# EDGAR Filing Document

**Accession Number:** 0001764974
**File Stem:** 0000950170-25-105957
**Filing Date:** 2025-8
**Character Count:** 336711
**Document Hash:** e7bc784ab66e76ac05c6258705196e12
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-25-105957.hdr.sgml**: 20250808

**ACCESSION NUMBER**: 0000950170-25-105957

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 79

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250808

**DATE AS OF CHANGE**: 20250808

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Turnstone Biologics Corp.
- **CENTRAL INDEX KEY:** 0001764974
- **STANDARD INDUSTRIAL CLASSIFICATION:** BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 832909368
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41747
- **FILM NUMBER:** 251199123

**BUSINESS ADDRESS:**
- **STREET 1:** 9310 ATHENA CIRCLE, SUITE 300
- **CITY:** LA JOLLA
- **STATE:** CA
- **ZIP:** 92037
- **BUSINESS PHONE:** 347-897-5988

**MAIL ADDRESS:**
- **STREET 1:** 9310 ATHENA CIRCLE, SUITE 300
- **CITY:** LA JOLLA
- **STATE:** CA
- **ZIP:** 92037

?xml version='1.0' encoding='ASCII'? 10-Q

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 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** **June 30,** 2025

**OR** 

☐ **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:** 001-41747

------

Turnstone Biologics Corp.

**(Exact name of registrant as specified in its charter)** 

------

---

| | |
|:---|:---|
| Delaware | 83-2909368 |
| **(State or other jurisdiction of**<br>**incorporation or organization)** | **(I.R.S. Employer**<br>**Identification No.)** |

---

1110 North Virgil Avenue PMB 94659

Los Angeles**,** California 90029

**(Address of principal executive offices)** 

**(**347**)** 897-5988

**(Registrant's telephone number, including area code)** 

------

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

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br>**Symbol(s)** | **Name of each exchange**<br>**on which registered** |
| Common Stock ($0.001 par value) | TSBX | Nasdaq Capital Market |

---

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, a 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 ☒

The number of shares of Registrant's common stock issued and outstanding as of August 5, 2025, was 23,140,691.

------

**Turnstone Biologics Corp.** 

**FORM 10-Q** 

**TABLE OF CONTENTS** 

---

| | | |
|:---|:---|:---|
|  |  | Page |
| PART I | [<u>FINANCIAL INFORMATION</u>](#part_i_financial_information) |  |
| Item 1 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Financial Statements</u>](#item_1_financial_statements) | &nbsp;&nbsp;&nbsp;&nbsp;1 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024</u>](#condensed_consolidated_balance_sheets) | &nbsp;&nbsp;&nbsp;&nbsp;1 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2025 and 2024 (unaudited)</u>](#condensed_cons_stmt_of_opertios_and_comp) | &nbsp;&nbsp;&nbsp;&nbsp;2 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2025 and 2024 (unaudited)</u>](#condensed_cons_stmt_of_equity) | &nbsp;&nbsp;&nbsp;&nbsp;3 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited)</u>](#condensed_consolidated_stmt_of_cash_flow) | &nbsp;&nbsp;&nbsp;&nbsp;4 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Notes to Condensed Consolidated Financial Statements (unaudited)</u>](#notes_to_the_financial_statement) | 5 |
| Item 2 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#item_2_mda) | &nbsp;&nbsp;&nbsp;&nbsp;23 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 3 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#item_3_quantative_and_qualitative_disc) | &nbsp;&nbsp;&nbsp;&nbsp;31 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 4 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Controls and Procedures</u>](#item_4_controls_and_procedures) | &nbsp;&nbsp;&nbsp;&nbsp;31 |
| &nbsp;&nbsp;&nbsp;&nbsp;PART II | &nbsp;&nbsp;&nbsp;&nbsp;[<u>OTHER INFORMATION</u>](#part_ii_other_information) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 1 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Legal Proceedings</u>](#item_1_legal_proceeding) | &nbsp;&nbsp;&nbsp;&nbsp;32 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 1A | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Risk Factors</u>](#item_1a_risk_factors) | &nbsp;&nbsp;&nbsp;&nbsp;32 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 2 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>](#item_2_unregistered_sales) | &nbsp;&nbsp;&nbsp;&nbsp;34 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 3 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Defaults Upon Senior Securities</u>](#item_3_defaults_upon_senior_securities) | &nbsp;&nbsp;&nbsp;&nbsp;34 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 4 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Mine Safety Disclosures</u>](#item_4_mine_safety_disclosures) | &nbsp;&nbsp;&nbsp;&nbsp;34 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 5 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Other Information</u>](#item_5_other_information) | &nbsp;&nbsp;&nbsp;&nbsp;34 |
| &nbsp;&nbsp;&nbsp;&nbsp;Item 6 | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Exhibits</u>](#item_6_exhibits) | &nbsp;&nbsp;&nbsp;&nbsp;35 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;[<u>Signature</u>](#signature) | 36 |

---

------

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS** 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties, many of which are beyond our control. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements as a result of various factors, including those set forth below under the caption "Risk Factors."

In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "would," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential" or "continue" or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations and financial condition. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, or Annual Report, and in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission, or SEC, after the date of this Quarterly Report on Form 10-Q.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.

------

**PART I. FINANCIAL INFORMATION** 

**ITEM 1. FINANCIAL STATEMENTS** 

**Turnstone Biologics Corp.** 

**Condensed Consolidated Balance Sheets** 

(in thousands, except share and per share amounts)

---

| | | |
|:---|:---|:---|
|  | **June 30, 2025** | **December 31, 2024** |
|  | **(unaudited)** |  |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $16688 | $28926 |
| &nbsp;&nbsp;Restricted cash | 1906 | 116 |
| &nbsp;&nbsp;Property and equipment held for sale | 313 |  |
| &nbsp;&nbsp;Prepaid expenses | 366 | 3191 |
| &nbsp;&nbsp;Operating lease right of use assets, current | 265 |  |
| &nbsp;&nbsp;Other current assets | 1571 | 1987 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 21109 | 34220 |
| Other assets, noncurrent |  | 811 |
| Operating lease right of use assets |  | 933 |
| Property and equipment, net |  | 4175 |
| **Total assets** | $21109 | $40139 |
| **Liabilities and stockholders' equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;Accounts payable | $2687 | $870 |
| &nbsp;&nbsp;Accrued expenses and other current liabilities | 3247 | 6244 |
| &nbsp;&nbsp;Operating lease liability, current | 411 | 1085 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 6345 | 8199 |
| Operating lease liability, noncurrent |  | 104 |
| Other liabilities, noncurrent |  | 369 |
| Total liabilities | 6345 | 8672 |
| Stockholders' equity |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2025 and <br> December 31, 2024, respectively, 0 shares issued and outstanding as of June 30, <br> 2025 and December 31, 2024, respectively |  |  |
| &nbsp;&nbsp;Common stock, $0.001 par value; 490,000,000 shares authorized at June 30, 2025 <br> and December 31, 2024, respectively, 23,140,691 and 23,136,617 shares<br> issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | 23 | 23 |
| &nbsp;&nbsp;Additional paid-in capital | 279834 | 279241 |
| &nbsp;&nbsp;Accumulated other comprehensive loss | (202) | (202) |
| &nbsp;&nbsp;Accumulated deficit | (264891) | (247595) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 14764 | 31467 |
| **Total liabilities and stockholders' equity** | $21109 | $40139 |

---

*The accompanying notes area an integral part of these unaudited condensed consolidated financial statements.* 

------

**Turnstone Biologics Corp.** 

**Condensed Consolidated Statements of Operations and Comprehensive Loss**

(unaudited)

(in thousands, except share and per share data)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 171 | 17730 | 4528 | 33520 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 5388 | 4327 | 10195 | 9228 |
| Total operating expenses | 5559 | 22057 | 14723 | 42748 |
| Loss from operations | (5559) | (22057) | (14723) | (42748) |
| Other income (expense), net | 81 | 755 | (2559) | 1833 |
| Net loss before income taxes | (5478) | (21302) | (17282) | (40915) |
| Provision for income taxes | (12) | (2) | (14) | (18) |
| Net loss | $(5490) | $(21304) | $(17296) | $(40933) |
| Other comprehensive loss: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized gain (loss) on available-for-sale debt securities |  | 10 |  | (107) |
| Total comprehensive loss | $(5490) | $(21294) | $(17296) | $(41040) |
| Weighted-average number of shares of common stock outstanding, basic and diluted | 23140510 | 23037714 | 23139461 | 23024754 |
| Net loss per share attributable to common stockholders, basic and diluted | $(0.24) | $(0.92) | $(0.75) | $(1.78) |

---

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.* 

------

**Turnstone Biologics Corp.** 

**Condensed Consolidated Statements of Stockholders' Equity**

(unaudited)

(in thousands, except share amounts)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Additional<br>Paid-In** | **Accumulated<br>Other<br>Comprehensive** | **Accumulated** | **Total<br>Stockholders'** |
|  | **Shares** | **Amount** | **Capital** | **Loss** | **Deficit** | **Equity** |
| Balance at December 31, 2024 | 23136617 | $23 | $279241 | $(202) | $(247595) | $31467 |
| Vesting of restricted stock units | 2279 |  | $— |  |  | $— |
| Stock-based compensation expense |  |  | $325 |  |  | $325 |
| Net loss |  |  |  |  | $(11806) | $(11806) |
| Balance at March 31, 2025 | 23138896 | $23 | $279566 | $(202) | $(259401) | $19986 |
| Vesting of restricted stock units | 1795 |  |  |  |  | $— |
| Stock-based compensation expense |  |  | $268 |  |  | $268 |
| Net loss |  |  |  |  | $(5490) | $(5490) |
| Balance at June 30, 2025 | 23140691 | $23 | $279834 | $(202) | $(264891) | $14764 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Additional<br>Paid-In** | **Accumulated<br>Other<br>Comprehensive** | **Accumulated** | **Total<br>Stockholders'** |
|  | **Shares** | **Amount** | **Capital** | **Loss** | **Deficit** | **Equity** |
| Balance at December 31, 2023 | 23099335 | $23 | $275521 | $(119) | (176758) | $98667 |
| Exercise of stock options | 29119 | $— | $44 |  |  | $44 |
| Stock-based compensation expense |  |  | $1046 |  |  | $1046 |
| Unrealized loss on available-for-sale debt securities |  |  |  | $(117) |  | $(117) |
| Net loss |  |  |  |  | $(19629) | $(19629) |
| Balance at March 31, 2024 | 23128454 | $23 | 276611 | $(236) | (196387) | $80011 |
| Stock-based compensation expense |  |  | $1019 |  |  | $1019 |
| Unrealized gain on available-for-sale debt securities |  |  |  | $10 |  | $10 |
| Net loss |  |  |  |  | $(21304) | $(21304) |
| Balance at June 30, 2024 | 23128454 | $23 | $277630 | $(226) | $(217691) | $59736 |

---

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.* 

------

**Turnstone Biologics Corp.** 

**Condensed Consolidated Statements of Cash Flows** 

(unaudited)

(in thousands)

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| **Operating Activities** |  |  |
| Net loss | $(17296) | $(40933) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 593 | 2065 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of property and equipment | 2564 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 301 | 1007 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of premium on short term investments |  | (1385) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of contingent consideration liability | (92) | 108 |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable - collaboration agreement |  | 194 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 2825 | 1233 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets | 1277 | 464 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (110) | (97) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 1817 | 1422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued compensation and other accrued liabilities | (3274) | 2445 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-current assets |  | 92 |
| Net cash flows used in operating activities | (11395) | (33385) |
| **Investing Activities** |  |  |
| Proceeds from maturities of short-term investments |  | 40000 |
| Purchase of short-term investments |  | (6740) |
| Proceeds from sale of property and equipment | 947 | 25 |
| Purchases of property and equipment |  | (249) |
| Net cash flows provided by investing activities | 947 | 33036 |
| **Financing Activities** |  |  |
| Payments of financing costs |  | (92) |
| Proceeds from exercise of stock options |  | 44 |
| Net cash flows used in financing activities |  | (48) |
| Net decrease in cash, cash equivalents and restricted cash | (10448) | (397) |
| Cash, cash equivalents and restricted cash at beginning of the period | 29042 | 17914 |
| Cash, cash equivalents and restricted cash at end of the period | $18594 | $17517 |
| **Supplemental Disclosure of Cash Flow Information:** |  |  |
| Cash paid for income taxes | 2 | 119 |
| **Supplemental Disclosure of Non-Cash Investing and Financing Activities:** |  |  |
| Financing costs included in accounts payable |  | 28 |
| Equipment sales included in other current assets | 50 |  |

---

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.* 

------

**Turnstone Biologics Corp.** 

**Notes to the Condensed Consolidated Financial Statements** 

**1. Nature of the Business and Basis of Presentation** 

***Organization*** 

Turnstone Biologics Corp. (the "Company" or "Turnstone") is a biotechnology company that was focused on developing new medicines to treat and cure patients with solid tumors. Until recently, Turnstone was pioneering a differentiated approach to tumor infiltrating lymphocytes ("TILs"), a clinically validated technology for treating solid tumors. The Company was developing next generation TIL therapies by selecting and expanding the most potent and tumor reactive T cells ("Selected TILs"). The Company's headquarters are located in Los Angeles, California.

***Merger Agreement***

On June 26, 2025, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with XOMA Royalty Corporation, a Nevada corporation ("XOMA"), and XRA 3 Corp., a Delaware corporation and a wholly-owned subsidiary of XOMA ("Merger Sub"). The Merger Agreement provides for, among other things: (i) the acquisition of all of the Company's outstanding shares of common stock, par value $0.001 per share common stock, by XOMA through a cash tender offer (the "Offer") by Merger Sub, for a price per share of common stock of (A) $0.34 (the "Cash Amount"), payable subject to any applicable tax withholding and without interest, plus (B) one contingent value right ("CVR"), which shall represent the right to receive potential payments, in cash, payable subject to any applicable tax withholding and without interest (such amount being the "CVR Amount", and the Cash Amount plus the CVR Amount, collectively being the "Offer Price"); and (ii) the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger.

Pursuant to the terms of the Merger Agreement, as of immediately prior to the effective time of the Merger (the "Effective Time"), by virtue of the Merger and without any action on the part of the holders of common stock, each outstanding share of common stock, will be converted into the right to receive the Offer Price. Each option to purchase shares of common stock from the Company will be cancelled and terminated for no consideration. The vesting for each restricted stock unit ("RSU") of the Company shall be accelerated and each RSU that is then outstanding will be cancelled and, in exchange therefor, the holder of such cancelled RSU will be entitled to receive in consideration of the cancellation of such RSU (A) an amount in cash without interest, less any applicable tax withholding, equal to the Cash Amount and (B) one CVR.

XOMA's obligation to accept shares of common stock tendered in the Offer is subject to conditions, set forth in the Merger Agreement. Following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement, including that the number of shares of common stock validly tendered (and not properly withdrawn) prior to the expiration of the Offer equals at least one share more than 50% of all shares of common stock issued and outstanding.

Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of XOMA without any additional Company stockholder approvals. The Merger will be effected as soon as practicable following the time of purchase by XOMA of shares of common stock validly tendered and not withdrawn by XOMA in the Offer.

At or prior to the time at which XOMA first irrevocably accepts for purchase the shares of common stock tendered in the Offer, XOMA and Merger Sub expect to enter into a CVR Agreement with a rights agent and a representative, agent and attorney-in-fact of the holders of CVRs. Each CVR holder will be entitled to the right to receive, its portion of the amount equal to (i) up to an aggregate amount for all CVR holders of $1.1 million to the extent received by the Company as a result of contingent payments relating to tax receivables and a lease security deposit, plus (ii) Net Cash Excess (as defined in the CVR Agreement), and minus (iii) Net Cash Shortfall (as defined in the CVR Agreement) ("CVR Proceeds"). In the event that any such CVR Proceeds are received after one year following the date of the closing of the Merger, holders of the CVRs will not receive any payment pursuant to the CVR Agreement.

The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the United States Securities and Exchange Commission (the "SEC"). The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in XOMA, any constituent corporation party to the Merger or any of their respective affiliates. No interest will accrue on any amounts payable on the CVRs to any holders.

------

***Reduction in Force***

Turnstone is reducing its workforce while also implementing further cost-containment and cash conservation measures. The Company intends to retain all employees essential for supporting value realization as part of the Merger Agreement. As of June 30, 2025, the Company has 3 employees and may continue reducing headcount as the Company completes the Merger.

***Nasdaq Compliance***

On September 27, 2024, the Company received a deficiency notice (the "Notice") from the Listing Qualifications Staff of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that, for the last 30 consecutive business days, the bid price of the Company's common stock had closed below $1.00 per share, the minimum closing bid price required by the continued listing requirements of Nasdaq Listing Rule 5450(a)(1). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days to regain compliance with the Minimum Bid Requirement.

On March 27, 2025, the Company received approval from the Listing Qualifications Department of Nasdaq to transfer the listing of the Company's common stock from the Nasdaq Global Market to the Nasdaq Capital Market (the "Approval"). The Company's securities were transferred to the Nasdaq Capital Market at the opening of business on March 31, 2025. The Company's common stock continues to trade under the symbol "TSBX." The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market, but with less stringent listing requirements, although listed companies must meet certain financial requirements and comply with Nasdaq's corporate governance requirements.

In connection with the Approval, the Company has been granted an additional 180-day grace period, or until September 22, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance with the Minimum Bid Price Requirement and qualify for continued listing on the Nasdaq Capital Market, the minimum bid price per share of the Company's common stock must be at least $1.00 for at least ten consecutive business days during the additional 180-day grace period. If the Company does not regain compliance during this additional grace period, its common stock would be subject to delisting by Nasdaq. As part of its transfer application, the Company notified Nasdaq that in order to regain compliance with the Minimum Bid Price Requirement during the additional grace period, it will implement a reverse stock split, and has filed a proxy statement soliciting a stockholder vote on such reverse stock split. If the Company's stock becomes subject to delisting as a result of the Company's failure to regain compliance with the Minimum Bid Price Requirement by September 22, 2025, the Company may appeal the decision to a Nasdaq Hearings Panel. In the event of an appeal, the Company's common stock would remain listed on the Nasdaq Capital Market pending a written decision by the Nasdaq Hearings Panel following a hearing. In the event that the Nasdaq Hearings Panel determines not to continue the Company's listing and the Company's common stock is delisted from The Nasdaq Capital Market, the Company's common stock may trade on the OTC Bulletin Board or other small trading markets, such as the pink sheets.

**Liquidity and Capital Resources** 

***Going Concern*** 

On June 26, 2025, the Company entered into the Merger Agreement. The Company has devoted, and expects to continue to devote, substantial time and resources to complete the Merger. The Company expects that the Merger will close in the third quarter of 2025. There can be no assurances that this transaction will be successfully consummated or lead to increased stockholder value, or that the Company will make any cash distributions to our stockholders. If the Merger is not consummated, the Board intends to pursue a dissolution and liquidation.

As of June 30, 2025, the Company had $16.7 million in cash and cash equivalents. The Company has concluded that the balance of cash and cash equivalents will be sufficient to fund its planned expenditures and meet its obligations for the twelve months following the date these unaudited condensed consolidated financial statements are filed with the SEC.

***Sources of Liquidity*** 

Since its inception, the Company has devoted substantially all of its efforts and financial resources to organizing and staffing the Company, business planning, raising capital, discovering product candidates and securing related intellectual property rights, and conducting research and development activities for its Selected TIL programs and product candidates. The Company does not have any products approved for sale, has not generated any revenue from product sales and has incurred overall net losses since commencement of the Company's operations, including a net loss of $17.3 million and $40.9 million for the six months ended June 30, 2025 and 2024, respectively. The Company has financed its operations through the issuance and sale of shares of the Company's redeemable convertible preferred stock, from collaboration revenue received pursuant to certain collaboration agreements, and most recently, with proceeds from its initial public offering ("IPO") completed on July 25, 2023 and the exercise of the

------

underwriters option to purchase additional shares on August 15, 2023. As of June 30, 2025, the Company had an accumulated deficit of $264.9 million. The Company expects to continue to generate significant operating losses for the foreseeable future.

On April 26, 2024 (the "Loan Closing Date"), the Company entered into a Loan and Security Agreement ("LSA") with Banc of California ("BOC") for a revolving credit facility in an aggregate principal amount of up to $20 million with annual interest at the greater of the Prime Rate (as defined in the LSA) or 4.25%. This LSA includes a covenant requiring the Company to (i) receive positive interim Phase 1 data for TIDAL-01 (as determined by the Company's Board), which was achieved in August 2024 and (ii) receive at least $40.0 million in new funding from the sale of equity, partnerships, and/or business development payments, in each case, by March 31, 2025, which was not achieved. If the Company fails to comply with any of the foregoing covenants, the Lender may terminate the commitments to make further loans and declare all of the obligations of the Company under the LSA to be immediately due and payable. On May 14, 2025, the LSA terminated with no amounts having been drawn and no significant termination fees were incurred (see *Note 8 - Term Loan* for additional information).

**2. Summary of Significant Accounting Policies** 

***Basis of Presentation of Unaudited Condensed Consolidated Financial Information***

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company's financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2025 or for any other period. The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, included in the Company's Annual Report on Form 10-K filed with the SEC on March 31, 2025. Certain prior period amounts reported in the Company's unaudited condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period presentation. Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standard Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").

***Principles of Consolidation*** 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

***Significant Accounting Policies*** 

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are consistent with those discussed in Note 2 to the audited consolidated financial statements included in the Company's Annual Report filed on Form 10-K filed with the SEC on March 31, 2025.

***Use of Estimates*** 

The preparation of these unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to accrued expenses, contingent liabilities, impairment of long-lived assets, revenue recognition, the valuation of equity-based compensation, common stock, restricted common stock, and income taxes. The Company bases its estimates on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

***Segment Reporting*** 

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The CODM is the Company's chief executive officer, Dr. Sammy Farah. The Company views its operations as and manages its business in one operating segment, which is the business of developing and commercializing therapeutics. Segment information is further described in *Note 13—Segments* to these consolidated financial statements.

------

***Restricted Cash and Investments*** 

Restricted cash consists of certificate of deposit accounts that are pledged as collateral for the Company's San Diego facility lease as well as the escrow deposit for H. Lee Moffitt Cancer Center ("Moffitt") (see *Note 6 - Agreements* for additional information). Restricted cash was approximately $1.9 million and $0.1 million as of June 30, 2025 and December 31, 2024, respectively.

The Company invests its excess cash in investment grade, short-term, fixed income securities and recognizes purchased securities on the settlement date. All investments have been classified as "available-for-sale" in the unaudited condensed consolidated balance sheets and are carried at estimated fair value based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such designation as of each balance sheet date.

The Company assesses its available-for-sale securities under the available-for-sale security impairment model in ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326") as of each reporting date in order to determine if a portion of any decline in fair value below carrying value is the result of a credit loss. The Company records credit losses in the unaudited condensed consolidated statements of operations and comprehensive loss as credit loss expense, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale securities. Declines in fair value below carrying value attributable to non-credit related factors are recorded as accumulated other comprehensive loss, which is a separate component of stockholders' equity.

Realized gains and losses are reported in other income (expense), net. Interest on short-term investments is included in other income (expense), net. The Company's investments are classified as current assets which reflects management's intention to use the proceeds from sales of these securities to fund its operations, as necessary.

***Concentration of Credit Risk*** 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments and restricted cash. The Company's investment policy restricts cash investments to high credit quality, investment grade investments. The Company's investment policy provides guidelines and limits regarding investment type, concentration, credit quality, and maturity aimed at maintaining sufficient liquidity to satisfy operating and working capital requirements along with strategic initiatives, preserving capital, and minimizing risk of capital loss while generating returns on its investments. The Company is exposed to credit risk in the event of default by the issuer or the institutions holding the cash and cash equivalents to the extent of the amounts recorded on the balance sheets.

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts or other foreign-hedging arrangements.

***Fair Value Measurements*** 

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be 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. The fair value hierarchy requires that an entity maximize the use of observable inputs when estimating fair value. The fair value hierarchy includes the following three-level classification which is based on the market observability of the inputs used for estimating the fair value of the assets or liabilities being measured:

**Level 1 –** Quoted market prices in active markets for identical assets or liabilities.

**Level 2 –** Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

**Level 3 –** Inputs that are generally unobservable and typically reflect management's estimate of assumptions that a market participant would use in pricing the asset or liability.

Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized at fair value in the unaudited condensed consolidated financial statements on a recurring basis (at least annually). To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments

------

categorized as Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

***Stock-Based Compensation*** 

The Company accounts for stock-based compensation expense related to stock options and RSUs, by estimating the fair value on the date of grant. The fair value of RSUs granted to employees is the closing price of the Company's common stock on the date of grant. The Company estimates the fair value of stock options granted to employees and non-employees using the Black-Scholes option pricing model. The Company recognizes stock-based compensation expense, over the requisite service period, based on the vesting provisions of the individual grants. Generally, the Company issues stock-based awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company accounts for forfeitures when they occur.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the expected term of the award, (c) the risk-free interest rate and (d) expected dividend yields. Due to the lack of a public market for the Company's common stock until July 21, 2023, and lack of company- specific historical and implied volatility data, the Company has based its computation of expected volatility on the average historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term. The Company uses the simplified method as prescribed by the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

***Contingent Consideration*** 

Consideration paid related to the Myst Merger Agreement (see *Note 7 - Asset Acquisition* for additional information) may include potential future payments that are contingent upon the Company achieving certain milestones in the future. Contingent consideration liabilities are measured at their estimated fair value as of the date of the unaudited condensed consolidated balance sheets using a probability-based income approach based on the monetary value of the milestone payment discounted for the likelihood of achieving the milestone and a present value factor based on the timing of when the milestone is expected to be achieved. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under other liabilities, non-current in the unaudited condensed consolidated balance sheets. Changes in the fair value of the contingent consideration are recorded as research and development expenses in the unaudited condensed consolidated statement of operations and comprehensive loss.

***Recently Issued Accounting Pronouncements*** 

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 the disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, *Income Taxes* (Topic 740)—*Improvements to Income Tax Disclosures* ("ASU 2023-09"). ASU 2023-09 requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, ASU 2023-09 requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in ASU 2023-09 are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.

------

**3. Fair Value of Financial Assets and Liabilities** 

As of June 30, 2025 and December 31, 2024, the Company's restricted cash consists of a certificate of deposit which is maintained as collateral in connection with its San Diego facility lease and the escrow deposit for the Asset Purchase Agreement entered into with Moffitt, (see *Note 6 – Agreement* for additional information) which are valued using Level 1 inputs. The Company's highly liquid money market funds included within cash equivalents and restricted cash are valued using Level 1 inputs.

The Company had $0.0 million and $0.1 million in contingent consideration liabilities as of June 30, 2025 and December 31, 2024, respectively, related to the Myst Merger Agreement. The contingent consideration balances are comprised of one potential milestone payment and is measured at fair value (see *Note 7—Asset Acquisition* for additional information). The fair value of the contingent consideration is estimated based on the monetary value of the milestone discounted for the likelihood of achieving the milestone and a present value factor based on the timing of when the milestone is expected to be achieved. The value for the contingent consideration balance is based on significant inputs not observable in the market which represents a Level 3 measurement within the fair value hierarchy. There were no transfers in or out of Level 3 during the periods presented.

The following tables represent a summary of the financial assets and liabilities that are measured on a recurring basis at fair value *(in thousands)*:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** |
|  | **Level 1** | **Level 2** | **Level 3** | **Fair Value** |
| Financial assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $14559 | $— | $— | $14559 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash<sup>(1)</sup> | 1906 |  |  | 1906 |
| Financial liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Contingent consideration<sup>(2)</sup> | $— | $— | $— | $— |
| Total financial assets | $16465 | $— | $— | $16465 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
|  | **Level 1** | **Level 2** | **Level 3** | **Fair Value** |
| Financial assets: |  |  |  |  |
| Money market funds | $22159 | $— | $— | $22159 |
| Restricted cash<sup>(1)</sup> | 116 |  |  | 116 |
| Total financial assets | $22275 | $— | $— | $22275 |
| Financial liabilities: |  |  |  |  |
| Contingent consideration<sup>(2)</sup> | $— | $— | $92 | $92 |
| Total financial liabilities | $— | $— | $92 | $92 |

---

------

(1)Restricted cash consists of a deposit of $0.1 million for the Company's San Diego office lease as of June 30, 2025 and December 31, 2024 and $1.8 million for the escrow deposit related to the Asset Purchase Agreement entered into with Moffitt as of June 30, 2025.

(2)Contingent consideration related to the Myst Merger Agreement.

------

The following significant unobservable inputs were used in the valuation of the contingent consideration payable to the sole common stockholder of Myst Therapeutics, Inc. ("Myst") pursuant to the Myst Merger Agreement:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value as of** |  |  |  |
| **Contingent Consideration Liability** | **June 30, 2025** | **Valuation Technique** | **Unobservable Input** | **Amount** |
|  | (in thousands) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;'Milestone payment for first registrational study (see Note 7 - Asset Acquisition for additional information) | $— | Discounted cash flow | Likelihood of occurrence | 0% |
|  | **Fair Value as of** |  |  |  |
| **Contingent Consideration Liability** | **December 31, 2024** | **Valuation Technique** | **Unobservable Input** | **Amount** |
|  | (in thousands) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;'Milestone payment for first registrational study (see Note 7 - Asset Acquisition for additional information) | $92 | Discounted cash flow | Likelihood of occurrence | 1% |
|  |  |  | Discount rate | 25% |
|  |  |  | Expected term (in years) | 3.5 |

---

The following table reflects the activity for the Company's contingent consideration, measured at fair value using Level 3 inputs (*in thousands*):

---

| | |
|:---|:---|
| Contingent consideration at December 31, 2024 | $92 |
| &nbsp;&nbsp;Changes in the fair value of contingent consideration | (92) |
| &nbsp;&nbsp;Contingent consideration at June 30, 2025 | $- |

---

The following tables show the Company's cash and cash equivalents by significant investment category *(in thousands*):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Estimated<br>Fair<br>Value** |
| Level 1: Money market funds | $14559 | $— | $— | $14559 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restricted cash | 1906 |  |  | 1906 |
| Total financial assets | $16465 | $— | $— | $16465 |
| Classified as: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents |  |  |  | $14559 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash |  |  |  | 1906 |
|  |  |  |  | $16465 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Estimated<br>Fair<br>Value** |
| Level 1: Money market funds | $22159 | $— | $— | $22159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 116 |  |  | 116 |
| Total financial assets | $22275 | $— | $— | $22275 |
| Classified as: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents |  |  |  | $22159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash |  |  |  | 116 |
|  |  |  |  | $22275 |

---

------

**4. Property and Equipment, Net** 

Property and equipment, net consist of the following (*in thousands*):

---

| | | |
|:---|:---|:---|
|  | **June 30,** | **December 31,** |
|  | **2025** | **2024** |
| Laboratory equipment | $1109 | $10053 |
| Furniture | 268 | 690 |
| Leasehold improvements |  | 1308 |
|  | 1377 | 12051 |
| Less accumulated depreciation and amortization | (775) | (7876) |
| Total property and equipment, net | 602 | 4175 |
| Reclassified to held for sale | (602) |  |
| Total property and equipment, net | $— | $4175 |
| Reclassified to held for sale | $602 |  |
| Less: Sales | $(289) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Held for sale | $313 | $— |

---

Property and equipment depreciation and amortization expense for the six months ended June 30, 2025 and twelve months ended December 31, 2024 was $0.3 million and $1.0 million, respectively.

As of June 30, 2025, the Company had $0.3 million in property and equipment held for sale, and the Company's intention is to complete the sale of the remaining assets within the third quarter of 2025. During the six months ended June 30, 2025, $1.4 million of assets were reclassified on the balance sheet as property and equipment held for sale. The Company recognized a loss on disposal of property and equipment of $2.6 million for the six months ended June 30, 2025.

**5. Accrued Expenses and Other Current Liabilities** 

Accrued expenses and other current liabilities consist of the following *(in thousands):* 

---

| | | |
|:---|:---|:---|
|  | **June 30,** | **December 31,** |
|  | **2025** | **2024** |
| Research and development expense | $22 | $3774 |
| Professional and consulting expense | 1272 | 545 |
| Taxes payable | 277 | 837 |
| Compensation | 1676 | 1088 |
| Total accrued expenses and other current liabilities | $3247 | $6244 |

---

**6. Agreements** 

***H. Lee Moffitt Cancer Center*** 

*Master Collaboration Agreement* 

In January 2021, the Company entered into an amended and restated master collaboration agreement (the "Moffitt Agreement"), with Moffitt, to amend a then-existing master collaboration agreement from November 2019, as amended March 2020, between Moffitt and the Company's now wholly-owned subsidiary, Myst, with the intent to continue to work collaboratively in the research of cancer immunotherapies.

Each party granted the other party a right to use its research materials for performance of the research plans agreed to by the parties (the "Research Plans"). Each party granted the other party a non-exclusive, worldwide, sublicensable, perpetual, irrevocable, royalty-free license under all inventions invented in performance of a Research Plan and invented jointly by the Company and Moffitt

------

(the "Joint Inventions") (with certain exclusions) to make, use, sell, offer for sale, import products and services and/or otherwise practice such inventions.

The Company granted Moffitt a royalty free, non-sublicensable, non-transferable, perpetual, non-exclusive license to use and practice certain inventions invented solely by the Company in the performance of a Research Plan for its internal non-commercial research purposes.

Moffitt granted the Company (i) a royalty-free, sublicensable, non-transferable, perpetual, non-exclusive license to use and practice certain inventions invented solely by Moffitt in the performance of a Research Plan ("Moffitt Inventions"), (a) for internal, non-commercial research purposes outside the field of ACT and/or (b) to research, develop, make, use, sell, offer to sell, or import products and/or services in the field of ACT and (ii) a royalty free, sublicensable, non-transferable, perpetual, non-exclusive license to use and practice certain inventions invented in performance of a Research Plan or through the use of specified Moffitt research materials.

Moffitt granted the Company an option to obtain, with terms to be negotiated in good faith under commercially reasonable terms, a royalty-bearing, sublicensable exclusive license in the Moffitt Inventions, the TCR Inventions, and/or Moffitt's interest in Joint Inventions. The Company could have exercised this option at any time within six months after Moffitt informed the Company of any new invention, and upon the Company's exercise, the parties would have a period of six months to negotiate the terms of such exclusive license.

The Moffitt Agreement expired in January 2025, which was four years from the effective date of the Moffitt Agreement. All activity being performed under the Moffitt Agreement has been transferred to the Alliance Agreement (as defined below).

*Moffitt Alliance Agreement* 

In June 2022, the Company entered into a life science alliance agreement with Moffitt (the "Alliance Agreement"), in order to further expand the Company's relationship and support the Company's existing agreements with Moffitt (the "Underlying Agreements"). Pursuant to the Alliance Agreement, the Company will have priority access to Moffitt's scientific research, manufacturing, and clinical capabilities for the development of novel TIL therapies, including expedited clinical trial activation, enhanced patient screening and data sharing, access to Moffitt's cellular therapies research and development infrastructure, expanded molecular data sets and biospecimens for research, and allocated cGMP manufacturing capacity for the Company's product candidates.

Under the Alliance Agreement, the Company is obligated to use commercially reasonable efforts to further develop TIL Products, to manufacture TIL Products, to obtain regulatory approval for at least one TIL Product in the United States and to commercialize TIL Products in all countries in which regulatory approval for a TIL Product has been obtained. For purposes of the Alliance Agreement, TIL Product means any pharmaceutical, biopharmaceutical, or biotechnology TIL product that has been developed by us or Moffitt and is advanced into clinical development under an IND sponsored by Moffitt.

Pursuant to the Alliance Agreement, the Company agreed to pay to Moffitt a total amount of at least $17.5 million (the "Alliance Funding Amount"), for research, development and manufacturing related services that will be paid equally over five years on June 1st of each year starting on June 1, 2023. The Alliance Funding Amount will be calculated annually at the conclusion of each payment period, and, to the extent the Company's annual aggregate payments to Moffitt of $3.5 million exceeds the applicable annual installment amount, the Company will receive a reduction in the amount due for future installment payments based on a predetermined formula agreed to by the parties. To the extent the aggregate annual payments are less than $3.5 million, the Company will prepay the remaining amount due.

In connection with the execution of the Alliance Agreement, the Company issued Moffitt 91,721 shares of its common stock. As partial consideration under the Alliance Agreement, the Company also agreed to issue Moffitt an additional 366,884 shares of its common stock in the aggregate upon the satisfaction of certain clinical and regulatory milestones with respect to TIL Products. The issuances of common stock are treated as performance-based stock awards. On February 27, 2023, 91,721 shares were issued due to the achievement of the milestone related to the start of the Phase 1 trial. In addition, upon achievement of certain thresholds for aggregate net sales of all TIL Products, the Company is required to make tiered sales-based milestones payments to Moffitt of up to an aggregate of $50.0 million. With respect to each of the equity and sales milestones described above, TIL Products include any

------

pharmaceutical, biopharmaceutical or biotechnology TIL Product that is developed by the Company or Moffitt and is advanced into clinical development under an IND sponsored by Moffitt.

Unless earlier terminated, the Alliance Agreement will remain in effect for a term of five years and may be extended for additional periods upon the mutual written consent of both parties. Either party may terminate the Alliance Agreement in the event of (i) the other party's material breach of the Alliance Agreement that remains uncured after ninety days of receiving written notice of such breach (or in the case of breach of payment obligations, within ten days), (ii) the other party's insolvency and (iii) a pandemic event resulting in government lockdowns or orders that legally compel such party to cease operations or that result in material disruptions in the available workforce and prevents such party from performing its contractual obligations for a period of more than six months. At any time after June 1, 2025, either party may terminate the Alliance Agreement without cause upon sixty days prior written notice to the other party (a "Termination for Convenience"). Upon a Termination for Convenience, the terminating party shall pay to the other party a termination fee in an amount equal to a low double digit percentage of the then remaining Alliance Funding Amount. Termination or expiry of one or more Underlying Agreements does not affect the term of the Alliance Agreement, which will continue to apply to the remaining ongoing Underlying Agreements.

On June 26, 2025, the Company (i) entered into an Asset Purchase Agreement (the "Purchase Agreement") by and among the Company and Moffitt, pursuant to which the Company will sell certain assets related to its TIDAL-01 program in consideration for the termination of the Alliance Agreement (as defined in the Purchase Agreement) ("Asset Sale"), subject to the terms and conditions of the Purchase Agreement, and (ii) entered into an Escrow Agreement (the "Escrow Agreement"), by and among the Company, Moffitt, and Citibank, N.A., as escrow agent.

Pursuant to the terms of the Purchase Agreement, Moffitt will assume certain obligations of the Company under the Myst Merger Agreement. The Company will receive a total consideration of approximately $3.0 million to offset the Company's obligations to Moffitt under the Alliance Agreement, of which, approximately $1.8 million was placed into an escrow account as of the date of the Purchase Agreement (the "Escrow Account"), subject to the terms and conditions of the Escrow Agreement.

Moffitt's obligation to closing the Asset Sale is subject to certain conditions set forth in the Purchase Agreement. Pursuant to the Merger Agreement, effective as of the Offer Closing Time (as defined in the Merger Agreement), Merger Sub shall assume all of the Company's obligations, duties, and covenants under the Purchase Agreement. Immediately following the consummation of the Merger, Merger Sub, as the sole stockholder of the Company shall duly execute a written consent pursuant to the requirements of the Company's governing documents and applicable law, for the adoption of the transactions, contemplate by the the Purchase Agreement. Following the consummation of the Merger, anticipated to occur in the third quarter of 2025, the Escrow Amount will be released to the Company.

It is a condition to the closing of the Merger that certain conditions to the Asset Sale shall have been satisfied or, if permitted by applicable law, waived.

If the transactions contemplated by the Merger Agreement are not consummated and the Company fails to obtain the requisite stockholder approval for the Asset Sale, the Purchase Agreement will terminate in accordance with its terms. If the foregoing should occur or if the Purchase Agreement is otherwise terminated, including as a result of the Asset Sale not being consummated by December 26, 2025, the Escrow Amount will be released to Moffitt.

**7. Asset Acquisition**

In December 2020, the Company entered into the Agreement and Plan of Merger and Reorganization (the "Myst Merger Agreement"), by and among the Company, Flatiron Merger Sub I, Inc. ("Merger Sub"), Flatiron Merger Sub II, LLC ("Merger LLC"), a direct, wholly-owned subsidiary of the Company, Myst, and Timothy Langer, the sole common stockholder of Myst ("Langer"). Pursuant to the Myst Merger Agreement, the business combination (the "Merger") was effected in two steps. The first step was the merger of Merger Sub with and into Myst. The second step was the merger of Myst with and into Merger LLC. The Merger closed on December 14, 2020, and the effective date of the Merger was January 20, 2021. As a result of the Merger, the separate existences of Merger Sub and Myst ceased, and Merger LLC became the Company's wholly-owned subsidiary.

Pursuant to the Myst Merger Agreement, on December 15, 2020, the Company paid the former equity holders of Myst, (the "Myst Holders"), a one-time up-front payment of $9.0 million in cash. The Company paid an additional cash consideration of $1.0 million to the Myst Holders on June 14, 2022. The Company also issued Langer up to 725,920 shares of the Company's common stock. Of these shares, 362,960 shares of the Company's common stock were issued upon the closing of the Merger and the remaining 362,960 shares of the Company's common stock were held in escrow with 25% vesting in December of each year that Langer remains with the Company. At December 31, 2024, Langer was still an advisor to the Company and all 362,960 shares of the Company's

------

common stock had vested and were released from escrow. This restricted equity grant was accounted for as a compensatory arrangement under ASC Topic 718, *Compensation — Stock Compensation* ("ASC 718") as continued service is required under the agreement.

In addition, under the Myst Merger Agreement, each Myst Holder is entitled to receive certain payments as consideration based on the achievement by the Company of three predefined milestones. The initial milestone is the closing of an initial public offering, which occurred on July 25, 2023, the second milestone is the first acceptance by the FDA of an IND filed by, on behalf of or for the benefit of the Company, or the Company's sublicensees for a product being developed by or on behalf of the Company or its sublicensees that is claimed as a product or method of making or using the product by a pending or issued Myst patent claim existing at the time of such acceptance, and the third milestone is the occurrence of the earlier of (i) the commencement of the first registration study for a product being developed by, on behalf of or for the benefit of the Company that is claimed as a product or a method of making or using the product by an issued Myst patent claim existing as of the time of such commencement or (ii) the issuance of a Myst patent claim that claims a product or method of making or using the product then being developed by, on behalf of or for the benefit of the Company, or its sublicensees, that is or was the subject of a registration study that has or had commenced. The milestones are not contingent on one another, and the milestones do not need to be achieved in any specific order.

Within 45 days of the achievement of the initial milestone, which occurred on July 25, 2023, the Company is obligated to pay the Myst Holders an aggregate amount equal to $3.0 million. At the Company's election, the Company may pay this consideration in cash or in shares of the Company's common stock. Pursuant to a letter agreement dated September 11, 2023 between the Company and the former equityholders of Myst regarding the $3.0 million milestone payment that became due and owing to the Myst Holders, the Company agreed to pay $0.2 million in cash to the former optionholders of Myst on or before September 30, 2023, with the remaining $2.8 million payable to Langer in shares of the Company's common stock. On September 11, 2023, the Company issued Langer 249,992 shares of the Company's common stock.

Within 45 days of the achievement of the second milestone, the Company is obligated to pay the Myst Holders an aggregate amount equal to $10.0 million. At the Company's election, the Company may pay this consideration in cash or in shares of the Company's common stock. In May 2022, this $10.0 million milestone was achieved. The Company elected to pay $5.0 million in the Company's common stock and $5.0 million in cash. Pursuant to a letter agreement dated July 25, 2022 between the Company and the former equityholders of Myst regarding the $10.0 million milestone payment that became due and owing to the Myst Holders, the Company agreed to pay to the former optionholders of Myst on or before July 28, 2022, $0.6 million in cash, with the remaining $9.4 million payable to Langer as follows: (i) on or before July 28, 2022, $2.2 million in cash, (ii) on or before July 31, 2022, $5.0 million in shares of the Company's common stock and (iii) on or before January 10, 2023, $2.2 million in cash. On June 8, 2022, the Company issued Langer 212,203 shares of the Company's common stock to settle the $5.0 million obligation payable in common stock. The Company then paid the Myst Holders $2.8 million in July 2022, with $2.2 million paid to Langer and $0.6 million paid to the remaining Myst Holders, and the remaining $2.2 million was paid to Langer in January 2023.

Within 45 days of the achievement of the third milestone, the Company is obligated to pay the Myst Holders an aggregate amount equal to $20.0 million. At the Company's election, the Company may pay this consideration in cash or in shares of its common stock. As part of shutting down the Company's the clinical trials, the Company reassessed the likelihood of achieving this milestone at 0% resulting in a carrying value of $0.0 million (*See Note 3—Fair Value of Financial Assets and Liabilities*).

The Company accounted for the merger with Myst pursuant to the Myst Merger Agreement as an asset acquisition as substantially all of the value received was concentrated in the acquired in-process research and development of Myst and did not have an alternate future use. The Company recognized a $19.4 million charge to research and development expense at the time of the completion of the asset acquisition during the year ended December 31, 2020. The Company determined that the milestone payments are separate units of account and accounted for the initial milestone as a derivative in accordance with ASC Topic 815, *Derivatives and Hedging* ("ASC 815") and the second and third milestones as liabilities in accordance with ASC Topic 480, *Distinguishing Liabilities from Equity* ("ASC 480"). In connection with the initial public offering, the Company reassessed its initial accounting of the milestone payments and concluded that they should be viewed as one unit of account because the milestone payments are not legally detachable from each other. The milestone payments, as one unit of account, would be classified as a liability in accordance with ASC 480 and measured at fair value, with changes in the fair value recorded in earnings. Regardless of whether the milestone payments are viewed as one unit of account or three units of account, because they are all subject to fair value measurement, the financial reporting effect of the contingent consideration arrangement as one unit of account or three units of account is substantially the same. As a liability under ASC 480, the contingent consideration will continue to be recorded at fair value until settled. The Company did not record a significant expense to the fair value of the contingent consideration for the six months ended June 30, 2025 and 2024, respectively.

------

**8. Term Loan** 

On April 26, 2024 (the "Closing Date"), the Company entered into the LSA, by and among the Company, as borrower, the Company's wholly owned subsidiary, Myst Therapeutics, LLC (together with the Company, the "Loan Parties") and BOC, as lender. The LSA provides for a revolving credit facility in an aggregate principal amount of up to $20.0 million (the "Revolving Loans"). The Company may request advances at any time the loan is not in default and not to exceed the Revolving Loans limit and may prepay any amounts outstanding at any time with no prepayment penalty. Upon termination of the LSA, whether in connection with acceleration, prepayment in full, or otherwise, the Company is obligated to make a nonrefundable payment of (i) $0.4 million at any time on or prior to the first anniversary of the Closing Date, and (ii) $0.2 million at any time after the first anniversary of the Closing Date but prior to the second anniversary. In addition, the Company is obligated to pay a fee in the event of certain corporate transactions equal to the greater of (i) $50,000 or (ii) 2% of the highest aggregate principal amount outstanding prior to the transaction (the "Success Fee"). The Success Fee is due upon any merger or consolidation, any sale of substantially all of the assets of the Company, or the closing of one or more related financings where aggregate cash proceeds from the sale of equity securities and/or upfront cash proceeds from strategic partnerships is equal to at least $75.0 million and occurs on or before the tenth anniversary of the Closing Date (each a "Success Fee Event"). If the LSA is terminated prior to the payment of the Success Fee, the Company will remain obligated to pay the Success Fee upon the occurrence of a Success Fee Event during such ten-year period.

The annual interest rate applicable to the Revolving Loans is the greater of the Prime Rate (as defined in the LSA) and 4.25%. Interest under the Revolving Loans is due and payable on the first calendar day of month during the term. The initial maturity date of the Revolving Loans is March 31, 2026, which may be extended to March 31, 2027 subject to the satisfaction of certain terms and conditions as set forth in the LSA. Upon maturity, all amounts outstanding will become due and payable.

The LSA contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The Company is also required to comply with certain covenants requiring the Company to (i) receive positive interim Phase 1 data for TIDAL-01 (as determined by the Company's Board), which was satisfied in August 2024 and (ii) receive at least $40.0 million in new funding from the sale of equity, partnerships, and/or business development payments, which was not achieved, in each case, by March 31, 2025. If the Company fails to comply with any of the foregoing covenants, the Lender may terminate the commitments to make further loans and declare all of the obligations of the Company under the LSA to be immediately due and payable.

The LSA also includes customary events of default, including failure to pay principal, interest or certain other amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross-default and cross-acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material invalidity of guarantees or grant of security interest, material adverse effect and change of control, in certain cases subject to certain thresholds and grace periods. If one or more events of default occurs and continues beyond any applicable cure period, the Lender may terminate the commitments to make further loans and declare all of the obligations of the Company under the LSA to be immediately due and payable. Additionally, upon the occurrence of an event of default, the Company is obligated to pay a fee equal to 3.0% above the interest rate then in effect on all outstanding obligations.

On May 14, 2025, the LSA was terminated with no amounts having been drawn and no significant termination fees were incurred.

The Company incurred $0.1 million of debt issuance costs which were recorded as part of other current assets but were written off as part of the termination of the LSA.

**9. Stockholders' Equity**

***Common Stock*** 

The Company's Amended and Restated Certificate of Incorporation which provides that the authorized common stock of the Company is 490,000,000 shares of common stock with a par value of $0.001 per share.

------

Shares of common stock reserved for future issuance consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,** | **December 31,** |
|  | **2025** | **2024** |
| Common stock options outstanding | 1856251 | 2650751 |
| Unvested RSUs | 1135 | 37673 |
| Shares available for issuance under the ESPP | 684646 | 453280 |
| Shares available for issuance under the Plans | 5636638 | 3656918 |
|  | 8178670 | 6798622 |

---

**10. Equity Based Compensation**

***2018 Equity Incentive Plan*** 

In December 2018, the Company adopted the 2018 Equity Incentive Plan (the "2018 Plan") which provided for the Company to grant incentive stock options or nonqualified stock options for the purchase of common stock, or restricted shares, to employees, members of the Board and consultants of the Company. The Company assumed all of the outstanding options under the amended and restated Equity Incentive Plan of Turnstone Biologics Inc. dated October 1, 2016 (the "2016 Plan") in connection with the corporate reorganization in December 2018. However, there were no changes to the terms of the options requiring modification accounting.

All options granted under the 2018 Plan have an exercise price, a vesting period determined by the Company's Board and ten-year term as determined and approved by the Company's Board (the Board may delegate authority to one of the boards' committees) at the time of grant. The terms and conditions of the restricted shares are determined by the Board at the grant date.

The majority of grants outstanding were approved with a four-year vesting schedule with 25% vesting after one year and the remainder vesting evenly over the remaining 36 months. Upon the effectiveness of the 2023 Plan defined and described below, no further grants will be made under the 2018 Plan. Any outstanding awards granted under these plans will remain subject to the terms of their 2016 and 2018 Plans, respectively, and applicable award agreements.

***2023 Equity Incentive Plan*** 

In July 2023, the Company's Board and stockholders adopted the 2023 Equity Incentive Plan (the "2023 Plan" and together with the 2018 and 2016 Plans the "Plans") which became effective upon the date of the IPO. Under the 2023 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, RSUs, performance stock awards, performance cash awards and other forms of stock awards to employees, directors and consultants. The maximum term of the stock option grants under the 2023 Plan is ten years. In general, the awards granted under the 2023 Plan vest over a four-year period from the vesting commencement date. The 2023 Plan does not permit early exercises. The number of shares available for future issuance under the 2023 Plan is the sum of (1) 1,889,435 new shares, plus (2) 712,503 remaining shares of common stock reserved under the 2018 Plan that became available for issuance upon the effectiveness of the 2023 Plan, and (3) up to 120,949 Returning Shares (as defined in the 2023 Plan), as such shares become available from time to time. The number of shares of common stock reserved for issuance under the 2023 Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2024 continuing through January 1, 2033, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company's Board. As of January 1, 2025, an additional 1,156,830 were available for future issuance under the 2023 Plan. Following the effectiveness of the 2023 Plan, no further grants may be made under the 2018 Plan; however, any outstanding equity awards granted under the 2018 Plan will continue to be governed by the terms of the Plan.

------

A summary of the stock option activity under the Plans is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of<br>Shares<br>Underlying<br>Outstanding<br>Options** | **Weighted-<br>Average Exercise<br>Price** | **Weighted-<br>Average<br>Remaining<br>Contractual Term<br>(Years)** | **Aggregate<br>Intrinsic Value<br>(in thousands)** |
| Outstanding — December 31, 2023 | 3374282 | $7.66 | 7.1 | $352 |
| &nbsp;&nbsp;&nbsp;&nbsp;Options granted | 129165 | $2.73 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options exercised | (29119) | $1.51 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options canceled/forfeited | (175770) | $6.97 |  |  |
| Outstanding — June 30, 2024 | 3298558 | $7.56 | 6.5 | $354 |
| Exercisable — June 30, 2024 | 1955510 | $8.40 | 4.9 | $341 |
| Vested and expected to vest — June 30, 2024 | 3298558 | $7.56 | 6.5 | $354 |
| Outstanding — December 31, 2024 | 2650751 | $7.33 | 4.9 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Options granted |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options exercised |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options canceled/forfeited | (794500) | $7.47 |  |  |
| Outstanding — June 30, 2025 | 1856251 | $7.27 | 4.0 | $— |
| Exercisable — June 30, 2025 | 1608990 | $7.69 | 3.4 | $— |
| Vested and expected to vest — June 30, 2025 | 1856251 | $7.27 | 4.0 | $— |

---

The fair value of each stock option granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing model, with the following range of assumptions:

---

| | |
|:---|:---|
|  | **Six Months Ended June 30,** |
|  | **2024** |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk-free interest rate | 4.30% - 4.72% |
| &nbsp;&nbsp;&nbsp;&nbsp;Expected term (in years) | 5.88-6.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividend yield | 0.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;Volatility | 94.0%-94.67% |
| &nbsp;&nbsp;&nbsp;&nbsp;Exercise price of stock options<br> granted | $2.68 - $2.88 |

---

------

The RSU activity under the 2023 Plan is summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **Number of<br>RSUs** | **Weighted-<br>Average Grant Date Fair Value** |
| Outstanding, non-vested as of December 31, 2023 | 102945 | $2.71 |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted | 16384 | $2.75 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cancelled/Forfeited | (10430) | $2.71 |
| &nbsp;&nbsp;&nbsp;&nbsp;Vested/Released |  | $— |
| Outstanding, non-vested as of June 30, 2024 | 108899 | $2.72 |
| Outstanding, non-vested as of December 31, 2024 | 37673 | $2.73 |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted |  | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Cancelled/Forfeited | (32464) | $2.73 |
| &nbsp;&nbsp;&nbsp;&nbsp;Vested/Released | (4074) | $2.70 |
| Outstanding, non-vested as of June 30, 2025 | 1135 | $2.71 |

---

The allocation of stock-based compensation expense for all stock awards, including options, restricted stock and RSUs, included in the Company's statements of operations is as follows (*in thousands*):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Research and development | $20 | $644 | $75 | $1294 |
| General and administrative | $248 | $375 | 518 | 771 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total stock-based compensation | $268 | $1019 | $593 | $2065 |

---

The weighted-average grant date fair market value of stock options granted to employees, directors and consultants during the six months ended June 30, 2024 was $2.14 per share. The Company did not grant any stock options during the six months ended June 30, 2025 and did not grant any RSUs for the six months ended June 30, 2025.

As of June 30, 2025, the Company had unrecognized stock-based compensation expense of $1.5 million and less than $0.1 million, related to stock options and RSUs respectively, which is expected to be recognized over a weighted-average period of 1.7 years and 2.4 years, respectively.

***2023 Employee Stock Purchase Plan***

In July 2023, the Company adopted the Employee Stock Purchase Plan (the "ESPP"), which became effective with the IPO on July 25, 2023. The ESPP was adopted by the Company's board of directors and stockholders in June 2023. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 222,287 shares of common stock. The number of shares of common stock reserved for issuance will automatically increase on January 1st of each calendar year for a period of up to ten years, commencing on January 1, 2024 and ending on (and including) January 1, 2033, in an amount equal to the lesser of (i) one percent (1%) of the total number of shares of capital stock outstanding on the last day of the calendar month before the date of the automatic increase, and (ii) 666,680 shares of common stock. Notwithstanding the foregoing, the board may act prior to the first day of any calendar year to provide that there will be no January 1st increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. On January 1, 2025, the shares available for issuance under the ESPP automatically increased by an additional 231,366 shares to 684,646 total shares available to be issued under the ESPP. As of June 30, 2025, there was no enrollment offered to the Company's employees.

**11. Income Taxes** 

The Company did not record federal income tax expense for the six months ended June 30, 2025 and 2024, respectively, as the Company expects to be in a cumulative taxable loss position in 2025 and 2024, and the net deferred tax assets are fully offset by a valuation allowance as it is not more likely than not that the benefit will be realized. The Company recorded a provision for state income taxes of less than $0.1 million for the six months ended June 30, 2025 and 2024, respectively.

------

**12. Leases** 

**Operating Leases** 

The Company leased laboratory and office space for its former corporate headquarters located in San Diego, California and office space in New York, New York. Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. In calculating the present value of the lease payments, the Company has elected to utilize its incremental borrowing rate based on the original lease term and not the remaining lease term. The Company determines if an arrangement is a lease by considering whether there is an identified asset, and the contract conveys the right to control its use. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company's lease terms may include options to extend or terminate a lease. If the lease includes non-lease components (i.e., common area maintenance) that are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but are reflected as an expense in the period incurred.

In July 2018, the Company entered into a lease agreement for approximately 6,500 square feet of office space in New York, New York. The term of the lease is seven years and three months, starting November 1, 2018. The lease requires the Company to share in prorated expenses and property taxes based upon actual amounts incurred. The lease contains escalating rent clauses which require higher rent payments in future years. In September 2022, the Company made the decision to sublease this space and executed a sublease in November 2022 for the remaining term of the lease. Since the Company is still responsible for making the lease payments, there was no impact to the operating lease liability from the sublease.

In June 2021, the Company entered into a lease agreement for approximately 19,474 square feet of office and laboratory space in San Diego, California. The initial term of the lease is 38 months with one renewal option for a period of three years and commenced in March 2022. The lease requires the Company to share in prorated expenses and property taxes based upon actual amounts incurred. The lease contains escalating rent clauses which require higher rent payments in future years. This lease expired in May 2025.

The Company recorded rent expense of $0.5 million and $0.8 million for the six months ended June 30, 2025 and 2024, respectively. The table below summarizes the Company's total lease costs included in its unaudited condensed consolidated financial statements, as well as other required quantitative disclosures (*in thousands*).

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Operating lease cost | $243 | $532 | $753 | $1064 |
| Sublease income | (146) | (134) | (290) | (268) |
| Total lease cost | $97 | $398 | $463 | $796 |

---

The present value assumptions used in calculating the present value of the lease payments were as follows:

---

| | |
|:---|:---|
|  | **Six Months Ended** |
|  | **June 30, 2025** |
| Weighted-average remaining lease term in years | 0.7 |
| Weighted-average discount rate | 5.77% |

---

The minimum aggregate future operating lease commitments at June 30, 2025 are as follows (*in thousands*):

---

| | |
|:---|:---|
|  | **Minimum Lease<br>Payments** |
| Remainder of 2025 | $313 |
| 2026 | 104 |
| 2027 |  |
| 2028 |  |
| 2029 |  |
| Total undiscounted lease payments | $417 |
| &nbsp;&nbsp;Less: imputed interest | (6) |
| Total operating lease liability | 411 |
| &nbsp;&nbsp;Less: current portion of operating lease liability | (411) |
| Operating lease liability, noncurrent | $— |

---

------

**13. Segments**

The Company operates and manages its business as one operating segment. The Company's CODM, is the chief executive officer, Dr. Sammy Farah. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net loss that is also reported on the consolidated statements of operations.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. All material long-lived assets are located in the United States. Long-lived assets consist of property and equipment, net, and operating lease right-of-use assets.

The CODM uses consolidated net loss to evaluate the Company's spend and monitor budget versus actual results. The monitoring of budgeted versus actual results is used in assessing performance of the segment and in establishing resource allocation across the organization.

Factors used in determining the reportable segment include the nature of the Company's operating activities, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance.

The following table presents reportable segment profit and loss, including significant expense categories, attributable to the Company's reportable segment for the periods presented (*in thousands*):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **For The Three Months Ended June 30,** | **For The Three Months Ended June 30,** | **For The Six Months Ended June 30,** | **For The Six Months Ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development - TIDAL-01 | 48 | (12054) | (1654) | (21445) |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development - compensation | (406) | (4388) | (2407) | (9398) |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | (5388) | (4308) | (10181) | (9182) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other segment expense<sup>(1)</sup> | 218 | (809) | (180) | (1716) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense | (31) | (498) | (301) | (1007) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income, net | 81 | 755 | (2559) | 1833 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | (12) | (2) | (14) | (18) |
| Consolidated net loss | $(5490) | $(21304) | $(17296) | $(40933) |

---

------

(1) includes research and development costs related to TIDAL-02 and other projects.

**14. Net Loss per Share** 

Basic and diluted net loss per share attributed to common stockholders is calculated by dividing net loss attributed to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company's potentially dilutive shares, which include restricted stock, unvested RSUs and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. Potentially dilutive common shares have been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-dilutive effect on net loss per common share due to the Company's net loss. There are no reconciling items used to calculate the weighted-average number of total common shares outstanding for basic and diluted net loss per common share.

------

The following outstanding potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders:

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| Restricted stock |  | 90740 |
| Unvested RSUs | 1135 | 108899 |
| Options to purchase common stock | 1856251 | 3298558 |
| Total | 1857386 | 3498197 |

---

**15. Restructuring Activities** 

In January 2025, the Company announced the discontinuation of all clinical studies and the pursuit of strategic alternatives which included additional reductions to its workforce. For the six months ended June 30, 2025, the Company incurred $2.1 million and $1.6 million in expenses which was recorded within research and development and general and administrative expenses, respectively in the Statement of Operations, related to employee severance and notice period payments, benefits and related costs in connection with the restructuring. During the six months ended June 30, 2025, $2.1 million of these payments had been made and $1.7 million were accrued at June 30, 2025 and included with other current liabilities.

The following table represents the expected costs associated with this restructuring (*in thousands*):

---

| | |
|:---|:---|
|  | **Employee severance and other benefits** |
| Restructuring expenses | 3737 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash payments | (2061) |
| Liability included in other current liabilities at June 30, 2025 | $1676 |

---

In October 2024, the Company announced a strategic prioritization of its pipeline, as well as a workforce reduction of approximately 60% and changes to our leadership team, to focus resources on the continued advancement of our Phase 1 program, TIDAL-01. For the year ended December 31, 2024, the Company incurred $1.8 million in expenses, with $1.5 million recorded with research and development expenses and $0.3 million recorded with general and administrative expenses in the Statement of Operations, related to employee severance and notice period payments, benefits and related costs in connection with the restructuring. This restructuring was completed in the fourth quarter of 2024.

**16. Legal Proceedings** 

The Company is not a party to any material legal matters or claims and does not have contingency reserves established for any litigation liabilities as of June 30, 2025 and December 31, 2024.

------

**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** 

*You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or the SEC, on March 31, 2025. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the "Risk Factors" section of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "we," "us" and "our" refer to Turnstone Biologics Corp.* 

**Overview** 

We are a biotechnology company that was previously focused on developing new medicines to treat and cure patients with solid tumors through a differentiated approach to tumor infiltrating lymphocytes (TIL) therapy by selecting and expanding the most potent tumor-reactive T cells, which we refer to as Selected TILs for potential treatment across the majority of solid tumors. Our previous lead Selected TIL candidate, TIDAL-01, was being developed for the treatment of colorectal cancer, head and neck cancer, and uveal melanoma and two investigator sponsored trials with H. Lee Moffitt Cancer Center and Research Institute, Inc., or Moffitt, across colorectal cancer, head and neck cancer, and uveal melanoma.

**Merger Agreement**

On June 26, 2025, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with XOMA Royalty Corporation, a Nevada corporation, or XOMA, and XRA 3 Corp., a Delaware corporation and a wholly-owned subsidiary of XOMA, or the Merger Sub. The Merger Agreement provides for, among other things: (i) the acquisition of all of our outstanding shares of common stock, par value $0.001 per share common stock, by XOMA through a cash tender offer, or the Offer, by Merger Sub, for a price per share of common stock of (A) $0.34, or the Cash Amount, payable subject to any applicable tax withholding and without interest, plus (B) one contingent value right, or CVR, which shall represent the right to receive potential payments, in cash, payable subject to any applicable tax withholding and without interest (such amount being the "CVR Amount", and the Cash Amount plus the CVR Amount, collectively being the "Offer Price"); and (ii) the merger of Merger Sub with and into us, or the Merger, with us surviving the Merger.

Pursuant to the terms of the Merger Agreement, as of immediately prior to the effective time of the Merger, or the Effective Time, by virtue of the Merger and without any action on the part of the holders of common stock, each outstanding share of common stock will be converted into the right to receive the Offer Price. Each option to purchase shares of common stock will be cancelled and terminated for no consideration. The vesting for each restricted stock unit, or RSU, shall be accelerated and each RSU that is then outstanding will be cancelled and, in exchange therefor, the holder of such cancelled RSU will be entitled to receive in consideration of the cancellation of such RSU (A) an amount in cash without interest, less any applicable tax withholding, equal to the Cash Amount and (B) one CVR.

At or prior to the time at which XOMA first irrevocably accepts for purchase the shares of common stock tendered in the Offer, XOMA and Merger Sub expect to enter into a CVR Agreement with a rights agent and a representative, agent and attorney-in-fact of the holders of CVRs. Each CVR holder will be entitled to the right to receive, its portion of the amount equal to (i) up to an aggregate amount for all CVR holders of $1.1 million to the extent received by us as a result of contingent payments relating to tax receivables and a lease security deposit, plus (ii) Net Cash Excess (as defined in the CVR Agreement), and minus (iii) Net Cash Shortfall (as defined in the CVR Agreement), or the CVR Proceeds. In the event that any such CVR Proceeds are received after one year following the date of the closing of the Merger, holders of the CVRs will not receive any payment pursuant to the CVR Agreement.

The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in XOMA, any constituent corporation party to the Merger or any of their respective affiliates. No interest will accrue on any amounts payable on the CVRs to any holders.

If the Merger is consummated, our common stock will be delisted and will no longer be quoted on Nasdaq, our obligation to file periodic reports under the Securities Exchange Act of 1934, as amended, will be suspended and we will be privately held.

------

**Reduction in Force and No Standalone Business Plan**

We are reducing our workforce while also implementing cost-containment and cash conservation measures. We intend to retain all employees essential for supporting value-realization as part of our pursuit of the Merger. As of the date hereof, we have 2 employees.

After a thorough assessment of our assets, liabilities and financial condition, particularly considering our market capitalization and our workforce reductions executed in October 2024 through July 2025, our Board has concluded that we do not have a standalone business plan and our only plan in the absence of a sale or merger is to pursue a dissolution and liquidation.

**Nasdaq Compliance** 

On September 27, 2024, we received a deficiency letter from the Nasdaq Listing Qualifications Department notifying us that we are not in compliance with Nasdaq Listing Rule 5450(a)(1), which requires us to maintain a minimum bid price of at least $1.00 per share for continued listing on The Nasdaq Global Select Market, or the Minimum Bid Requirement. Our failure to comply with the Minimum Bid Requirement was based on our common stock per share price being below the $1.00 threshold for a period of 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an initial period of 180 calendar days, to regain compliance with the Minimum Bid Requirement.

On March 27, 2025, we received approval from the Listing Qualifications Department of Nasdaq to transfer the listing of the Company's common stock from the Nasdaq Global Market to the Nasdaq Capital Market, or the Approval. Our securities were transferred to the Nasdaq Capital Market at the opening of business on March 31, 2025. Our common stock will continue to trade under the symbol "TSBX." The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market, but with less stringent listing requirements, although listed companies must meet certain financial requirements and comply with Nasdaq's corporate governance requirements.

In connection with the Approval, we were granted an additional 180-day grace period, or until September 22, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance with the Minimum Bid Price Requirement and qualify for continued listing on the Nasdaq Capital Market, the minimum bid price per share of our common stock must be at least $1.00 for at least ten consecutive business days during the additional 180-day grace period. If we do not regain compliance during this additional grace period, its common stock would be subject to delisting by Nasdaq. As part of its transfer application, we notified Nasdaq that in order to regain compliance with the Minimum Bid Price Requirement during the additional grace period, we will implement a reverse stock split, and have filed a proxy statement soliciting a stockholder vote on such reverse stock split. If our stock becomes subject to delisting as a result of our failure to regain compliance with the Minimum Bid Price Requirement by September 22, 2025, we may appeal the decision to a Nasdaq Hearings Panel. In the event of an appeal, our common stock would remain listed on the Nasdaq Capital Market pending a written decision by the Nasdaq Hearings Panel following a hearing. In the event that the Nasdaq Hearings Panel determines not to continue our listing and our common stock is delisted from The Nasdaq Capital Market, our common stock may trade on the OTC Bulletin Board or other small trading markets, such as the pink sheets.

**Collaboration Agreements** 

Below is a summary of the key terms for certain of our collaboration agreements. For a more detailed description of our collaboration agreements, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

***Moffitt Collaboration Agreements*** 

*Master Collaboration Agreement* 

In January 2021, we entered into an amended and restated master collaboration agreement, or the Moffitt Agreement, with Moffitt, to amend a then-existing master collaboration agreement from November 2019, as amended March 2020, between Moffitt and our now wholly-owned subsidiary, Myst Therapeutics LLC, with the intent to continue to work collaboratively in the research of cancer immunotherapies.

Moffitt granted us (1) a royalty-free, sublicensable, non-transferable, perpetual, non-exclusive license to use and practice certain inventions invented solely by Moffitt in the performance of a research plan or through use of any data generated thereunder, or Moffitt Inventions, (a) for internal, non-commercial research purposes outside the field of adoptive cell therapy and/or (b) to research, develop, make, use, sell, offer to sell, or import products and/or services in the field of adoptive cell therapy and (2) a royalty free, sublicensable, non-transferable, perpetual, non-exclusive license to use and practice certain inventions invented in performance of a

------

research plan or through the use of Moffitt research materials, which are (i) specifically directed to the identity of melanoma-specific T cell receptors, (ii) invented during the collaboration term or within one year after the end of the collaboration term within the field of adoptive cell therapy, and (iii) invented solely by either parties' employees or by both parties' employees jointly, to research, develop, make, use, sell, offer to sell, or import products and/or services for cancer immunotherapy involving identifying relevant tumor reactive T cells from TILs.

The Moffitt Agreement expired in January 2025, which was four years from the effective date of the Moffitt Agreement. All activity being performed under the Moffitt Agreement has been transferred to the Alliance Agreement (as defined below).

*Moffitt Alliance Agreement* 

In June 2022, we entered into a life science alliance agreement with Moffitt, or the Alliance Agreement, in order to further expand our relationship and support our existing agreements with Moffitt, or the Underlying Agreements. Pursuant to the Alliance Agreement, we will have priority access to Moffitt's scientific research, manufacturing, and clinical capabilities for the development of novel TIL therapies, including expedited clinical trial activation, enhanced patient screening and data sharing, access to Moffitt's cellular therapies research and development infrastructure, expanded molecular data sets and biospecimens for research, and allocated cGMP manufacturing capacity for our product candidates.

Under the Alliance Agreement, we are obligated to use commercially reasonable efforts to further develop TIL Products (as defined below), to manufacture TIL Products, to obtain regulatory approval for at least one TIL Product in the United States and to commercialize TIL Products in all countries in which regulatory approval for a TIL Product has been obtained. For purposes of the Alliance Agreement, TIL Product means any pharmaceutical, biopharmaceutical, or biotechnology TIL product that has been developed by us or Moffitt and is advanced into clinical development under an IND sponsored by Moffitt.

Pursuant to the Alliance Agreement, we agreed to pay to Moffitt a total amount of at least $17.5 million, or Alliance Funding Amount, for research, development and manufacturing related services that will be paid equally over five years on June 1st of each year starting on June 1, 2023. The Alliance Funding Amount will be calculated annually at the conclusion of each payment period, and, to the extent our annual aggregate payments to Moffitt of $3.5 million exceeds the applicable annual installment amount, we will receive a reduction in the amount due for future installment payments based on a predetermined formula agreed to by the parties. To the extent the aggregate annual payments are less than $3.5 million, we will prepay the remaining amount due. On June 28, 2024, the Alliance Agreement was amended to remove the true up of the applicable annual installment amount of $3.5 million. The Alliance Funding Amount remains $17.5 million over the five-year term.

In connection with the execution of the Alliance Agreement, we issued Moffitt 91,721 shares of our common stock. As partial consideration under the Alliance Agreement, we also agreed to issue Moffitt an additional 366,884 shares of our common stock in the aggregate upon the satisfaction of certain clinical and regulatory milestones with respect to TIL Products. During the twelve months ended December 31, 2023, an additional 91,721 shares of our common stock were issued to Moffitt as a result of the achievement of the milestone related to the start of the Phase 1 clinical trial for a TIL Product. In addition, upon achievement of certain thresholds for aggregate net sales of all TIL Products, we are required to make tiered sales-based milestones payments to Moffitt of up to an aggregate of $50.0 million. With respect to each of the equity and sales milestones described above, TIL Products include any pharmaceutical, biopharmaceutical or biotechnology TIL product that is developed by us or Moffitt and is advanced into clinical development under an IND sponsored by Moffitt.

At any time after June 1, 2025, either party may terminate the Alliance Agreement without cause upon sixty days prior written notice to the other party (a "Termination for Convenience"). Upon a Termination for Convenience, the terminating party shall pay to the other party a termination fee in an amount equal to a low double digit percentage of the then remaining Alliance Funding Amount.

On June 26, 2025, we (i) entered into an Asset Purchase Agreement, or the Purchase Agreement, by and among us and Moffitt, pursuant to which we will sell certain assets related to its TIDAL-01 program in consideration for the termination of the Alliance Agreement (as defined in the Purchase Agreement), or the Asset Sale, subject to the terms and conditions of the Purchase Agreement, and (ii) entered into an Escrow Agreement, or the Escrow Agreement, by and among us, Moffitt, and Citibank, N.A., as escrow agent.

Pursuant to the terms of the Purchase Agreement, Moffitt will assume certain obligations of ours under the Myst Merger Agreement. We will receive a total consideration of approximately $3.0 million to offset our obligations to Moffitt under the Alliance Agreement, of which, approximately $1.8 million was placed into an escrow account as of the date of the Purchase Agreement (the "Escrow Account"), subject to the terms and conditions of the Escrow Agreement.

------

Moffitt's obligation to closing the Asset Sale is subject to certain conditions set forth in the Purchase Agreement. Pursuant to the Merger Agreement, effective as of the Offer Closing Time (as defined in the Merger Agreement), Merger Sub shall assume all of our obligations, duties, and covenants under the Purchase Agreement. Immediately following the consummation of the Merger, Merger Sub, as the sole stockholder of ours shall duly execute a written consent pursuant to the requirements of the our governing documents and applicable law, for the adoption of the transactions, contemplate by the the Purchase Agreement. Following the consummation of the Merger, anticipated to occur in the third quarter of 2025, the Escrow Amount will be released to the us.

It is a condition to the closing of the Merger that certain conditions to the Asset Sale shall have been satisfied or, if permitted by applicable law, waived.

If the transactions contemplated by the Merger Agreement are not consummated and we fail to obtain the requisite stockholder approval for the Asset Sale, the Purchase Agreement will terminate in accordance with its terms. If the foregoing should occur or if the Purchase Agreement is otherwise terminated, including as a result of the Asset Sale not being consummated by December 26, 2025, the Escrow Amount will be released to Moffitt.

**Components of Our Results of Operations** 

***Operating Expenses*** 

*Research and Development Expenses* 

Research and development expenses consist primarily of external and internal costs incurred for our research and development activities, including adjusted development of our platform, our product discovery efforts and the development of our future product candidates. We expense research and development costs as incurred.

External costs include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clinical trial expenses, including costs of third-party contract research organizations, or CROs, and costs of performing toxicity studies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•expenses to acquire technologies to be used in research and development;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical materials and developing manufacturing processes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•costs related to compliance with regulatory requirements.

Internal costs include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•employee-related expenses, which include salaries, benefits and stock-based compensation for employees engaged in research and development functions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•facility-related and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization expense and expenses related to other general support services and supplies.

Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our unaudited condensed consolidated financial statements as prepaid or accrued research and development expenses. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed.

In connection with the execution of the Merger Agreement, we discontinued all clinical studies evaluating TIDAL-01 and all nonclinical research and manufacturing activities.

*General and Administrative Expenses* 

General and administrative expenses consist primarily of personnel costs, allocated expenses and other expenses for outside professional services, including legal, intellectual property, human resources, audit and accounting services. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation.

------

*Other Income (Expense), Net* 

Other income (expense), net consists primarily of interest income earned on our short-term investments and foreign currency remeasurement gains and losses.

**Results of Operations** 

**Comparison of the Three Months Ended June 30, 2025 and 2024** 

The following tables set forth our results of operations (*in thousands*):

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended June 30,** | **Three Months Ended June 30,** |  |
|  | **2025** | **2024** | **Change ($)** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 171 | 17730 | 17559 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 5388 | 4327 | (1061) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 5559 | 22057 | 16498 |
| Loss from operations | (5559) | (22057) | 16498 |
| Other income, net | 81 | 755 | (674) |
| Provision for income taxes | (12) | (2) | (10) |
| Net loss | $(5490) | $(21304) | $15814 |

---

***Research and Development Expenses*** 

The following table summarizes our research and development expenses *(in thousands):* 

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended June 30,** | **Three Months Ended June 30,** |
|  | **2025** | **2024** |
| Pre-clinical research and development | $(121) | $2130 |
| Manufacturing | (193) | 9195 |
| Clinical and regulatory | 79 | 2017 |
| Personnel related | 406 | 4388 |
| Total research and development | $171 | $17730 |

---

Research and development expenses were $0.1 million and $17.7 million during the three months ended June 30, 2025 and 2024, respectively, a decrease of $17.6 million, or 99.4%. The decrease was due to shutting down all clinical development and pursuit of a strategic transaction.

***General and Administrative Expenses*** 

General and administrative expenses were $5.4 million and $4.3 million during the three months ended June 30, 2025 and 2024, respectively, an increase of $1.1 million, or 25.6% due to the costs to the execution of our Merger Agreement and employee restructuring.

***Other Income, Net*** 

Other income, net was $0.1 million and $0.8 million during the three months ended June 30, 2025 and 2024, respectively, a decrease of $0.7 million, or 89.3% due to the decrease in interest earned on cash and cash equivalents as well as a loss on the sale of laboratory equipment of $0.2 million.

.

------

**Comparison of the Six Months Ended June 30, 2025 and 2024** 

The following tables set forth our results of operations (*in thousands*):

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |  |
|  | **2025** | **2024** | **Change ($)** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 4528 | 33520 | 28992 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 10195 | 9228 | (967) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 14723 | 42748 | 28025 |
| Loss from operations | (14723) | (42748) | 28025 |
| Other income (expense), net | (2559) | 1833 | (4392) |
| Provision for income taxes | (14) | (18) | 4 |
| Net loss | $(17296) | $(40933) | $23637 |

---

***Research and Development Expenses*** 

The following table summarizes our research and development expenses *(in thousands):* 

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| Pre-clinical research and development | $467 | $3496 |
| Manufacturing | 410 | 17329 |
| Clinical and regulatory | 1244 | 3297 |
| Personnel related | 2407 | 9398 |
| Total research and development | $4528 | $33520 |

---

Research and development expenses were $4.5 million and $33.5 million during the six months ended June 30, 2025 and 2024, respectively, a decrease of $29.0 million, or 86.6%. The decrease was due to shutting down clinical development and pursuit of a strategic transaction.

***General and Administrative Expenses*** 

General and administrative expenses were $10.2 million and $9.2 million during the six months ended June 30, 2025 and 2024, respectively, an increase of $1.0 million, or 10.9% due to expenses related to the pursuit of a strategic transaction.

***Other Income (Expense), Net*** 

Other income (expense), net was ($2.6) million and $1.8 million during the six months ended June 30, 2025 and 2024, respectively, a decrease of $4.4 million, or 244.4% due to the decrease in cash and cash equivalents as well as a loss on the sale of laboratory equipment. We anticipate that this will continue to decrease as we earn less interest income due to the continued decrease in the balance of cash and cash equivalents.

**Liquidity and Capital Resources** 

Our headquarters are located in Los Angeles, California and we operate as one segment. Since our inception, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, discovering product candidates and securing related intellectual property rights and conducting research and development activities for our Selected TIL programs and product candidates. We do not have any products approved for sale, we have not generated any revenue from product sales, and we have incurred overall net losses since our inception through June 30, 2025.

On June 26, 2025 we entered into the Merger Agreement. We have devoted, and expect to continue to devote, substantial time and resources to complete the Merger. We expect that the Merger will close in the third quarter of 2025. There can be no assurance that the Merger will be consummated or lead to increase stockholder value, or that we will make any cash distributions to our stockholders. If the Merger is not consummated, our Board intends to pursue a dissolution and liquidation.

On April 26, 2024, or the Loan Closing Date, we entered into a Loan and Security Agreement, or LSA, with Banc of California, or BOC, for a revolving credit facility in an aggregate principal amount of up to $20 million with interest at the greater of the Prime

------

Rate or 4.25%. This LSA includes a covenant requiring us to (i) receive positive interim Phase 1 data for TIDAL-01 (as determined by our Board) and (ii) receive at least $40.0 million in new funding from the sale of equity, partnerships, and/or business development payments, which was not achieved, in each case, by March 31, 2025. If we fail to comply with any of the foregoing covenants, BOC may terminate the commitments to make further loans and declare all of our obligations under the LSA to be immediately due and payable. On May 14, 2025, the LSA was terminated with no amounts having been drawn and no significant termination fees incurred.

**Funding Requirements** 

Because of the numerous risks and uncertainties associated with the status of our company and the Merger, we are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the amount of time it takes to consummate our Merger Agreement and whether it is completed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the amount and cost of legal and professional services required to consummate our Merger, including fees related to the engagement of a advisors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our need to continue to operate as a public company.

As of June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $16.7 million and $28.9 million, respectively. We believe that our existing cash and cash equivalents will enable us to fund our planned operating expenses and capital expenditures through our anticipated closing of the Merger in the third quarter of 2025. If the Merger is not consummated, our Board intends to pursue a dissolution and liquidation.

***Cash Flows*** 

The following table summarizes our cash flows *(in thousands)*:

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| Cash used in operating activities | $(11395) | $(33385) |
| Cash provided by investing activities | 947 | 33036 |
| Cash used in financing activities |  | (48) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net decrease in cash and cash equivalents | $(10448) | $(397) |

---

***Cash Flows from Operating Activities*** 

Cash used in operating activities for the six months ended June 30, 2025 was $11.4 million, primarily due to our net loss of $17.3 million which was partially offset by the decrease in our net operating assets and liabilities of $2.5 million, changes in stock-based compensation of $0.6 million, loss on the disposal of property and equipment of $2.6 million and depreciation and amortization expense of $0.3 million.

Cash used in operating activities for the six months ended June 30, 2024 was $33.4 million, primarily due to our net loss of $40.9 million and accretion of the premium on short-term investments of $1.4 million which was partially offset by the decrease in our net operating assets and liabilities of $5.8 million, changes in stock-based compensation of $2.1 million, and depreciation and amortization expense of $1.0 million.

***Cash Flows from Investing Activities*** 

Cash provided by investing activities for the six months ended June 30, 2025 was $1.0 million, resulting from the sale of property and equipment.

Cash provided by investing activities for the six months ended June 30, 2024 was $33.0 million, due primarily to $40.0 million in maturities of short-term investments offset by the purchases of $6.7 million of short-term investments and $0.3 million in purchases of property and equipment.

**Contractual Obligations and Commitments** 

We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts provide for termination at the

------

request of either party with less than one year notice, and therefore we believe that our non-cancellable obligations under these agreements are not material. We additionally have contractual obligations for our operating lease related to our office space. These obligations are further described in Note 12 to our unaudited condensed consolidated financial statements. We are also party to certain collaboration and license agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments. The amount and timing of those payments are unknown or uncertain as the Company is unable to estimate the timing or likelihood of the events that will obligate those payments.

We have milestones, royalties, and/or other payments due to third parties under our existing license and collaboration agreements. See Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We can't estimate when such payments will be due and none of these events were probable to occur as of June 30, 2025 and December 31, 2024, respectively.

**Critical Accounting Polices and Estimates** 

The preparation of our financial statements and related disclosures in conformity with generally accepted accounting principles in the United States and our discussion and analysis of our financial condition and operating results require us to make judgments, assumptions and estimates that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. Our significant accounting policies and methods used in preparation of our unaudited condensed consolidated financial statements are described in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

There have been no material changes to our critical accounting policies from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates" included in our 10-K filed with the SEC on March 31, 2025.

***Accounting Pronouncements Recently Adopted*** 

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, such standards will not have a material impact on our unaudited condensed consolidated financial statements or do not otherwise apply to our current operations.

**Emerging Growth and Smaller Reporting Company Status** 

The JOBS Act permits an "emerging growth company" such as us to take advantage of reduced reporting requirements that are otherwise applicable to public companies and also an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to not "opt out" of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the IPO, (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous rolling three-year period or (iv) the date on which we are deemed to be a large accelerated filer under the Exchange Act.

We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our ordinary shares held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

------

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** 

We are a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act, for this reporting period and are not required to provide the information required under this item.

**ITEM 4. CONTROLS AND PROCEDURES** 

***Evaluation of Disclosure Controls and Procedures*** 

As of June 30, 2025, management, with the participation and supervision of our Principal Executive Officer and our Principal Financial and Accounting Officer, have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Principal Executive Officer and our Principal Financial and Accounting Officer have concluded that, as of June 30, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

***Changes in Internal Control over Financial Reporting***

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

------

**PART II. OTHER INFORMATION** 

**ITEM 1. LEGAL PROCEEDINGS** 

From time to time, we have been or may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently not party to any legal proceedings material to our operations or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by a government authority. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources, and other factors, and there can be no assurances that favorable outcomes will be obtained.

**ITEM 1A. RISK FACTORS** 

Our business involves significant risks, some of which are described below. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations". The occurrence of any of the events or developments described below could adversely affect our business, results of operations and financial condition. In any such event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may impair our business, results of operations and financial condition. Except for the additional risk factors set forth below, there have been no material changes to the risk factors disclosed in Item1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025,and Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 filed with the SEC on May 9, 2025.

**Risks Related to the Offer and the Merger**

***The Offer and the Merger are subject to a number of conditions beyond our control. Failure to complete the Offer and the Merger within the expected time frame, or at all, could have a material adverse effect on our business, operating results, financial condition and our share price.***

On June 26, 2025, we entered into the Merger Agreement with XOMA and Merger Sub, pursuant to which, and upon the terms and subject to the conditions of, Merger Sub commenced a cash tender offer to purchase our common stock. After the completion of the Offer, the satisfaction or waiver of certain conditions set forth in the Merger Agreement and in accordance with the DGCL, Merger Sub will be merged with and into Turnstone, with Turnstone continuing as the surviving corporation and as a wholly owned subsidiary of XOMA, and pursuant to the Merger, each share of common stock that is not validly tendered and irrevocably accepted for purchase pursuant to the Offer, except as provided in the Merger Agreement, will be converted in the Merger into the right to receive an amount equal to the Merger Consideration (as defined in the Merger Agreement). Merger Sub's obligation to accept shares of common stock tendered in the Offer is subject to conditions, including: (i) that the number of shares of common stock validly tendered (and not properly withdrawn) prior to the expiration of the Offer equals at least one share more than 50% of all shares of common stock then issued and outstanding as of the expiration of the Offer; (ii) the absence of any legal restraint preventing or prohibiting the consummation of the Offer, the Merger or any of the other transactions contemplated by the Merger Agreement; (iii) accuracy of the representations and warranties made by the Company in the Merger Agreement, subject to specified materiality qualifications; (iv) compliance by the Company with its covenants under the Merger Agreement in all material respects; and (v) the Closing Net Cash (as defined in the Merger Agreement) shall be no less than the amount specific in the Merger Agreement. The obligations of XOMA and Merger Sub to consummate the Offer and the Merger under the Merger Agreement are not subject to a financing condition.

We cannot predict whether or when the conditions to the Offer will be satisfied. If one or more of these conditions are not satisfied, and as a result, we do not complete the Offer and the Merger, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the Offer and the Merger. Certain costs associated with the Offer and the Merger have already been incurred or may be payable even if the Offer and the Merger are not consummated. Finally, any disruptions to our business resulting from the announcement and pendency of the Offer and the Merger, including any adverse changes in our relationships with our partners, suppliers and employees, could continue or accelerate in the event that we fail to consummate the Offer and the Merger.

Our share price may also fluctuate significantly based on announcements by XOMA, other third parties, or us regarding the Offer and the Merger or based on market perceptions of the likelihood of the satisfaction of the conditions to the consummation of the Offer and the Merger. Such announcements may lead to perceptions in the market that the Offer and the Merger may not be completed, which could cause our share price to fluctuate or decline. Other factors outside of our control, such as a governmental entity enacting a legal restraint or prohibition that prevents or prohibits the Offer or the Merger, could cause us not to satisfy the

------

closing condition relating to the absence of Legal Restraints (as defined in the Merger Agreement) (the Legal Restraint Condition) and thus the Offer and the Merger would not be consummated. Further, unforeseen and unexpected expenses could cause our net cash to be below the applicable threshold thus causing us to fail to satisfy the Closing Net Cash Condition.

If we do not consummate the Offer and the Merger, the price of our common stock may decline significantly from the current market price, which may reflect a market assumption that the Offer and the Merger will be consummated. Further, if we do not consummate the Offer and Merger, we will be required to seek stockholder approval to consummate the transactions contemplated by the Purchase Agreement and if such approval is not obtained in a timely manner, the $1.8 million held in escrow would be released entirely to Moffit and such amount would not be available to our stockholders in a dissolution. Any of these events could have a material adverse effect on our business, operating results and financial condition and could cause a decline in the price of our common stock**.**

***Our stockholders may not receive any payment on the CVR and the CVR may expire valueless.***

If the Offer and the Merger are completed, the holders of our common stock and RSUs will be entitled to receive one CVR per share of common stock, share of common stock underlying a RSU representing the right to receive, subject to the terms and conditions of the CVR Agreement. Each CVR will represent a contractual right to receive contingent cash payments equal to (i) up to an aggregate amount for all CVR holders of $1,110,000 to the extent received by the Company as a result of contingent payments relating to tax receivables and a lease security deposit, plus (ii) Net Cash Excess (as defined in the CVR Agreement), and minus (iii) Net Cash Shortfall (as defined in the CVR Agreement) ("CVR Proceeds"). In the event that any such CVR Proceeds are received after one year following the date of the closing of the Merger, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. The CVRs will not be transferable, except in the limited circumstances specified in the CVR Agreement, will not have any voting or dividend rights, and will not represent any equity or ownership interest in us or any of our affiliates, and interest will not accrue on any amounts potentially payable on the CVRs. Accordingly, the right of any of our stockholders to receive any future payment on or derive any value from the CVRs will be contingent solely upon the receipt of CVR Proceeds between the Closing Date (as defined in the CVR Agreement) and the Expiration Date (as defined in the CVR Agreement). If no CVR Proceeds are received during this time period, then and no payments will be made under the CVRs, and the CVRs will expire valueless.

***Stockholder litigation could prevent or delay the consummation of the Offer and the Merger or otherwise negatively impact our business, operating results and financial condition.***

We may incur additional costs in connection with the defense or settlement of any stockholder litigation in connection with the Offer and the Merger. Any such litigation may adversely affect our ability to complete the Offer and the Merger and may impact our ability to meet the Closing Net Cash Condition. We could incur significant costs in connection with any such litigation, including costs associated with the indemnification of our directors and officers. Furthermore, one of the conditions to the consummation of the Offer and the Merger is the Legal Restraint Condition. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the consummation of the Offer and the Merger, then such injunctive or other relief may prevent the consummation of the Offer or the Merger within the expected time frames or at all.

***If the Merger is not consummated, our Board intends to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend significantly on the timing of such liquidation as well as the amount of cash that may need to be reserved for commitments and contingent liabilities.***

There can be no assurance that the Merger will be completed. If the Merger is not completed, our Board intends to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, with the passage of time, the amount of cash available for distribution will be reduced as we continue to fund our operations. In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up.

------

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES** 

Not applicable.

**ITEM 4. MINE SAFETY DISCLOSURES** 

Not applicable.

**ITEM 5. OTHER INFORMATION** 

Not applicable.

------

**ITEM 6. EXHIBITS** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** |
| **Exhibit**<br>**No.** | **Description** | **Form** | **File No.** | **Exhibit** | **Filing<br>Date** |
| 2.1 | [<u>Agreement and Plan of Merger and Reorganization, dated December 11, 2020, between Turnstone Biologics Corp., Flatiron Merger Sub I, Inc., Flatiron Merger Sub II, LLC, Myst Therapeutics, Inc. and Timothy Langer</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312523165338/d574486dex21.htm).  | S-1/A | 333-272600 | 2.1 | July 17, 2023 |
| 2.2 | [<u>Agreement and Plan of Merger, dated June 26, 2025, by and among XOMA Corporation, XRA 3 Corp. and Turnstone Biologics Corp.</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312525154092/d928306d8ka.htm) | 8-K/A<br>| 001-41747<br>| 2.1 | July 1, 2025 |
| 2.3 | [<u>Asset Purchase Agreement, dated June 26, 2025, by and among Turnstone Biologics Corp. and Lee Moffitt Cancer Center and Research Institute, Inc</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312525151306/d928306dex22.htm) | 8-K<br>| 001-41747<br>| 2.2 | June 27, 2025 |
| 3.1 | [<u>Amended and Restated Certificate of Incorporation of the Company</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312523193445/d878456dex31.htm). | 8-K | 001-41747 | 3.1 | July 25, 2023 |
| 3.2 | [<u>Amended and Restated Bylaws of the Company.</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312523193445/d878456dex32.htm) | 8-K | 001-41747 | 3.2 | July 25, 2023 |
| 10.1 | [<u>Escrow Agreement, dated June 26, 2025, by and among Turnstone Biologics Corp., H. Lee Moffitt Cancer Center and Research Institute, Inc. and Citibank, N.A.</u>](https://www.sec.gov/Archives/edgar/data/1764974/000119312525151306/d928306dex101.htm) | 8-K | 001-41747<br>| 10.1 | June 27, 2025 |
| 31.1\* | [<u>Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](tsbx-ex31_1.htm) |  |  |  |  |
| 31.2\* | [<u>Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](tsbx-ex31_2.htm) |  |  |  |  |
| 32.1\*+ | [<u>Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](tsbx-ex32_1.htm) |  |  |  |  |
| 101.INS\* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |  |  |  |  |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |  |  |  |  |
| 104\* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |  |  |  |  |

---

\* Filed herewith.

+ Furnished herewith and not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

------

**SIGNATURE** 

Pursuant to the requirements of Section 13 or 15(d) of The Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Los Angeles, State of California, on the 8th day of August 2025.

---

| |
|:---|
| **Turnstone Biologics Corp.** |
| */s/ Wendy Worcester* |
| **Wendy Worcester** |
| **Principal Financial and Accounting Officer** |

---

------

## Exhibit 10.1

Exhibit 10.1

**LOAN AND SECURITY AGREEMENT**

This LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into as of April 26, 2024, by and among BANC OF CALIFORNIA, a California state-chartered bank ("Bank"); TURNSTONE BIOLOGICS CORP., a Delaware corporation ("Parent" or "Borrower"); and MYST THERAPEUTICS, LLC, a Delaware limited liability company("Myst"; and together with each other Person that becomes a guarantor hereunder from time to time (each a "Guarantor" and, collectively, "Guarantors"; Borrower and Guarantors are each referred to herein as a "Loan Party" and, collectively, as "Loan Parties").

**RECITALS**

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower and Borrower will repay the amounts owing to Bank.

**AGREEMENT**

The parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **DEFINITIONS AND CONSTRUCTION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.1 Definitions**. As used in this Agreement, all capitalized terms shall have the definitions set forth on <u>Exhibit A</u>. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.2 Accounting Terms**. Any accounting term not specifically defined on <u>Exhibit A</u> shall be construed in accordance with GAAP, and all calculations shall be made in accordance with GAAP (except for non-compliance with FAS 123R in monthly reporting). The term "financial statements" shall include the accompanying notes and schedules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **LOAN AND TERMS OF PAYMENT.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.1 Credit Extensions.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Promise to Pay**. Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Advances Under Non-Formula Revolving Line.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i) Amount**. Subject to and upon the terms and conditions of this Agreement, (A) Borrower may request Non-Formula Advances in an aggregate outstanding principal amount not to exceed the Non-Formula Revolving Line, less any amounts reserved under the Ancillary Services Sublimit, and (B) amounts borrowed pursuant to this <u>Section 2.1(b)</u> may be repaid and reborrowed at any time prior to the Non-Formula Revolving Maturity Date, at which time all Non-Formula Advances under this <u>Section 2.1(b)</u> shall be immediately due and payable. Borrower may prepay any Non-Formula Advances without penalty or premium.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii) Form of Request**. Whenever Borrower desires a Non- Formula Advance, Borrower will notify Bank (which notice shall be irrevocable) by email (or, if permitted by Bank, through the use of an E-System)no later than 3:30 p.m. Eastern time (2:30 p.m. Eastern time for wire transfers) on the Business Day that the Non-Formula

------

Advance is to be made. Each such notification shall be given by a Loan Advance/Paydown Request Form in substantially the form of <u>Exhibit C</u>. Bank is authorized to make Non-Formula Advances under this Agreement, based upon instructions received from an Authorized Officer, or without instructions if in Bank's reasonable discretion such Non-Formula Advances are necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to rely on any notice given by a person whom Bank reasonably believes to be an Authorized Officer, and Borrower shall indemnify and hold Bank harmless for any damages, losses, costs, and expenses suffered by Bank as a result of such reliance. Bank will credit the amount of Non-Formula Advances made under this <u>Section 2.1(b)</u> to Borrower's deposit account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii) Ancillary Services Sublimit**. Subject to the terms and conditions of this Agreement, at any time and from time to time from the date hereof through the Business Day immediately prior to the Non-Formula Revolving Maturity Date, Loan Parties may request the provision of Ancillary Services from Bank. The aggregate limits of Ancillary Services shall not exceed the Ancillary Services Sublimit, <u>provided</u> that availability under the Non-Formula Revolving Line will be reduced by (i) the Letter of Credit Exposure, (ii) the aggregate limits of corporate credit card services provided to Borrower, (iii) the total amount of any Automated Clearing House processing reserves, (iv) the applicable Foreign Exchange Reserve Percentage, and (v) any other reserves taken by Bank in connection with other treasury management services requested by a Loan Party and approved by Bank. In addition, Bank may, in its reasonable discretion, charge as Non-Formula Advances any amounts that become due or owing to Bank or for which Bank becomes liable in connection with the provision of Ancillary Services. The terms and conditions (including repayment and fees) of such Ancillary Services shall be subject to the terms and conditions of Bank's standard forms of application and agreement for the applicable Ancillary Services, which the applicable Loan Party hereby agrees to execute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv) Collateralization of Obligations Extending Beyond Maturity**. Borrower shall take, and shall cause each other Loan Party to take, such actions as Bank may reasonably request to cause its obligations with respect to any Ancillary Services to be secured to Bank's reasonable satisfaction as of the Non-Formula Revolving Maturity Date. If Borrower has not secured to Bank's reasonable satisfaction Loan Parties' obligations with respect to any Ancillary Services by the Non-Formula Revolving Maturity Date, then, effective as of such date, the balance in any of Borrower's deposit accounts held by Bank and the certificates of deposit or time deposit accounts issued by Bank in Borrower's name (and any interest paid thereon or proceeds thereof, including any amounts payable upon the maturity or liquidation of such certificates or accounts), shall automatically secure such obligations to the extent of the then continuing or outstanding Ancillary Services. Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts thereon or any requests by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the applicable Ancillary Services are outstanding or continue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.2 Overadvances**. If the aggregate amount of the outstanding Non-Formula Advances exceeds the Non-Formula Revolving Line at any time, Borrower shall immediately pay to Bank, in Cash, the amount of such excess.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.3 Interest Rates, Payments, and Calculations.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Interest Rates**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i) Non-Formula Advances**. Except as set forth in <u>Section</u> <u>2.3(b)</u>, the Non-Formula Advances shall bear interest, on the outstanding daily balance thereof, at a

------

variable annual rate equal to the greater of: (A) the Prime Rate then in effect; or (B) four and twenty-five hundredths percent (4.25%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Late Fee; Default Rate**. If any payment is not made within 15 days after the date such payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) 3% of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law. After the occurrence and during the continuance of an Event of Default, all Obligations shall bear interest, upon notice of such increase given by Bank, at a rate equal to three percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default (such rate, the "Default Rate"); <u>provided</u> that, from and after the occurrence of any Event of Default described in <u>Section 8.5</u>, such increase shall be automatic and without the requirement of any notice from Bank. In all such events, and notwithstanding the date on which application of the Default Rate is communicated to Borrower, the Default Rate may be accrued (at the election of Bank) from the initial date of any Event of Default until all existing Events of Default are waived in writing in accordance with the terms of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) Payments**. Interest under the Non-Formula Revolving Line shall be due and payable on the first calendar day of each month during the term hereof. Borrower authorizes Bank, at Bank's option, to charge all interest, all Bank Expenses, all Periodic Payments, and any other amounts due and owing in accordance with the terms of this Agreement against any of Borrower's deposit accounts at Bank or against the Non-Formula Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d) Computation**. In the event that the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a 360- day year for the actual number of days elapsed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.4 Crediting Payments**. When no Event of Default has occurred and is continuing, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies**.** After the occurrence and during the continuance of an Event of Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such application of funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 3:30 p.m. Eastern time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.5 Fees**. Borrower shall pay to Bank the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Facility Fee**. On or before the Closing Date, a nonrefundable facility fee of $50,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Bank Expenses**. On the Closing Date, all Bank Expenses incurred through the Closing Date; and, after the Closing Date, all Bank Expenses, as and when they become due;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) Success Fee.** Upon a Success Fee Event, a one-time fee equal to the Success Fee Amount (such fee, the "Success Fee"). This <u>Section 2.5(c)</u> will survive any termination of this Agreement; <u>provided</u> that this <u>Section 2.5(c)</u> shall terminate on the tenth anniversary of the Closing Date if no Success Fee Event has occurred on or before that date. If this Agreement is terminated prior to payment of the Success Fee, Borrower shall give Bank written notice of the first Success Fee Event to occur thereafter and, if the Success Fee Event occurred on or before the tenth anniversary of the Closing Date, pay the Success Fee upon the closing of such Success Fee Event; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d) Early Termination Fee.** Upon the termination of this Agreement, whether in connection with acceleration, prepayment in full, or otherwise, (a) at any time on or before the first anniversary of the Closing Date, a nonrefundable fee of $400,000 and (b) at any time after the first anniversary of the Closing Date but on or before the second anniversary of the Closing Date, a nonrefundable fee of $200,000. This <u>Section 2.5(d)</u>will survive any termination of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.6 Term**. This Agreement shall become effective on the Closing Date and, subject to <u>Section 12.7</u>, shall continue in full force and effect for so long as any Obligations (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)) remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **CONDITIONS OF LOANS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1 Conditions Precedent to Closing**. The agreement of Bank to enter into this Agreement on the Closing Date is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, each of the following items and completed each of the following requirements:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** this Agreement, duly executed by each Loan Party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** an officer's certificate of each Loan Party with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** a financing statement (Form UCC-1) for each Loan Party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** Borrower shall have opened one or more deposit accounts with Bank and funded not less than $50,000 into such accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** current SOS Reports indicating that, except for Permitted Liens, there are no other security interests or Liens of record in the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** current financial statements, including annual audited statements for Parent's 2022 fiscal year, together with an unqualified opinion on such financial statements; company-prepared consolidated balance sheets, income statements, and statements of cash flows for each of the preceding twelve months; and such other updated financial information as Bank may reasonably request;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)** a current Compliance Certificate in accordance with <u>Section 6.2</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)** evidence that the insurance policies required by <u>Section 6.5</u> hereof are in full force and effect, together with appropriate evidence showing loss payable and additional insured clauses or endorsements in favor of Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** a Borrower Information Certificate; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)** such other documents or certificates, and completion of such other matters, as Bank may reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.2 Conditions Precedent to All Credit Extensions**. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is contingent upon Borrower's compliance with <u>Section 3.1</u>above, and is further subject to the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** timely receipt by Bank of the Loan Advance/Paydown Request Form as provided in <u>Section 2.1</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** Loan Parties shall have completed the transition of their operating cash and non-operating cash to Bank, subject only to the Outside Cash Allowance described in <u>Section 6.6</u> hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** in Bank's reasonable discretion, there has not been a Material Adverse Effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** if an Unrestricted Acquisition or Unrestricted Investment has occurred, Bank has determined, in its sole and absolute discretion, to make such Credit Extension; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** the representations and warranties contained in <u>Article 5</u> shall be true and correct in all material respects on and as of the date of such Loan Advance/Paydown Request Form and on the effective date of each Credit Extension as though made at and as of each such date (<u>provided</u>, <u>however</u>, that those representations and warranties expressly referring to another date shall be true and correct in all material respects as of such date, and <u>provided</u> <u>further</u> that any representation or warranty that contains a materiality qualification therein shall be true and correct in all respects), and no Event of Default shall have occurred and be continuing or would exist after giving effect to such Credit Extension. The making of each Credit Extension shall be deemed to be a representation and warranty by Loan Parties on the date of such Credit Extension as to the accuracy of the facts referred to in this <u>Section 3.2</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **CREATION OF SECURITYINTEREST.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1 Grant of Security Interest**. Each Loan Party grants and pledges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by each Loan Party of each of its covenants and duties under the Loan Documents. Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first-priority security interest in the presently existing Collateral and will constitute a valid, first-priority security interest in later-acquired Collateral. Each Loan Party also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property except for Permitted Liens. Notwithstanding any termination of this Agreement or of any filings undertaken related to Bank's rights under the Code, Bank's Lien on the Collateral shall remain in effect for so long as any Obligations (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)) are outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2 Perfection of Security Interest**. Each Loan Party authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (a) either specifically describe the Collateral or describe the Collateral as all assets of such Loan Party of the kind pledged hereunder, and (b) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether such Loan Party is an organization, the type of organization and any organizational identification number issued to such Loan Party, if applicable. Loan Parties shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to the filing of a financing statement. Where Collateral is in possession of a third-party bailee, each Loan Party shall take such steps as Bank

------

reasonably requests for Bank to (x) subject to <u>Section 7.11</u> below, obtain an acknowledgment, in form and substance reasonably satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, and (y) obtain "control" of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term "control" are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance to Bank. No Loan Party will create any chattel paper without placing a legend on such chattel paper acceptable to Bank indicating that Bank has a security interest in such chattel paper. Loan Parties from time to time may deposit with Bank specific cash collateral to secure specific Obligations. Each Loan Party authorizes Bank to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by a Loan Party or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding. Each Loan Party shall take such other actions as Bank reasonably requests to perfect its security interests granted under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.3 Pledge of Collateral**. Each Loan Party hereby pledges, assigns and grants to Bank a security interest in all of the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. Each Loan Party will deliver to Bank (a) on the Closing Date, the certificate or certificates for any then-certificated Shares, and (b) with respect to any Shares uncertificated as of the Closing Date, promptly upon certification, the certificate or certificates for such Shares, in each case accompanied by an instrument of assignment duly governing such Shares. The relevant Loan Party shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and during the continuance of an Event of Default hereunder, Bank may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Bank and may cause new certificates representing such securities to be issued in the name of Bank or its transferee. Unless an Event of Default has occurred and is continuing, each Loan Party shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, <u>provided</u> that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and during the continuance of an Event of Default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **REPRESENTATIONS AND WARRANTIES.**

Each Loan Party represents and warrants as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.1 Due Organization and Qualification**. Each Loan Party and each Subsidiary is duly existing under the laws of the state in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.2 Due Authorization; No Conflict**. The execution, delivery, and performance of the Loan Documents are within each Loan Party's powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in any Loan Party's Certificate of Incorporation, Bylaws, or other governing document, as applicable, nor will they constitute an event of default under any material agreement by which a Loan Party is bound. No Loan Party is in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.3 Collateral**. Each Loan Party has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. All Collateral is located solely in the United States. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made. Except as set forth in the <u>Schedule</u> or as permitted by <u>Section 6.6</u>,no Loan Party's Cash is maintained or invested with a Person other than Bank or Bank's affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.4 Intellectual Property**. Each Loan Party is the sole owner of the intellectual property created or purchased by the applicable Loan Party, except for licenses granted by a Loan Party to its customers in the ordinary course of business and licenses constituting Permitted Liens. The intellectual property created, licensed or purchased by each Loan Party constitutes all intellectual property necessary for the conduct of such Loan Party's business as now conducted and as presently proposed to be conducted. To the best of each Loan Party's knowledge, each of the material Copyrights, Patents, and Trademarks created or purchased by the applicable Loan Party is valid and enforceable, and no part of the material intellectual property created or purchased by any Loan Party has been judged invalid or unenforceable, in whole or in part, and no claim has been made to any Loan Party that any part of the intellectual property created or purchased by any Loan Party violates the rights of any third party except to the extent such claim would not reasonably be expected to cause a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.5 Name; Location of Chief Executive Office**. Except as disclosed in the <u>Schedule</u>, no Loan Party has done business under any name other than that specified on the signature page hereof, and each Loan Party's exact legal name is as set forth in the first paragraph of this Agreement. The chief executive office of each Loan Party is located at the address indicated in <u>Article 10</u> hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.6 Litigation**. Except as set forth in the <u>Schedule</u>, there are no actions or proceedings pending by or against any Loan Party or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.7 No Material Adverse Change in Financial Statements**. All consolidated and consolidating financial statements related to Loan Parties and any Subsidiary that are delivered by Loan Parties to Bank or otherwise submitted to Bank fairly present in all material respects Loan Parties' financial condition as of the date thereof and Loan Parties' results of operations for the period then ended. There has not been a material adverse change in the consolidated or in the consolidating financial condition of any Loan Party since the date of the most recent of such financial statements submitted to Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.8 Solvency, Payment of Debts**. Each Loan Party is able to pay its debts (including trade debts) as they mature; the fair saleable value of each Loan Party's assets (including goodwill minus disposition costs)exceeds the fair value of its liabilities; and no Loan Party is left with unreasonably small capital after the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.9 Compliance with Laws and Regulations**. Each Loan Party and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. No event has occurred resulting from any Loan Party's failure to comply with ERISA that is reasonably likely to result in such Loan Party incurring any liability that could reasonably be expected to have a Material Adverse Effect. No Loan Party is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. No Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). No Loan

------

Party has violated any statutes, laws, ordinances or rules applicable to it, including without limitation Environmental Laws, the violation of which would reasonably be expected to have a Material Adverse Effect. Each Loan Party and each Subsidiary have filed or caused to be filed all tax returns required to be filed and have paid, or have made adequate provision for the payment of, all taxes reflected therein, except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.10 Subsidiaries**. No Loan Party owns any Capital Stock of any Person, except for the Capital Stock of another Loan Party and for Permitted Investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.11 Government Consents**. Each Loan Party and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to all governmental authorities that are necessary for the continued operation of such Loan Party's or Subsidiary's business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.12 Inbound Licenses**. Except as disclosed on the Schedule, no Loan Party is a party to, nor is bound by, any material license or other agreement important for the conduct of such Loan Party's business that prohibits or otherwise restricts such Loan Party from granting a security interest in such Loan Party's interest in such license or agreement or any other property important for the conduct of such Loan Party's business, other than this Agreement or the other Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.13 Shares**. As of the Closing Date, the Shares of the Canadian Subsidiary are uncertificated. Each Loan Party has full power and authority to create a first lien on the Shares, and no disability or contractual obligation exists that would prohibit such Loan Party from pledging the Shares pursuant to this Agreement. To each Loan Party's knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect, to the Shares. The Shares have been and will remain duly authorized and validly issued and are fully paid and non-assessable. To each Loan Party's knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and such Loan Party knows of no reasonable grounds for the institution of any such proceedings. No interest in any limited liability company or limited partnership controlled by a Loan Party is represented by a certificate unless (a) the limited liability company agreement or limited partnership agreement expressly provides that such interest shall be a "Security" within the meaning of Article8 of the Code, and (b) such certificate has been delivered to Bank. With respect to each limited liability company or limited partnership controlled by a Loan Party whose interests are uncertificated, such limited liability company or limited partnership has not elected, whether in its limited liability company agreement or limited partnership agreement or otherwise, to have such interests be treated as a "Security" within the meaning of Article 8 of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.14 Full Disclosure**. No representation, warranty or other statement made by any Loan Party in any report, certificate, or written statement furnished or submitted to Bank taken together with all such reports, certificates, and written statements furnished or submitted to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in such reports, certificates, or statements not misleading in light of the circumstances in which they were made, it being recognized by Bank that the projections and forecasts provided by a Loan Party in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may materially differ from the projected or forecasted results.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **AFFIRMATIVE COVENANTS.**

Each Loan Party covenants that, until payment in full of all outstanding Obligations (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)), and for so long as Bank may have any commitment to make a Credit Extension hereunder, Loan Parties shall do all of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1 Good Standing and Government Compliance**. Each Loan Party shall maintain its and each of its Subsidiaries' corporate existence and good standing in their respective states of formation, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the organizational identification number issued to such Loan Party by the authorities of the state in which such Loan Party is organized, if applicable. Each Loan Party shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Each Loan Party shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, including without limitation all Environmental Laws, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2 Financial Statements, Reports, Certificates; Collateral Audits.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** Loan Parties shall deliver to Bank: (i) within 45 days after the end of each calendar quarter, a company-prepared consolidated balance sheet, income statement, and statement of cash flows covering Turnstone Group's operations during such period, prepared in accordance with GAAP, consistently applied (subject to year-end audit adjustments and the absence of footnotes), in a form reasonably acceptable to Bank and certified by a Responsible Officer; (ii) within 180 days after the end of each of Parent's fiscal years, audited (or such other level of review as Parent's board of directors requires) consolidated financial statements of Turnstone Group prepared in accordance with GAAP, consistently applied, together with, if audited, an unqualified opinion (other than a going concern qualification based solely on Borrower having negative profits or a determination that Borrower has fewer than 12 months' liquidity) on such financial statements from an independent certified public accounting firm of nationally recognized standing or other accounting firm reasonably acceptable to Bank; (iii) an annual budget (which shall include a balance sheet, income statement, and statement of cash flows for each calendar month),approved by Parent's board of directors, for each of Parent's fiscal years not later than 45 days after the beginning of such fiscal year; (iv) if applicable, copies of all statements, reports and notices sent or made available generally by Parent to its shareholders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (v) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against any Loan Party or any Subsidiary that could reasonably be expected to result in damages or costs to any Loan Party or any Subsidiary of $500,000 or more; (vi) promptly upon receipt, each management letter prepared by an independent certified public accounting firm regarding Parent's management control systems; (vii) such budgets, sales projections, operating plans or other financial information as Bank may reasonably request from time to time; and (viii) promptly upon Bank's request, and otherwise as Loan Parties may determine, informal updates on any material developments with Loan Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** Within 30 days after the last day of each month, Borrower shall deliver to Bank (i) a Compliance Certificate certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of <u>Exhibit D</u> hereto, (ii) account statements prepared as of the last day of the applicable month for all of Loan Parties' bank accounts held

------

outside Bank, and (iii) a balance sheet for the Canadian Subsidiary prepared as of the last day of such month.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** As soon as possible and in any event within three calendar days after becoming aware of the occurrence or existence of an Event of Default hereunder, Loan Parties shall deliver to Bank a written statement of a Responsible Officer setting forth details of the Event of Default and the action that Loan Parties have taken or propose to take with respect thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Loan Parties' usual business hours but no more than once a year (unless an Event of Default has occurred and is continuing), to inspect Loan Parties' Books and to make copies thereof and to check, test, inspect, audit and appraise the Collateral at Loan Parties' expense in order to verify Loan Parties' financial condition or the amount of, condition of, or any other matter relating to the Collateral.

Loan Parties may deliver to Bank on an electronic basis any certificates, reports, requests, or information required pursuant to this <u>Section 6.2</u>, and Bank shall be entitled to rely on the information contained in the electronic files, <u>provided</u> that Bank in good faith believes that the files were delivered by, or on behalf of, a Responsible Officer. Loan Parties shall include a submission date on any certificates, statements, and reports to be delivered electronically.

Any submission by Loan Parties of a Compliance Certificate or other financial statement pursuant to this <u>Section 6.2</u>or otherwise submitted to Bank shall be deemed to be a representation by each Loan Party that (v) as of the date of such Compliance Certificate, financial statement, or request, the information and calculations set forth therein are true, accurate and correct; (w) as of the end of the compliance period set forth in such submission, Loan Parties are in complete compliance with all required covenants except as noted in such Compliance Certificate or financial statement, as applicable; (x) as of the date of such submission, no Event of Default has occurred and is continuing; and (y) all representations and warranties, other than any representations or warranties that are made as of a specific date in <u>Article 5</u>, remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Certificate, financial statement, or request, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3 Inventory and Equipment; Returns**. Each Loan Party shall keep all Inventory and Equipment in good and merchantable condition, free from all material defects except for Inventory and Equipment (a) sold in the ordinary course of business, and (b) for which adequate reserves have been made, in all cases in the United States; provided that Borrower may maintain Inventory and Equipment with an aggregate value of up to $1,500,000 outside the United States. Returns and allowances, if any, as between a Loan Party and its account debtors shall be on the same basis and in accordance with the usual customary practices of such Loan Party as they exist on the Closing Date. Each Loan Party shall promptly notify Bank of all returns and recoveries and of all disputes and claims involving Inventory having a book value of more than $100,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.4 Taxes**. Each Loan Party shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A., and state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank indicating that such Loan Party or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof; <u>provided</u> that such Loan Party or Subsidiary need not make (i) any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by such Loan Party or such Subsidiary or (ii) any such payments (other than federal or state income taxes) in an aggregate amount not exceeding $100,000.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.5 Insurance**. Each Loan Party, at its expense, shall (a) keep the Collateral insured against loss or damage, and (b) maintain liability and other insurance, in each case as ordinarily insured against by other owners in businesses similar to Loan Parties' business. All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. All policies of property insurance shall contain a lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank as lender's loss payee. All liability insurance policies shall show, or have endorsements showing, Bank as an additional insured. Any such insurance policies shall specify that the insurer must give at least 20 days' notice to Bank before canceling its policy for any reason. Within 30 days of the Closing Date, Loan Parties shall cause to be furnished to Bank a copy of its policies of insurance including any endorsements covering Bank or showing Bank as an additional insured. Upon Bank's request, Loan Parties shall deliver to Bank certified copies of the policies of insurance and evidence of all premium payments. Proceeds payable under any casualty policy will, at Loan Parties' option, be payable to Loan Parties to replace the property subject to the claim; <u>provided</u> that any such replacement property shall be deemed Collateral in which Bank has been granted a first-priority security interest; <u>provided further</u> that, if an Event of Default has occurred and is continuing, all proceeds payable under any such policy shall, at Bank's option, be payable to Bank to be applied on account of the Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.6 Primary Depository**. Beginning 30 days after the Closing Date and continuing at all times thereafter, Loan Parties shall maintain, and shall cause each of their respective Subsidiaries to maintain, all of their non-operating Cash in accounts with Bank or Bank's affiliates. Beginning 60 days after the Closing Date and at all times thereafter, Loan Parties shall maintain, and shall cause each of their respective Subsidiaries to maintain, all of their operating Cash in accounts with Bank or Bank's affiliates. Of the total Cash held by Loan Parties in accounts with Bank and Bank's affiliates, the lesser of (a) 15% of Loan Parties' aggregate Cash or (b) $15,000,000 must be held in non-interest-bearing depository, operating, or insured cash sweep accounts with Bank. Notwithstanding the foregoing, (x) Loan Parties and their Subsidiaries may maintain Cash in an aggregate amount not to exceed the Outside Cash Allowance in accounts outside Bank, so long as such accounts(other than the Excluded Account)are subject to an account control agreement in form and substance satisfactory to Bank for any account owned by a Loan Party, and (b) the Canadian Subsidiary's Cash is instead governed by <u>Section 7.14</u>. In addition, Loan Parties shall transition all of their credit card, foreign exchange, and letter of credit business, except to the extent constituting Permitted Indebtedness, to Bank within30 days after the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.7 Financial Covenants.** Loan Parties shall achieve and satisfy the following covenants:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Performance/Funding Milestone**. Prior to the earlier to occur of**(i)** March 31, 2025, or (ii) the first date on which Loan Parties' unrestricted Cash at Bank is less than the aggregate outstanding principal amount (including Ancillary Services reserves) of Credit Extensions, Borrower shall achieve the Performance/Funding Milestone.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Future Financial Covenant**. Bank and Borrower shall mutually agree on the addition of a financial covenant to this Agreement to apply during2025 and thereafter. Such financial covenant shall be incorporated herein by an amendment. Bank and Loan Parties agree to use commercially reasonable efforts to execute such an amendment by February 28, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.8 Consent of Inbound Licensors**. Prior to entering into or becoming bound by any material inbound license or agreement, each Loan Party shall (a) provide written notice to Bank of the material terms of such license or agreement (other than open-source licenses, "off the shelf" licenses and licenses that are commercially available to the public) with a description of its likely impact on such Loan Party's business or financial condition; and (b) in good faith use commercially reasonable efforts to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for such Loan Party's interest in such licenses or contract rights to be deemed Collateral and for Bank to

------

have a security interest in it that might otherwise be restricted by the terms of the applicable license or agreement, whether now existing or entered into in the future, <u>provided</u>, <u>however</u>, that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.9 Creation/Acquisition of Subsidiaries.** In the event that a Loan Party or any Subsidiary of a Loan Party creates or acquires any Subsidiary, such Loan Party or Subsidiary shall promptly notify Bank of such creation or acquisition, and such Loan Party or Subsidiary shall take all actions reasonably requested by Bank to achieve any of the following with respect to such "***New Subsidiary***" (defined as a Subsidiary formed after the date hereof during the term of this Agreement): (a) to cause such New Subsidiary to become either(i) a Guarantor hereunder, if such New Subsidiary is organized under the laws of the United States, or (ii) a secured guarantor with respect to the Obligations, if such New Subsidiary is not organized under the laws of the United States; and (b) to grant and pledge to Bank a perfected security interest in 100% of the Capital Stock held by such Loan Party or Subsidiary of any such New Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.10 Collateral Support from Canadian Subsidiary**. Loan Parties acknowledge that, as of the Closing Date, Bank is not requiring that the Canadian Subsidiary become a secured guarantor of the Obligations or that the equity interests of the Canadian Subsidiary be pledged to Bank under a pledge agreement governed by Canadian law, but Bank reserves the right to request such actions in the future upon a Collateral Support Trigger Event. Loan Parties agree to take all actions reasonably requested by Bank to accomplish such actions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.11 Further Assurances**. At any time and from time to time, Loan Parties shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **NEGATIVE COVENANTS.**

Each Loan Party covenants and agrees that, until the outstanding Obligations are paid in full (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)) or for so long as Bank has any commitment to make any Credit Extensions, no Loan Party will do any of the following without Bank's prior written consent, which shall not be unreasonably withheld:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1 Dispositions**. Convey, sell, lease, license, transfer, or otherwise dispose of (collectively, to "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with Bank to accounts opened at another financial institution (other than accounts permitted by <u>Section 6.6</u>), other than Permitted Transfers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control**. Change its name or the state of its formation or relocate its chief executive office without 10 days prior written notification to Bank; replace or suffer the departure of its chief executive officer or chief financial officer without delivering written notification to Bank within 10 days; fail to appoint an interim replacement or fill a vacancy in the position of chief executive officer or chief financial officer for more than 45 consecutive days; fail to provide Bank with at least 5 days' prior written notice of the departure of a representative of either OrbiMed or Versant Ventures from Parent's board of directors; take action to liquidate, wind up, or otherwise cease to conduct business in the ordinary course; engage in any business, or permit any of its Subsidiaries to engage in any business, other than as reasonably related or incidental to the businesses currently engaged in by a Loan Party; change its fiscal year end; convert to another form of incorporated or unincorporated business or entity; have a Change in Control; or Divide.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3 Mergers or Acquisitions**. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into a Loan Party or of a Loan Party into another Loan Party), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the Capital Stock or property of another Person, or a division, line of business, or business unit of another Person, in each case except where (a) each of the following conditions is applicable: (i) such transaction either satisfies the requirements of clause (a) of the defined term "Approved Acquisition" or is an Unrestricted Acquisition, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) Borrower is the surviving entity; or (b) the Obligations are repaid in full and this Agreement is terminated concurrently with the closing of any merger or consolidation of Borrower in which Borrower is not the surviving entity. No Loan Party shall, without Bank's prior written consent, enter into any binding contractual arrangement with any investment banker, business broker, or similar Person to attempt to facilitate a merger or acquisition of any Loan Party or the sale of all or substantially all of any Loan Party's assets (any such agreement, an "Investment Banker Agreement") unless (w) no Event of Default exists when such Investment Banker Agreement is entered into by such Loan Party,(x) such Investment Banker Agreement does not give the counterparty the right, in connection with a sale of a Loan Party's stock or assets pursuant to or resulting from an assignment for the benefit of creditors, an asset turnover to such Loan Party's creditors (including, without limitation, Bank), foreclosure, bankruptcy or similar liquidation, to claim any fee, payment or damages from any parties, other than from a Loan Party or such Loan Party's investors, and (y) such Loan Party notifies Bank in advance of entering into such an Investment Banker Agreement and provides a copy of the Investment Banker Agreement to Bank. Notwithstanding anything herein to the contrary, sub- clause (x) of the immediately preceding sentence shall not apply to a contractual arrangement described in such sentence if such arrangement includes a provision that specifically states that any fees, damages, or payments (other than payments made in the ordinary course of business as reimbursements for expenses) owed to (i) any investment bank, other advisor, or agent, or (ii) the Person acquiring Borrower or merging with Borrower, shall: (x) only be deemed earned, due, and payable after the indefeasible payment in full of all of Borrower's Obligations (other than inchoate indemnity obligations) under this Agreement; (y) be expressly acknowledged by the party to whom they are owed as being junior to the Obligations; and (z) name Bank as an express third party beneficiary of such provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.4 Indebtedness**. Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on a Loan Party an obligation to prepay any Indebtedness, except (a) Indebtedness to Bank and (b) equipment lease financing Indebtedness in an amount not exceeding $1,500,000 during the term of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.5 Encumbrances**. Create, incur, assume or allow any Lien with respect to its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person (other than (a) the licensors of in-licensed property with respect to such property or (b) the lessors of specific equipment or lenders financing specific equipment with respect to such leased or financed equipment) that such Loan Party in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of its property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.6 Distributions**. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any Capital Stock, except that Loan Parties may (a) repurchase the stock of current or former employees or directors pursuant to stock repurchase agreements in an aggregate amount not to exceed $500,000in any fiscal year, so long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such

------

repurchase, (b) repurchase the stock of former employees or directors pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees or directors to a Loan Party,(c) make distributions to another Loan Party, (d) convert or exchange any of its convertible securities into or for equity securities pursuant to the terms of such convertible securities or otherwise in exchange thereof,(e) pay dividends solely in equity, and (f) make de minimis payments in lieu of fractional shares in an aggregate amount not exceeding $10,000 in any fiscal year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.7 Investments**. Directly or indirectly acquire or own an Investment in, or make any Investment in or to, any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments, or maintain or invest any of its investment property with a Person other than Bank or as permitted by <u>Section 6.6</u>or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank, in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise distributing property to a Loan Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.8 Capitalized Expenditures**. In any fiscal year, make Capitalized Expenditures greater than 150% of the Capitalized Expenditures indicated in the board-approved annual budget delivered in accordance with Section 6.2(a)(iii) for such fiscal year (or, if applicable, 150% of the Capital Expenditures indicated in a board-approved budget for such fiscal year revised for purposes of a Phase II clinical study).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.9 Transactions with Affiliates**. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of a Loan Party except for (a) transactions that are in the ordinary course of such Loan Party's business, upon fair and reasonable terms that are no less favorable to such Loan Party than would be obtained in an arm's-length transaction with a non-affiliated Person, (b) the sale of Parent's equity securities in bona fide transactions with Parent's existing investors that do not result in a Change in Control,(c) reasonable and customary compensation arrangements and benefit plans for officers and other employees of Borrower entered into or maintained in the ordinary course of business, (d) reasonable and customary fees paid to members of its board of directors in the ordinary course of business, and (e) Permitted Investments and transactions permitted by Section 7.6 that expressly contemplate Affiliates as Investment recipients or contract counterparties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.10 Subordinated Debt**. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or amend any provision affecting Bank's rights contained in any documentation relating to the Subordinated Debt without Bank's prior written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.11 Inventory and Equipment**. Beginning 60 days after the Closing Date and at all times thereafter, (a) store Inventory or Equipment of a book value in excess of $2,000,000 with a bailee, warehouseman, collocation facility, or similar third party unless such third party has been notified of Bank's security interest and Bank has received a bailee waiver in favor of Bank, in form and substance reasonably satisfactory to Bank, duly executed by the applicable Loan Party and such third party; or (b) with respect to any leased or licensed real property, store Collateral of a book value in excess of $2,000,000 unless the landlord has been notified of Bank's security interest and Bank has received a landlord waiver, in form and substance reasonably satisfactory to Bank, duly executed by the applicable Loan Party and such landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.12 No Investment Company; Margin Regulation**. Become or be controlled by an "investment company," within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit

------

for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.13 Intellectual Property Creation or Acquisition**. After the Closing Date, permit any Subsidiary that is not a Loan Party to create or acquire any intellectual property unless all rights with respect to that intellectual property are immediately transferred to a Loan Party, except for (i) any intellectual property created or acquired pursuant to the Collaboration Agreement, dated as of November 24, 2021, among Canadian Subsidiary, Centre Hospitalier de l'Universite de Montreal and Dr. Simon Turcotte and (ii) any maintenance, non-provisional, continuation or divisional fillings, and any and all letters patent or patents in the United States of America and all foreign countries or jurisdictions which may be granted therefor and thereon, including, without limitation, any modifications to such letters patent or patents such as through reissue, re-examination or other post-grant proceeding, for any intellectual property held by any such Subsidiary as of the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.14 Transfers to Canadian Subsidiary; Cash at Canadian Subsidiary**. (a) Make any Investments in or Transfer any assets to the Canadian Subsidiary, except that Borrower may make such Investments or Transfers in an aggregate amount not exceeding $600,000 (or its equivalent in other currencies) per month to fund the Canadian Subsidiary's operating expenses incurred in the ordinary course of business; or (b) permit the Canadian Subsidiary to maintain cash in excess of $1,000,000 (or its equivalent in other currencies) at any time; except that, for one period of up to 30 consecutive days in any 12-month period, the Canadian Subsidiary's cash may exceed $1,000,000 but be no greater than $2,000,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **EVENTS OF DEFAULT.**

Any one or more of the following events shall constitute an Event of Default under this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.1 Payment Default**. If Borrower fails to pay any of the Obligations when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.2 Covenant Default.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If any Loan Party fails to perform any obligation under <u>Sections 6.2</u> (financial reporting), <u>6.4</u>(taxes), <u>6.5</u> (insurance), <u>6.6</u> (primary depository), or <u>6.7</u>(financial covenants) of this Agreement or violates any of the covenants contained in <u>Article 7</u> of this Agreement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If any Loan Party fails or neglects to perform or observe any other material term, provision, condition, or covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between any Loan Party and Bank and as to any default under such other term, provision, condition, or covenant that can be cured, has failed to cure such default within 10 days after a Loan Party receives notice thereof or any officer of a Loan Party becomes aware thereof; <u>provided</u>, <u>however</u>, that, if the default cannot by its nature be cured within such 10-day period or cannot after diligent attempts by such Loan Party be cured within such 10-day period and such default is likely to be cured within a reasonable time, then such Loan Party shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.3 Material Adverse Change**. If there occurs any circumstance or any circumstances which would reasonably be expected to have a Material Adverse Effect;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.4 Attachment**. If any material portion of a Loan Party's assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or Person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 10 days, or if a Loan Party is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of a Loan Party's assets, or if a notice of lien, levy, or assessment is filed of record with respect to any material portion of a Loan Party's assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within 10 days after a Loan Party receives notice thereof, <u>provided</u> that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by such Loan Party (<u>provided</u>, <u>further</u>, that no Credit Extensions will be made during such cure period);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.5 Insolvency**. If any Loan Party becomes insolvent, or if an Insolvency Proceeding is commenced by a Loan Party, or if an Insolvency Proceeding is commenced against a Loan Party and is not dismissed or stayed within 30 days (<u>provided</u> that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.6 Other Agreements**. If (a) there is a default or other failure to perform in any agreement to which any Loan Party is a party with a third party or parties (i) resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of $500,000, (ii) in connection with any lease of real property material to the conduct of Borrower's business caused by a Loan Party's failure to pay rent, or (iii) that would reasonably be expected to have a Material Adverse Effect, or (b) any default or event of default (however designated) occurs with respect to any Subordinated Debt and is not cured within any applicable cure period; provided, however, that an Event of Default under this Section 8.6 caused by the occurrence of a breach or default under such other agreement shall be cured or waived for purposes of this Agreement upon Bank receiving written notice from the party asserting such breach or default of the cure or waiver of such breach or default under such other agreement if, at the time of such cure or waiver under such other agreement, (w) Bank has not declared an Event of Default under this Agreement or exercised any rights with respect thereto; (x) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any other Loan Document; and (y) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith business judgment of Bank be materially less advantageous to Borrower or any Loan Party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.7 Judgments**. If a final, uninsured judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least $500,000 (not covered by insurance maintained in accordance with Section 6.6 as to which liability has been accepted by the carrier) shall be rendered against any Loan Party and shall remain unsatisfied, unpaid or unstayed for a period of 10 days (<u>provided</u> that no Credit Extensions will be made prior to the satisfaction or stay of the judgment); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.8 Misrepresentations**. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any report, certificate or other writing delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **BANK'S RIGHTS AND REMEDIES.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.1 Rights and Remedies**. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by each Loan Party:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**`declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (<u>provided</u> that, upon the occurrence of an Event of Default described in <u>Section 8.5</u> (insolvency), all Obligations shall become immediately due and payable without any action by Bank);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn as collateral security for the repayment of any future drawings under such Letters of Credit, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit, and Borrower shall promptly deposit and pay such amounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** cease advancing money or extending credit to or for the benefit of any Loan Party under this Agreement or under any other agreement between a Loan Party and Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Each Loan Party agrees to assemble the Collateral if Bank so requires and to make the Collateral available to Bank as Bank may designate. Each Loan Party authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank's determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith.

With respect to any Loan Party's owned premises, such Loan Party hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank's rights or remedies provided herein, at law, in equity, or otherwise;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** place a "hold" on any account maintained with Bank, decline to honor presentments (including but not limited to checks, wires, and ACH drafts) against any account at Bank, and/or deliver a notice of exclusive control, an entitlement order, or other directions or instructions pursuant to any control agreement or similar agreements providing control of any Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)** set off and apply to the Obligations any and all (i) balances and deposits of any Loan Party held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of any Loan Party held by Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)** ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein)the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this <u>Section 9.1</u>, to use, without charge, any Loan Party's labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this <u>Section 9.1</u>, any Loan Party's rights under all licenses and all franchise agreements shall inure to Bank's benefit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including any

------

Loan Party's premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate. Bank may sell the Collateral without giving any warranties as to the Collateral. Bank may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Bank sells any of the Collateral upon credit, Loan Parties will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser. If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Loan Parties shall be credited with the proceeds of the sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)** credit bid and purchase Collateral at any public sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(k)** apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of any Loan Party, any guarantor or any other Person liable for any of the Obligations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(l)** any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Loan Parties.

Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral, and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.2 Power of Attorney**. Effective only upon the occurrence and during the continuance of an Event of Default, each Loan Party hereby irrevocably appoints Bank (and any of Bank's designated officers or employees) as such Loan Party's true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank's security interest in the Accounts; (b) endorse such Loan Party's name on any checks or other forms of payment or security that may come into Bank's possession; (c) sign such Loan Party's name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to such Loan Party's policies of insurance; (f) settle and adjust disputes and claims respecting Accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral; <u>provided</u> that Bank may exercise such power of attorney to sign the name of a Loan Party on any of the documents described in <u>clause (g)</u>above regardless of whether an Event of Default has occurred. The appointment of Bank as such Loan Party's attorney in fact, and each and every one of Bank's rights and powers, being coupled with an interest, is irrevocable until all of the Obligations (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)) have been fully repaid and performed and Bank's obligation to provide advances hereunder is terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.3 Accounts Collection**. At any time after the occurrence and during the continuation of an Event of Default, Bank may notify any Person owing funds to any Loan Party of Bank's security interest in such funds and verify the amount of such Account. Each Loan Party shall collect all amounts owing to such Loan Party for Bank, receive in trust all payments as Bank's trustee and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.4 Bank Expenses**. If any Loan Party fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to such Loan Party: (a) make payment of

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.5 Bank's Liability for Collateral**. Bank has no obligation to clean up or otherwise prepare the Collateral for sale. All risk of loss, damage or destruction of the Collateral shall be borne by Loan Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.6 No Obligation to Pursue Others**. Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and Bank may release, modify, or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Bank's rights against any Loan Party. Each Loan Party waives any right it may have to require Bank to pursue any other Person for any of the Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.7 Remedies Cumulative**. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on a Loan Party's part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. Each Loan Party expressly agrees that this <u>Section 9.7</u> may not be waived or modified by Bank by course of performance, conduct, estoppel, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.8 Demand; Protest**. Except as otherwise provided in this Agreement, each Loan Party waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, and any other notices relating to the Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **NOTICES.**

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other reporting required pursuant to <u>Section 6.2</u> of this Agreement, which shall be sent as directed in the monthly reporting forms provided by Bank) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by electronic mail to Loan Parties or to Bank, as the case may be, at its address set forth below:

If to a Loan Party: Turnstone Biologics Corp., on behalf of each Loan Party

9310 Athena Circle, Suite 300 La Jolla, CA 92037

Attn: Venkat Ramanan

Email: venkat.ramanan@turnstonebio.com

If to Bank: Banc of California

555 S. Mangum Street, Suite 1000 Durham, North Carolina 27701

Attn: Loan Operations Manager

Email: loannotices@pacwest.com

------

with a copy to: Banc of California

555 S. Mangum Street, Suite 1000 Durham, North Carolina 27701

Attn: Rilus Graham

Email: Rilus.Graham@bancofcal.com

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.**

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of North Carolina, without regard to principles of conflicts of law. Jurisdiction shall lie in the State of North Carolina. All disputes, controversies, claims, actions, and similar proceedings arising with respect to this Agreement or any related agreement or transaction shall be brought in the General Court of Justice of North Carolina sitting in Durham County, North Carolina or the United States District Court for the Middle District of North Carolina, except as provided below with respect to arbitration of such matters. BANK AND EACH LOAN PARTY EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALLNOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR ANY LOAN PARTY, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM. If the jury waiver set forth in this <u>Article 11</u> is not enforceable, then any dispute, controversy, claim, action, or similar proceeding arising out of or relating to this Agreement, the Loan Documents or any of the transactions contemplated therein shall be settled by final and binding arbitration held in Durham County, North Carolina in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with those rules. The arbitrator shall apply North Carolina law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration. Judgment upon any award resulting from arbitration may be entered into and enforced by any state or federal court having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief or to compel arbitration in accordance with this <u>Article 11</u>. The costs and expenses of the arbitration, including without limitation the arbitrator's fees, expert witness fees, and reasonable attorneys' fees incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such costs and expenses, both parties shall share equally in the payment of the arbitrator's fees as and when billed by the arbitrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **GENERAL PROVISIONS.**

**12.1 Successors and Assigns**. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all Persons who become bound as a debtor to this Agreement; <u>provided</u>, <u>however</u>, that neither this Agreement nor any rights hereunder may be assigned by any Loan Party without Bank's prior written consent, which consent may be granted or withheld in Bank's sole discretion. Bank shall have the right without the consent of or notice to any Loan Party to sell, assign, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights, and benefits hereunder. Notwithstanding

------

the foregoing, so long as no Event of Default shall have occurred and is continuing, Bank shall not assign its interests in the Loan Documents to any Person who, in the reasonable estimation of Bank, is (a) a direct competitor of Borrower or (b) a vulture fund or distressed debt fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.2 Indemnification**. Each Loan Party shall defend, indemnify, and hold harmless Bank and its officers, directors, employees, Affiliates, advisors, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its officers, employees, and agents as a result of or in any way arising out of, following, or consequential to transactions between Bank and any Loan Party whether under this Agreement, or otherwise (including without limitation reasonable attorneys' fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and non-appealable order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.3 Time of Essence**. Time is of the essence for the performance of all obligations set forth in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.4 Severability of Provisions**. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.5 Amendments in Writing, Integration.** All amendments to or terminations of this Agreement or the other Loan Documents must be in writing. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.6 Counterparts; Electronic Transmission; Electronic Signatures.** This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Executed copies of this Agree mentor the signature pages of this Agreement sent by facsimile or transmitted electronically in Portable Document Format or any similar format, or transmitted electronically by digital image, DocuSign, or other means of electronic transmission, shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have to object to such treatment. The words "execution," "signed," "signature," "delivery," and words of like import in or relating to this Agreement and/or any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity, or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system,as the case may be. As used herein, "Electronic Signatures" means any electronic symbol or process attached to, or associated with, any contractor other record and adopted by a person with the intent to sign, authenticate, or accept such contract or record.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.7 Survival**. All covenants, representations, and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (other than inchoate indemnity obligations and Ancillary Services that have been secured to Bank's satisfaction pursuant to Section 2.1(b)(iv)) remain outstanding or so long as Bank has any obligation to make any Credit Extension to Borrower. The obligations of Loan Parties to indemnify Bank with respect to the expenses, damages, losses, costs, and liabilities described in <u>Section 12.2</u> shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.8 Confidentiality and Publicity.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** No Loan Party shall, and shall not permit any of its Affiliates to: (i) publish or disclose any materials containing Bank's name, including in any press release or otherwise in connection with any advertising or marketing, without first obtaining Bank's prior written consent, or (ii) use Bank's name (or the name of any of its Affiliates) in connection with its operations or business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** In handling any confidential information, Bank shall exercise commercially reasonable efforts to maintain in confidence, in accordance with its customary procedures for handling confidential information, all written non-public information furnished to Bank on a confidential basis clearly identified at the time of delivery as such ("Confidential Information") other than any such Confidential Information that becomes generally available to the public or becomes available to Bank from a source other than a Loan Party and that is not known to Bank to be subject to confidentiality obligations; <u>provided</u> that Bank and its Affiliates shall have the right to disclose Confidential Information to: (i) such Person's Affiliates; (ii) such Person or such Person's Affiliates' lenders, funding sources, or financing sources; (iii) such Person's or such Person's Affiliates' directors, officers, trustees, partners, members, managers, employees, agents, advisors, representatives, attorneys, equity owners, professional consultants, portfolio management services, and rating agencies; (iv) any successor or assign of Bank; (v) any Person to whom Bank offers to sell, assign, or transfer any Credit Extension or any part thereof or any interest or participation therein; (vi) any Person that provides statistical analysis and/or information services to Bank or its Affiliates; and (vii) any Person (A) to the extent required by it by law, (B) as may be required in connection with the examination, audit, or similar investigation of Bank,(C) in response to any subpoena or other legal process or informal investigative demand, (D) in connection with any litigation, or (E) in connection with the actual or potential exercise or enforcement of any right or remedy under any Loan Document. The obligations of Bank and its Affiliates under this <u>Section 12.8</u>shall supersede and replace any other confidentiality obligations agreed to by Bank or its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.9 E-Systems.** Bank is hereby authorized by each Loan Party to establish procedures (and to amend such procedures from time to time) to facilitate administration and servicing of the Credit Extensions and other matters incidental thereto. Without limiting the generality of the foregoing, Bank is hereby authorized to establish procedures to make available or deliver, or to accept, notices, documents, and similar items, by posting to or submitting and/or completion, on E-Systems. Each Loan Party acknowledges and agrees that the use of transmissions via an E- System or electronic mail is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure, and abuse, and each Loan Party assumes and accepts such risks by hereby authorizing the transmission via E-Systems or electronic mail. All uses of an E-System shall be governed by and subject to, in addition to this <u>Section 12.9</u>, the separate terms and conditions posted or referenced in such E-System(or such terms and conditions as may be updated from time to time, including on such E-System) and related contractual obligations executed by any Loan Party in connection with the use of such E-System. ALL E- SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED "AS-IS" AND "AS AVAILABLE". NO REPRESENTATION OR WARRANTY OF ANY KIND IS MADE BY BANK OR ANY OF ITS AFFILIATES IN CONNECTION WITH ANY E-SYSTEMS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.** **GUARANTY.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.1** For and in consideration of the Credit Extensions by Bank to Borrower hereunder, and acknowledging that Bank would not enter into this Agreement without the benefit of this guaranty, Guarantors hereby unconditionally and irrevocably guarantee the prompt and complete payment of all amounts that Borrower owes to Bank and performance by Borrower of this Agreement and the other

------

Loan Documents in strict accordance with their respective terms. This guaranty is a continuing guaranty that covers, without limitation, new debts incurred by Borrower under the Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.2** If Borrower does not pay any amount or perform its obligations in strict accordance with the Loan Documents, Guarantors shall immediately pay all amounts due thereunder (including, without limitation, all principal, interest and fees) and otherwise proceed to complete the same and satisfy all of Borrower's obligations under the Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.3** The obligations hereunder are joint and several, and the obligations hereunder are independent of the obligations of Borrower and any other Person or entity, and a separate action or actions may be brought and prosecuted against Guarantors whether action is brought against Borrower or whether Borrower be joined in any such action or actions. Guarantors waive the benefit of any statute of limitations affecting their liability hereunder, or the enforcement thereof, to the extent permitted by law. Guarantors' liability under this guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.4** Guarantors authorize Bank, without notice or demand and without affecting their liability hereunder, from time to time to (a) renew, extend or otherwise change the terms of the Loan Documents or any part thereof; (b) take and hold security for the payment of this guaranty or the Loan Documents, and exchange, enforce, waive and release any such security; and (c) apply such security and direct the order or manner of sale thereof as Bank in its sole discretion may determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.5** Guarantors waive any right to require Bank to (a) proceed against Borrower, any other guarantor or any other Person; (b) proceed against or exhaust any security held from Borrower; or (c) pursue any other remedy in Bank's power whatsoever. Bank may, at its election, exercise or decline or fail to exercise any right or remedy each may have against Borrower or any security held by Bank, including without limitation the right to foreclose upon any such security by judicial or nonjudicial sale, without affecting or impairing in any way the liability of Guarantors hereunder. Guarantors waive any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower. Guarantors waive any setoff, defense or counterclaim that Borrower may have against Bank. Guarantors waive any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower. Until all of the amounts that Borrower owes to Bank have been paid in full, Guarantors shall have no right of subrogation or reimbursement, contribution or other rights against Borrower, and Guarantors waive any right to enforce any remedy that Bank now has or may hereafter have against Borrower. Guarantors waive all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance of this guaranty and of the existence, creation or incurring of new or additional indebtedness. Guarantors assume the responsibility for being and keeping themselves informed of the financial condition of Borrower and of all other circumstances bearing upon the risk of nonpayment of any indebtedness or nonperformance of any obligation of Borrower, warrant to Bank that they will keep so informed, and agree that, absent a request for particular information by Guarantors, Bank shall have no duty to advise Guarantors of information known to Bank regarding such condition or any such circumstances. Guarantors waive any benefits that they have that permit a subordinating creditor to assert surety ship defenses or that give a subordinating creditor rights to require a senior creditor to marshal assets. Guarantors will not assert such a defense or right. Without limiting the generality of the foregoing, Guarantors hereby specifically waive the benefits of N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.6** If Borrower becomes insolvent or is adjudicated bankrupt or files a petition for reorganization, arrangement, composition or similar relief under any present or future provision of the United States Bankruptcy Code, or if such a petition is filed against Borrower, and in any such

------

proceeding some or all of any indebtedness or obligations under the Loan Documents are terminated or rejected or any obligation of Borrower is modified or abrogated, or if Borrower's obligations are otherwise avoided for any reason, Guarantors agree that Guarantors' liability hereunder shall not thereby be affected or modified and such liability shall continue in full force and effect as if no such action or proceeding had occurred. This guaranty shall continue to be effective or be reinstated, as the case may be, if any payment must be returned by Bank upon the insolvency, bankruptcy or reorganization of Borrower, a Guarantor or otherwise, as though such payment had not been made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.7** Any indebtedness of Borrower now or hereafter held by Guarantors is hereby subordinated to any indebtedness of Borrower to Bank; and such indebtedness of Borrower to Guarantors shall be collected, enforced and received by Guarantors as trustees for Bank and be paid over to Bank on account of the indebtedness of Borrower to Bank but without reducing or affecting in any manner the liability of Guarantors under the other provisions of this guaranty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.8** Guarantors agree to pay all Bank Expenses which may be incurred by Bank in the enforcement of this guaranty. No terms or provisions of this guaranty may be changed, waived, revoked or amended except in compliance with <u>Section 12.5</u>. Should any provision of this guaranty be determined by a court of competent jurisdiction to be unenforceable, all of the other provisions shall remain effective. This guaranty, together with any agreements (including without limitation any security agreements or any pledge agreements) executed in connection with this guaranty, embodies the entire agreement among the parties hereto with respect to the matters set forth herein and supersedes all prior agreements among the parties with respect to the matters set forth herein. No course of prior dealing among the parties, no usage of trade, and no parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. There are no conditions to the full effectiveness of this guaranty. Bank may assign this guaranty without in any way affecting Guarantors' liability under it. This guaranty shall inure to the benefit of Bank and its successors and assigns. This guaranty is in addition to the guarantees of any other guarantors and any and all other guarantees of Borrower's indebtedness or liabilities to Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.9** All payments made by Guarantors hereunder will be made free and clear of, and without deduction or withholding for, any present or future taxes (but excluding any tax imposed on or measured by the net income or profits of Bank pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of Bank is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto. If any taxes are so levied or imposed, Guarantors agree to pay the full amount of such taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this guaranty, after withholding or deduction for or on account of any taxes, will not be less than the amount provided for herein and in this Agreement.

*[Signature Page Follows]*

------

IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

BORROWER:

TURNSTONE BIOLOGICSCORP.

By:

Name: Sammy Joseph Farah

Title: Chief Executive Officer

GUARANTOR:

MYST THERAPEUTICS, LLC

By:

Name: Sammy Joseph Farah

Title: Chief Executive Officer

BANK:

BANC OF CALIFORNIA

By:

Name: Rilus Graham

Title: Managing Director

------

**EXHIBIT A**

DEFINITIONS

"Accounts" means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations owing to a Loan Party arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by a Loan Party and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by a Loan Party and such Loan Party's Books relating to any of the foregoing.

"Acquisition" means (a) the purchase or other acquisition by Borrower or any of its Subsidiaries of all or substantially all of the assets of (or all or substantially all of the assets representing a business unit or business line of or customer base of) any other Person, or (b) the purchase or other acquisition (whether by means of merger, consolidation, or otherwise) by Borrower or any of its Subsidiaries of all or substantially all of the stock or other equity interests of any other Person.

"Affiliate" means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person's senior executive officers, directors, and general partners.

"Ancillary Services" means any products or services requested by a Loan Party and approved by Bank under the Non-Formula Revolving Line, including, without limitation, corporate credit card services, Automated Clearing House transactions, FX Contracts, Letters of Credit, or other treasury management services.

"Ancillary Services Sublimit" means a sublimit for Ancillary Services under the Non-Formula Revolving Line not to exceed $1,000,000.

"Approved Acquisition" means any Acquisition

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**in which the amounts (excluding equity consideration, but including the assumption of liabilities) paid by Borrower and its Subsidiaries, together with all such amounts paid by Borrower and its Subsidiaries in any other Approved Acquisitions and Approved Investments, does not exceed (i)

$2,000,000 during any fiscal year or(ii) $4,000,000 during the term of this Agreement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**as to which Bank has provided its prior written consent.

"Approved Investment" means any Investment

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**in which the amounts (excluding equity consideration, but including the assumption of liabilities) paid by Borrower and its Subsidiaries, together with all such amounts paid by Borrower and its Subsidiaries in any other Approved Acquisitions and Approved Investments, does not exceed (i)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$2,000,000 during any fiscal year or (ii) $4,000,000 during the term of this Agreement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**as to which Bank has provided its prior written consent.

"Authorized Officer" means someone designated as such in the corporate resolution provided by Borrower to Bank in which this Agreement and the transactions contemplated hereunder are authorized by Borrower's board of directors. If Borrower provides subsequent corporate resolutions to Bank after the Closing Date, the individual(s) designated as "Authorized Officer(s)" in the most recently provided resolution shall be the only "Authorized Officers" for purposes of this Agreement.

"Bank Expenses" means all reasonable and documented costs or expenses(including reasonable and documented attorneys' fees and expenses, whether generated by in-house counsel or by outside counsel)incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys' fees and expenses (whether

------

generated in-house or by outside counsel) incurred in amending, enforcing, or defending the Loan Documents (including fees and expenses of appeal), incurred before, during, and after an Insolvency Proceeding, whether or not suit is brought.

"Books" means all of Loan Parties' books and records including: ledgers; records concerning Loan Parties' assets or liabilities, the Collateral, business operations, or financial condition; and all computer programs, or tape files, and the equipment containing such information.

"Business Day" means any day that is not a Saturday, Sunday, or other day on which banks in the State of North Carolina are authorized or required to close.

"Canadian Subsidiary" means Turnstone Biologics Inc., a Canadian federal corporation.

"Capital Stock" means (a) any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or securities (whether voting or non-voting, whether preferred, common or otherwise), and (b) any option, warrant, security or other right (including Indebtedness securities or other evidence of Indebtedness) directly or indirectly convertible into or exercisable or exchangeable for, or otherwise to acquire directly or indirectly, any capital stock, partnership, membership, limited liability company, joint venture or other ownership or equity interest, participation or security described in <u>clause (a)</u> above.

"Capitalized Expenditures" means current period unfinanced cash expenditures that are capitalized and amortized over a period of time in accordance with GAAP, including but not limited to capitalized cash expenditures for capital equipment, capitalized manufacturing and labor costs as they relate to inventory, and capitalized cash expenditures for software development.

"Cash" means unrestricted cash and cash equivalents.

"Change in Control" means (a) a transaction (other than a bona fide equity financing or series of financings on terms and from investors reasonably acceptable to Bank) in which any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner"(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Parent ordinarily entitled to vote in the election of directors, empowering such "person" or "group" to elect a majority of the board of directors of Parent, who did not have such power before such transaction or (b) except as permitted by Section 7.3, Parent ceasing to own and control, directly or indirectly, all of the economic and voting rights associated with all of the outstanding Capital Stock of any other Loan Party.

"Closing Date" means the date of this Agreement.

"Code" means the North Carolina Uniform Commercial Code as amended or supplemented from time to time.

"Collateral" means the property described on Exhibit B attached hereto and all Negotiable Collateral to the extent not described on Exhibit B, except to the extent any such property (a) is non-assignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 25-9-406and 25-9-408 of the Code),(b) is property for which the granting of a security interest therein is contrary to applicable law, <u>provided</u> that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, (c) constitutes the Capital Stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting power of all classes of Capital Stock of such controlled foreign corporations entitled to vote, if the grant of a security interest in such Capital Stock pursuant to this Agreement would result in material adverse "deemed dividend" tax consequences to a Loan Party due to the application of IRC Section956, or (d) is property(including any attachments, accessions, or replacements) that is subject to a Lien

------

that is permitted pursuant to <u>clause (c)</u> of the definition of "Permitted Liens", if the grant of a security interest with respect to such property pursuant to this Agreement would be prohibited by the agreement creating such Permitted Lien or would otherwise constitute a default thereunder, <u>provided</u> that such property will be deemed "Collateral" hereunder upon the termination and release of such Permitted Lien

"Collateral Support Trigger Event" means that

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**during the most recently completed fiscal quarter of Borrower, the Canadian Subsidiary's revenue represented greater than ten percent (10%) of the consolidated total revenue of Borrower and its Subsidiaries, taken as a whole, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**as of the last day of the most recently completed fiscal quarter of Borrower, the Canadian Subsidiary's assets represented greater than ten percent (10%) of the consolidated total assets of Borrower and its Subsidiaries, taken as a whole.

"Compliance Certificate" means a compliance certificate, in substantially the form of Exhibit D attached hereto, executed by a Responsible Officer of Borrower.

"Contingent Obligation" means, as applied to any Person, any director indirect liability, contingent or otherwise, of that Person with respect to (a) any indebtedness, lease, dividend, letter of credit, or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made, or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable;(b) any obligations with respect to undrawn letters of credit, corporate credit cards, or merchant services issued for the account of that Person; and (c) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates, or commodity prices; <u>provided</u>, <u>however</u>, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; <u>provided</u>, <u>however</u>, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

"Copyrights" means any and all copyright rights, copyright applications, copyright registrations, and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired, or held.

"Credit Extension" means each Non-Formula Advance, the use of the Ancillary Services Sublimit, or any other extension of credit by Bank to or for the benefit of a Loan Party hereunder.

"Divide" means, with respect to any Person that is an entity, the dividing of such Person into two or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other statute with respect to any corporation, limited liability company, partnership, or other entity.

"Environmental Laws" means all laws, rules, regulations, orders, and the like issued by any federal, state, local, foreign, or other governmental or quasi-governmental authority or any agency pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive, or radioactive materials, asbestos, or other similar materials.

"Equipment" means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts, and attachments in which any Loan Party has any interest.

------

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

"E-System" means any electronic system approved by Bank, including any Internet or extranet-based site, whether such electronic system is owned, operated, or hosted by Bank, any of its Affiliates, or any other Person, providing for access to data protected by passcodes or other security system, or otherwise used to facilitate communication between Loan Parties and Bank with respect to the Loan Documents.

"Event of Default" has the meaning assigned in Article 8.

"Excluded Account" means the cash collateral account at Silicon Valley Bank securing the letter of credit permitted in the Schedule.

"Foreign Exchange Reserve Percentage" means a percentage of reserves for FX Contracts as determined by Bank, in its sole discretion from time to time.

"FX Contracts" means contracts between a Loan Party and Bank for foreign exchange transactions.

"GAAP" means generally accepted accounting principles, consistently applied, as in effect from time to time in the United States.

"Indebtedness" means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures, or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations, including but not limited to any sublimit contained herein.

"Insolvency Proceeding" means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

"Intellectual Property" means all of each Loan Party's right, title, and interest in and to the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**Copyrights, Patents, and Trademarks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**any and all trade secrets and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)**any and all design rights which may be available to a Loan Party now or hereafter existing, created, acquired, or held;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d)**any and all claims for damages by way of past, present, and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e)**all licenses or other rights to use any Copyrights, Patents, or Trademarks and all license fees and royalties arising from such use to the extent permitted by such license or rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**f)**all amendments, renewals and extensions of any Copyrights, Patents, or Trademarks; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**g)**all proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

"Inventory" means all present and future inventory in which any Loan Party has any interest.

------

"Investment" means any beneficial ownership of (including stock, partnership or limited liability company interest, or other securities) any Person, or any loan, advance, or capital contribution to any Person.

"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

"Letter of Credit" means a commercial or standby letter of credit or similar undertaking issued by Bank (or any of its correspondent banks) at a Loan Party's request.

"Letter of Credit Exposure" means, as of any date of determination, the sum, without duplication, of (a) the aggregate undrawn amount of all outstanding Letters of Credit and any obligations of Bank related to purchased participations or indemnity or reimbursement obligations with respect to Letters of Credit, plus (b) the aggregate unreimbursed amount of all drawn Letters of Credit until such amount becomes a Non-Formula Advance under the terms of this Agreement.

"Lien" means any mortgage, lien, deed of trust, charge, pledge, security interest, or other encumbrance.

"Loan Documents" means, collectively, this Agreement, any note or notes executed by Borrower, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.

"Material Adverse Effect" means a material adverse effect on (a) the operations, business, or financial condition of Loan Parties and their Subsidiaries taken as a whole, (b) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents, or (c) a Loan Party's interest in, or the value, perfection, or priority of Bank's security interest in the Collateral.

"Negotiable Collateral" means all of any Loan Party's present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes),securities, documents of title, and chattel paper, and such Loan Party's Books relating to any of the foregoing.

"Non-Formula Advance" or "Non-Formula Advances" means a cash advance or cash advances under the Non- Formula Revolving Line.

"Non-Formula Revolving Line" means a Credit Extension of up to Twenty Million Dollars ($20,000,000) (inclusive of any amounts reserved under the Ancillary Services Sublimit).

"Non-Formula Revolving Maturity Date" means March 31, 2026; except that, if Parent receives, after the Closing Date but on or before March 31, 2026, at least Seventy-Five Million Dollars($75,000,000) in aggregate funding from (a) the sale or issuance of Parent's equity securities (including through a 'private investment in public equity'), (b) payments under partnership agreements, and/or (c) upfront business development payments (inclusive of funding satisfying the Performance/Funding Milestone), then the term "Non-Formula Revolving Maturity Date" will instead mean March 31, 2027.

"Obligations" means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by any Loan Party pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from a Loan Party to others that Bank may have obtained by assignment or otherwise. For the avoidance of doubt, if this Agreement is terminated by Borrower following repayment in full of outstanding Obligations but prior to the payment of the Success Fee, the Success Fee shall not remain an Obligation secured by the security interest granted under Section 4.1.

"Outside Cash Allowance" means

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**when no Credit Extensions are outstanding, the lesser of

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a.**forty percent (40%) of Loan Parties' aggregate Cash, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b.**$30,000,000; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**when any Credit Extension is outstanding, the lesser of

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a.**forty percent (40%) of Loan Parties' aggregate Cash, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b.**$10,000,000.

"Patents" means all patents, patent applications, and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same.

"Performance/Funding Milestone" means Bank's receipt of evidence reasonably satisfactory to Bank that both of the following events have occurred:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**Loan Parties have achieved positive interim Phase 1 data for TIDAL-01, as confirmed in writing by Parent's board of directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**Parent's receipt, after the Closing Date, of at least $40,000,000 in cash proceeds from (i) the issuance of Parent's equity securities (including through a 'private investment in public equity'), (ii) payments under partnership agreements, and/or (iii) upfront business development payments.

"Periodic Payments" means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument or agreement now or hereafter in existence between Borrower and Bank.

"Permitted Indebtedness" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**Indebtedness of a Loan Party in favor of Bank arising under this Agreement or any other Loan Document;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**Indebtedness existing on the Closing Date and disclosed in the <u>Schedule</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)**Indebtedness not to exceed $1,500,000 in the aggregate at any time secured by a lien described in <u>clause (c)</u> of the defined term "Permitted Liens," <u>provided</u> that such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d)**Subordinated Debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e)**Indebtedness to trade creditors incurred in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**f)**unsecured Indebtedness incurred in the ordinary course of business under corporate credit card facilities in an amount not to exceed $250,000 at any time outstanding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**g)**other Indebtedness in the aggregate principal amount outstanding at any time not to exceed $250,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**h)**Indebtedness consisting of the financing of insurance premiums not exceeding one year's worth of premiums;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**i)**capital lease obligations to the extent that the underlying lease is required to be treated as a capital lease under Accounting Standards Codification 842, Leases (or any other Accounting Standards Codification having similar result or effect) (and related interpretations) where such lease would have

------

been treated as an operating lease prior to the effectiveness of such Accounting Standards Codification;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**j)**to the extent such payments constitute Indebtedness, milestone, royalty, success fees and other contingent licensing payments due and payable by Borrower and its Subsidiaries for intellectual property licensed or acquired, so long as Loan Parties have notified Bank of the payments or provided to Bank the associated licenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**k)**to the extent constituting Indebtedness, Permitted Investments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**l)**extensions, refinancings, and renewals of any items of Permitted Indebtedness, <u>provided</u> that the principal amount is not increased or the terms modified to impose more burdensome terms upon a Loan Party or its Subsidiary, as the case may be.

"Permitted Investments" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**Investments existing on the Closing Date and disclosed in the <u>Schedule</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**(i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any state thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor's Corporation or Moody's Investors Service, (iii) Bank's certificates of deposit maturing no more than one year from the date of investment therein, (iv) Bank's money market accounts; (v) Investments in regular depositor checking accounts held with Bank or as otherwise permitted by, and subject to the terms and conditions of, <u>Section 6.6</u> of this Agreement, and (vi) Investments consistent with any investment policy adopted by Parent's board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)**Investments accepted in connection with Permitted Transfers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d)**Investments by Borrower or any Subsidiary in any Borrower or a Loan Party, (ii) Investments of Subsidiaries that are not a Borrower or Loan Party in or to other Subsidiaries or Borrower, (iii) Investments by Loan Parties in Subsidiaries not to exceed $250,000 in the aggregate in any fiscal year, and (iv) Investments in the Canadian Subsidiary permitted by <u>Section 7.14</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e)**Investments not to exceed $500,000outstanding in the aggregate at any time consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers, or directors relating to the purchase of equity securities of a Loan Party or its Subsidiaries pursuant to employee stock purchase plan agreements approved by such Loan Party's board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**f)**Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of a Loan Party's business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**g)**Investments consisting of notes receivable of, or prepaid royalties and other credit extensions to, customers and suppliers who are not Affiliates, in the ordinary course of business, <u>provided</u> that this <u>clause</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**h)**shall not apply to Investments of any Loan Party in any Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**i)**joint ventures or strategic alliances in the ordinary course of a Loan Party's business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical

------

support, <u>provided</u> that any cash Investments by Loan Parties do not exceed $500,000 in the aggregate in any fiscal year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**j)**Investments permitted under <u>Section 7.3</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**k)**other Investments up to $250,000 per year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**l)**Investments satisfying the requirements of clause (a) of the defined term "Approved Investment"; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**m)**Unrestricted Investments.

"Permitted Licenses" means, (a) non-exclusive licenses and sublicenses for the use of intellectual property of Borrower or any of its Subsidiaries entered into in the ordinary course of business and not interfering with the business of any Loan Party or any of its Subsidiaries, and (b) any exclusive license of intellectual property of Borrower or its Subsidiaries so long as all such exclusive licenses (w) do not result in a legal transfer of title to the licensed property but (1) may be exclusive in respects other than territory so long as commercially reasonable and limited to defined field(s) and (2) may be exclusive as to territory only as to discrete geographical areas outside of the United States(e.g., each of China, India, and Japan would be considered discrete geographic areas), (x) do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a Lien on, or assign or otherwise transfer any intellectual property of Borrower or any of its Subsidiaries (after giving effect to any anti-assignment provisions of the Code),and (y) do not restrict the ability of Bank in the event of a liquidation of any of the Collateral to dispose of such Collateral in accordance with Bank's rights and remedies under this Agreement and the other Loan Documents.

"Permitted Liens" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**any Liens existing on the Closing Date and disclosed in the <u>Schedule</u>(excluding Liens to be satisfied with the proceeds of the Credit Extensions) or arising under this Agreement, the other Loan Documents, or any other agreement in favor of Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**Liens for taxes, fees, assessments, or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which Loan Parties maintain adequate reserves;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)**Liens securing Indebtedness not to exceed $1,500,000 in the aggregate at any time (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by a Loan Party or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, in each case <u>provided</u> that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d)**Liens incurred in connection with the extension, renewal, or refinancing of the indebtedness secured by Liens of the type described in <u>clauses (a)</u> through <u>(c)</u> above, <u>provided</u> that any extension, renewal, or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed, or refinanced does not increase;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e)**Liens arising from judgments, decrees, or attachments in circumstances not constituting an Event of Default under <u>Section 8.4</u> (attachment) or <u>Section 8.7</u> (judgments);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**f)**Liens securing Subordinated Debt, <u>provided</u> that such Liens do not encumber assets beyond those assets comprising the Collateral;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**g)**Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto and for which reserves have been established in accordance with GAAP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**h)**Liens in the form of security deposits securing real property leases in an aggregate amount not exceeding $500,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**i)**Liens to secure payment of workers' compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**j)**Liens in favor of other financial institutions arising in connection with Borrower's and its Subsidiaries' deposit and/or securities accounts held at such institutions, provided that such deposit and/or security accounts are permitted to be maintained under Section 6.6;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**k)**leases or subleases of real property granted in the ordinary course of Borrower's business (or, if referring to another Person, in the ordinary course of such Person's business), and leases, subleases, non- exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower's business (or, if referring to another Person, in the ordinary course of such Person's business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**l)**Permitted Licenses.

"Permitted Transfer" means the conveyance, sale, lease, transfer, or disposition by a Loan Party or any Subsidiary of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**Inventory in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**Permitted Licenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c)**worn-out, surplus, or obsolete Equipment not financed with the proceeds of Credit Extensions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d)**grants of security interests and other Liens that constitute Permitted Liens;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e)**other assets of a Loan Party or its Subsidiaries that do not in the aggregate exceed $250,000 during any fiscal year, except that Transfers to the Canadian Subsidiary will instead be governed by <u>Section 7.14;</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**f)**transfers constituting Permitted Investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**g)**consisting of the sale or issuance of any stock, partnership, membership, or other ownership interest or other equity securities of Borrower permitted under Section 7.2 of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**h)**consisting of Borrower's or its Subsidiaries' use or transfer of money or cash equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**i)**transfers among Loan Parties.

"Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity, or governmental agency.

------

"Prime Rate" means the variable rate of interest, per annum, most recently announced by Bank, as its "prime rate," whether or not such announced rate is the lowest rate available from Bank.

"Responsible Officer" means, with respect to any Loan Party, each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Vice President of Finance, and the Controller of such Loan Party, as well as any other officer or employee identified as an Authorized Officer in the corporate resolution delivered by Loan Parties to Bank in connection with this Agreement.

"Shares" means one hundred percent (100%) of the issued and outstanding Capital Stock owned or held of record by a Loan Party in any Subsidiary.

"SOS Reports" means the official reports from the Secretaries of State of the state where a Loan Party's chief executive office is located, each state of a Loan Party's formation, and other applicable federal, state, or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.

"Subordinated Debt" means any debt incurred by a Loan Party that is subordinated in writing to the debt owing by such Loan Party to Bank on terms reasonably acceptable to Bank (and identified as being such by such Loan Party and Bank).

"Subsidiary" means any corporation, partnership, or limited liability company or joint venture in which (a) any general partnership interest or (b) more than 50% of the Capital Stock of which by the terms thereof having ordinary voting power to elect the board of directors, managers, or trustees of the entity, at the time as of which any determination is being made, is owned directly or indirectly by a Loan Party.

"Success Fee Amount" means the greater of (a) $50,000 or (b) two percent (2.00%) of the highest aggregate principal amount (excluding Ancillary Services reserves) of Credit Extensions outstanding at any time on or before the consummation of a Success Fee Event.

"Success Fee Event" means (a) any merger or consolidation of a Loan Party with or into another entity (except one in which the holders of equity of such Loan Party immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the equity interests in the surviving entity),(b) any sale of all or substantially all of the assets of the Turnstone Group taken as a whole (in one or more related and contemporaneous transactions), or (c) closing one or more related financings where aggregate cash proceeds from the sale of equity securities and/or upfront cash proceeds from strategic partnerships is equal to at least $75,000,000.

"Turnstone Group" means Parent and its Subsidiaries.

"Unrestricted Acquisition" means any Acquisition other than an Approved Acquisition, with respect to which the Unrestricted Acquisition/Investment Conditions are satisfied.

"Unrestricted Investment" means an Investment permitted by clause(l) of the defined term "Permitted Investment", with respect to which the Unrestricted Acquisition/Investment Conditions are satisfied.

"Unrestricted Acquisition/Investment Conditions" means that both

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**at the time of the completion of an Acquisition or Investment, no Credit Extensions (including reserves under the Ancillary Services Sublimit for specific Ancillary Services requested by Loan Parties, in the amounts so requested or otherwise agreed to by Loan Parties) are outstanding; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**within 10 Business Days after the completion of an Acquisition or Investment, Borrower notifies Bank of that Acquisition or Investment and provides Bank with all material transaction documents with respect to that Acquisition or Investment.

------

**EXHIBIT B-1**

**DEBTOR: TURNSTONE BIOLOGICS CORP.** 

**SECURED PARTY: BANC OF CALIFORNIA**

**COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITYAGREEMENT**

All personal property of Debtor, whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles, domain names and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor's books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.

All terms above have the meanings given to them in the North Carolina Uniform Commercial Code, as amended or supplemented from time to time, including revised Article 9 of the Uniform Commercial Code-Secured Transactions.

Notwithstanding the foregoing, the Collateral shall not include any of the intellectual property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or received by Debtor, or in which Debtor now holds or hereafter acquires or receives any right or interest (collectively, the "Intellectual Property"); <u>provided</u>, <u>however</u>, that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the foregoing (the "Rights to Payment").

Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of April 26, 2024, include the Intellectual Property to the extent and only to the extent necessary to permit perfection of Bank's security interest in the Rights to Payment, and further <u>provided</u>, <u>however</u>, that Bank's enforcement rights with respect to any security interest in the Intellectual Property shall be absolutely limited to the Rights to Payment only, and Bank shall have no recourse whatsoever with respect to the underlying Intellectual Property.

------

**EXHIBIT B-2**

**DEBTOR: MYST THERAPEUTICS, LLC** 

**SECURED PARTY: BANC OF CALIFORNIA**

**COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITYAGREEMENT**

All personal property of Debtor, whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a)**all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles, domain names and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor's books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b)**any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.

All terms above have the meanings given to them in the North Carolina Uniform Commercial Code, as amended or supplemented from time to time, including revised Article 9 of the Uniform Commercial Code-Secured Transactions.

Notwithstanding the foregoing, the Collateral shall not include any of the intellectual property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or received by Debtor, or in which Debtor now holds or hereafter acquires or receives any right or interest (collectively, the "Intellectual Property"); <u>provided</u>, <u>however</u>, that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the foregoing (the "Rights to Payment").

Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of April 26, 2024, include the Intellectual Property to the extent and only to the extent necessary to permit perfection of Bank's security interest in the Rights to Payment, and further <u>provided</u>, <u>however</u>, that Bank's enforcement rights with respect to any security interest in the Intellectual Property shall be absolutely limited to the Rights to Payment only, and Bank shall have no recourse whatsoever with respect to the underlying Intellectual Property.

------

**EXHIBIT C**

**LOAN ADVANCE/PAYDOWN REQUESTFORM**

*[Please refer to New Borrower Kit]*

**EXHIBIT D COMPLIANCE CERTIFICATE**

*[Please refer to New Borrower Kit]*

------

**SCHEDULE OF EXCEPTIONS**

**Permitted Indebtedness** (Exhibit A) – Reimbursement obligations under a letter of credit issued by Silicon Valley Bank outstanding on the Closing Date in the face amount of $116,000 and a letter of credit issued by Silicon Valley Bank outstanding on the Closing Date in the face amount of $225,000; provided that such letters of credit are cancelled or allowed to expire no later than December 31, 2024.

**Permitted Investments** (Exhibit A) – None.

**Permitted Liens** (Exhibit A) – Liens on cash collateral of up to $341,000 securing the letters of credit identified in "Permitted Indebtedness" above; provided that such cash collateral is transferred to Bank no later than December 31, 2024.

**Prior Names** (Section 5.5) –None.

**Litigation** (Section 5.6) –None.

**Inbound Licenses** (Section 5.12) – None.

------

**USA PATRIOT ACT NOTICE**

**OF**

**CUSTOMER IDENTIFICATION**

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.

------

**<u>INSURANCE CHECKLIST</u>**

In connection with the closing of your credit facility with Banc of California (the "Bank"), the following conditions related to insurance must be satisfied:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.<u>Insurance Company Requirements</u> - All insurance required pursuant to the loan documents shall be issued by insurance companies in good standing with a current rating of A- or better by A.M. Best Company and a Financial Size Category of VIII or higher.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.<u>Property Insurance.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.Pre-Closing: Borrower must provide an Acord Form 28 showing evidence of property insurance, naming Banc of California as a certificate holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.Post-Closing: Within30 days following closing, Borrower must provide Bank with a Lender's Loss Payable endorsement showing Banc of California as a lender's loss payee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.<u>Liability Insurance.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.Pre-Closing: Borrower must provide an Acord Form 25 showing Banc of California as a certificate holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.Post-Closing: Within 30 days following closing, Borrower must provide Bank with an endorsement to Borrower's liability insurance policy showing Banc of California as an additional insured.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.<u>Name and Address</u>– Bank name and address format on all insurance related documentation should be as follows:

Banc of California, its successors and assigns,

**555 S. Mangum Street, Suite 1000, Durham, NC 27701** 

**Attn: Loan Operations Department**

Please email copies of any documentation related to insurance to insurance@pacwest.com, and if you have any questions related to the insurance requirements associated with the closing of your credit facility please contact Lisa Stansell at (919) 597-7487 or via email at lstansell@pacwest.com.

------

## Exhibit 31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sammy Farah, certify that:

1. I have reviewed this Form 10-Q of Turnstone Biologics Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: August 8, 2025 | By: | /s/ Sammy Farah |
|  |  | Sammy Farah, M.B.A., Ph.D.<br>President and Chief Executive Officer |
|  |  | (*Principal Executive Officer*) |

---

------

## Exhibit 31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Wendy Worcester, certify that:

1. I have reviewed this Form 10-Q of Turnstone Biologics Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: August 8, 2025 | By: | /s/ Wendy Worcester  |
|  |  | Wendy Worcester <br>Vice President, Controller |
|  |  | (*Principal Financial and Accounting Officer*) |

---

------

## Exhibit 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Sammy Farah, President and Chief Executive Officer of Turnstone Biologics Corp. (the "Company"), and Wendy Worcester, Vice President, Controller of the Company, each hereby certifies that, to the best of his or her knowledge:

1. The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2025, to which this Certification is attached as Exhibit 32.1 (the "Periodic Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 8, 2025

---

| | |
|:---|:---|
| &nbsp;&nbsp;/s/ *Sammy Farah* | &nbsp;&nbsp;/s/ *Wendy Worcester*  |
| &nbsp;&nbsp;Sammy Farah, M.B.A., Ph.D.<br>President and Chief Executive Officer | &nbsp;&nbsp;Wendy Worcester<br>Vice President, Controller |
| &nbsp;&nbsp;(*Principal Executive Officer*) | &nbsp;&nbsp;(*Principal Financial and Accounting Officer*) |

---

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

------