|
0.80
|
8,637
|
5,000
|
||||||||||||||||
|
Series A
|
9,411,765
|
9,411,765
|
$
|
1.70
|
$
|
1.70
|
31,378
|
16,000
|
||||||||||||||||
|
Series B*
|
20,080,321
|
20,080,321
|
$
|
2.49
|
$
|
2.49
|
82,826
|
50,000
|
||||||||||||||||
|
Series C*
|
13,329,269
|
13,329,269
|
$
|
2.63
|
$
|
2.63
|
46,002
|
35,000
|
||||||||||||||||
|
Total
|
57,821,355
|
57,821,355
|
|
|
|
|
$ | 177,403 | $ |
116,000
|
||||||||||||||
As of December 31, 2025, the Company’s redeemable convertible preferred
stock consisted of the following (in thousands, except share and per
share data):
|
December 31, 2025
|
||||||||||||||||||||||||
|
Shares
Authorized
|
Shares Issued
and
Outstanding
|
Issue Price
Per Share
|
Conversion
Price Per
Share
|
Net
Carrying
Value
|
Aggregate
Liquidation
Preference
|
|||||||||||||||||||
|
Series Seed-1*
|
10,000,000
|
10,000,000
|
$
|
1.00
|
$
|
1.00
|
$
|
8,560
|
$
|
10,000
|
||||||||||||||
|
Series Seed-2*
|
5,000,000
|
5,000,000
|
$
|
1.00
|
$
|
0.80
|
8,637
|
5,000
|
||||||||||||||||
|
Series A
|
9,411,765
|
9,411,765
|
$
|
1.70
|
$
|
1.70
|
30,606
|
16,000
|
||||||||||||||||
|
Series B*
|
20,080,321
|
20,080,321
|
$
|
2.49
|
$
|
2.49
|
80,790
|
50,000
|
||||||||||||||||
|
Series C*
|
13,329,269
|
13,329,269
|
$
|
2.63
|
$
|
2.63
|
44,874
|
35,000
|
||||||||||||||||
|
Total
|
57,821,355
|
57,821,355
|
|
|
|
|
$ | 173,467 | $ |
116,000
|
||||||||||||||
|
*
|
As of March 31, 2026 and December 31, 2025, all of the shares of Series Seed-I and Series Seed-2, 4,016,064 shares of Series B, and 2,285,018 shares of Series
C, were issued to GNI USA, Inc.; and 4,819,278 shares of Series B were issued to GNI Group Ltd.
|
8. Collaborations
The Company has no products approved for commercial sales and has not generated any revenue from commercial product sales. The total
revenue to date has been generated principally from collaboration and license agreements.
The Company’s contract liabilities represent primarily up-front, nonrefundable payment received from the Astellas Agreement which was
included in deferred revenue in the consolidated balance sheets. Contract liabilities are released and revenues are recognized over time based on the progress towards the completion of performance obligations.
The following tables present changes in the Company’s contract liability balances (in thousands):
|
March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Contract liabilities
|
$
|
—
|
$
|
4,824
|
||||
|
Revenue recognized in the year from the contract liability at the beginning of the period:
|
1,000
|
6,292
|
||||||
11
Index
9. Income Taxes
The Company did not provide for any income taxes in its condensed consolidated statement of operations and comprehensive (loss) income
for the three months ended March 31, 2026 and 2025. Management considered the Company’s history of cumulative net losses incurred since inception, its early stage of development of its product candidates, and its projection of book and
tax losses for the year ending December 31, 2026. Based on its evaluation of the positive and negative evidence bearing upon its ability to realize its deferred tax assets, the Company determined that it is more likely than not that it
will not realize such benefits. Accordingly, the Company has recorded a full valuation allowance against its deferred tax assets as of March 31, 2026 and December 31, 2025, and recorded $71 and nil income taxes benefit for the three
months ended March 31, 2026, and 2025, respectively. Management reevaluates the positive and negative evidence at each reporting period.
10. Net Loss Per Share
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in
thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Numerator:
|
||||||||
|
Net (loss) income
|
$
|
(8,719
|
)
|
$
|
1,204
|
|||
|
Accretion of redeemable convertible preferred stock
|
(3,936
|
)
|
(3,565
|
)
|
||||
|
Net loss attributable to common stockholders
|
$
|
(12,655
|
)
|
$
|
(2,361
|
)
|
||
|
Denominator:
|
||||||||
|
Weighted-average common stock outstanding - basic and diluted
|
10,023,615
|
10,023,615
|
||||||
|
Net loss per share attributable to common stockholders - basic and diluted
|
$
|
(1.26
|
)
|
$
|
(0.24
|
)
|
||
For the three months ended March 31, 2026 and 2025 the effects of all outstanding redeemable convertible preferred stock and share
options were excluded from the computation of diluted loss per share as their effects would be anti-dilutive.
11. Segments Information
The primary measure of segment profitability for the Company’s operating segment is considered to be consolidated net loss which is
used by the CODMs to monitor budget versus actual results to make operating decisions, such as allocating resources to the research and development activities. Significant segment expenses reviewed by the CODM on a regular basis are
research and development expenses and general and administrative expenses. Other segment items include foreign currency exchange gain, interest income, other income, net and income tax benefit.
12
Index
The following table sets forth the Company’s segment information for revenue, segment net income (loss), and significant expenses (in
thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Collaboration revenue
|
$
|
1,911
|
$
|
8,513
|
||||
|
Less (add):
|
||||||||
|
Research and development expenses
|
4,743
|
4,996
|
||||||
|
General and administrative expenses
|
6,785
|
3,249
|
||||||
|
Other segment items
|
(898
|
)
|
(936
|
)
|
||||
|
Segment net (loss) income
|
(8,719
|
)
|
1,204
|
|||||
|
Reconciliation of profit or loss
|
||||||||
|
Adjustments and reconciling items
|
—
|
—
|
||||||
|
Consolidated net (loss) income
|
(8,719
|
)
|
1,204
|
|||||
Geographic Information
Collaboration revenue consist of the following (in thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Collaboration revenue
|
||||||||
|
- United States
|
$
|
928
|
$
|
4,101
|
||||
|
- China
|
983
|
4,412
|
||||||
|
Total
|
1,911
|
8,513
|
||||||
Long-lived assets consist of the following (in thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Long-lived assets
|
||||||||
|
- United States
|
$
|
1,167
|
$
|
1,637
|
||||
|
- China
|
5,623
|
5,817
|
||||||
|
Total
|
6,790
|
7,454
|
||||||
12. Related Party Transactions
The related parties that had balances with the Company as of March 31, 2026 and December 31, 2025 and transactions for the three
months ended March 31, 2026 and 2025 are as follows:
|
Name of Related Party
|
|
Relationship with the Company
|
|
Shanghai Genomics Technology, Ltd.
|
|
Entity controlled by GNI Group Ltd.
|
|
Shanghai Genomics, Inc.
|
|
Entity controlled by GNI Group Ltd.
|
13
Index
(a) Related party transactions
Research and development expenses for the related services received from related parties were as follows (in thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Shanghai Genomics Technology, Ltd.
|
$
|
47
|
$
|
24
|
||||
Operating lease ROU assets and operating lease liabilities recognized for leases of offices from Shanghai Genomics, Inc. as of March
31, 2026 and December 31, 2025 were as follows (in thousands):
|
March 31,
|
December 31,
|
|||||||
|
2026
|
2025
|
|||||||
|
|
||||||||
|
Operating lease right-of-use assets
|
$
|
1,299
|
$
|
1,296
|
||||
|
Operating lease liabilities, current
|
(72
|
)
|
(69
|
)
|
||||
|
Operating lease liabilities, non-current
|
(1,227
|
)
|
(1,227
|
)
|
||||
The related lease expense recognized from related parties included in “Research and development expenses” and “General and
administrative expenses” in the interim condensed consolidated statements of comprehensive loss were as follows (in thousands):
|
Three months ended March 31,
|
||||||||
|
2026
|
2025
|
|||||||
|
Research and development expenses
|
$
|
19
|
$
|
18
|
||||
|
General and administrative expenses
|
60
|
56
|
||||||
13. Commitments and Contingencies
The Company did not have any litigation, capital or other significant commitments, long-term obligations, or guarantees as of March
31, 2026 and December 31, 2025 other than disclosed in these interim condensed consolidated financial statements.
Although the Company is not currently subject to any litigation, and no litigation is currently threatened against it, the Company may
be subject to legal proceedings, claims, and litigations arising in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues amounts that it
believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss that is reasonably estimable.
14. Subsequent Events
The Company has evaluated subsequent events through July 15, 2026, the date on which the accompanying interim condensed consolidated
financial statements are available to be issued.
On May 4, 2026, in accordance with the terms of the Merger Agreement, by and among Gyre, Merger Sub and the Company, Gyre acquired
Cullgen. Pursuant to the Merger Agreement, Merger Sub merged with and into Cullgen, with Cullgen continuing as a wholly owned subsidiary of Gyre and the surviving corporation of the Merger. The Merger is intended to qualify for
federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. The management evaluated the transaction and concluded that the merger did not impact
the Company's income tax provision for the three months ended March 31, 2026. The Company will continue to evaluate the tax effects of the transaction in subsequent reporting periods.
Under the terms of the Merger Agreement, Gyre acquired Cullgen in an all-stock transaction that valued Cullgen at approximately $300
million. At the effective time of the Merger (the “Effective Time”), each then outstanding share of Cullgen capital stock (the “Cullgen Capital Stock”), excluding shares of Cullgen Capital Stock held as treasury stock immediately prior
to the Effective Time and any dissenting shares, converted into (1) with respect to shares of Cullgen Capital Stock held by certain designated holders, (i) for each share of Cullgen common stock (“Cullgen Common Stock”) held by such
holders, a number of shares of Gyre’s Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), equal to (x) 0.4753 (the “Exchange Ratio”) divided by five, and (ii) for each share of Cullgen
preferred stock (“Cullgen Preferred Stock”) held by such designated holders, a number of shares of Series B Preferred Stock equal to (x) the number of shares of Cullgen Common Stock issuable upon conversion of each share of Cullgen
Preferred Stock, multiplied by the Exchange Ratio, and divided by five, and (2) with respect to shares of Cullgen Capital Stock held by each other holder, (i) for each share of Cullgen Common Stock held by such holders, a number of
shares of common stock equal to the Exchange Ratio, and (ii) for each share of Cullgen Preferred Stock held by such holders, a number of shares of common stock equal to the number of shares of Cullgen Common Stock issuable upon
conversion of each share of Cullgen Preferred Stock, multiplied by the Exchange Ratio. Each share of Series B Preferred Stock received in the Merger is convertible into five shares of common stock, subject to certain conditions
described below with respect to the Conversion Proposal (as defined below). Notwithstanding anything herein to the contrary, in no event will Gyre issue greater than 19.99% of its issued and outstanding common stock or its voting power
prior to the approval of the Conversion Proposal.
14
Index
In addition, at the Effective Time (1) each then-outstanding in-the-money option to purchase shares of Cullgen Common Stock that was
outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, ceased to represent a right to acquire shares of Cullgen Common Stock and converted into and became an option to purchase shares of common
stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement, (2) each then-outstanding option to purchase shares of Cullgen Common
Stock that was not an in-the-money option and was outstanding and unexercised immediately prior to the Effective Time was cancelled at the Effective Time for no consideration, and (3) each Cullgen restricted stock unit will vest and be
settled for Cullgen Common Stock and the holder thereof received a number of shares of common stock calculated in accordance with the Merger Agreement.
15
Exhibit 99.2
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
On May 4, 2026 (the "Merger Closing Date"), Gyre Therapeutics, Inc. (the "Company") acquired Cullgen, Inc. ("Cullgen") pursuant to the Agreement and Plan of Merger and
Reorganization dated March 2, 2026, by and among the Company (the “Merger Agreement”), Cullgen and Helix Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). Merger Sub merged with and into Cullgen,
with Cullgen continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the "Merger"). The Company acquired Cullgen in an all-stock transaction that valued Cullgen at approximately $300 million, and all
outstanding shares of Cullgen capital stock were exchanged for shares of the Company's common stock or Series B Convertible Preferred Stock in accordance with the exchange terms set forth in the Merger Agreement. The Company evaluated the Merger
under ASC 805-50 and determined that the Merger is a combination of entities under common control because the Company and Cullgen were controlled by the same parent, GNI Japan, both before and after the Merger, and such control was not
transitory. Accordingly, the assets and liabilities transferred are recognized at their historical carrying amounts on the Merger Closing Date, no new basis of accounting or goodwill is recognized, and the Company's financial statements are
retrospectively adjusted to reflect the combination as if it had consummated at the beginning of the earliest period presented, consistent with ASC 805-50 and applicable SEC rules and regulations.
The following unaudited pro forma condensed combined financial statements are based on the Company's historical financial statements and Cullgen's historical
consolidated financial statements as adjusted to give effect to the Company's acquisition of Cullgen. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2026, and the year ended December 31,
2025, give effect to the Merger as if it had consummated on January 1, 2024. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, reflects the retrospective combination of entities under common
control and excludes the ownership-attribution effects of the Company's acquisition/exchange of Cullgen interests held by parties other than GNI Japan, as described in Note 1. The unaudited pro forma condensed combined balance sheet as of March
31, 2026, gives effect to the transaction as if it had been consummated at the end of the three-month period ended March 31, 2026. The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only
and is not necessarily indicative of the financial position or results of operations that would have been realized had the transaction been completed on the dates assumed, nor is it necessarily indicative of the future financial position or
results of operations of the combined company. The unaudited pro forma condensed combined financial information does not include Management's Adjustments, as defined in Article 11 of Regulation S-X, including potential cost savings or other
operational efficiencies that could result from the acquisition. Management has not identified material intercompany revenues, expenses, management services arrangements or other transactions between the Company and Cullgen requiring elimination
or other Transaction Accounting Adjustments. The assumptions and estimates underlying the Transaction Accounting Adjustments reflected in the unaudited pro forma condensed combined financial statements are described in the accompanying notes,
which should be read together with the pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements should be read together with the Company's historical financial statements, which are
included in the Company's latest annual report on Form 10-K and quarterly report on Form 10-Q, and Cullgen's historical information included herein.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2026
(U.S. dollars in thousands)
|
Gyre Therapeutics, Inc.
(Historical)
|
Cullgen, Inc.
(Historical)
|
Historical Combined
Prior to Adjustments
|
Transaction Accounting
Adjustments [A]
|
Transaction Accounting
Adjustments [B]
|
Transaction Accounting
Adjustments [C]
|
Transaction Accounting
Adjustments [D]
|
Pro Forma
Combined
|
|||||||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||||||||||||||
|
Cash and cash equivalents
|
37,501
|
13,322
|
50,823
|
50,823
|
||||||||||||||||||||||||||||
|
Short-term bank deposits
|
12,307
|
-
|
12,307
|
12,307
|
||||||||||||||||||||||||||||
|
Short-term investments
|
-
|
21,998
|
21,998
|
21,998
|
||||||||||||||||||||||||||||
|
Notes receivable
|
3,817
|
-
|
3,817
|
3,817
|
||||||||||||||||||||||||||||
|
Accounts receivables, net
|
22,763
|
-
|
22,763
|
22,763
|
||||||||||||||||||||||||||||
|
Other receivables from GNI
|
230
|
-
|
230
|
230
|
||||||||||||||||||||||||||||
|
Inventories
|
11,352
|
-
|
11,352
|
11,352
|
||||||||||||||||||||||||||||
|
Prepaid assets and other current assets
|
3,762
|
2,442
|
6,204
|
6,204
|
||||||||||||||||||||||||||||
|
Total current assets
|
91,732
|
37,762
|
129,494
|
-
|
-
|
-
|
-
|
129,494
|
||||||||||||||||||||||||
|
Property and equipment, net
|
23,572
|
3,879
|
27,451
|
27,451
|
||||||||||||||||||||||||||||
|
Intangible assets, net
|
4,627
|
8
|
4,635
|
4,635
|
||||||||||||||||||||||||||||
|
Deferred tax assets
|
7,723
|
-
|
7,723
|
7,723
|
||||||||||||||||||||||||||||
|
Long-term certificates of deposit
|
29,419
|
-
|
29,419
|
29,419
|
||||||||||||||||||||||||||||
|
Other assets, noncurrent
|
4,942
|
2,903
|
7,845
|
7,845
|
||||||||||||||||||||||||||||
|
Total assets
|
162,015
|
44,552
|
206,567
|
-
|
-
|
-
|
-
|
206,567
|
||||||||||||||||||||||||
|
LIABILITIES AND EQUITY
|
||||||||||||||||||||||||||||||||
|
Accounts payable
|
265
|
1,538
|
1,803
|
1,803
|
||||||||||||||||||||||||||||
|
Due to related parties
|
226
|
-
|
226
|
226
|
||||||||||||||||||||||||||||
|
Accrued expenses and other current liabilities
|
15,415
|
2,403
|
17,818
|
302
|
18,120
|
|||||||||||||||||||||||||||
|
Income tax payable
|
3,131
|
83
|
3,214
|
3,214
|
||||||||||||||||||||||||||||
|
Operating lease liabilities, current
|
751
|
548
|
1,299
|
1,299
|
||||||||||||||||||||||||||||
|
Total current liabilities
|
19,788
|
4,572
|
24,360
|
-
|
302
|
-
|
-
|
24,662
|
||||||||||||||||||||||||
|
Operating lease liabilities, noncurrent
|
72
|
2,157
|
2,229
|
2,229
|
||||||||||||||||||||||||||||
|
Deferred government grants
|
840
|
-
|
840
|
840
|
||||||||||||||||||||||||||||
|
Warrant liability, noncurrent
|
2,872
|
-
|
2,872
|
2,872
|
||||||||||||||||||||||||||||
|
Other noncurrent liabilities
|
1,458
|
58
|
1,516
|
1,516
|
||||||||||||||||||||||||||||
|
Total liabilities
|
25,030
|
6,787
|
31,817
|
-
|
302
|
-
|
-
|
32,119
|
||||||||||||||||||||||||
|
Contingently redeemable, convertible preferred stock (mezzanine equity)
|
-
|
177,403
|
177,403
|
(61,403
|
)
|
(116,000
|
)
|
22,430
|
22,430
|
|||||||||||||||||||||||
|
Common stock
|
91
|
1
|
92
|
(1
|
)
|
14
|
105
|
|||||||||||||||||||||||||
|
Additional paid-in capital
|
174,651
|
5,372
|
180,023
|
116,001
|
(22,444
|
)
|
273,580
|
|||||||||||||||||||||||||
|
Statutory reserve
|
3,648
|
-
|
3,648
|
3,648
|
||||||||||||||||||||||||||||
|
Accumulated deficit
|
(77,667
|
)
|
(144,834
|
)
|
(222,501
|
)
|
61,403
|
(302
|
)
|
(161,400
|
)
|
|||||||||||||||||||||
|
Accumulated other comprehensive income (loss)
|
586
|
(177
|
)
|
409
|
409
|
|||||||||||||||||||||||||||
|
Total stockholders’ equity (deficit)
|
101,309
|
(139,638
|
)
|
(38,329
|
)
|
61,403
|
(302
|
)
|
116,000
|
(22,430
|
) |
116,342
|
||||||||||||||||||||
|
Noncontrolling interest
|
35,676
|
-
|
35,676
|
35,676
|
||||||||||||||||||||||||||||
|
Total stockholders’ equity (deficit)
|
136,985
|
(139,638
|
)
|
(2,653
|
)
|
61,403
|
(302
|
)
|
116,000
|
(22,430
|
) |
152,018
|
||||||||||||||||||||
|
Total liabilities, contingently redeemable, convertible preferred stock, and stockholders’ equity
|
162,015
|
44,552
|
206,567
|
-
|
-
|
-
|
-
|
206,567
|
||||||||||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2026
(U.S. dollars in thousands, except share and per share data)
|
Gyre Therapeutics, Inc.
(Historical)
|
Cullgen, Inc.
(Historical)
|
Historical Combined
Prior to Adjustments
|
Transaction Accounting
Adjustments
|
Note
|
Pro Forma
Combined
|
|||||||||||||||||||
|
Revenues
|
22,519
|
1,911
|
24,430
|
-
|
24,430
|
|||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Cost of revenues
|
1,227
|
-
|
1,227
|
-
|
1,227
|
|||||||||||||||||||
|
Selling and marketing
|
14,136
|
-
|
14,136
|
-
|
14,136
|
|||||||||||||||||||
|
Research and development
|
6,738
|
4,743
|
11,481
|
-
|
11,481
|
|||||||||||||||||||
|
General and administrative
|
7,220
|
6,785
|
14,005
|
-
|
14,005
|
|||||||||||||||||||
|
Transaction costs
|
2,553
|
-
|
2,553
|
-
|
|
|
2,553
|
|||||||||||||||||
|
Total operating expenses:
|
31,874
|
11,528
|
43,402
|
-
|
43,402
|
|||||||||||||||||||
|
Loss from operations
|
(9,355
|
)
|
(9,617
|
)
|
(18,972
|
)
|
-
|
(18,972
|
)
|
|||||||||||||||
|
Other income, net:
|
||||||||||||||||||||||||
|
Change in fair value of warrant liability
|
89
|
-
|
89
|
-
|
89
|
|||||||||||||||||||
|
Other income, net
|
29
|
827
|
856
|
-
|
856
|
|||||||||||||||||||
|
Loss before income taxes
|
(9,237
|
)
|
(8,790
|
)
|
(18,027
|
)
|
-
|
(18,027
|
)
|
|||||||||||||||
|
Provision for income taxes
|
(621
|
)
|
71
|
(550
|
)
|
-
|
(550
|
)
|
||||||||||||||||
|
Net loss
|
(9,858
|
)
|
(8,719
|
)
|
(18,577
|
)
|
-
|
(18,577
|
)
|
|||||||||||||||
|
Net loss attributable to non-controlling interest
|
(1,167
|
)
|
-
|
(1,167
|
)
|
(1,167
|
)
|
|||||||||||||||||
|
Accretion of redeemable convertible preferred stock
|
-
|
(3,936
|
)
|
(3,936
|
)
|
3,936
|
[F]
|
|
-
|
|||||||||||||||
|
Net loss available to common stockholders
|
(8,691
|
)
|
(12,655
|
)
|
(21,346
|
)
|
3,936
|
(17,410
|
)
|
|||||||||||||||
|
Net loss per share attributable to common stockholders:
|
||||||||||||||||||||||||
|
Basic
|
$
|
(0.10
|
)
|
$
|
(1.26
|
)
|
[Note 3]
|
|
$
|
(0.16
|
)
|
|||||||||||||
|
Diluted
|
$
|
(0.10
|
)
|
$
|
(1.26
|
)
|
[Note 3]
|
|
$
|
(0.17
|
)
|
|||||||||||||
|
Weighted average shares used in calculating net loss per share attributable to common stockholders:
|
||||||||||||||||||||||||
|
Basic
|
91,317,142
|
10,023,615
|
[Note 3]
|
|
105,767,669
|
|||||||||||||||||||
|
Diluted
|
91,344,584
|
10,023,615
|
[Note 3]
|
|
105,795,111
|
|||||||||||||||||||
|
Other comprehensive loss:
|
||||||||||||||||||||||||
|
Net loss from operations
|
(9,858
|
)
|
(8,719
|
)
|
(18,577
|
)
|
-
|
(18,577
|
)
|
|||||||||||||||
|
Foreign currency translation adjustments
|
1,957
|
222
|
2,179
|
-
|
2,179
|
|||||||||||||||||||
|
Unrealized loss on short-term investments
|
-
|
(51
|
)
|
(51
|
)
|
-
|
(51
|
)
|
||||||||||||||||
|
Reclassification adjustment for realized loss to net loss
|
-
|
(8
|
)
|
(8
|
)
|
-
|
(8
|
)
|
||||||||||||||||
|
Comprehensive loss from operations
|
(7,901
|
)
|
(8,556
|
)
|
(16,457
|
)
|
-
|
(16,457
|
)
|
|||||||||||||||
|
Net loss attributable to noncontrolling interest
|
(1,167
|
)
|
-
|
(1,167
|
)
|
-
|
(1,167
|
)
|
||||||||||||||||
|
Foreign currency translation adjustments attributable to noncontrolling interest
|
592
|
-
|
592
|
-
|
592
|
|||||||||||||||||||
|
Comprehensive loss attributable to noncontrolling interest
|
(575
|
)
|
-
|
(575
|
)
|
-
|
(575
|
)
|
||||||||||||||||
|
Comprehensive loss attributable to common stockholders
|
(7,326
|
)
|
(12,492
|
)
|
(19,818
|
)
|
3,936
|
|
|
(15,882
|
)
|
|||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2025
(U.S. dollars in thousands, except share and per share data)
|
Gyre Therapeutics, Inc.
(Historical)
|
Cullgen, Inc.
(Historical)
|
Historical Combined
Prior to Adjustments
|
Transaction Accounting
Adjustments
|
Note
|
Pro Forma
Combined
|
|||||||||||||||||||
|
Revenues
|
116,588
|
15,373
|
131,961
|
-
|
131,961
|
|||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Cost of revenues
|
5,416
|
-
|
5,416
|
-
|
5,416
|
|||||||||||||||||||
|
Selling and marketing
|
65,179
|
-
|
65,179
|
-
|
65,179
|
|||||||||||||||||||
|
Research and development
|
13,698
|
19,330
|
33,028
|
-
|
33,028
|
|||||||||||||||||||
|
General and administrative
|
20,804
|
10,246
|
31,050
|
-
|
31,050
|
|||||||||||||||||||
|
Loss on disposal of assets, net
|
4
|
-
|
4
|
-
|
4
|
|||||||||||||||||||
|
Transaction costs
|
- |
- |
- |
302 |
[E] |
302 |
||||||||||||||||||
|
Total operating expenses:
|
105,101
|
29,576
|
134,677
|
302
|
134,979
|
|||||||||||||||||||
|
Income (loss) from operations
|
11,487
|
(14,203
|
)
|
(2,716
|
)
|
(302
|
) |
(3,018
|
)
|
|||||||||||||||
|
Other income, net:
|
||||||||||||||||||||||||
|
Change in fair value of warrant liability
|
2,707
|
-
|
2,707
|
-
|
2,707
|
|||||||||||||||||||
|
Other expense, net
|
(1,505
|
)
|
403
|
(1,102
|
)
|
-
|
(1,102
|
)
|
||||||||||||||||
|
Interest income, net
|
1,747
|
1,905
|
3,652
|
-
|
3,652
|
|||||||||||||||||||
|
Income (loss) before income taxes
|
14,436
|
(11,895
|
)
|
2,541
|
(302
|
) |
2,239
|
|||||||||||||||||
|
Provision for income taxes
|
(4,556
|
)
|
1,090
|
(3,466
|
)
|
-
|
(3,466
|
)
|
||||||||||||||||
|
Net income (loss)
|
9,880
|
(10,805
|
)
|
(925
|
)
|
(302
|
) |
(1,227
|
)
|
|||||||||||||||
|
Net income (loss) attributable to non-controlling interest
|
4,853
|
-
|
4,853
|
4,853
|
||||||||||||||||||||
|
Accretion of redeemable convertible preferred stock
|
-
|
(14,801
|
)
|
(14,801
|
)
|
14,801
|
[F]
|
|
-
|
|||||||||||||||
|
Net income (loss) available to common stockholders
|
5,027
|
(25,606
|
)
|
(20,579
|
)
|
14,499
|
(6,080
|
)
|
||||||||||||||||
|
Net income (loss) per share attributable to common stockholders:
|
||||||||||||||||||||||||
|
Basic
|
$
|
0.06
|
$
|
(2.55
|
)
|
[Note 3]
|
|
$
|
(0.06
|
)
|
||||||||||||||
|
Diluted
|
$
|
0.02
|
$
|
(2.55
|
)
|
[Note 3]
|
|
$
|
(0.08
|
)
|
||||||||||||||
|
Weighted average shares used in calculating net income (loss) per share attributable to common stockholders:
|
||||||||||||||||||||||||
|
Basic
|
89,344,622
|
10,023,615
|
[Note 3]
|
|
103,795,149
|
|||||||||||||||||||
|
Diluted
|
103,180,037
|
10,023,615
|
[Note 3]
|
|
103,878,456
|
|||||||||||||||||||
|
Other comprehensive income (loss):
|
||||||||||||||||||||||||
|
Net income (loss) from operations
|
9,880
|
(10,805
|
)
|
(925
|
)
|
(302
|
) |
(1,227
|
)
|
|||||||||||||||
|
Foreign currency translation adjustments
|
2,636
|
432
|
3,068
|
-
|
3,068
|
|||||||||||||||||||
|
Unrealized gain on short-term investments
|
-
|
23
|
23
|
-
|
23
|
|||||||||||||||||||
|
Reclassification adjustment for realized loss to net loss
|
-
|
(10
|
)
|
(10
|
)
|
-
|
(10
|
)
|
||||||||||||||||
|
Comprehensive income (loss) from operations
|
12,516
|
(10,360
|
)
|
2,156
|
(302
|
) |
1,854
|
|||||||||||||||||
|
Net income (loss) attributable to noncontrolling interest
|
4,853
|
-
|
4,853
|
-
|
4,853
|
|||||||||||||||||||
|
Foreign currency translation adjustments attributable to noncontrolling interest
|
818
|
-
|
818
|
-
|
818
|
|||||||||||||||||||
|
Comprehensive income (loss) attributable to noncontrolling interest
|
5,671
|
-
|
5,671
|
-
|
5,671
|
|||||||||||||||||||
|
Comprehensive income (loss) attributable to common stockholders
|
6,845
|
(25,161
|
)
|
(18,316
|
)
|
14,499
|
|
|
(3,817
|
)
|
||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2024
(U.S. dollars in thousands, except share and per share data)
|
Gyre Therapeutics, Inc.
(Historical)
|
Cullgen, Inc.
(Historical)
|
Historical Combined
Prior to Adjustments
|
Transaction Accounting
Adjustments
|
Note
|
Pro Forma
Combined
|
|||||||||||||||||||
|
Revenues
|
105,757
|
23,914
|
129,671
|
-
|
129,671
|
|||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Cost of revenues
|
3,884
|
-
|
3,884
|
-
|
3,884
|
|||||||||||||||||||
|
Selling and marketing
|
57,511
|
-
|
57,511
|
-
|
57,511
|
|||||||||||||||||||
|
Research and development
|
12,024
|
19,743
|
31,767
|
-
|
31,767
|
|||||||||||||||||||
|
General and administrative
|
16,109
|
6,343
|
22,452
|
-
|
22,452
|
|||||||||||||||||||
|
Loss on disposal of assets, net
|
66
|
-
|
66
|
-
|
66
|
|||||||||||||||||||
|
Total operating expenses:
|
89,594
|
26,086
|
115,680
|
-
|
115,680
|
|||||||||||||||||||
|
Income (loss) from operations
|
16,163
|
(2,172
|
)
|
13,991
|
-
|
13,991
|
||||||||||||||||||
|
Other income, net:
|
||||||||||||||||||||||||
|
Change in fair value of warrant liability
|
7,167
|
-
|
7,167
|
-
|
7,167
|
|||||||||||||||||||
|
Other expense, net
|
(1,659
|
)
|
3,489
|
1,830
|
-
|
1,830
|
||||||||||||||||||
|
Interest income, net
|
1,547
|
-
|
1,547
|
-
|
1,547
|
|||||||||||||||||||
|
Income (loss) before income taxes
|
23,218
|
1,317
|
24,535
|
-
|
24,535
|
|||||||||||||||||||
|
Provision for income taxes
|
(5,320
|
)
|
(2,490
|
)
|
(7,810
|
)
|
(7,810
|
)
|
||||||||||||||||
|
Net income (loss)
|
17,898
|
(1,173
|
)
|
16,725
|
-
|
16,725
|
||||||||||||||||||
|
Net income (loss) attributable to non-controlling interest
|
5,813
|
(721
|
)
|
5,092
|
-
|
5,092
|
||||||||||||||||||
|
Accretion of redeemable convertible preferred stock
|
-
|
(13,431
|
)
|
(13,431
|
)
|
9,693
|
[G]
|
|
(3,738
|
)
|
||||||||||||||
|
Net income (loss) available to common stockholders
|
12,085
|
(13,883
|
)
|
(1,798
|
)
|
9,693
|
7,895
|
|||||||||||||||||
|
Net income (loss) per share attributable to common stockholders:
|
||||||||||||||||||||||||
|
Basic
|
$
|
0.14
|
$
|
(1.38
|
)
|
[Note 3]
|
$
|
0.09
|
||||||||||||||||
|
Diluted
|
$
|
0.05
|
$
|
(1.38
|
)
|
[Note 3]
|
$
|
0.01
|
||||||||||||||||
|
Weighted average shares used in calculating net income (loss) per share attributable to common
stockholders:
|
||||||||||||||||||||||||
|
Basic
|
85,094,948
|
10,023,615
|
[Note 3]
|
85,094,948
|
||||||||||||||||||||
|
Diluted
|
102,293,526
|
10,023,615
|
[Note 3]
|
102,293,526
|
||||||||||||||||||||
|
Other comprehensive income (loss):
|
||||||||||||||||||||||||
|
Net income (loss) from operations
|
17,898
|
(1,173
|
)
|
16,725
|
-
|
16,725
|
||||||||||||||||||
|
Foreign currency translation adjustments
|
(1,460
|
)
|
(215
|
)
|
(1,675
|
)
|
-
|
(1,675
|
)
|
|||||||||||||||
|
Unrealized (loss) gains on short-term investments
|
-
|
(75
|
)
|
(75
|
)
|
-
|
(75
|
)
|
||||||||||||||||
|
Reclassification adjustment for realized loss to net loss
|
-
|
2
|
2
|
-
|
2
|
|||||||||||||||||||
|
Comprehensive income (loss) from operations
|
16,438
|
(1,461
|
)
|
14,977
|
-
|
14,977
|
||||||||||||||||||
|
Net income (loss) attributable to noncontrolling interest
|
5,813
|
(721
|
)
|
5,092
|
-
|
5,092
|
||||||||||||||||||
|
Foreign currency translation adjustments attributable to noncontrolling interest
|
(507
|
)
|
-
|
(507
|
)
|
-
|
(507
|
)
|
||||||||||||||||
|
Comprehensive income (loss) attributable to noncontrolling interest
|
5,306
|
(721
|
)
|
4,585
|
-
|
4,585
|
||||||||||||||||||
|
Comprehensive income (loss) attributable to common stockholders
|
11,132
|
(14,171
|
)
|
(3,039
|
)
|
9,693
|
6,654
|
|||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
1. Basis of Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and is derived from the
historical consolidated financial statements of the Company and Cullgen. The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of Cullgen by the Company as if the transaction had consummated on March 31, 2026.
The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2026, and the year ended December 31, 2025, give effect to the Merger as if it had consummated on January 1, 2024. The unaudited pro forma
condensed combined statement of operations for the year ended December 31, 2024, reflects the retrospective combination of entities under common control and excludes the ownership-attribution effects of the Company's acquisition/exchange of
Cullgen interests held by parties other than GNI Japan, as described below.
The unaudited pro forma condensed combined financial information has been prepared for
illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized had the transaction been completed on the dates assumed, nor is it necessarily indicative of the
future financial position or results of operations of the combined company. The unaudited pro forma condensed combined financial information does not include Management's Adjustments, as defined in Article 11 of Regulation S-X, including
potential cost savings or other operational efficiencies that could result from the acquisition. Management has not identified material intercompany revenues, expenses, management services arrangements or other transactions between the Company
and Cullgen requiring elimination or other Transaction Accounting Adjustments. The unaudited pro forma condensed combined financial information
reflects Transaction Accounting Adjustments that depict, in the pro forma condensed combined balance sheet, the accounting for the Merger required by U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and, in the pro forma condensed
combined statements of operations, the effects of the pro forma balance sheet adjustments assuming those adjustments were made as of January 1, 2024.
The Transaction Accounting Adjustments are based upon currently available information and assumptions that management believes are reasonable under the
circumstances. Actual results may differ materially from those reflected in the unaudited pro forma condensed combined financial information. The accompanying notes describe the assumptions underlying and Transaction Accounting Adjustments
reflected in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information includes Cullgen's historical financial information derived from Cullgen's standalone U.S.
GAAP financial statements. Management reviewed GNI Japan's historical carrying-basis information for Cullgen and did not identify acquisition-accounting basis differences, pushdown accounting adjustments or goodwill associated with Cullgen that
would require adjustment to Cullgen's standalone financial statements for purposes of the unaudited pro forma condensed combined financial information. GNI Japan's historical consolidation records reflected a noncontrolling interest in Cullgen
prior to the Merger; however, because the unaudited pro forma condensed combined balance sheet gives effect to the Company's acquisition of 100% of Cullgen as if the transaction had consummated as of the balance sheet date, any such historical
noncontrolling interest would be eliminated in the pro forma presentation, with the offset reflected within equity. Accordingly, management has not separately presented or manually attributed a noncontrolling interest in Cullgen in the unaudited
pro forma condensed combined financial information for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. Management concluded that any separate attribution and subsequent elimination of such historical
noncontrolling interest would be presentational only and would not affect the final presentation of the combined company's pro forma assets, liabilities, total equity, results of operations before attribution, or cash flows. This presentation
differs from the presentation expected in the Company's future periodic reports on Forms 10-Q and 10-K, in which the Company expects to retrospectively recast comparative periods prior to the Merger for periods during which the Company and
Cullgen were under common control and to manually attribute the portion of Cullgen's historical equity and net income or loss attributable to ownership interests held by parties other than GNI Japan as noncontrolling interest.
For the year ended December 31, 2024, which is an earlier annual period presented solely to reflect the retrospective combination of entities under common
control, the Company disaggregated the Merger's accounting effects between (i) the common-control transfer of the Cullgen business to the Company and (ii) the acquisition/exchange of Cullgen interests held by parties other than GNI Japan. The
2024 unaudited pro forma condensed combined statement of operations reflects the common-control transfer and retains the historical attribution of Cullgen's net income or loss and preferred stock accretion to noncontrolling interests to the
extent described in Note [G] but does not reflect the later ownership-attribution effects of the Company's acquisition/exchange of the non-GNI interests. Those ownership-attribution effects are reflected in the unaudited pro forma condensed
combined statements of operations for the year ended December 31, 2025, and the three months ended March 31, 2026.
2. Transaction Accounting Adjustments
Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
[A] Represents the elimination of the cumulative
accretion recorded on Cullgen's redeemable convertible preferred stock and the corresponding adjustment to accumulated deficit. Because all outstanding shares of Cullgen redeemable convertible preferred stock were exchanged in the Merger and
are not part of the post-transaction capital structure, the historical accretion previously recognized to adjust such securities to redemption value has been reversed for pro forma presentation purposes.
[B] Represents the accrual of approximately $0.3
million of additional transaction costs incurred by the Company subsequent to March 31, 2026, and prior to the Merger Closing Date. Because the unaudited pro forma condensed combined balance sheet gives effect to the Merger as if it had been
consummated on March 31, 2026, the Transaction Accounting Adjustment reflects the transaction costs incurred in connection with the Merger as if such costs had been incurred and accrued as of March 31, 2026.
[C] Represents the elimination of Cullgen's
historical redeemable convertible preferred stock, classified as mezzanine equity, and common stock. Pursuant to the Merger Agreement, all outstanding shares of Cullgen capital stock were exchanged for shares of the Company's common stock and
Series B Convertible Preferred Stock at the effective time of the Merger. Accordingly, Cullgen's historical capital accounts were eliminated and the Company's post-transaction capital structure was reflected in the pro forma combined balance
sheet.
[D] Represents the issuance of Company common
stock and Series B Convertible Preferred Stock, classified as mezzanine equity, in exchange for all outstanding shares of Cullgen capital stock pursuant to the Merger Agreement. Consistent with the accounting for transfers of net assets between
entities under common control, the equity interests issued have been recorded at an amount equal to the historical carrying value of Cullgen's net assets transferred to the Company. As a result, no step-up to fair value was recognized for the
equity securities issued as merger consideration, regardless of whether the fair value of such securities was readily determinable.
Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Operations
[E] Represents the accrual of additional
transaction costs incurred by the Company subsequent to March 31, 2026. The remaining transaction costs of $2.6 million are included in the historical income statement of the Company for the three months ended March 31, 2026. These costs will
not affect the Company's income statement beyond 12 months after the transaction date.
[F] Represents the elimination of historical
accretion related to Cullgen's redeemable convertible preferred stock for the three months ended March 31, 2026, and the year ended December 31, 2025. In connection with the Merger, all outstanding shares of Cullgen redeemable convertible
preferred stock were exchanged for shares of the Company's common stock or Series B Convertible Preferred Stock and ceased to be outstanding.
As a result, the historical accretion to redemption value associated with such securities has been removed from those pro forma statements of
operations because it relates to securities that were extinguished in the Merger and will not affect the combined company's results of operations following the Merger. See Note [G] for the treatment of Cullgen's historical preferred stock
accretion for the year ended December 31, 2024.
[G] For the year ended December 31, 2024, the unaudited pro forma condensed combined statement of operations reflects the retrospective combination of entities under common control and excludes
the ownership-attribution effects of the Company's acquisition/exchange of Cullgen interests held by parties other than GNI Japan. Accordingly, the adjustment to Cullgen's historical preferred stock accretion (i) eliminates accretion
attributable to preferred shares held by GNI-controlled holders and (ii) allocates the portion of non-GNI preferred stock accretion not attributable to the Company's controlling common interest. The pro forma combined amount retains the
portion of non-GNI preferred stock accretion allocable to the Company's controlling common interest. The calculation is as follows (in thousands):
|
Description
|
Amount
|
|||
|
Cullgen historical accretion of redeemable convertible preferred stock (A)
|
$
|
13,431
|
||
|
Less: accretion attributable to GNI-held preferred shares (B)
|
(3,722
|
)
|
||
|
Non-GNI / NCI preferred stock accretion (C = A - B)
|
9,709
|
|||
|
GNI controlling common interest percentage
|
38.5
|
%
|
||
|
Non-GNI / NCI preferred stock accretion attributable to GNI controlling common interest (D = C x 38.5%)
|
3,738
|
|||
|
Non-GNI / NCI preferred stock accretion attributable to non-GNI common interests (E = C - D)
|
5,971
|
|||
|
Transaction Accounting Adjustment to preferred stock accretion line (B + E)
|
$
|
9,693
|
||
3. Net Income (Loss) Per Share
The following table presents the calculation of unaudited pro forma basic and diluted net income (loss) per share attributable to common stockholders and the
weighted-average shares used in the calculations (in thousands, except share and per share data):
|
Three Months Ended March 31, 2026
|
Year Ended December 31, 2025
|
Year Ended December 31, 2024
|
||||||||||
|
Numerator:
|
||||||||||||
|
Historical combined net income (loss) available to common stockholders
|
$
|
(21,346
|
)
|
$
|
(20,579
|
)
|
$
|
(1,798
|
)
|
|||
|
Transaction Accounting Adjustments:
|
||||||||||||
|
Adjustment to accretion of redeemable convertible preferred stock
|
3,936
|
14,801
|
9,693
|
|||||||||
|
Transaction costs
|
-
|
(302
|
) |
-
|
|
|||||||
|
Pro forma net income (loss) available to common stockholders - basic
|
$
|
(17,410
|
)
|
$
|
(6,080
|
)
|
$
|
7,895
|
||||
|
Less: change in fair value of warrant liability
|
(89
|
)
|
(2,707
|
)
|
(7,167
|
)
|
||||||
|
Pro forma net income (loss) available to common stockholders - diluted
|
$
|
(17,499
|
)
|
$
|
(8,787
|
)
|
$
|
728
|
||||
|
Denominator:
|
||||||||||||
|
Historical Gyre weighted-average shares outstanding - basic
|
91,317,142
|
89,344,622
|
85,094,948
|
|||||||||
|
Shares of Company common stock issued as Merger consideration
|
14,450,527
|
14,450,527
|
-
|
|||||||||
|
Pro forma weighted-average shares outstanding - basic
|
105,767,669
|
103,795,149
|
85,094,948
|
|||||||||
|
Incremental shares from Gyre historical securities included in diluted EPS
|
27,442
|
83,307
|
17,198,578
|
|||||||||
|
Pro forma weighted-average shares outstanding - diluted
|
105,795,111
|
103,878,456
|
102,293,526
|
|||||||||
|
Pro forma net income (loss) per share attributable to common stockholders - basic
|
$
|
(0.16
|
)
|
$
|
(0.06
|
)
|
$
|
0.09
|
||||
|
Pro forma net income (loss) per share attributable to common stockholders - diluted
|
$
|
(0.17
|
)
|
$
|
(0.08
|
)
|
$
|
0.01
|
||||
For the year ended December 31, 2024, the pro forma weighted-average shares outstanding exclude the 14,450,527 shares of Company common stock issued to non-GNI former
holders of Cullgen capital stock as Merger consideration because the 2024 unaudited pro forma condensed combined statement of operations reflects only the retrospective common-control combination effects and does not reflect the
acquisition/exchange of those non-GNI interests. Those shares are included in pro forma weighted-average shares outstanding for the three months ended March 31, 2026, and the year ended December 31, 2025, which reflect the ownership-attribution
effects of the Merger.
The diluted EPS numerator excludes the change in fair value of the warrant liability because the Company's liability-classified warrants are assumed to be share-settled
for purposes of diluted EPS to the extent dilutive. For the year ended December 31, 2024, after giving effect to the adjustment described in Note [G], the pro forma diluted EPS numerator was positive after excluding the change in fair value of
the warrant liability; accordingly, Gyre's historical dilutive securities were included in pro forma diluted weighted-average shares outstanding to the extent dilutive. Incremental shares from converted Cullgen options were excluded for all
periods presented because inclusion would have been anti-dilutive for the three months ended March 31, 2026, and the year ended December 31, 2025, and because the 2024 statement of operations does not reflect the acquisition/exchange of non-GNI
interests.
Each share of Series B Convertible Preferred Stock is convertible into five shares of the Company's common stock following stockholder approval of the Conversion
Proposal, subject to applicable beneficial ownership limitations. The Conversion Proposal was approved by stockholders on June 10, 2026, subsequent to the Merger Closing Date. Because the stockholder approval requirement was a substantive
conversion contingency that had not been satisfied as of the Merger Closing Date and was resolved subsequent to the Merger, the common shares issuable upon conversion of the Series B Convertible Preferred Stock have not been reflected in pro
forma diluted weighted-average shares outstanding for any period presented.