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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36593

Soleno Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

     Delaware

     77-0523891

     (State or other jurisdiction of
incorporation or organization)

     (I.R.S. Employer
Identification No.)

100 Marine Parkway, Suite 400

Redwood City, California

(Address of principal executive offices)

94065

(Zip Code)

(650) 213-8444

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	SLNO	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2025, there were 53,710,025 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

SOLENO THERAPEUTICS, INC.

TABLE OF CONTENTS


	Page
PART I—FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets (unaudited)	3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	5
Condensed Consolidated Statements of Cash Flows (unaudited)	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	28
PART II—OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3. Defaults Upon Senior Securities	63
Item 4. Mine Safety Disclosures	63
Item 5. Other Information	63
Item 6. Exhibits	64
EXHIBIT INDEX	65
SIGNATURES	65

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Soleno Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	September 30, 2025			December 31, 2024
Assets	(unaudited)
Current assets
Cash and cash equivalents	$	246,662		$	87,928
Marketable securities		252,272			203,509
Accounts receivable, net		25,506			-
Inventory, net		6,674			-
Prepaid expenses and other current assets		3,739			2,452
Total current assets		534,853			293,889
Long-term assets
Property and equipment, net		150			186
Operating lease right-of-use assets		2,314			2,798
Intangible assets, net		5,347			6,805
Long-term marketable securities		57,148			27,211
Other long-term assets		83			83
Total assets	$	599,895		$	330,972
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	8,145		$	8,882
Accrued compensation		7,248			4,776
Operating lease liabilities		697			526
Other current liabilities		17,163			4,563
Total current liabilities		33,253			18,747
Long-term liabilities
Contingent liability for Essentialis purchase price		19,473			14,791
Long-term debt, net		49,854			49,828
Long-term lease liabilities		2,112			2,472
Other long-term liabilities		398			21
Total liabilities		105,090			85,859
Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 100,000,000 shares authorized, 53,703,675 and 45,703,811 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively		54			46
Additional paid-in-capital		969,119			696,966
Accumulated other comprehensive income		360			361
Accumulated deficit		(474,728	)		(452,260	)
Total stockholders’ equity		494,805			245,113
Total liabilities and stockholders’ equity	$	599,895		$	330,972

See accompanying notes to condensed consolidated financial statements

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Product revenue, net	$	66,018		$	—		$	98,675		$	—

Operating expenses
Cost of goods sold		1,141			—			1,837			—
Research and development		8,405			30,138			31,069			57,082
Selling, general and administrative		33,753			49,197			91,250			68,558
Change in fair value of contingent consideration		614			877			4,682			2,915
Total operating expenses		43,913			80,212			128,838			128,555
Operating income (loss)		22,105			(80,212	)		(30,163	)		(128,555	)
Other income (expense), net
Interest income, net		5,298			3,596			11,822			8,687
Interest expense		(1,390	)		-			(4,127	)		-
Total other income (expense), net		3,908			3,596			7,695			8,687
Net income (loss)	$	26,013		$	(76,616	)	$	(22,468	)	$	(119,868	)

Other comprehensive income (loss)
Net unrealized gain (loss) on marketable securities		261			1,049			(31	)		898
Foreign currency translation adjustment		14			(1	)		30			(3	)
Total comprehensive income (loss)	$	26,288		$	(75,568	)	$	(22,469	)	$	(118,973	)

Net income (loss) per share - basic	$	0.49		$	(1.83	)	$	(0.45	)	$	(3.08	)
Net income (loss) per share - diluted	$	0.47		$	(1.83	)	$	(0.45	)	$	(3.08	)

Weighted-average common shares outstanding - basic		53,328,094			41,879,025			50,022,910			38,917,169
Weighted-average common shares outstanding - diluted		54,921,916			41,879,025			50,022,910			38,917,169

See accompanying notes to condensed consolidated financial statements

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2025 and 2024

(unaudited)

(in thousands, except share data)


									Accumulated
						Additional			Other						Total
	Common Stock					Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			Income (Loss)			Deficit			Equity
Balances at January 1, 2025		45,703,811		$	46	$	696,966		$	361		$	(452,260	)	$	245,113
Stock-based compensation		-			-		14,679			-			-			14,679
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		943,980			1		13,365			-			-			13,366
Exercise of common stock warrants		1,879,678			2		3,009			-			-			3,011
Net unrealized loss on marketable securities		-			-		-			(139	)		-			(139	)
Foreign currency translation adjustment		-			-		-			4			-			4
Net loss		-			-		-			-			(43,773	)		(43,773	)
Balances at March 31, 2025		48,527,469			49		728,019			226			(496,033	)		232,261
Stock-based compensation		-			-		9,958			-			-			9,958
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		1,039,402			1		626			-			-			627
Tax withholding payments for net share-settled equity awards		(433	)		-		(33	)		-			-			(33	)
Exercise of common stock warrants		870,628			-		2,176			-			-			2,176
Net unrealized loss on marketable securities		-			-		-			(153	)		-			(153	)
Foreign currency translation adjustment		-			-		-			12			-			12
Net loss		-			-		-			-			(4,708	)		(4,708	)
Balances at June 30, 2025		50,437,066			50		740,746			85			(500,741	)		240,140
Stock-based compensation		-			-		10,401			-			-			10,401
Sale of common stock, net of issuance costs of $14,300		2,705,882			3		215,718			-			-			215,721
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		74,185			-		2,255			-			-			2,255
Exercise of common stock warrants		486,542			1		(1	)		-			-			-
Net unrealized gain on marketable securities		-			-		-			261			-			261
Foreign currency translation adjustment		-			-		-			14			-			14
Net income		-			-		-			-			26,013			26,013
Balances at September 30, 2025		53,703,675		$	54	$	969,119		$	360		$	(474,728	)	$	494,805


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances at January 1, 2024		31,678,159	$	32	$	433,885	$	-		$	(276,410	)	$	157,507
Stock-based compensation		-		-		6,445		-			-			6,445
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units		14,034		-		15		-			-			15
Exercise of common stock warrants and pre-funded common stock warrants		1,644,886		1		922		-			-			923
Net unrealized loss on marketable securities		-		-		-		(105	)		-			(105	)
Foreign currency translation adjustment		-		-		-		(1	)		-			(1	)
Net loss		-		-		-		-			(21,398	)		(21,398	)
Balances at March 31, 2024		33,337,079		33		441,267		(106	)		(297,808	)		143,386
Stock-based compensation		-		-		7,160		-			-			7,160
Issuance of restricted stock units under equity incentive plans		75,750		-		-		-			-			-
Sale of common stock, net of issuance costs of $9,746		3,450,000		4		148,951		-			-			148,955
Exercise of common stock warrants and pre-funded common stock warrants		1,435,319		1		2,619		-			-			2,620
Exercise of stock options		88,631		-		537		-			-			537
Net unrealized loss on marketable securities		-		-		-		(46	)		-			(46	)
Foreign currency translation adjustment		-		-		-		(1	)		-			(1	)
Net loss		-		-		-		-			(21,854	)		(21,854	)
Balances at June 30, 2024		38,386,779		38		600,534		(153	)		(319,662	)		280,757
Stock-based compensation		-		-		56,598		-			-			56,598
Issuance of restricted stock units under equity incentive plans		789,500		1		-		-			-			1
Exercise of common stock warrants and pre-funded common stock warrants		1,782,048		2		2,145		-			-			2,147
Exercise of stock options		82,889		-		764		-			-			764
Net unrealized gain on marketable securities		-		-		-		1,049			-			1,049
Foreign currency translation adjustment		-		-		-		(1	)		-			(1	)
Net loss		-		-		-		-			(76,616	)		(76,616	)
Balances at September 30, 2024		41,041,216	$	41	$	660,041	$	895		$	(396,278	)	$	264,699

See accompanying notes to condensed consolidated financial statements

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(22,468	)	$	(119,868	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,508			1,484
Accretion of premium/discount on marketable securities		(2,325	)		(3,495	)
Non-cash lease expense		484			250
Amortization of debt issuance costs		26			-
Stock-based compensation expense		34,375			70,203
Change in fair value of contingent consideration		4,682			2,915
Other non-cash reconciling items		30			(3	)
Change in operating assets and liabilities:
Accounts receivable		(25,506	)		-
Inventory		(6,011	)		-
Prepaid expenses, other current assets and other assets		(1,287	)		279
Accounts payable		(674	)		3,094
Accrued compensation		2,472			273
Operating lease liabilities		(189	)		(152	)
Other liabilities		12,977			(85	)
Net cash used in operating activities		(1,906	)		(45,105	)
Cash flows from investing activities:
Purchases of property and equipment		(15	)		(210	)
Purchases of marketable securities		(267,936	)		(308,915	)
Maturities of marketable securities		191,530			77,000
Net cash used in investing activities		(76,421	)		(232,125	)
Cash flows from financing activities:
Proceeds from the sale of common stock, net of issuance costs		215,721			148,955
Payment of debt issuance costs		(62	)		-
Proceeds from exercise of common stock warrants		5,187			-
Proceeds from exercise of common stock warrants and pre-funded common stock warrants, net of costs		-			5,690
Proceeds received prior to and for the issuance of common stock and pre-funded warrants		-			-
Proceeds from exercise of stock options		16,248			1,317
Tax withholding payments for net share-settled equity awards		(33	)		-
Net cash provided by financing activities		237,061			155,962
Net increase (decrease) in cash and cash equivalents		158,734			(121,268	)
Cash and cash equivalents, beginning of period		87,928			169,681
Cash and cash equivalents, end of period	$	246,662		$	48,413

Supplemental disclosure of non-cash operating and financing information
Cash paid for interest	$	3,316		$	-
Operating lease right-of-use assets obtained in exchange for operating lease obligations	$	-		$	2,835

See accompanying notes to condensed consolidated financial statements.

Soleno Therapeutics, Inc.

September 30, 2025

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. Overview

Soleno Therapeutics, Inc. (the Company or Soleno) is a biopharmaceutical company developing novel therapeutics for the treatment of rare diseases. On March 26, 2025, the Company announced that its lead product candidate, VYKATTM XR (diazoxide choline) extended-release tablets, formerly known as DCCR, had been approved by the U.S. Food and Drug Administration (FDA). VYKAT XR is indicated to treat hyperphagia in adults and pediatric patients four years of age and older with Prader-Willi syndrome (PWS). On April 14, 2025, the Company announced that prescriptions of VYKAT XR had been delivered to the first individuals living with PWS who had been prescribed the medication and began recognizing revenue from the sales of VYKAT XR during the three months ended June 30, 2025. The Company is incorporated in the State of Delaware and is headquartered in Redwood City, California.

Note 2. Liquidity

The Company used $1.9 million of net cash in its operating activities, had a net loss of $22.5 million during the nine months ended September 30, 2025 and had an accumulated deficit of $474.7 million at September 30, 2025 resulting from losses incurred since its inception. The Company had $246.7 million of cash and cash equivalents and $309.4 million of marketable securities on September 30, 2025. With FDA approval of VYKAT XR and first prescriptions being delivered in April 2025, the Company began recognizing revenue during the three months ended June 30, 2025 and became profitable for the three months ended September 30, 2025. The Company’s ability to sustain operating profitability is dependent upon continued successful commercialization of VYKAT XR.

As of September 30, 2025, the Company had $50.0 million of debt outstanding under the loan and security agreement with Oxford Financing LLC and its affiliates (collectively, Oxford) entered into in December 2024. Under the terms of the loan agreement with Oxford, following FDA approval of VYKAT XR, an additional $50 million became available through September 30, 2025, but was not drawn down, and $25 million is available during the period October 1, 2025 to September 30, 2026. An additional tranche of $25 million may become available upon achievement of certain commercial milestones. A final $50 million may be made available upon the Company's mutual consent with Oxford. The loan carries an interest-only period of 48 months and a total term of 60 months; provided that if specific milestones are achieved prior to September 30, 2026, the interest-only period and maturity date will be extended by 12 months. The term loans accrue interest at a floating rate equal to, subject to certain conditions, (a) 1-month term SOFR plus (b) 5.50%.

In addition to the Oxford loan and security agreement, the Company has financed its operations through issuance of equity securities. In July 2025, the Company closed an underwritten public offering of 2,705,882 shares of its common stock at an offering price of $85.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $230.0 million, before deducting the underwriter discount and other offering expenses, totaling approximately $14.3 million.

On July 19, 2024, the Company entered into an Open Market Sale AgreementSM (the Sales Agreement) with Jefferies LLC, as sales agent (Jefferies), pursuant to which the Company may offer and sell, from time to time, through Jefferies shares of its common stock having an aggregate offering price of up to $150 million.

In May 2024, the Company closed an underwritten public offering of 3,450,000 shares of its common stock at a public offering price of $46.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $158.7 million, before deducting the underwriter discount and other offering expenses, totaling approximately $9.7 million.

The Company expects that its current cash, cash equivalents and marketable securities balances and cash flows from operations will be sufficient to enable the Company to meet its obligations for at least the next twelve months from the date of this filing.

Note 3. Basis of Presentation and Summary of Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to the significant accounting policies during the three and nine months ended September 30, 2025 as compared to the significant accounting policies described in Note 3 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, except as noted below.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2025. For further information, refer to the financial statements and footnotes included in the Company’s annual financial statements for the fiscal year ended December 31, 2024, which are included in the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission (SEC) on February 28, 2025.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. Key estimates included in the financial statements include the valuation of deferred income tax assets, the valuation of financial instruments, stock-based compensation, accrued costs for services rendered in connection with third-party contractor clinical trial activities, reserves for product sales, and the valuation of contingent liabilities for the purchase price of assets obtained through acquisition.

Accounts Receivable, net

Accounts receivable, net consists of amounts due from customers, net of customer allowances for cash discounts and any estimated expected credit losses. The Company's measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. To date, the Company has not experienced any credit losses. The Company's contract with its customer has customary payment terms that require payment within 45 days. The Company analyzes amounts that are past due for collectability, and periodically evaluates the creditworthiness of its customer. Based on its assessment, as of September 30, 2025, the Company determined that an allowance for credit loss was not required.

Concentration of Major Customers and Off-Balance Sheet Risk

The Company contracts with one customer, its specialty pharmacy, to market and distribute VYKAT XR to patients in the United States. As of September 30, 2025, its accounts receivable, net are solely from sales of VYKAT XR, and are from this sole customer.

The Company's dependency on one customer exposes it to several risks, including the potential for disruptions in its distribution network, changes in this customer's business strategies, or financial difficulties faced by this customer. Any significant disruption or change in the Company's relationship with this customer could materially and adversely affect its ability to effectively reach other potential end users and maintain its market position.

While the Company believes its relationship with this customer is strong and mutually beneficial, there can be no assurance that it will be able to maintain this relationship or that it will be able to replace this specialty pharmacy with alternative specialty pharmacies, if necessary.

The Company relies on sole source suppliers and third-party manufacturers to supply raw materials and manufacture its product. The inability of these suppliers or manufacturers to fulfill supply requirements of the Company could materially impact future operating results. A change in the relationship with these suppliers or manufacturers, or an adverse change in their business, could materially impact future operating results.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or 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 which the entity expects to receive in exchange for those goods or services.

Product Revenue, net

The Company sells its product to one specialty pharmacy. The product is distributed through a third-party logistics distribution agent (3PL) that does not take title to the product. In the Company's agreement with the 3PL, the Company acts as principal because it

retains control of the product. Once the product is delivered to the Company’s specialty pharmacy, the specialty pharmacy takes title to the product. The specialty pharmacy then distributes the product to patients. The Company offers returns of product sold to the customer on a limited basis; however, no material returns have been recognized to date.

Revenue from product sales is recognized when the customer obtains control of the Company's product, which occurs at the point in time that there is a transfer of title to the customer. The Company has no other performance obligations besides the sale of product. The Company classifies payments to its customers or other parties in the distribution channel for services that are distinct and priced at fair value as selling, general and administrative expenses in its condensed consolidated statements of operations and comprehensive income (loss). Otherwise, payments to a customer or other parties in the distribution channel that do not meet those criteria are classified as a reduction of revenue, as discussed further below. Because the Company's payment terms are 45 days or less, the Company concluded there is not a significant financing component. The Company expenses incremental costs of obtaining a contract as and when incurred since the expected amortization period of the asset that the Company would have recognized is one year or less.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price, or the transaction price, which includes estimates of variable consideration for which reserves are established and which result from rebates, discounts, returns, and co-pay assistance that are offered within the contract between the Company and its customer relating to the sale of VYKAT XR. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than the customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are weighted for relevant factors such as the Company's historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from the Company's estimates, it will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

The following are the components of variable consideration related to product revenue:

Government rebates: The Company is subject to discount obligations under several government programs, including Medicaid programs, Medicare and TRICARE in the United States. The Company estimates these rebates based upon a range of possible outcomes that are weighted for the estimated payer mix. These reserves are recorded in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability that is included in accrued expenses and other current liabilities on the Company's condensed consolidated balance sheets. On a quarterly basis, the Company updates its estimates and records any adjustments in the period that it identifies the adjustments.

Trade discounts and allowances: The Company provides discounts on VYKAT XR sales to its customer for prompt payment. This discount is recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company receives and pays for various distribution services from its customer in the distribution channel.

Product returns: The Company's customer has limited return rights related to unexpected instances in which the product is found to be damaged or defective. The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of revenue and a refund liability in the period in which the related product revenue is recognized. Based on the distribution model for VYKAT XR, the Company believes there will be minimal returns as such returns have not been material to date.

Other incentives: Other incentives include co-payment assistance the Company provides to patients with commercial insurance that have coverage and reside in states that allow co-payment assistance. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue. The estimate is recorded as a reduction of revenue in the same period the related revenue is recognized.

Provisions for trade discounts and allowances are recorded as reductions to accounts receivable, and returns, government rebates, and other incentives are recorded as a component of accrued expenses.

The table below summarizes balances and activity in each of the product revenue allowance and reserve categories as follows (in thousands):



	Rebates			Discounts and Chargebacks			Copay Assistance and Returns			Total
Balance as of December 31, 2024	$	-		$	-		$	-		$	-
Provisions		10,211			2,760			707			13,678
Credits/payments		(641	)		(2,106	)		(462	)		(3,209	)
Balance as of September 30, 2025	$	9,570		$	654		$	245		$	10,469

Inventory

The Company capitalizes inventory costs associated with products when future economic benefit is expected to be realized. These costs consist of raw materials, manufacturing-related costs, personnel costs including stock-based compensation, facility costs, and other indirect overhead costs. Prior to receiving FDA approval for VYKAT XR in March 2025, the Company expensed costs related to inventory for clinical and pre-commercial purposes directly to research and development expense. Following the FDA’s approval of VYKAT XR, the Company began capitalizing inventory related to commercialized products held for sale, in-process of production for sale, and raw materials to be used in the manufacturing of inventory.

The Company values inventory at the lower of cost or estimated net realizable value. The Company determines the cost of inventory, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. Raw materials and work in process includes all inventory costs prior to packaging and labeling, including raw materials, active pharmaceutical ingredient, and drug product. Finished goods include packaged and labeled products. Raw materials and work in process that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made. On a quarterly basis, the Company analyzes its inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf life.

Cost of Goods Sold

Cost of goods sold consists of manufacturing costs, transportation and freight, amortization of capitalized intangibles, royalty payments and indirect overhead costs associated with the manufacturing and distribution of VYKAT XR. Cost of goods sold may also include periodic costs related to certain manufacturing services and inventory adjustment charges. Finally, cost of goods sold may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances.

Recently Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends the guidance in ASC 740, Income Taxes. This ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for fiscal years beginning after December 15, 2024. Adoption is permitted either prospectively or retrospectively. The Company is evaluating the effect that ASU 2023-09 will have on its annual financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense, which requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. The guidance also requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. The guidance is effective for the Company for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. The Company is evaluating the effect that ASU 2024-03 will have on its financial statements and disclosures.

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not currently expected to have a material impact on the Company’s financial statements upon adoption.

Note 4. Fair Value of Financial Instruments

The carrying value of the Company’s cash, cash equivalents and accounts payable, approximate fair value due to the short-term nature of these items.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

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Level I — Unadjusted quoted prices in active markets for identical assets or liabilities;

•

Level II — Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

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Level III — Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The fair value of marketable securities, which are Level 2 financial instruments, is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers. Marketable securities, all of which are classified as available-for-sale securities, consisted of the following at September 30, 2025 (in thousands):


	September 30, 2025
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	$	205,900	$	244	$	(12	)	$	206,132
Other government agency securities		3,009		6		-			3,015
Corporate debt securities and commercial paper		100,181		96		(4	)		100,273
Total	$	309,090	$	346	$	(16	)	$	309,420

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	Fair Value Measurements at September 30, 2025
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	239,570	$	239,570	$	—	$	—
Total cash equivalents	$	239,570	$	239,570	$	—	$	—

Marketable securities:
U.S. Treasury securities	$	206,132	$	—	$	206,132	$	—
Other government agency securities		3,015		—		3,015		—
Corporate debt securities and commercial paper		100,273		—		100,273		—
Total marketable securities		309,420		—		309,420		—
Total assets	$	548,990	$	239,570	$	309,420	$	—

Liabilities
Essentialis purchase price contingency liability	$	19,473	$	—	$	—	$	19,473
Total liabilities	$	19,473	$	—	$	—	$	19,473


	Fair Value Measurements at December 31, 2024
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	59,885	$	59,885	$	—	$	—
Total cash equivalents	$	59,885	$	59,885	$	—	$	—

Marketable securities:
U.S. treasury securities	$	198,065	$	—	$	198,065	$	—
Corporate debt securities and commercial paper		32,655		—		32,655		—
Total marketable securities		230,720		—		230,720		—
Total assets	$	290,605	$	59,885	$	230,720	$	—

Liabilities
Essentialis purchase price contingency liability	$	14,791	$	—	$	—	$	14,791
Total liabilities	$	14,791	$	—	$	—	$	14,791

Based on the terms of the Company’s completed merger with Essentialis on March 7, 2017, the Company is obligated to make cash earnout payments of up to a maximum of $21.2 million to the former Essentialis stockholders. The fair value of the Essentialis purchase price contingent liability has historically been estimated using scenario-based methods based upon the Company’s analysis of the likelihood of obtaining specified approvals from the FDA as well as achieving two commercial sales milestones of $100 million and $200 million in cumulative revenue. The Level 3 estimates are based, in part, on subjective assumptions. As of September 30, 2025, following the receipt of FDA approval for VYKAT XR, the Company no longer considers FDA approval as a variable and determined a 100% probability of achieving the remaining two milestones. Prior to receiving FDA approval, management relied on published research relating to clinical development success rates to determine the likelihood of FDA approval occurring. Based on this assessment, an 88% probability of achieving all three milestones was determined to be reasonable as of December 31, 2024. During the periods presented, other than as discussed above regarding the receipt of FDA approval for VYKAT XR, the Company has not changed the manner in which it values its Essentialis purchase price contingent liability.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between levels within the hierarchy during the periods presented.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 liabilities for the nine months ended September 30, 2025 and 2024 (in thousands):


	Purchase Price
	Contingent Liability
Balance at January 1, 2025	$	14,791
Change in value of contingent liability		4,682
Balance at September 30, 2025	$	19,473

	Purchase Price
	Contingent Liability
Balance at January 1, 2024	$	11,549
Change in value of contingent liability		2,915
Balance at September 30, 2024	$	14,464

Note 5. Balance Sheet Components

Inventory consisted of the following (in thousands):


	September 30, 2025			December 31, 2024
Raw materials	$	4,167		$	-
Work in process		2,022			-
Finished goods		525			-
Less: Reserve for excess and obsolete inventory		(40	)		-
Total inventory, net	$	6,674		$	-

Other current liabilities consisted of the following (in thousands):


	September 30, 2025		December 31, 2024
Product revenue reserve for rebates, returns, and other incentives	$	9,816	$	-
Accrued consulting and professional fees		3,464		1,259
Accrued research and development costs		1,859		1,478
Accrued clinical trial site costs		1,510		1,826
Accrued interest payable		407		-
Other		107		-
Total other current liabilities	$	17,163	$	4,563

Note 6. Commitments and Contingencies

Facility Leases

On June 13, 2024, the Company entered into a new office lease in Redwood City, California for office space for its headquarters facility. The lease provides office space of approximately 18,026 square feet and for base monthly rent payments beginning at $57,400 that increase annually by approximately 3.0% over the term of five years from the date of occupancy. In addition to base rent, the Company has agreed to reimburse the landlord for certain operating expenses under the terms of the lease. The lease commencement date was September 1, 2024 when the premises became available for occupancy. The Company’s operating lease for its predecessor headquarters facility office space in Redwood City, California began on June 1, 2023 and expired in May 2025.

The Company's operating lease right-of-use (ROU) assets, current operating lease liabilities and long-term operating lease liabilities each appear as a separate line within the Company's condensed consolidated balance sheets. In September 2024, the Company recorded an increase to its ROU assets by $2.8 million and an increase to its lease liability of $2.8 million as a result of the June 2024 office lease. As of September 30, 2025 and December 31, 2024, the Company's short-term lease liabilities were equal to $0.7 million and $0.5 million, respectively, and the long-term operating lease liabilities were equal to $2.1 million and $2.5 million, respectively.

The weighted average discount rate related to the Company's lease liabilities was 8.5% as of September 30, 2025 over a remaining term of 3.9 years, and 8.5% as of December 31, 2024 over a remaining term of 4.7 years. The discount rate was determined based on estimates of the Company’s incremental borrowing rate, as the discount rate implicit in the lease cannot be readily determined.

The components of lease expense during the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Operating lease cost:
Operating lease cost	$	182	$	137	$	672	$	291
Variable lease cost		-		4		6		12
Short-term lease cost		11		54		37		147
Total operating lease cost	$	193	$	195	$	715	$	450

Supplemental cash flow information related to leases was as follows (in thousands):


Cash paid for amounts included in the measurement of lease liabilities:
	Nine Months Ended September 30,
	2025		2024
Operating cash flows from operating leases	$	375	$	248

The following is a schedule by year of future maturities of the Company's operating lease liabilities as of September 30, 2025 (in thousands):


2025 (remainder of the year)	$	118
2026		751
2027		861
2028		942
2029		665
Total lease payments		3,337
Less interest		(528	)
Total	$	2,809

Other Commitments

The Company enters into agreements in the normal course of business, including with contract research organizations for clinical trials, contract manufacturing organizations for certain manufacturing services and supplies, and vendors for preclinical studies as well as other services and products for operating purposes, which are generally cancelable upon written notice. As of September 30, 2025, the Company’s non-cancelable other commitments were $25.2 million in the aggregate.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

Note 7. Long-term Debt

On December 17, 2024, the Company entered into a loan and security agreement for up to $200 million with Oxford. The loan is collateralized by substantially all of the Company's assets, including its intellectual property, subject to certain limitations.

As of September 30, 2025, the Company had $50.0 million outstanding under the Oxford loan agreement. Under the terms of the loan agreement with Oxford, following FDA approval of VYKAT XR, an additional $50 million became available through September 30, 2025, but was not drawn down, and $25 million is available during the period October 1, 2025 to September 30, 2026. An additional tranche of $25 million may become available upon achievement of certain commercial milestones. A final $50 million may be made available upon the mutual consent of the Company and Oxford. The loan carries an interest-only period of 48 months and a total term of 60 months; provided that if specific milestones are achieved prior to September 30, 2026, the interest-only period and maturity date will be extended by 12 months. The term loans accrue interest, payable monthly, at a floating rate equal to, subject to certain conditions, (a) 1-month term SOFR plus (b) 5.50%. The principal portion of the loan is due in eleven equal monthly installments beginning February 1, 2029, through December 1, 2029. However, if a specified milestone is achieved on or after

December 17, 2025, then the term loan will begin to amortize in equal monthly installments beginning on February 1, 2030, and the maturity date will be extended to December 1, 2030. At maturity, the final principal payment will include a fee of 5% of the total principal borrowed. The $2.5 million final interest payment related to the $50 million borrowed as of September 30, 2025 is accrued over the term of loan as long-term accrued interest payable. However, if a specified milestone is achieved on or after December 17, 2025, then the term loan will begin to amortize in equal monthly installments beginning on February 1, 2030, the maturity date will be extended to December 1, 2030, and the final payment will include a fee of 6.5% of the total principal borrowed. As of September 30, 2025, $398 thousand was accrued as part of other long-term liabilities on the condensed consolidated balance sheet. Loan issuance costs of $174 thousand were recorded as a reduction of the principal loan balance on the condensed consolidated balance sheet and are amortized as interest expense over the term of the loan.

The outstanding long-term debt consisted of the following (in thousands):


	September 30, 2025			December 31, 2025
Long-term debt	$	50,000		$	50,000
Unamortized debt issuance costs		(146	)		(172	)
Total long-term debt, net	$	49,854		$	49,828

The following table provides the components of interest expense related to the long-term debt (in thousands):


	Three Months Ended September 30, 2025		Nine Months Ended September 30, 2025
Interest expense based on contractual loan rate	$	1,254	$	3,724
Amortization of debt issuance costs and accretion of final interest payment		136		403
Total interest expense	$	1,390	$	4,127

The loan and security agreement provides for both affirmative and negative covenants, including covenants limiting the ability of the Company and their subsidiaries to, among other things, dispose of assets, incur debt, grant liens, pay dividends and distributions on their capital stock, make investments and acquisitions, and enter into transactions with affiliates, in each case subject to customary exceptions for a loan facility of this size and type. In addition, the loan and security agreement contains a minimum revenue covenant commencing on the earlier of the date that more than $50 million principal amount of term loans have been funded under the loan and security agreement and June 30, 2026; provided that such minimum revenue covenant shall not be tested during periods when the Company’s market capitalization or unrestricted cash meet certain minimum thresholds. The occurrence of an event of default could result in the acceleration of the Company’s obligations under the loan and security agreement, the termination of the lenders’ commitments, a 5.0% increase in the applicable rate of interest and the exercise by the lender of other rights and remedies provided for under the loan and security agreement. The Company was in compliance with all applicable debt covenants as of September 30, 2025.

Note 8. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Preferred Stock.

July 2025 Public Offering of Common Stock

In July 2025, the Company closed an underwritten public offering of 2,705,882 shares of its common stock at a public offering price of $85.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $230.0 million, before deducting the underwriter discount and other offering expenses, totaling approximately $14.3 million.

May 2024 Public Offering of Common Stock

On May 9, 2024, the Company closed an underwritten public offering of 3,450,000 shares of its common stock at a public offering price of $46.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $158.7 million, before deducting the underwriter discount and other offering expenses, totaling approximately $9.7 million.

October 2023 Public Offering of Common Stock and Concurrent Private Placement of Common Stock and Pre-Funded Warrants

On October 2, 2023, the Company closed an underwritten public offering of 3,450,000 shares of its common stock at a public offering of $20.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $69.0 million, before deducting the underwriting discount and other offering expenses. Concurrently, the Company also completed the closing of approximately $60.0 million for 1,825,000 shares of its common stock and 1,175,000 pre-funded warrants in a private offering pursuant to a securities purchase agreement with certain investors, including entities affiliated with existing stockholders, at a price per share of common stock equal to the public offering price of $20.00 and a price per pre-funded warrant of $19.99. In aggregate, the Company received $129.0 million of gross proceeds less offering costs of $8.2 million. The Company is not required under any circumstance to settle any of the pre-funded warrants for cash, and therefore classified the pre-funded warrants as permanent equity.

December 2022 Securities Purchase Agreement

On December 16, 2022, the Company entered into a Securities Purchase Agreement for a private placement (Private Placement) with certain entities and members of management (collectively, Purchasers). Pursuant to the Securities Purchase Agreement, the Company agreed to sell to the Purchasers warrants to purchase up to an aggregate of 22,598,870 shares of the Company’s common stock, at a purchase price of $0.4425 per warrant. The closing of the Private Placement occurred on May 8, 2023 (the Issue Date), following the satisfaction of certain closing conditions, including the completion of enrollment in the randomized withdrawal period of Study C602. The Company received gross proceeds of $10.0 million for the sale and issuance of warrants to purchase common stock.

The warrants were separated into two tranches with 8,598,870 Tranche A Warrants with an exercise price of $1.75 per share and aggregate proceeds of up to approximately $15.0 million, and 14,000,000 Tranche B Warrants with an exercise price of $2.50 per share and aggregate proceeds of up to $35.0 million. The Tranche A warrants were immediately exercisable and were required to be exercised within 30 days of announcement of positive top-line data from the randomized withdrawal period of Study C602. On September 26, 2023, the Company announced positive top-line data and subsequently received $15.0 million from the exercise of the Tranche A warrants. The Tranche B warrants were also immediately exercisable and, following the FDA's approval of VYKAT XR, the remainder of these warrants were exercised. The Company received an aggregate of $35.0 million from the exercise of the Tranche B warrants. As of September 30, 2025, there were no remaining warrants outstanding under the Securities Purchase Agreement.

March 2022 Public Offering of Common Stock

On March 31, 2022, the Company sold 2,666,667 shares of its common stock at a public offering price of $3.75 per share, and for certain investors, in lieu of common stock, pre-funded warrants (the 2022 pre-funded warrants) to purchase 1,333,333 shares of its common stock at a public offering price $3.60 per pre-funded warrant, which represents the per share public offering price for the common stock less the $0.15 per share exercise price for each 2022 pre-funded warrant. The March 2022 pre-funded warrants are immediately exercisable and may be exercised at any time until all of the March 2022 pre-funded warrants are exercised in full. Each share of common stock or March 2022 pre-funded warrant was sold together with one, immediately exercisable, common warrant (the 2022 common warrants) with a five-year term to purchase one share of common stock at an exercise price of $4.50 per share. The net proceeds of the offering were $13.8 million, after deducting the underwriting discount and other offering expenses. The Company is not required under any circumstance to settle any of the 2022 pre-funded warrants or the 2022 common warrants for cash, and therefore classified both types of warrants as permanent equity.

Through September 30, 2025, 2,150,406 of the March 2022 common warrants had been exercised for gross proceeds of $9.7 million and 1,847,995 warrants were exercised using the cashless exercise option with no proceeds to the Company. As of September 30, 2025, 1,599 of the March 2022 common warrants remained outstanding.

At the Market Offering

In July 2024, the Company entered into the Sales Agreement with Jefferies, pursuant to which the Company may offer and sell up to $150.0 million of shares of its common stock, from time to time, through Jefferies.

The Company will pay Jefferies a commission of 3.0% of the aggregate gross proceeds from the sale of shares and has agreed to provide Jefferies with customary indemnification and contribution rights. The Company has also agreed to reimburse Jefferies for certain specified expenses. The Company is not obligated to sell any shares under the Sales Agreement. The offering of the shares

pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement by Jefferies or the Company, as permitted therein.

Common Stock Warrants

As of September 30, 2025 and December 31, 2024, the following table summarizes the Company's outstanding common stock warrants:

          
         As of September 30, 2025

         As of December 31, 2024

          
         Number of Common Warrant Shares

         Weighted-Average Exercise Price per Share

SOLENO THERAPEUTICS INC 10-Q