What changed in this filing

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Item 9A. Controls and Procedures

2023-03-15 compared with 2022-03-15 · 444 added, 738 removed, 707 unchanged (63% of the section changed)

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There are inherent limitations to the effectiveness of any system of disclosure controls and procedures.

These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints.

These limitations include the possibility of human error, the circumvention or overriding of the controls

and procedures and reasonable resource constraints.

In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions.

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Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for the Company.

Our internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of our

consolidated financial statements in accordance with U.S.

generally accepted accounting principles, or GAAP, and includes those policies and procedures that:

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Our internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with U.S.

GAAP, and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company;

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material affect on the financial statements.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, assessed our internal control over financial reporting as of December 31, 2021.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed our internal control over financial reporting as of December 31, 2022.

Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for “emerging growth companies”.

Remediation of Previously Reported Material Weakness

During the preparation of our consolidated financial statements as of and for the year ended December 31, 2020, we identified material weaknesses in our internal control over financial reporting.

The material weaknesses we identified were as follows:

we did not design or maintain an effective control environment commensurate with our financial reporting requirements due to lack of a sufficient number of accounting professionals with the appropriate level of experience and training;

we did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, and monitoring controls maintained at the corporate level were not at a sufficient level of precision to provide the appropriate level of oversight of activities related to our internal control over financial reporting;

we did not design and maintain effective controls over segregation of duties with respect to the preparation and review of account reconciliations as well as creating and posting manual journal entries;

we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose complex transactions.

We took a number of actions in 2021 to improve our internal control over financial reporting to remediate these material weaknesses.

The remediation efforts and progress summarized below are intended to address and remediate the identified material weaknesses:

In the first quarter of 2021, we engaged a permanent Vice President, Corporate Controller, and a Senior Manager of Finance, together with third-party consultants, to improve and oversee all aspects of accounting operations, financial reporting, and Sarbanes-Oxley Act of 2002, as amended, compliance;

We also successfully implemented a new Enterprise Resource Planning (ERP) system, Microsoft 365 Business Central, in January 2021, replacing QuickBooks and providing efficiency and financial controls.

We provided appropriate training to all key accounting personnel who are responsible for posting and reviewing journal entries;

In the first quarter of 2021, we reevaluated our existing internal controls and, in the second quarter, we implemented additional controls to enhance our internal control environment.

Since the third quarter of 2021, we have been performing internal control testing to ensure these controls are operating effectively as designed and implemented.

For the year ended December 31, 2021, we completed our testing of the design and operating effectiveness of the implemented controls and determined they were effective.

As a result, we have concluded the material weaknesses identified in fiscal year 2020 have been remediated as of December 31, 2021.

We cannot assure you that material weaknesses or significant deficiencies will not occur in the future or that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.

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Changes in Internal Control over Financial Reporting

Other than as stated above, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, since March 2020, we have requested that our employees work remotely, as appropriate.

Other than as stated above, no change in our internal control over our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, we have adopted a hybrid work schedule where employees may work remotely, as appropriate.

We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment.

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We have adopted a code of business conduct and ethics for directors, officers, and employees, known as the Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics is available on our website at http://www.adicetbio.com under the Corporate Governance section of our Investors page.

The Code of Business Conduct and Ethics is available on our website at https://investor.adicetbio.com/corporate-governance/governance-highlights .

We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver.

Shareholders may request a free copy of the Code of Business Conduct and Ethics from our Compliance Officer, c/o Adicet Bio, Inc., 200 Clarendon Street, Floor 6, Suite #6041, Boston, MA 02116.

Shareholders may request a free copy of the Code of Business Conduct and Ethics from our Compliance Officer, c/o Adicet Bio, Inc., 200 Berkeley Street, 19th Floor, Boston, MA 02116.

Executiv e Compensation.

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Consolidated Statements of Stockholders’

Consolidated Statements of Cash Flows

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The Exhibit Index is incorporated herein by reference.

10 -K Summary

We have elected not to include summary information.

ADICET BIO, INC.

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Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’

Equity (Deficit) for the years ended December 31, 2021 and 2020

Consolidated Statements of Stockholders’

Equity for the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

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We have audited the accompanying consolidated balance sheets of Adicet Bio, Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’

equity (deficit), and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

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Cash and cash equivalents

Short-term marketable debt securities

Accounts receivable—related party

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Operating lease right-of-use asset

In-process research and development

Restricted cash

Long-term marketable debt securities

Other non-current assets

Liabilities, redeemable convertible preferred stock, and stockholders’

equity (deficit)

Liabilities and Stockholders’

Current liabilities:

Accounts payable

Contract liabilities—related party, current

Contract liabilities —

related party, current

Accrued and other current liabilities

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Total current liabilities

Operating lease liability, net of current maturities

Contingent consideration liability

Deferred tax liability

Operating lease liability, net of current portion

Other non-current liabilities

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Total stockholders’

Total liabilities, redeemable convertible preferred stock, and stockholders’

Total liabilities and stockholders’

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

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Year Ended December 31,

Revenue—related party

Revenue —

related party

Operating expenses:

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Interest expense

Other income (expense), net

Loss before income tax benefit

Income tax expense (benefit)

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares used in computing net loss per share

attributable to common stockholders, basic and diluted

Other comprehensive income (loss):

Unrealized gain (loss) on marketable debt securities, net of tax

Total other comprehensive income (loss)

Other expense, net

Loss before income tax provision

Income tax provision

Net loss per share, basic and diluted

Weighted-average common shares used in computing net loss per share, basic and diluted

Other comprehensive loss:

Unrealized loss on marketable debt securities, net of tax

Total other comprehensive loss

Comprehensive loss

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Adicet Bio, Inc.

Consolidated Statements of Redeemable Converti ble Preferred Stock and Stockholders’

Equity (Deficit)

Consolidated Statements of Stockholders’

(in thousands, except share amounts)

Redeemable Convertible

Preferred Stock

Comprehensive

Stockholders’

Shareholders'

Income (Loss)

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Issuance of common stock upon exercise of stock options

Issuance of common stock related to financing, net of issuance costs of $ 823,940

Issuance of common stock for cashless exercise of warrants

Purchase of common stock under Employee Stock Purchase Plan

Stock-based compensation expense

Conversion of shares of redeemable convertible preferred stock

to shares of common stock in connection with the Merger

Exchange of common stock in connection with the Merger

Issuance of common stock upon accelerated vesting of restricted stock units in connection with merger

Conversion of redeemable convertible preferred stock

warrants to common stock warrants

Other comprehensive loss

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Issuance of common stock upon exercise of stock options

Issuance of common stock related to financing, net of issuance costs of $ 823,940

Issuance of common stock for cashless exercise of warrants

Issuance of common stock resulting from Employee Stock Purchase Plan

Issuance of common stock upon vesting of restricted stock

Issuance of common stock upon exercise of warrants

Shares withheld for taxes

Purchase of common stock under Employee Stock Purchase Plan

Issuance of common stock pursuant to at-the-market offering, net of issuance costs of $ 1.6 million

Stock-based compensation expense

Other comprehensive loss

Balance at December 31, 2022

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Stock-based compensation expense

Loss on disposal of assets for lease

Net amortization of premiums and accretion of discounts on investments

Change in fair value of redeemable convertible preferred stock warrant liability

Impairment of in-process research and development

Gain on remeasurement of contingent consideration liability

Net amortization of premiums and accretion discounts on investments

Loss on disposal of property, plant, and equipment

Loss on disposal of lease assets

Amortization of deferred debt issuance costs

Impairment of in-process research and development

Remeasurement of contingent consideration liability

Changes in operating assets and liabilities:

Accounts Receivable—related party

Accounts receivable - related party

Prepaid expenses and other current assets

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Accounts payable

Contract liabilities—related party

Operating lease liabilities

Accrued and other current liabilities

Other non-current liabilities

Contract liabilities —

related party

Operating lease liability

Accrued and other current and non-current liabilities

Net cash used in operating activities

Cash flows from investing activities

Cash and restricted cash acquired in connection with the Merger

Proceeds from sales of marketable debt securities

Purchases of marketable debt securities

Proceeds from maturities of marketable debt securities

Purchase of property and equipment

Purchases of property and equipment

Net cash provided by (used in) investing activities

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Proceeds from Employee Stock Purchase Plan

Proceeds from issuance of common stock pursuant to at-the-market offering, net of issuance costs

Proceeds from exercise of stock options

Taxes withheld and paid related to net share settlement of equity awards

Deferred issuance costs

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Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, at the beginning of the period

Cash, cash equivalents and restricted cash, at the end of the period

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:

Cash, cash equivalents and restricted cash, at the beginning of period

Cash, cash equivalents and restricted cash, at the end of period

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash in consolidated balance sheets

Cash, cash equivalents and restricted cash

Supplemental cash flow information

Cash received from tax refund

Cash paid for income taxes

Cash received for income tax refunds

Supplemental disclosures of noncash investing and financing activities

Purchase of property and equipment included in accounts payable and accrued liabilities

Purchases of property and equipment included in accounts payable and accrued expenses

Operating right-of-use assets obtained in exchange for operating lease liabilities

Common stock offering costs included in accrued liabilities at period end

Right-of-use assets recognized upon adoption of Topic 842

Operating lease right-of-use asset obtained in exchange for operating lease liability

Conversion of redeemable convertible preferred stock into common stock

Conversion of redeemable convertible preferred stock warrants into common stock warrants

Fair value of net assets acquired in Merger

Adjustment to goodwill

Issuance of redeemable convertible preferred stock warrants in connection with the Loan Agreement

The accompanying notes are an integral part of these financial statements.

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(resTORbio)), together with its subsidiaries, (the Company) is a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer.

The Company is advancing a pipeline of off-the-shelf gamma delta T cells, engineered with chimeric antigen receptors (CARs) and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients.

The Company is advancing a pipeline of “off-the-shelf”

gamma delta T cells, engineered with chimeric antigen receptors (CARs) and adaptors (CAds), to enhance selective tumor targeting and facilitate innate and adaptive anti-tumor immune response for durable activity in patients.

The Company's approach to activate, engineer, and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows it to generate new product candidates in a rapid and cost-efficient manner.

The Company was incorporated in November 2014 in Delaware.

The principal executive offices are located in Boston, Massachusetts.

The Company also has another office in Menlo Park, California.

Adicet Bio, Inc.

(when referred to prior to the Merger (as defined below), (Former Adicet)) was incorporated in November 2014 in Delaware and was headquartered in Menlo Park, CA.

(when referred to prior to the merger, Former Adicet) was incorporated in November 2014 in Delaware.

On September 15, 2020, Former Adicet completed a merger (Merger) with resTORbio, pursuant to which Former Adicet merged with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing its name to “Adicet Therapeutics, Inc.”

(Adicet Therapeutics).

In connection with the Merger, the Company changed its name from “resTORbio, Inc.”

to “Adicet Bio, Inc.”

The Company’s principal executive offices are located in Boston, Massachusetts.

The Company also has offices in Redwood City, California.

Adicet Bio Israel Ltd.

(formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of Former Adicet and is located in Haifa, Israel.

(formerly Applied Immune Technologies Ltd.) (Adicet Israel) is a wholly owned subsidiary of the Company and is located in Haifa, Israel.

Adicet Israel was founded in 2006.

During 2019, Former Adicet consolidated its operations, including research and development activities, in the United States and as a result substantially reduced its operations in Israel.

Merger with resTORbio

Prior to September 15, 2020, the Company was a clinical-stage biopharmaceutical company known as resTORbio that had historically focused on developing innovative medicines that target the biology of aging, to prevent or treat age-related diseases with the potential to extend healthy lifespans.

On April 28, 2020 , resTORbio entered into a definitive Merger Agreement with Former Adicet.

Under the terms of the Merger Agreement, Former Adicet agreed to merge with a wholly owned subsidiary of resTORbio in an all-stock transaction with Former Adicet surviving as a wholly owned subsidiary of resTORbio and changing its name to “Adicet Therapeutics, Inc.”

(such transactions, the Merger).

Under the exchange ratio formula in the Merger Agreement, immediately following the Effective Time of the Merger, the securityholders of Former Adicet as of immediately prior to the Effective Time of the Merger owned approximately 75 % of the outstanding shares of the Company’s common stock on a fully-diluted basis and securityholders of resTORbio as of immediately prior to the Effective Time of the Merger owned approximately 25 % of the outstanding shares of the Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

The Company concluded that the transaction represented a business combination pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations .

Further, Former Adicet was determined to be the accounting acquirer based upon the terms of the Merger and other factors including:

(i) Former Adicet’s securityholders own approximately 75% of the voting rights of the combined company (on a fully-diluted basis excluding equity incentives available for grant);

(ii) Former Adicet designated a majority (five of seven) of the initial members of the Board of Directors of the combined company;

and (iii) the terms of the exchange of equity interests based on the exchange ratio at the announcement of the Merger factored in an implied premium to resTORbio’s stockholders.

The composition of senior management of the combined company was determined to be a neutral factor in the accounting acquirer determination, as the combined company will leverage the expertise of the senior management of both companies.

Accordingly, the reported operating results prior to the business combination are those of Former Adicet.

On September 15, 2020, the Company completed the Merger pursuant to the Merger Agreement (the Effective Time).

In connection with the Merger, and immediately prior to the Effective Time, resTORbio effected a reverse stock split of its common stock at a ratio of 1-for-7 (the Reverse Stock Split).

Also, in connection with the Merger, the Company changed its name from “resTORbio, Inc.”

to “Adicet Bio, Inc.”

(the Name Change), Former Adicet changed its name from “Adicet Bio, Inc.”

to “Adicet Therapeutics, Inc.”

and the business conducted by the Company became primarily the business, which was previously conducted by Former Adicet, which is a biotechnology company discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases.

At the Effective Time, each outstanding share of Former Adicet capital stock was converted into the right to receive 0.1240 (the Exchange Ratio) shares of Company’s common stock, as set forth in the Merger Agreement.

The Exchange Ratio was determined based on the total number of outstanding shares of Company’s common stock and Former Adicet capital stock, each on a fully diluted basis, and the respective valuations of Former Adicet and resTORbio at the time of execution of the Merger Agreement.

In connection with the Merger, the Company also assumed certain outstanding Former Adicet warrants and Former Adicet stock options under Former Adicet’s 2015 Stock Incentive Plan (the 2015 Adicet Stock Incentive Plan) and Former Adicet’s 2014 Share Option Plan (the 2014 Share Option Plan and, together with the 2015 Adicet Stock Incentive Plan, the Former Adicet Plans), with such stock options and warrants henceforth representing the right to purchase a number of shares of Company’s common stock equal to the Exchange Ratio multiplied by the number of shares of Former Adicet’s

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

capital stock previously represented by such stock options and warrants, as applicable, with a proportionate adjustment in exercise price.

Immediately following the Effective Time, there were approximately 19,589,828 shares of the Company’s common stock outstanding (post Reverse Stock Split), with the former equity holders of Former Adicet holding approximately 75 % of the outstanding shares of Company’s common stock on a fully-diluted basis and the former equity holders of resTORbio holding approximately 25 % of the outstanding shares of Company’s common stock on a fully-diluted basis (in each case excluding equity incentives available for grant).

Please refer to Note 3 “Business Combinations”

for further discussions of the Merger.

The Company has incurred significant net operating losses and negative cash flows from operations since inception and had an accumulated deficit of $ 168.3 million as of December 31, 2021.

The Company has historically financed its operations primarily through a collaboration and licensing arrangement, the private placement of equity securities and debt, and cash received in the Merger.

During 2019, the Company consolidated its operations, including research and development activities, in the United States and as a result, substantially reduced its operations in Israel.

The Company has incurred significant net operating losses and negative cash flows from operations and has an accumulated deficit of $ 238.1 million as of December 31, 2022.

The Company has historically financed its operations primarily through a collaboration and licensing arrangement, public and private placements of equity securities and debt, and cash received in the Merger with resTORbio.

To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from product sales.

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The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses of approximately $ 128.8 million.

In connection with the offering, the Company also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840 shares of its common stock for $ 15.0 million at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

In December 2021, the Company closed an underwritten public offering, or the December 2021 Follow-On Offering, of 7,187,500 shares of its common stock at a public offering price of $ 14.00 per share.

In connection with the offering, the Company also entered into a stock purchase agreement with certain existing investors for $ 15.0 million of shares of the Company’s common stock at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

In December 2021, the Company closed an underwritten public offering of 7,187,500 shares of its common stock at a public offering price of $ 14.00 per share.

The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses, of approximately $ 94.2 million.

The Company expects that its cash and cash equivalents balances as of December 31, 2021, including the gross proceeds it received in February 2021 and December 2021 from its underwritten public offerings and the proceeds received from a stock purchase agreement with certain existing investors, will be sufficient to fund its forecasted operating expenses, capital expenditure requirements for at least the next twelve months from the issuance of these annual consolidated financial statements.

All of the Company’s revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement with Regeneron.

The Company does not expect to generate any significant product revenue until it obtains regulatory approval of and commercialize any of the Company’s product candidates or enter into additional collaborative agreements with third parties, and it does not know when, or if, either will occur.

The Company expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of, and seek regulatory approvals for, its product candidates and begin to commercialize any approved products.

The Company is subject to all of the risks typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business.

On March 12, 2021, the Company entered into a Capital On Demand Sales Agreement (the Sales Agreement) with JonesTrading Institutional Services LLC, as sales agent, to provide for the offering, issuance and sale of up to an aggregate amount of $ 75.0 million shares of common stock from time to time in “at-the-market”

(ATM) offerings under a registration statement on Form S-3 (File No.

333-254193) (2021 Shelf Registration Statement) filed with the SEC, which was declared effective on March 30, 2021.

In August 2022, pursuant to the Sales Agreement and subject to the limitations thereof, the Company sold an aggregate of 2,611,723 shares of common stock at $ 17.23 per share resulting in net proceeds to the Company of $ 43.4 million after deducting sales agent commissions and expenses.

In November 2022, the Company filed a new prospectus supplement to the 2021 Shelf Registration Statement for the offer and sale of up to $ 100.0 million of shares of common stock from time to time through the sales agent, which includes the $ 30.0 million of shares of common stock not sold under the original prospectus and up to an additional $ 70.0 million of shares of common stock.

The Company expects that its cash and cash equivalents will be sufficient to fund its forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of these consolidated financial statements.

All of the Company’s revenue to date has been generated from a collaboration and license agreement with Regeneron Pharmaceuticals Inc, (Regeneron).

The Company does not expect to generate any significant product revenue until it obtains regulatory approval of and commercializes any of the Company’s product candidates or enters into additional collaborative

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

agreements with third parties, and it does not know when, or if, either will occur.

The Company expects to continue to incur significant losses for the foreseeable future, and it expects the losses to increase as the Company continues the development of, and seeks regulatory approvals for, its product candidates and begins to commercialize any approved products.

The Company is subject to all of the risks typically related to the development of new product candidates, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract drug manufacturing organizations (CDMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology and it may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect its business.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings, collaborative or other arrangements with corporate or other sources of financing.

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Although the Company continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period.

Such estimates include the valuation of the intangible assets acquired in business combinations, redeemable convertible preferred stock warrant liability, redeemable convertible preferred stock tranche liability, the Technion Research and Development Foundation liability (TRDF Liability), contingent consideration liability for contingent value right (CVR), deferred tax assets, useful lives of property and equipment, accruals for research and development activities, revenue recognition and stock-based compensation and the Company’s incremental borrowing rate.

Such estimates include deferred tax assets, useful lives of property and equipment, accruals for research and development activities, revenue recognition and stock-based compensation and the Company’s incremental borrowing rate.

Actual results could differ from those estimates.

Contingent Consideration Liability (CVR)

The estimated fair value of the CVR, initially measured and recorded on the acquisition date, is considered to be a Level 3 instrument.

The contingent consideration liability is recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in research and development expenses in the consolidated statements of operations and comprehensive loss.

During the second quarter of 2021, the Company performed a re-measurement of the fair value of the CVR liability and adjusted the liability to zero.

This resulted in a $ 1.0 million gain in research and development expense in the statements of operations and comprehensive loss for the year ended December 31, 2021.

Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business combination.

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If the fair value of the reporting unit exceeds the carrying value of the net assets, goodwill is not impaired, and no further testing is required.

If the fair value of the reporting unit is less than the carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit.

The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal year ended December 31, 2021 and determined that goodwill was no t impaired.

If the fair value of the reporting unit is less than the carrying value, the Company measures the amount of impairment loss, if

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Intangible Assets

In connection with the Merger, the Company acquired certain IPR&D assets, which were classified as indefinite-lived intangible assets.

Acquired IPR&D represents the fair value assigned to research and development assets that the Company acquires and have not been completed at the acquisition date.

The fair value of IPR&D acquired in a business combination is recorded on the Company’s consolidated balance sheets at the acquisition-date fair value and is determined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the products, and discounting the projected net cash flows to present value.

IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

The Company performed a review for impairment of IPR&D during the second quarter of the year ended December 31, 2021 and recognized an impairment charge of $ 1.2 million, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss.

any, as the excess of the carrying value over the fair value of the reporting unit.

The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal year ended December 31, 2022 and determined that goodwill was no t impaired.

The Company operates and manages its business as one reportable and operating segment, which is the business of research and development of allogeneic immunotherapies for cancer and other diseases.

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Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, and marketable debt securities.

The Company’s cash and cash equivalents are held at two financial institutions in the United States and one financial institution in Israel and such amounts may, at times, exceed insured limits.

The Company invests its cash equivalents and marketable debt securities in money market funds, United States government securities, commercial paper, corporate bonds, and asset-backed securities.

The Company limits its credit risk associated with cash equivalents and marketable debt securities by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments.

The Company has not experienced any losses on its deposits of cash and cash equivalents and marketable debt securities to date.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents.

The Company’s cash and cash equivalents are held at one financial institution in the U.S.

and one financial institution in Israel and such amounts may, at times, exceed insured limits.

The Company invests its cash equivalents in money market funds.

The Company limits its credit risk associated with cash equivalents by placing them with banks and institutions it believes are highly creditworthy and in highly rated investments.

The Company has not experienced any losses on its deposits of cash and cash equivalents to date.

The Company has one customer, Regeneron, which represents 100 % of the Company’s total revenue during the years ended December 31, 2022 and 2021 and outstanding accounts receivable as of December 31, 2021 (see Note 8).

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The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

COVID-19 may impact the timing of regulatory approval of the INDs for clinical trials, the enrollment of any clinical trials that are

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

approved, the availability of clinical trial materials and regulatory approval and commercialization of our products.

COVID-19 may also impact the Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.

Cash and Cash Equivalents

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As of December 31, 2022 and 2021, cash and cash equivalents consist of cash deposited with banks and investments in money market funds with maturities of three months or less from the date of purchase.

Marketable Debt Securities

Marketable debt securities are investments in marketable debt securities with maturities greater than three months at the time of purchase.

The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date.

The Company has classified and accounted for its marketable debt securities as available-for-sale.

The Company classifies highly liquid securities with maturities beyond 12 months as long-term marketable debt securities in the consolidated balance sheet.

These securities are carried at fair value as determined based upon quoted market prices or pricing models for similar securities.

Unrealized gains and losses, if any, are excluded from earnings and are reported as a component of accumulated other comprehensive income (loss).

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of operations and comprehensive loss.

Realized gains and losses, if any, on available-for-sale securities are included in other income (expense), net.

The cost of securities sold is based on the specific identification method.

Interest and dividends on securities classified as available-for-sale are included in interest income.

The Company did not have any outstanding marketable debt securities as of December 31, 2021 and did not identify any of its marketable debt securities as other-than-temporarily impaired as of December 31, 2020.

Restricted Cash

Restricted cash is comprised of cash that is restricted as to withdrawal or use under the terms of certain contractual agreements.

Restricted cash for years ended December 31, 2021 and 2020 consists of collateral for letters of credit issued in connection with real estate leases (see Note 12).

The Company did no t have any restricted cash as of December 31, 2022 .

Restricted cash for the year ended December 31, 2021 consists of collateral for letters of credit issued in connection with real estate leases (see Note 10).

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Fair Value of Financial Instruments

The carrying amounts of certain financial instruments of the Company, including cash equivalents, restricted cash, accounts payable and accrued and other current liabilities approximate fair value due to their relatively short maturities.

The Company’s marketable debt securities and CVR liability are carried at fair value (see Notes 4 and 5).

The carrying amounts of certain financial instruments of the Company, including cash equivalents, restricted cash, accounts receivable, accounts payable and accrued and other current liabilities approximate fair value due to their relatively short maturities.

Property and Equipment, Net

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Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, generally three years.

Leasehold improvements are amortized using the straight-line method over the shorter of the assets’

Leasehold improvements are amortized using the straight-line method over the lesser of the assets’

estimated useful lives or the remaining term of the lease.

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If such asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group.

There has been no such impairment of long-lived assets during the years ended December 31, 2021 and 2020.

The Company performed a review for impairment of in process research and development (IPR&D) during the second quarter of the year ended December 31, 2021 and recognized an impairment charge of $ 1.2 million, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss.

This impairment charge reduced the carrying value of the asset to $ 0 at December 31, 2021.

There has been no such impairment of long-lived assets during the year ended December 31, 2022.

Revenue Recognition

Under ASC 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

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The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

All of the Company’s revenues are derived through a license and collaboration agreement (see Note 10).

All of the Company’s revenues for the years ended December 31, 2022 and 2021 are derived through a license and collaboration agreement with Regeneron (see Note 8).

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

For revenue recognition purposes, the Company determines the term of its license or collaboration agreements by evaluating the period during which present and enforceable rights and obligations exist.

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The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

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Research and Development Expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including payroll and related expenses, costs for CMOs, costs for CROs, materials, supplies, depreciation on and maintenance of research equipment, consulting costs, and the allocated portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, information technology costs and general support services.

Research and development expenses include costs directly attributable to the conduct of research and development programs, including payroll and related expenses, costs for CDMOs, costs for CROs, materials, supplies, depreciation on and maintenance of research equipment, consulting costs, and the allocated portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, information technology costs and general support services.

All costs associated with research and development are expensed within the consolidated statements of operations and comprehensive loss as incurred.

Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.

Accrued CRO, CMO, and Research and Development Expenses

The Company has entered into various agreements with CMOs and CROs.

Accrued CRO, CDMO, and Research and Development Expenses

The Company has entered into various agreements with CDMOs and CROs.

The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

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If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly.

Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered.

Payments made to CDMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered.

Through December 31, 2022 there had been no material adjustments to the Company’s prior period estimates of accrued research and development expenses.

Effective January 1, 2020, the Company adopted ASU No.

2016-02, Leases (Topic 842) (ASU 2016-02), using the modified retrospective approach through a cumulative-effect adjustment as of the adoption date, with prior periods unchanged and presented in accordance with the guidance in Topic 840, Leases (Topic 840).

Consistent with ASU 2016-02, the Company determines if an arrangement is a lease, or contains a lease, at inception.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Consistent with ASU No.

2016-02, Leases (Topic 842) (ASU 2016-02), the Company determines if an arrangement is a lease, or contains a lease, at inception.

Leases with a term greater than 12 months are recognized on the balance sheet as Right-of-Use (ROU) assets and current and long-term operating lease liabilities, as applicable.

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When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Fair Value of Common Stock

Prior to the Merger the fair value of the Company’s common stock was determined by its Board of Directors with input from management and third-party valuation specialists.

The Company’s approach to estimate the fair value of the Company’s common stock is consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

of Privately-Held- Company Equity Securities Issued as Compensation .

Determining the best estimated fair value of the Company’s common stock requires significant judgement and management considers several factors, including the Company’s stage of development, equity market conditions affecting comparable public companies, significant milestones and progress of research and development efforts.

Subsequent to the Merger, the fair value of the Company’s common stock is determined based on its closing market price.

Stock-Based Compensation

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The Company records interest and penalties related to uncertain tax positions, if applicable, as a component of income tax expense (benefit).

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources.

The other comprehensive loss disclosed in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020 consists of changes in unrealized gains and losses on marketable debt securities.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities.

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period.

The Company’s potentially dilutive shares, which include outstanding stock options, Employee Stock Purchase Plan awards, unvested restricted stock units (RSUs), and shares issuable upon conversion of the Convertible Notes, 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.

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities.

The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income (loss) available to common

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in undistributed earnings as if all income (loss) for the period had been distributed.

Other Comprehensive Loss

Other comprehensive loss is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources.

There was no other comprehensive loss for the year ended December 31, 2022.

The other comprehensive loss disclosed in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2021 consists of unrealized losses on marketable debt securities.

Net Loss per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common stock and potentially dilutive securities outstanding for the period.

The Company’s potentially dilutive shares, which include outstanding stock options, Employee Stock Purchase Plan (ESPP) awards, unvested restricted stock units (RSUs), and shares issuable upon exercise of the warrants, 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.

Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities.

The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in undistributed earnings as if all income (loss) for the period had been distributed.

The Company’s participating securities do not have a contractual obligation to share in the Company’s losses.

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The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, other than as disclosed in these notes to the consolidated financial statements.

See Note 21 for further information.

Refer to Note 18.

Subsequent Events .

Recent Accounting Pronouncements

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Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-15, Intangibles–Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15).

The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

Accordingly, the update requires entities in a hosting arrangement that is a service contract to follow the guidance in ASC 350-40, Internal-Use Software (ASC 350-40) to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense.

Costs to develop or obtain internal-use software that cannot be capitalized under ASC 350-40, such as training costs and certain data conversion costs, also cannot be capitalized for a hosting arrangement that is a service contract.

Therefore, an entity in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to.

Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed.

ASU 2018-15 also requires entities to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement.

ASU 2018-15 was effective for public entities for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

For nonpublic entities, ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

Early adoption is permitted, including adoption in any interim period.

The Company adopted ASU 2018-15 beginning January 1, 2021.

The adoption of ASU 2018-15 resulted in an immaterial amount of assets recorded on the Company's balance sheet.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606 (ASU 2018-18), which is intended to clarify the circumstances under which certain transactions in collaborative arrangements should be accounted for under the revenue recognition standard.

Certain transactions between collaboration arrangement participants should be accounted for as revenue under ASC Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account.

For public business entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

For all other entities, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2020.

Early adoption is permitted.

The Company adopted ASU 2018-18 beginning January 1, 2021.

The adoption of this standard did not have a material impact on the Company's financial statements and related disclosures.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplify various aspects related to the accounting for income taxes.

This ASU removes exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

For public companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2020.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted ASU 2019-12 beginning January 1, 2021 on a prospective basis.

The adoption of this standard did not have a material impact on the Company's financial statements and related disclosures

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) (ASU 2020-04).

The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022.

An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued.

Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic.

The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (LIBOR) are impacted by reference rate reform.

The Company adopted ASU 2020-04 beginning January 1, 2021.

The adoption of this standard did not have a material impact on the Company's financial statements and related disclosures.

In July 2021, FASB issued ASU No.

2021-05, Lease (Topic 842), Lessors - Certain Leases with Variable Lease Payments (ASU 2021-05).

ASU 2021-05 amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference rate index or a rate.

The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease.

ASU 2021-05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted.

The Company adopted ASU 2021-05 in the first quarter of 2022.

The impact on its consolidated financial statements and related disclosures was not material.

Accounting Pronouncements Not Yet Adopted

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These changes will result in earlier recognition of credit losses.

For public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, adoption is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For SEC filers that are eligible to be smaller reporting companies and for all other entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

For SEC filers that are eligible to be smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

The Company plans to adopt the provisions of ASU 2016-13 effective January 1, 2023 and is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

In January 2017, the FASB issued ASU No.

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An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

The new guidance for accelerated filing companies became effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and all other entities should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

SEC filers that are eligible to be smaller reporting companies should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

The amendment should be applied on a prospective basis.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In July 2021, FASB issued ASU No.

2021-05, Lease (Topic 842), Lessors - Certain Leases with Variable Lease Payments (ASU 2021-05).

ASU 2021-05 amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference rate index or a rate.

The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease.

ASU 2021-05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this ASU on the Company's consolidated financial statements, but does not believe the adoption of this standard will have a material impact on the Company's consolidated financial statements.

Business Combination

On September 15, 2020, Former Adicet completed its merger with resTORbio.

Based on the Exchange Ratio of 0.1240 , immediately following the Merger, resTORbio stockholders and holders of resTORbio restricted stock units and options to acquire resTORbio common stock owned approximately 25.0 % of the outstanding capital stock of the combined company on a fully diluted basis, and Former Adicet stockholders, holders of options or warrants to acquire Former Adicet capital stock owned approximately 75.0 % of the outstanding capital stock of the combined company on a fully diluted basis.

resTORbio’s stockholders continued to own and hold their existing shares of the Company’s common stock (after giving effect to the 1-for-7 reverse stock split).

Pursuant to the terms of the Merger, the vesting of all outstanding resTORbio stock options was accelerated in full as of immediately prior to the Effective Time.

All out-of-the-money resTORbio stock options were cancelled for no consideration.

All in-the-money resTORbio stock options remained outstanding after the completion of the Merger in accordance with their terms.

For accounting purposes, the Company assumed 81,370 in-the-money resTORbio stock options after giving effect to reverse stock split.

In addition, 91,309 unvested resTORbio restricted stock units outstanding

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

and unsettled, after giving effect to reverse stock split, as of immediately prior to the Effective Time of the Merger, were accelerated in full and the holders of such restricted stock units received 54,553 shares of the Company’s common stock (after reduction by the number of shares of resTORbio common stock necessary to satisfy applicable tax withholding obligations at the maximum statutory rate).

The fair value of these modified stock options and restricted stock units attributable to pre-combination services was recorded as a component of consideration transferred and the fair value of these modified stock options and restricted stock units attributable to post-combination services was recognized as stock compensation expense in the Company’s consolidated statements of operations and comprehensive loss.

At the closing of the Merger, all shares of Former Adicet common stock and Former Adicet redeemable convertible preferred stock then outstanding were converted to Former Adicet’s common stock under their original terms and were then exchanged for the Company’s common stock.

In connection with the Merger, the Company entered into a Contingent Value Rights Agreement (the CVR Agreement) with Computershare Inc.

and Computershare Trust Company, N.A.

as joint rights agent.

Per the terms of the Merger, each holder of resTORbio common stock as of immediately prior to the completion of the Merger is entitled to one contractual contingent value right, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the Effective Time.

The CVR holders were entitled to receive net proceeds from the commercialization, if any, from a third-party commercial partner of RTB101, resTORbio’s small molecule product candidate that is a potent inhibitor of target of rapamycin complex 1 (TORC1), for a COVID-19 related indication.

The total purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed of resTORbio based on their fair values as of the completion of the Merger, with the excess allocated to goodwill.

The purchase price is calculated based on the fair value of resTORbio common stock that the resTORbio stockholders owned as of the closing date of the Merger because, with no active trading market for shares of Former Adicet, the fair value of the resTORbio’s common stock represented a more reliable measure of the fair value of consideration transferred in the Merger.

The following summarizes the purchase price in the Merger (in thousands, except share and per share amounts):

Fair value of common stock shares of the combined company

owned by resTORbio stockholders (1)

Fair value of contingent consideration liability with respect to CVR (2)

Purchase price

(1) Represents the share consideration of the combined company that the resTORbio stockholders own as of the closing of the Merger calculated as follows:

Number of shares of the combined company owned by resTORbio

stockholders (a)

Multiplied by the fair value per share of resTORbio common

Acquisition date fair value of resTORbio

Estimated fair value of modified stock options and restricted stock units attributable to pre-combination services (3)

portion of the fair value to be distributed as CVR (c)

Fair value of shares of the combined company owned by resTORbio

Represents the number of shares of common stock of the combined company that the resTORbio stockholders owned as of the closing of the Merger.

This amount is calculated as 5,207,695 shares (post-reverse stock split) of resTORbio common stock outstanding as of September 15, 2020.

The fair value of shares of the combined company owned by resTORbio stockholders is based on the closing price of resTORbio common stock on September 14, 2020.

The fair value of resTORbio common stock was further adjusted to remove the estimated fair value of the CVR embedded within the closing price, as each holder of resTORbio stock received one contractual CVR immediately prior to the Merger.

(2) Each holder of resTORbio common stock as of immediately prior to the completion of the Merger was entitled to one CVR issued by resTORbio, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of resTORbio common stock held by such holder as of immediately prior to the Effective Time of the Merger.

(3) Based on the capitalization of resTORbio as of September 15, 2020, 91,309 outstanding unvested resTORbio restricted stock units were accelerated in connection with the Merger and holders of the restricted stock units were issued approximately 54,553 shares of resTORbio

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

common stock on a net settlement basis.

Similarly, in connection with the Merger, vesting of outstanding resTORbio stock options was accelerated in full and the stock options that were not in the in-the-money on the close of the Merger were canceled, resulting in approximately 81,370 surviving stock options.

The acquisition date fair value of these modified resTORbio restricted stock units and resTORbio stock options attributable to the pre-combination services is included in the estimated purchase price.

The Merger was accounted for as a business combination which requires that assets acquired, and liabilities assumed be recognized at their fair value as of the acquisition date.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement.

Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations.

The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired (in thousands):

December 31, 2020

Measurement Period Adjustments

Final Purchase

Price Allocation

Net assets acquired:

Cash and cash equivalents

Prepaid expenses and other current assets

Property and equipment

Restricted cash

Accounts payable

Accrued and other current liabilities

Other liabilities

Deferred tax liability

Purchase price

The goodwill of $ 19.5 million is not tax deductible and represents the excess of the consideration paid over the fair value of assets acquired and liabilities assumed.

Goodwill is mainly attributable to the enhanced value of the combined company, as reflected in the increase in market value of the resTORbio common shares following the announcement of the Merger with Former Adicet.

The fair value of acquired IPR&D is related to the research and development of RTB101 for a COVID-19 related indication and was conducted pursuant to resTORbio's license agreement with Novartis (see Note 11).

The RTB101 compound IPR&D project was valued using an income approach, specifically a projected discounted cash flow method, adjusted for the probability of technical success (PTS).

The projected discounted cash flow models used to estimate the Company’s IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:

Estimates of potential cash flows to be generated by the project and resulting asset, which was developed utilizing estimates of total patient population, market penetration rates, demand risk adjustment factors, and product pricing;

Estimates regarding the timing of and the expected costs of goods sold, research and development expenses, selling, general and administrative expenses to advance the clinical programs to commercialization, cash flow adjustments and partner profit split;

The projected cash flows were then adjusted using PTS factors that were selected considering both the current state of clinical development and the nature of the proposed indication, (i.e., respiratory therapeutics);

Finally, the resulting probability adjusted cash flows were discounted to a present value using a risk-adjusted discount rate, developed considering the market risk present in the forecast and the size of the asset.

This IPR&D intangible asset is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

Upon the review of impairment indicators of IPR&D during the second quarter of 2021, the Company concluded that the IPR&D was fully

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

impaired and recorded an impairment charge within research and development expenses in the consolidated statement of operations and comprehensive loss for the remaining balance of the IPR&D intangible asset June 30, 2021.

The Company recognized IPR&D impairment charges of $ 2.3 million, $ 0.5 million, and $ 0.7 million for the quarters ended as of December 31, 2020, March 31, 2021, and June 30, 2021.

On July 29, 2021, the Company sent Novartis a termination notice.

Termination will automatically take effect as of 60 days from the date of delivery of the termination notice to Novartis, but in no event later than October 1, 2021 without any further notice or action required of either Novartis or the Company.

The contingent consideration for the CVR was valued using an income approach, leveraging the probability adjusted discounted cash flow used in the valuation of the IPR&D and then deducting the administrative fee to be retained by the combined company and other permitted deductions in order to arrive at the net cash expected to be paid out to the CVR holders.

The probability adjusted cash flow includes significant estimates and assumptions pertaining to commercialization events and cash consideration received by the Company for the grant of rights to commercialize RTB101 during the term of the CVR Agreement (as discussed above).

These cash flows were then discounted to present value using the same discount rate applied in the valuation of the IPR&D.

Transaction costs for the Merger were $ 7.1 million for the year ended December 31, 2020 and were expensed as incurred in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The following tables present changes in the Company's IPR&D and CVR since the Merger (in thousands):

Acquisition Date

Fair value as of

September 15, 2020

In-process research and development

Contingent Value Rights

The Company plans to adopt the provisions of ASU 2017-04 effective January 1, 2023 and is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

Fair Value Measurements

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Total fair value of assets

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

December 31, 2021

Money market funds (1) (2)

Marketable debt securities (2)

Asset-backed securities

Corporate debt securities

Commercial paper

Marketable debt securities

Total fair value of assets

Contingent consideration

Total fair value of liabilities

(1) Included in cash and cash equivalents in the consolidated balance sheets

(2) Included in short-term marketable debt securities in the consolidated balance sheets.

Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Corporate debt securities, commercial paper and asset-backed securities are classified within Level 2 of the fair value hierarchy as they take into consideration valuations obtained from third-party pricing services.

The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value.

These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

As part of the acquisition of resTORbio, the Company entered into a CVR Agreement and recorded the fair value of the CVR as part of consideration transferred.

The Company considers the contingent consideration liability a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy.

In June 2021, the Company determined the possibility of any commercialization events for RTB101 was close to zero (see Note 3).

As a result, the fair value of the CVR liability was adjusted to zero .

On October 27, 2021, the Company provided a Termination Notice under the CVR Agreement to the joint rights agents to terminate its obligations under the CVR Agreement, effective immediately.

Marketable Debt Securities

The following tables summarize the Company’s marketable debt securities (in thousands):

December 31, 2020

Asset-backed securities

Corporate debt securities

Commercial paper

The following table summarizes the classification of the Company’s marketable debt securities in the consolidated balance sheets (in thousands):

Short-term marketable debt securities

Long-term marketable debt securities

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

(1) Included in cash and cash equivalents in the consolidated balance sheets.

(2) Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Prepaid Expenses and Other Current Assets

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Prepaid insurance

Prepayments to CRO's

Prepaid Maintenance

Prepayments to CMO's

Other current assets

Tax receivable

Prepaid software subscription and licensing fees

Interest receivable

Prepayments to CROs

Prepaid maintenance

Prepayments to CDMOs

Other prepaid expenses and current assets

Total prepaid expenses and other current assets

Property and Equipment, net

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

As of December 31,

Useful life (years)

Laboratory equipment

Leasehold improvements

Lesser of useful life

or lease term

Lesser of useful life or lease term

Furniture and fixtures

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Computer equipment

Accumulated depreciation and

Accumulated depreciation and amortization

Property and equipment, net

1 unchanged sentence

All of the Company’s property and equipment as of December 31, 2022 and 2021 is located in the U.S.

Construction in progress has increased by $ 11.9 million due to building construction related to the Company's leased space in Redwood City.

Construction in process will continue to increase through the first half of 2022, until completion of construction.

On March 18, 2022, the Company's wholly-owned subsidiary Adicet Therapeutics entered into Change Order No.

3 (the Change Order No.

3) to a construction agreement between Adicet Therapeutics and CP Enterprises, Inc.

d/b/a CP Construction (CP Construction) (the Construction Agreement).

The Construction Agreement provides for pre-construction and construction services at the Company's office and laboratory space in Redwood City, California (1000 Bridge Parkway) for consideration of approximately $ 13.8 million to CP Construction, including previous change orders.

The Change Order No.

3 increased the budget for the construction by approximately $ 5.3 million in order to build one good manufacturing practice (GMP) cell processing and one vector manufacturing suite in addition to controlled materials warehousing at 1000 Bridge Parkway.

In June 2022, the Company moved its operations to 1000 Bridge Parkway which resulted in reclassifying $ 18.4 million from construction in progress to leasehold improvements for the twelve months ended December 31, 2022.

The remaining $ 9.3 million in Construction in Progress as of December 31, 2022 primarily relates to leasehold improvements and laboratory equipment for the internal GMP manufacturing suite.

In the year ended December 31, 2022, the Company disposed of an aggregate of $ 0.2 million of fixed assets within furniture and fixtures, computer equipment and software.

This disposal related to assets obtained through the Merger with resTORbio as well as assets disposed of when the Company moved its operations to 1000 Bridge Parkway.

The Company did not receive any proceeds as a result of these disposals and recognized a loss of less than $ 0.1 million related to this transaction.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Accrued and Other Current Liabilities

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Accrued compensation

Accrued CMO costs

Accrued CDMO costs

Accrued professional services

Accrued research and development expenses

Accrued other liabilities

Accrued other research and development expenses

Accrued CRO costs

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

City, CA and other purposes permitted under the Loan Agreement, with an interest rate equal to the greater of 0.25 % above the Prime Rate (as defined in the Loan Agreement) or 5.00 %.

Accrued other liabilities

Total accrued and other liabilities

On April 28, 2020, the Company entered into a Loan and Security Agreement with Pacific Western Bank (PacWest) for a term loan not exceeding $ 12.0 million (the Loan Agreement) to finance leasehold improvements for the facilities in Redwood City, CA and other purposes permitted under the Loan Agreement, with an interest rate equal to the greater of 0.25 % above the Prime Rate (as defined in the Loan Agreement) or 5.00 %.

The Loan Agreement granted to Pacific Western Bank a security interest on substantially all of the Company’s assets other than intellectual property to secure the performance of the Company’s obligations under the Loan Agreement, and contains a variety of affirmative and negative covenants, including required financial reporting, limitations on certain dispositions of assets or distributions, limitations on the incurrence of additional debt or liens and other customary requirements.

As of December 31, 2021, the Company was in compliance with such covenants.

Pursuant to the Loan Agreement in April 2020, the Company may request to draw upon the term loan at any time through the date eighteen months after the date of the Loan Agreement (Availability End Date), which was October 28, 2021 .

No amounts were drawn under the Loan Agreement through the Availability End Date.

Pursuant to the Loan Agreement, the Company may request to draw upon the term loan at any time through the date eighteen months after the date of the Loan Agreement (Availability End Date), which was October 28, 2021 .

On October 21, 2021, the Company amended the Loan Agreement with PacWest (the 2021 Loan Amendment) under which PacWest will provide one or more Term Loans, as well as Non-Formula Ancillary Services which shall not exceed $ 5.5 million in the aggregate.

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The aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $ 15.0 million, which each Term Loan to be in an amount of not less than $1.0 million.

As of December 31, 2021, the Company had outstanding Non-Formula Ancillary Services of $ 4.4 million.

Accordingly, as of December 31, 2021, the Company has $ 10.6 million available under the Term Loan.

Pursuant to the 2021 Loan Amendment, the interest rate for the Term Loans shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.

On December 2, 2022, the Company further amended the Loan Agreement with PacWest (the 2022 Loan Amendment).

The 2022 Loan Amendment extends the drawdown period for any Term Loan by one year from April 19, 2023 to April 19, 2024.

In addition, pursuant to the 2022 Loan Amendment, if the Company receives at least $ 60.0 million from the sale or issuance of our equity securities and/or up-front cash payments from strategic partnerships other than payments from Regeneron on or before September 30, 2023, then the Interest Only End Date (as defined in the 2022 Loan Amendment) will be extended another six months from April 19, 2024 to October 19, 2024.

Furthermore, the 2022 Loan Amendment extends the final maturity date of any Term Loan by one year from October 19, 2025 to October 19, 2026, and the maturity date of Non-Formula Ancillary Services to November 30, 2023.

As of December 31, 2022, the Company has $ 10.6 million available under the Term Loan.

As of the date of this Annual Report on Form 10-K, the Company was in compliance with the covenants of the 2022 Loan Amendment and had no indebtedness outstanding under the Term Loan.

As of December 31, 2022, the deferred debt issuance costs were $ 0.4 million and are included in other non-current assets on the Company’s consolidated balance sheets.

Regeneron License and Collaboration Arrangement

Agreement Terms

Third Party Agreements

On July 29, 2016, the Company entered into a License and Collaboration Agreement with Regeneron, which was amended in April 2019, with such amendment becoming effective in connection with Regeneron’s investment in the Company’s Series B redeemable convertible preferred stock private placement transaction in July 2019 (as amended, the Regeneron Agreement).

Agreement Structure .

Agreement Terms.

The Regeneron Agreement has two principal components:

(a) a research collaboration component under which the parties will research, develop, and commercialize next-generation engineered gamma delta immune cell therapeutics (ICPs), namely engineered gamma delta immune cells with CARs and TCRs directed to disease-specific cell surface antigens, which includes the grant of certain licenses to intellectual property between the two parties, and (b) for a certain period following the effective date, a license to the Company to use certain of Regeneron’s proprietary mice to develop and commercialize ICPs generated by the Company, with certain limitations relating to targets under the Regeneron Agreement.

Research Collaboration .

Research activities under the collaboration are governed by research plans, which include the strategy, goals, activities, and responsibilities of the parties with respect to a target.

The Company is primarily responsible for generating, validating, and optimizing ICPs, developing processes for manufacture of ICPs, and certain preclinical and clinical manufacturing activities for ICPs;

Regeneron’s key responsibility is generating, validating, and optimizing CARs and TCRs that bind to the applicable target.

The parties have formed a joint research committee to monitor and govern the research and development efforts during the research program term.

Rights to Research Targets .

Under the terms of the collaboration, the parties will conduct research on mutually agreed upon targets.

Regeneron may obtain exclusive rights for the targets that it chooses in accordance with the target selection mechanism set forth in the Regeneron Agreement, and the Company similarly may obtain exclusive rights for targets it chooses in accordance with such target selection mechanism.

The Company has the right to develop and commercialize ICPs to the first collaboration target to come out of the research program.

On January 28, 2022, the Company received a payment of $ 20.0 million from Regeneron for exercise of its option to license exclusive rights to ADI-002 and Regeneron potentially has additional options to other ICP targets under the Regeneron Agreement.

Pursuant to the Agreement with Regeneron, the Company had the right to elect to co-fund ADI-002's future development costs.

The Company did not elect its option.

For those targets it does not have an option to license, Regeneron has a right of first negotiation for up to two targets.

Regeneron has the right to terminate the research program in its entirety (a) for convenience on six months prior written notice given at any time after December 31, 2019, or (b) following a change of control (as defined in the Regeneron Agreement) of the Company.

The parties mutually agreed to their first product declaration criteria for collaboration ICP, CD20, in 2018.

Rights to Company-Developed Targets .

Regeneron has an exclusive license to use targeting moieties generated by the Company by its use of Regeneron’s proprietary mice to develop and commercialize non-ICPs.

(a) a research collaboration component under which the parties will research, develop, and commercialize next-generation engineered gamma delta immune cell

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Exclusivity .

During the five-year target selection period that expired in July 2021, the Company may not directly or indirectly research, develop, manufacture or commercialize an ICP, or grant a license to do the foregoing, except pursuant to the agreement.

For so long as either party is researching or developing an ICP to a target under the research program, neither party may research, develop, manufacture or commercialize any other ICP to such target, or grant a license to do the foregoing.

And for so long as a party is researching, developing or commercializing an ICP to target that is licensed to it (and royalty bearing) under the agreement, neither party may research, develop, manufacture or commercialize any other ICP to such target, or grant a license to permit another party to do the foregoing.

These exclusivity obligations are limited to engineered gamma delta immune cells to targets reasonably considered to have therapeutic relevance in oncology.

The Regeneron Agreement includes certain exceptions to the exclusivity obligations of the parties, including with respect to targets that are rejected by one party in the target selection process, as well as protections in the event of a change of control of a party where the acquirer has a competing program.

Co-Funding and Profit Sharing .

The Company has an option to co-fund specified portions of the future development costs for, and to co-promote, ICPs to a target for which Regeneron has exercised an option, and to participate in the profits for such target.

The Company has the right to exercise this right in various geographic regions, including on a worldwide basis.

In the event the Company exercises such right, the parties will share further development costs and profits proportionally to their co-funding percentages.

Financial Terms .

The Company received a non-refundable upfront payment of $ 25.0 million from Regeneron upon execution of the Regeneron Agreement and has received an aggregate of $ 20.0 million of additional payments for research funding from Regeneron as of December 31, 2021.

In addition, Regeneron may have to pay the Company additional amounts in the future consisting of up to an aggregate of $ 80.0 million of option exercise fees for a certain number of collaboration ICPs, as specified in the Regeneron Agreement.

Regeneron must also pay the Company high single digit royalties as a percentage of net sales for ICPs to targets for which it has exclusive rights, and low single digit royalties as a percentage of net sales on any non-ICP product comprising a targeting moiety generated by the Company through the use of Regeneron’s proprietary mice.

The Company must pay Regeneron mid-single to low double digit, but less than teens, of royalties as a percentage of net sales of ICPs to targets for which the Company has exercised exclusive rights, and low to mid-single digit of royalties as a percentage of net sales of targeting moieties generated from the Company’s license to use Regeneron’s proprietary mice.

Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or twelve (12) years from first commercial sale.

Other Terms .

The Regeneron Agreement contains customary representations, warranties and covenants by the Company and Regeneron and includes (i) an obligation of the Company to use commercially reasonable efforts to develop and commercialize at least one product based on a collaboration ICP that is not an optioned collaboration ICP for each collaboration target and (ii) an obligation of Regeneron to use commercially reasonable efforts to develop and commercialize at least one product based on an optioned collaboration ICP for each collaboration target.

The Company and Regeneron are required to indemnify the other party against all losses and expenses related to breaches of its representations, warranties and covenants under the Regeneron Agreement.

Term and Termination .

therapeutics (ICPs) namely engineered gamma delta immune cells with CARs and TCRs directed to disease-specific cell surface antigens, which includes the grant of certain licenses to intellectual property between the two parties, and (b) for a certain period following the effective date, a license that allows the Company to use certain of Regeneron’s proprietary mice to develop and commercialize ICPs generated by the Company, with certain limitations relating to targets under the Regeneron Agreement.

The term of the Regeneron Agreement expires, on a product-by-product basis, on the expiration of the obligation to pay royalties for such product.

1 unchanged sentence

The licenses to develop and commercialize an ICP to a target that one party has exclusively licensed may be terminated by such party for convenience.

Equity Investments .

In connection with its collaboration, Regeneron and the Company entered into a side letter pursuant to which, among other matters, Regeneron was granted certain stockholder rights and investment rights in connection with the Company’s next equity financing that met certain criteria and in connection with an initial public offering by the Company.

Regeneron exercised its investment right and purchased approximately $ 10.0 million of the Company’s Series B redeemable convertible preferred stock in a private placement transaction in July 2019.

The remaining obligations under the side letter agreement terminated immediately prior to the Effective Time of the Merger.

Revenue Recognition

The Company identified the following material promises under the Regeneron Agreement:

(1) a research license, (2) a collaboration invention license, (3) a trademark license, (4) research and development services during the research term, (5) manufacturing services to manufacture collaboration ICPs for the research programs, (6) participation in the joint research committee, and (7) information sharing during the research term.

The Company considered that the licenses granted under the Regeneron Agreement are not capable of being distinct and are not distinct from the research and development and manufacturing services within the context of the Regeneron Agreement, because 1) such licenses are for the research and development effort during the research term, unless Regeneron exercises its option under the Regeneron Agreement, 2) the research and development services significantly increase the utility of such licenses, and 3) research and development services require collaboration ICPs being manufactured.

Specifically, the Company’s granted licenses can only provide benefit to Regeneron in combination with the Company’s research and development and manufacturing services to discover the collaboration ICPs.

Similarly, the participation in the joint research committee and information sharing are not capable of being distinct and are not distinct from

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

the research and development and manufacturing services within the context of the agreement, because the participation in the joint research committee is for monitoring and governing of the research and development efforts and the information sharing is for sharing results of such research and development efforts.

Therefore, all of the promises above are combined into a single performance obligation.

The Company also evaluated whether the option provided to Regeneron represents a material right that would require separate deferral and recognition.

The option exercise will provide Regeneron with a development and commercial license to develop and commercialize the optioned collaboration ICPs.

The Company concluded that the $25.0 million upfront payment to the Company was not negotiated to provide incremental discount for the future option fees payable upon Regeneron’s exercise of the option.

Regeneron could decide not to exercise the option at its own discretion.

The exercise of the option by Regeneron is not certain and is dependent on many factors, such as progress made on the specific option-eligible collaboration ICP, Regeneron’s overall assessment of commercial feasibility of the further research, development and commercialization of the Option products, availability and cost of alternative programs and products.

The option provides Regeneron with a license for intellectual property that will be improved from the inception of the Regeneron Agreement.

In addition, the option fee is significant compared to the sum total of the upfront payment and research funding fees in the original Regeneron Agreement.

Therefore, the Company determined that the option provided to Regeneron does not represent a material right and that any potential exercise of the option should be accounted as a separate contract.

Hence, upon the option exercise by Regeneron the option fee would be allocated to the development and commercial license which would be the only performance obligation in that separate contract and recognized as revenue when control of the license rights is transferred to Regeneron.

For revenue recognition purposes, the Company determined that the duration of the contract is the same as the research term of five years beginning on the execution of the Regeneron Agreement on July 29, 2016.

The contract duration is defined as the period during which parties to the contract have present and enforceable rights and obligations.

For revenue recognition purposes, the five-year term has been extended to the first quarter of 2022 due to additional time required to complete the performance obligation under the Regeneron Agreement.

The Company determined that Regeneron faces significant in-substance penalties were it to terminate the Regeneron Agreement prior to the end of the research term.

At contract inception, the Company determined the transaction price of the Regeneron Agreement to be $ 55.0 million, consisting of the $ 25.0 million upfront payment and the aggregate research funding fees of $ 30.0 million payable over the research term.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Per the terms of the original Regeneron Agreement prior to the amendment effective from July 2019, the research funding fees of $ 30.0 million were payable merely due to the passage of time and therefore did not represent a variable consideration.

After the amendment became effective in July 2019, $ 20.0 million of these fees became contingent upon meeting certain development and regulatory milestones.

Therefore, the Company concluded that after the amendment such potential payments became variable consideration.

The receipt of the variable consideration was subject to substantial uncertainty and was therefore excluded from the transaction price upon the effective date of the amendment.

Accordingly, the transaction price was reduced to $ 35.0 million in July 2019.

The Company re-evaluates the transaction price if there is a significant change in facts and circumstances at least at the end of each reporting period.

The Company increased the transaction price by $ 10.0 million in June 2020 to $ 45.0 million when it achieved the milestone for the selection of a clinical candidate to the second collaboration target under the Regeneron Agreement, resulting in the recognition of an additional $ 5.0 million in revenue during the three months ended June 30, 2020.

The Company also considered the existence of any significant financing component within the Regeneron Agreement given its upfront payment structure.

Based upon this assessment, the Company concluded that the up-front payment was provided for valid business reasons and not for the purpose of providing financing.

The reason for the initial advance payment at the beginning of the contract is not to provide financing to the Company, but to ensure Regeneron’s commitment to the contract and to provide assurance that the customer will perform its obligations under the contract.

Accordingly, the Company has concluded that the upfront payment structure of the Regeneron Agreement does not result in the existence of a significant financing component.

The royalty payments will be recognized when the related sales occur as they were determined to relate predominantly to the intellectual property licenses granted to Regeneron and therefore have also been excluded from the transaction price.

The Company has determined that the combined performance obligation is satisfied over time.

Financial Terms.

The Company received a non-refundable upfront payment of $ 25.0 million from Regeneron upon execution of the Regeneron Agreement and an aggregate of $ 20.0 million of additional payments for research funding from Regeneron through December 31, 2022 .

In addition, Regeneron may have to pay the Company additional amounts in the future consisting of up to an aggregate of $ 80.0 million of option exercise fees, as specified in the Regeneron Agreement.

Regeneron must also pay the Company high single digit royalties as a percentage of net sales for immune cell products (ICPs) to targets for which it has exclusive rights, and low single digit royalties as a percentage of net sales on any non-ICP product comprising a targeting moiety generated by the Company through the use of Regeneron’s proprietary mice.

Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or twelve (12) years from first commercial sale.

ASC 606 requires the Company to select a single revenue recognition method for the performance obligation that depicts the Company’s performance in transferring control of the services.

The Company has determined that the combined performance obligation was satisfied over time.

Accordingly, the Company utilizes a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize.

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These costs consist primarily of internal full-time equivalent effort and third-party contract costs.

Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

performance obligations over the research term of five years.

Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations over the research term of five years.

A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations.

In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

The following table presents changes in the Company’s contract liabilities (in thousands):

Year ended December 31, 2021

Balance at beginning

Additions (Deductions) (1)

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations has been recorded in the period in which changes are identified and amounts can be reasonably estimated.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Per the terms of the original Regeneron Agreement prior to the amendment becoming effective in April 2019, the research funding fees of $ 30.0 million were payable merely due to the passage of time and therefore did not represent a variable consideration.

After the amendment became effective in April 2019, $ 20.0 million of these fees became contingent upon meeting certain development and regulatory milestones.

Therefore, the Company concluded that after the amendment such potential payments became variable consideration.

The receipt of the variable consideration was subject to substantial uncertainty and was therefore excluded from the transaction price upon the effective date of the amendment.

Accordingly, the transaction price was reduced from $55.0 million to $ 35.0 million in July 2019.

The Company re-evaluates the transaction price if there is a significant change in facts and circumstances at least at the end of each reporting period.

During the twelve months ended December 31, 2022, the Company recognized $ 5.0 million in revenue related to the Regeneron Agreement.

The Company also recognized $ 20.0 million of revenue related to Regeneron's exercise of an option for ADI-002, which is described below, and resulted in an aggregate of $ 25.0 million recorded as revenue during the twelve months ended December 31, 2022.

The Company's performance obligations under the Regeneron Agreement were completed during the first quarter of 2022.

During the twelve months ended December 31, 2021, the Company recognized $ 9.7 million in revenue related to the Regeneron Agreement.

The Company also evaluated whether the option provided to Regeneron represents a material right that would require separate deferral and recognition.

The option exercise provided Regeneron with a development and commercial license to

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

develop and commercialize the optioned collaboration ICPs.

The option provided Regeneron with a license for intellectual property that will be improved from the inception of the Regeneron Agreement.

In addition, the option fee is significant compared to the sum total of the upfront payment and research funding fees in the original Regeneron Agreement.

Therefore, the Company determined that the option provided to Regeneron did not represent a material right and that any potential exercise of the option should be accounted as a separate contract.

Hence, upon the option exercise by Regeneron the option fee would be allocated to the development and commercial license which would be the only performance obligation in that separate contract and recognized as revenue on a point in time basis when control of the license rights is transferred to Regeneron.

On January 28, 2022, Regeneron exercised its option to license the exclusive, worldwide rights to ADI-002, an allogeneic gamma delta CAR T-cell therapy directed against Glypican-3, pursuant to the Regeneron Agreement.

In conjunction with the exercise of the Option, Regeneron paid an exercise fee of $ 20.0 million to the Company on January 28, 2022, and the Company completed the transfer of the associated license rights to Regeneron during the first quarter of 2022.

Pursuant to the Regeneron Agreement, upon Regeneron’s exercise of the option, the Company had a specified period of time to elect to co-fund future development costs of ADI-002, and to participate in any potential profits with Regeneron up to a specified co-funding percentage in various geographic regions, including on a worldwide basis (Co-Funding Option).

The Company elected not to exercise its Co-Funding Option for ADI-002.

Accordingly, Regeneron is responsible, at its sole cost, for all development, manufacturing and commercialization of ADI-002 and must pay the Company high single digit royalties as a percentage of any net sales of ADI-002 for a period commencing on the first commercial sale until the longer of (i) the expiration or invalidity of the licensed patent rights or (ii) a low double digit amount of years from first commercial sale.

The following tables present changes in the Company’s contract liabilities for the twelve months ended December 31, 2022 and 2021 (in thousands):

Twelve Months Ended December 31, 2022

End of Period

Contract liability

Year ended December 31, 2020

Balance at beginning

Additions (Deductions) (1)

Contract asset

Twelve Months Ended December 31, 2021

End of Period

Contract liability

(1) Deductions to contract liabilities relate to deferred revenue recognized as revenue during the reporting period.

As of December 31, 2021, contract liabilities related to the Regeneron Agreement of $ 4.8 million was comprised of the $ 25.0 million upfront payment, $ 10.0 million in total research funding fees for fiscal years 2017 and 2018, and $ 10.0 million for achievement of the milestone for the selection of a clinical candidate for the second collaboration target in June 2020, less $ 40.2 million of cumulative license and collaboration revenue recognized from the inception of the Regeneron Agreement as of December 31, 2021 and will be recognized as the combined performance obligation is satisfied.

As of December 31, 2020, contract liabilities related to the Regeneron Agreement of $ 14.0 million was comprised of the $ 25.0 million upfront payment, $ 10.0 million in total research funding fees for fiscal years 2017 and 2018, and $ 10 million for achievement of the milestone for the selection of a clinical candidate to the second collaboration target in June 2020, less $ 31.0 million of cumulative license and collaboration revenue recognized from the inception of the Regeneron Agreement as of December 31, 2020.

For the years ended December 31, 2021 and 2020, the Company recognized $ 9.2 million and $ 17.9 million of license and collaboration revenue, respectively, from amounts included in the contract liability balances at the beginning of the period.

There were no costs to obtain or fulfill the contract that meet the criteria to be capitalized.

License, Funding and Other Agreements Related to the CVR

Contingent Value Rights Agreement

As discussed in Note 3, in connection with the Merger, the Company entered into the CVR Agreement with Computershare Inc.

and Computershare Trust Company, N.A.

as joint rights agent.

The CVR holders are entitled to receive net proceeds from the commercialization, if any, received from a third-party commercial partner of RTB101 for a COVID-19 related indication.

The total fees and expenses of the Company’s clinical trials for a COVID-19 related indication of RTB101 is limited to $ 3.0 million under the CVR Agreement.

Through October 31, 2020, the Company’s total accumulated spend was $ 1.1 million of expenses.

In November 2020, management terminated the nursing home study due to slow enrollment and as a consequence lowered the probability of finding a partner due to the delay in time to commercialization of RTB101.

In February 2021, management terminated the National Institute on Aging study of RTB101 for COVID-19 post-exposure prophylaxis in adults age 65 years and older due to poor enrollment .

In March 2021, management estimated that the probability of finding a partner should be further reduced.

As a result, the fair value of the CVR liability was decreased by $ 0.4 million to $ 0.6 million.

In June 2021, the Company determined the possibility of any commercialization events for RTB101 was close to zero (see Note 3).

As a result, the fair value of the CVR liability was adjusted to zero .

On October 27, 2021, the Company provided a Termination Notice under the CVR Agreement to the joint rights agent to terminate its obligations under the CVR Agreement, effective immediately.

Novartis License Agreement

On March 23, 2017, resTORbio entered into an exclusive license agreement with Novartis International Pharmaceutical Ltd.

Under the agreement, Novartis granted resTORbio an exclusive, field-restricted, worldwide license, to certain

(2) Deductions are shown net of additions that are the result of a reduction to cumulative revenue recognized as a result of a change in overall estimated costs, primarily due to an extension of time to fulfill the combined performance obligation, which was recorded as a change in estimate during the twelve months ended December 31, 2021.

As of December 31, 2022 , there were no contract liabilities and no contract assets related to the Regeneron Agreement.

As of December 31, 2021, contract liabilities related to the Regeneron Agreement of $ 4.8 million was comprised of the $ 25.0 million upfront payment and additional $ 5.0 million research funding fees in each of 2017 and 2018, and $ 10.0 million for achievement of the milestone for the selection of a clinical candidate to the second collaboration target in June 2020, less $ 40.2 million of cumulative license and collaboration revenue recognized from the inception of the Regeneron Agreement as of December 31, 2021.

Twist Bioscience

In March 2021, the Company entered into an Antibody Discovery Agreement (the Twist Agreement) with Twist Bioscience Corporation (Twist).

Under the terms of the Twist Agreement, Twist will utilize its proprietary platform technology to assist the Company with the discovery of novel antibodies related to target antigens selected by the Company.

The Company maintains the sole and exclusive rights to any program antibodies discovered under the Twist Agreement and has the right to patent, assign, license or transfer any work product under the agreement.

Furthermore, the Company has the right to sublicense

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

intellectual property rights owned or controlled by Novartis, to develop, commercialize and sell one or more therapeutic products comprising RTB101 or RTB101 in combination with everolimus in a fixed dose combination.

The exclusive field under the license agreement is for the treatment, prevention and diagnosis of disease and other conditions in all indications in humans and animals.

The agreement may be terminated by either party upon a material breach of obligation by the other party that is not cured with 60 days after written notice.

resTORbio may terminate the agreement in its entirety or on a product-by-product or country-by-country basis with or without cause with 60 days’

prior written notice.

As consideration for the license, resTORbio is required to pay up to an aggregate of $ 4.3 million upon the satisfaction of clinical milestones, up to an aggregate of $ 24 million upon the satisfaction of regulatory milestones for the first indication approved, and up to an aggregate of $ 18 million upon the satisfaction of regulatory milestones for the second indication approved.

In addition, resTORbio is required to pay up to an aggregate of $ 125 million upon the satisfaction of commercial milestones, based on the amount of annual net sales.

resTORbio is also required to pay tiered royalties ranging from a mid-single digit percentage to a low-teen digit percentage on annual net sales of products.

These royalty obligations last on a product-by-product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a Novartis patent covering a subject product, (ii) the expiration of any regulatory exclusivity for the subject product in a country, or (iii) the 10 th anniversary of the first commercial sale in the country, and are subject to a reduction after the expiration of the last valid claim of a Novartis patent or the introduction of a generic equivalent of a product in a country.

On July 27, 2021, the Company sent Novartis a termination notice.

Termination automatically took effect on September 25, 2021, 60 days from the date of delivery of the termination notice to Novartis, without further notice of action required of either Novartis or the Company.

its rights to program antibodies to third parties.

The Company may terminate the Twist Agreement at any time, with or without cause, upon a specified period advance written notice.

Per the terms of the agreement, the Company will pay Twist an upfront, non-refundable project initiation fee, a technology access fee, as well as a project fee for each project entered into under the agreement.

Additionally, the Company will pay fees for development and regulatory milestones in the tens of millions of dollars and low single digit royalties on net sales to Twist for programs initiated under the agreement.

In November 2022, the Company entered into an amendment to the Twist Agreement (the Twist Amendment).

The Twist Amendment updates the language associated with Twist's audit rights as well as the amounts associated with technology access fees.

On a cumulative basis as of December 31, 2022 , the Company has incurred and expensed $ 1.0 million related to project initiation fees, technology access fees and projects fees as research and development expense related to this agreement.

License, Funding and Other Agreements

National Institute of Health

In May 2019, resTORbio was awarded a 5 -year grant for up to $ 1.5 million from the NIH to study RTB101 and the regulation of antiviral immunity in the elderly.

resTORbio is entitled to use the award solely to conduct the research and is solely responsible for commencing and conducting the research and will furnish periodic progress updates to the NIH throughout the term of the award.

After completing the research, resTORbio must provide the NIH with a formal report describing the work performed and the results of the research.

For funds received under the NIH funding agreement, resTORbio recognizes a reduction in research and development expenses in an amount equal to the qualifying expenses incurred in each period up to the amount funded by the NIH.

Qualifying expenses incurred by resTORbio in advance of funding by the NIH are recorded in the consolidated balance sheets as other current assets.

For the year ended December 31, 2021, $ 0.4 million qualifying expenses have been incurred and $ 0.5 million have been funded by the NIH.

The difference in the amount incurred by the Company and funded by the NIH was due to timing of requesting reimbursements from the NIH.

In May 2019, the Company was awarded a 5 -year grant for up to $ 1.5 million from the National Institutes of Health (the NIH) to study RTB101 and the regulation of antiviral immunity in the elderly.

The Company is entitled to use the award solely to conduct the research.

The Company is solely responsible for commencing and conducting the research and will furnish periodic progress updates to the NIH throughout the term of the award.

After completing the research, the Company must provide the NIH with a formal report describing the work performed and the results of the research.

For funds received under the NIH funding agreement, the Company recognizes a reduction in research and development expenses in an amount equal to the qualifying expenses incurred in each period up to the amount funded by the NIH.

Qualifying expenses incurred by the Company in advance of funding by the NIH are recorded in the consolidated balance sheets as other current assets.

For the twelve months ended December 31, 2022 , no qualifying expenses have been incurred and no thing has been funded by the NIH.

On a cumulative basis as of December 31, 2022 , $ 1.3 million has been incurred and $ 1.3 million has been funded by the NIH.

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Operating Leases

The Company leases office and laboratory space in Menlo Park, CA, Redwood City, CA, and Boston, MA.

As of December 31, 2021, except as described below, there have been no material changes in lease obligation from those disclosed in Note 12 to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

On June 25, 2021, the Company entered into an amendment to the Menlo Park lease to extend the term of the lease from March 31, 2022 to June 30, 2022 and replace the previously leased premises (known as 173 and 175-177 Jefferson Drive) with another nearby premises (known as 235 Constitution Drive).

The lease commenced on July 15, 2021 and expires on June 30, 2022 .

In connection with these changes, the Company will incur monthly rent payments ranging from $ 87,286 to $ 89,904 , increasing over the remaining term of the lease.

Given the lease is short-term in nature, the Company is using the practical expedient for the lease and has not recorded a right of use asset or lease liability.

Therefore, the Company will recognize rent expense on a straight-line basis over the lease term.

On July 19, 2021, the Company entered into a Sublease (the Sublease Agreement) with RFS OPCO LLC (Sublessee), whereby the Company agreed to sublease to Sublessee all of the 9,501 rentable square feet of office space in Boston, MA, currently leased by the Company pursuant to the Company’s lease with 500 Boylston & 222 Berkeley Owner (DE) LLC, dated January 8, 2018, as amended (the Master Lease).

The term of the sublease started on September 1, 2021 and ends on July 30,

The Company leases office and laboratory space in Redwood City, CA, and Boston, MA.

On October 31, 2018, Adicet Therapeutics executed a non-cancelable lease agreement for an office and laboratory facility at 1000 Bridge Parkway, Redwood City, California (the Redwood City Lease), with an expiration date of February 28, 2030.

The initial annual base rent for the Redwood City Lease is an aggregate of $ 1.3 million, and such amount will increase 3 % annually.

On June 16, 2022, Adicet Therapeutics entered into a second lease amendment with Westport Office Park, LLC (the Second Amendment).

The Second Amendment further amends the lease agreement, dated as of October 31, 2018, as amended on December 30, 2020, for the premises located at 1000 Bridge Parkway in Redwood City, CA.

The Second Amendment expands the space leased by Adicet Therapeutics at 1000 Bridge Parkway to include a portion of 1200 Bridge Parkway, increasing Adicet Therapeutics’

leased space by 12,204 square feet (the Expansion Space).

Adicet Therapeutics will pay a monthly fee for the Expansion Space increasing annually from $7 3,000 to $ 78,000 over the thirty-six (36) month term of the Second Amendment.

The Second Amendment also provides Adicet Therapeutics with an allowance to construct improvements to the Expansion Space.

The initial right-of-use asset and operating lease liability for 1200 Bridge Parkway at lease commencement was $ 2.3 million.

On January 9, 2023, Adicet Therapeutics entered into a third lease amendment with Westport Office Park, LLC (the Third Amendment).

The Third Amendment further amends the lease agreement, dated as of October 31, 2018, as amended on December 30, 2020 and June 16, 2022, for the premises located at 1000 Bridge Parkway.

The Third Amendment increases the tenant improvement allowance as of January 1, 2023 for an additional $ 3.0 million, and the Company expects to utilize the full allowance for the continued buildout of office and laboratory space at 1000 Bridge Parkway.

Per the terms of this amendment,

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

this additional allowance will be repaid through equal monthly payments of principal amortization and interest on a monthly basis over the term of the lease at an interest rate of eight percent ( 8 %) per annum.

The Company received the allowance on February 21, 2023.

On January 8, 2018, the Company entered into a lease agreement for office space at 500 Boylston St, Boston, Massachusetts (500 Boylston Lease).

Under the terms of the 500 Boylston Lease, the Company rented 4,544 square feet of office space with an expiration date on February 28, 2021.

The base monthly rent increased annually from $ 18,933 to $ 19,691 over the term of the lease.

This lease was amended on April 1, 2019 to expand the office space to 9,501 square feet and extend the term of the lease until July 31, 2026 (500 Boylston St Amended Lease).

The base monthly rent under the 500 Boylston St Amended Lease increases annually from $ 49,089 to $ 55,282 .

Under the terms of this amended lease agreement, the Company was permitted to assign, sublease or transfer this lease, with the consent of the landlord.

The term of the sublease started on September 1, 2021 and ends on July 30, 2026.

The aggregate base rent due to the Company under the Sublease is approximately $ 3.5 million starting October 1, 2021.

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The expected undiscounted cash flows to be received from the sublease as of December 31, 2022 is as follows (in thousands):

2026 and thereafter

The Company recognized rent expense, net of sublease income, of $ 3.9 million and $ 4.3 million for the years ended December 31, 2022 and 2021, respectively.

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Remaining Terms

Redwood City, CA

Menlo Park, CA

Redwood City, CA (1000 Bridge Parkway)

Redwood City, CA (1200 Bridge Parkway)

Weighted Average

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2022 and 2021:

(in thousands)

Year ended December 31,

Operating lease cost

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Operating cash flows used for lease liabilities

Operating lease right of use asset obtained in exchange of operating lease liability

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022 , operating right-of-use assets were $ 20.3 million and operating lease liabilities were $ 21.0 million.

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Operating lease liability, net of current maturities

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

The Company maintains letters of credit of $ 4.1 million, $ 0.2 million, and $ 0.2 million in connection with the Company’s office leases in Redwood City, CA, Menlo Park, CA, and Boston, MA, respectively.

As of December 31, 2021, the cash amount associated with the Menlo Park Lease is recorded as restricted cash on the consolidated balance sheet.

As of December 31, 2020, all cash amounts are recorded as restricted cash on the consolidated balance sheet.

The Company maintains letters of credit of $ 4.1 million and $ 0.2 million in connection with the Company’s office leases in Redwood City, CA and Boston, MA, respectively.

As of December 31, 2021, all cash amounts were recorded as restricted cash on the consolidated balance sheet.

As of December 31, 2022, these cash amounts are no longer restricted.

Indemnification Agreements

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liability insurance.

Legal Proceedings

In connection with the Merger, seven lawsuits were filed against the Company, its directors, Former Adicet, and/or Merger Sub.

which were either dismissed or settled for of $ 0.2 million in the fourth quarter of 2020.

Stockholders' Equity

Common stockholders are entitled to dividends if and when declared by the Board of Directors subject to the prior rights of the preferred stockholders.

As of December 31, 2021 and 2020, no dividends on common stock had been declared by the Board of Directors.

In February 2021, the Company completed an underwritten public offering of 10,575,513 shares of its common stock at a public offering price of $ 13.00 per share.

The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses of approximately $ 128.8 million.

In connection with the February 2021 offering, the Company also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840 shares of our common stock for $ 15.0 million at a price per share equal to the public offering price, with an initial closing for investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

In December 2021, the Company closed an underwritten public offering, or the December 2021 Follow-On Offering, of 7,187,500 shares of its common stock at a public offering price of $ 14.00 per share.

The Company received net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses of approximately $ 94.2 million.

The Company’s Certificate of Incorporation, as amended, authorized the Company to issue 150,000,000 shares of $ 0.0001 par value common stock as of December 31, 2022.

Common stockholders are entitled to dividends if and when declared by the Board of Directors of the Company subject to the prior rights of the preferred stockholders.

As of December 31, 2022 , no dividends on common stock had been declared by the Board of Directors.

The Company has the following shares of common stock reserved for future issuance:

Stock options available for future grant

Stock options and restricted stock units available for future grant

Stock options issued and outstanding

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Warrants to Purchase Shares of Common Stock

In February 2021, PacWest exercised 5,301 warrants, which resulted in the net issuance was 1,806 shares of common stock.

The following provides a roll forward of outstanding warrants:

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Outstanding and exercisable warrants to purchase

preferred shares as of December 31, 2020

Outstanding and exercisable warrants to purchase

common stock as of December 31, 2021

As of December 31, 2021, the Company's outstanding warrants to purchase shares of common stock consisted of the following:

In April 2022, a warrant holder exercised 220,890 warrants at an exercise price of $ 11.32 per warrant, which resulted in a net issuance of 100,731 shares to the warrant holder.

There was no cash received by the Company as a result of this transaction.

The following provides a roll forward of outstanding warrants to purchase common stock as of December 31, 2022:

Issuance Date

Stock Issuable

Classification

Expiration Date

September 15, 2020

July 25, 2026

September 15, 2020

August 21, 2026

September 15, 2020

September 19, 2026

September 15, 2020

September 26, 2026

At-the-Market (ATM) Offering

On December 1, 2020, the Company entered into a Sales Agreement (the 2020 Sales Agreement) with Evercore Group L.L.C.

Wainwright & Co., LLC (collectively, the Agents), pursuant to which the Company may sell, from time to time, at its option, up to an aggregate of $ 50.0 million of shares of the Company’s common stock, through the Agents, as its sales agents.

No sales of Shares have been made under the 2020 Sales Agreement.

The ATM offering was terminated in February 2021 .

On March 12, 2021, the Company entered into a Sales Agreement (the 2021 Sales Agreement) with JonesTrading Institutional Services (the Agent), pursuant to which the Company could sell, from time to time, at its option, up to an aggregate of $ 75.0 million of shares of its common stock, through the Agent, as its sales agent.

No shares were sold under the 2021 Sales Agreement as of December 31, 2021.

Number of Shares of Common Stock Issuable

Weighted Average Exercise Price

Weight Average Contractual Term (Years)

Outstanding, December 31, 2021

Warrants issued

Warrants exercised

Outstanding, December 31, 2022

Stock-Based Compensation

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Total stock-based compensation

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

Summary of Plans

The Plans are administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors.

The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years.

Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over four years.

Non-statutory options granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years.

Shares that are expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards.

In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

The 2017 Plan and 2018 Plan

In 2017, resTORbio adopted the 2017 Plan.

In connection with resTORbio’s initial public offering completed in January 2018, the resTORbio Board adopted and resTORbio’s stockholders approved the 2018 Plan.

The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by 4 % of the outstanding number of shares of resTORbio’s common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board.

On April 27, 2021, the stockholders approved an amendment and restatement of the 2018 Stock Option and Incentive Plan, to, among other things, increase the aggregate number of shares authorized for issuance under the 2018 Plan by 1,500,000 shares, plus on January 1, 2022 and each January 1, thereafter, the number of shares authorized for issuance shall be increased by the lesser of 5% of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31, or such lesser number as determined by the compensation committee.

On January 1, 2022, the number of shares reserved and available for issuance under the 2018 Plan automatically increased by 1,986,845 shares of Common Stock equal to 5 % of the number of shares of Common Stock issued and outstanding on December 31, 2021.

Since the date of effectiveness of the 2018 Plan, resTORbio has not and the Company will not grant any further awards under the 2017 Plan.

However, any shares of common stock subject to awards under the 2017 Plan that expire, terminate, or otherwise are surrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock being issued will become available for issuance under the 2018 Plan.

As of December 31, 2021, there are no outstanding options under the 2017 Plan.

As of December 31, 2021, the number of shares of common stock available for grant under the 2017 and 2018 Plan is 1,683,999 .

As of December 31, 2021, an aggregate of 2,574,170 shares of common stock were issuable upon the exercise of outstanding stock options under the 2017 Plan and 2018 Plans at a weighted average exercise price of $ 15.10 per share.

In addition to this amount, as of December 31, 2021, 771,660 shares of common stock were issuable upon the vesting of 6,410 performance stock units (PSUs) granted in May 2021, 205,250 RSUs granted in August 2021, and 560,000 RSUs and PSUs granted in October 2021.

The 2014 Plan and 2015 Plan

As of December 31, 2021, the number of shares of common stock available for grant under the 2014 and 2015 Plan is 277,339 .

As of December 31, 2021, an aggregate of 915,657 shares of common stock were issuable upon the exercise of outstanding stock options under the 2015 plan at a weighted average exercise price of $ 11.46 per share and an aggregate of 22,987 shares of common stock were issuable upon the exercise of outstanding stock options under the 2014 Plan at a weighted average exercise price of $ 1.61 per share.

Since the date of effectiveness of the Merger, the Company has not and will not grant any further awards under the 2014 Plan.

The following table presents stock-based compensation expense by type of award (in thousands):

Year Ended December 31,

Stock Options

Restricted stock units (including performance-based RSUs)

Employee Stock Purchase Plan

The 2018 ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and increasing each January 1 thereafter through January 1, 2028, by the least of (i) 1 % of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31;

(ii) 77,703 shares or (iii) such number of shares as determined by the ESPP administrator.

On January 1, 2020, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 79,369 to 131,432 shares.

On January 1, 2021, as a result of the

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 131,432 to 524,775 .

During the 2021 Annual Meeting of the stockholders held on April 27, 2021, the stockholders approved an amendment and restatement of the Company's 2018 ESPP.

As a result, the Company increased the shares available for issuance under the 2018 ESPP to 524,775 shares.

For the year ended December 31, 2021 the Company issued a total of 15,667 shares under the 2018 ESPP.

Expense related to the issuance of such shares was less than $ 0.1 million.

No shares were issued under the 2018 ESPP during the year ended December 31, 2020.

Stock Options

A summary of stock option activity is set forth below (in thousands, except share and per share data):

Outstanding Awards

Term (in years)

(in thousands)

Outstanding, December 31, 2021

Options authorized

Options granted

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Vested and expected to vest, December 31, 2022

The fair value of each stock option was estimated at the date of grant using a Black-Scholes option-pricing model using the following assumptions:

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

The assumptions used in the Black Scholes Model to calculate stock-based compensation are as follows:

Year Ended December 31,

Expected volatility

Expected term (years)

5.5 - 6.1 years

0.9 - 6.1 years

77.4 % - 81.7 %

77.2 % - 79.8 %

Risk-free interest rate

Risk free rates

1.6 % - 4.22 %

0.1 % - 1.4 %

Dividend yield

Expected term

0.90 - 6.08 years

1.00 - 6.08 years

Dividend rate

The fair value of each stock option was estimated at the date of grant using a Black-Scholes option-pricing model using the following assumptions:

The assumptions are as follows:

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The Company will continue to use judgment in evaluating the expected volatility, risk-free interest rates, dividend yield and expected term, utilized for stock-based compensation on a prospective basis.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money at December 31, 2022 and 2021.

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Restricted Stock Units

The following table presents a summary of the Company's RSU activity and related information:

In October 2021, the Company granted 560,000 RSUs with service and performance conditions to certain employees, 448,000 of which vested during the year ended December 31, 2022.

Vesting of these awards is contingent on the occurrence of certain milestone events and fulfilment of any remaining service condition.

As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable.

The Company determined that the achievement of the milestone was considered probable as of December 31, 2021.

The expense recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of units granted.

The aggregate fair

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

value at of these RSU's as of the grant date was $ 4.5 million and the Company recognized $ 1.6 million and $ 2.2 million of related expense during the years ended December 31, 2021 and 2022, respectively.

Number of Units Outstanding

Weighted Average

Grant Date Fair Value

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Outstanding, December 31, 2022

In May 2021, the Company granted 6,410 RSUs with service and performance conditions to an employee, none of which vested during the year ending December 31, 2021.

Vesting of these awards is contingent on the occurrence of certain milestone events and fulfilment of any remaining service condition.

As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable.

The expense recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of units granted.

The Company recognized less than $ 0.1 million of related expense during the year ended December 31, 2021.

In October 2021, the Company granted 560,000 RSUs with service and performance conditions to certain employees, none of which vested during the year ended December 31, 2021.

Vesting of these awards is contingent on the occurrence of certain milestone events and fulfilment of any remaining service condition.

As a result, the related compensation cost is recognized as an expense when achievement of the milestone is considered probable.

The expense recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of units granted.

The Company recognized $ 1.6 million of related expense during the year ended December 31, 2021.

The Company did no t grant any RSU's in 2022.

The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2021 was $ 7.84 .

There was no RSU activity during the year ended December 31, 2020.

Additionally, no RSUs vested during the year ended December 31, 2021.

As of December 31, 2021, there was approximately $ 4.1 million of unrecognized compensation cost related to unvested RSUs that the Company expects to recognize over a remaining weighted-average period of approximately 1.3 years.

The following table presents stock-based compensation expense by type of award (in thousands):

Year Ended December 31,

Stock Options

Restricted stock units (including performance-based RSUs)

As of December 31, 2022, there was approximately $ 1.1 million of unrecognized compensation cost related to unvested RSUs including performance-based RSUs that the Company expects to recognize over a remaining weighted-average period of approximately 0.7 years.

Summary of Plans

The Company has a 2014 Share Option Plan (the 2014 Plan), 2015 Stock Incentive Plan (the 2015 Plan), 2017 Stock Incentive Plan (the 2017 Plan), 2018 Stock Incentive Plan (the 2018 Plan), 2018 Employee Stock Purchase Plan (the 2018 ESPP), and 2022 Inducement Plan (the Inducement Plan, and, collectively with the 2014 Plan, the 2015 Plan, the 2017 Plan, the 2018 Plan and the 2018 ESPP, the Plans).

The Plans are administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors or by the Chief Executive Officer.

The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100 % of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years.

Non-statutory options granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years.

Shares that are expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards.

In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

The 2014 Plan and 2015 Plan

As of December 31, 2022 , the number of shares of common stock available for grant under the 2014 Plan and 2015 Plan is 118,172 shares.

As of December 31, 2022 , an aggregate of 979,195 shares of common stock were issuable upon the exercise of outstanding stock options under the 2015 Plan at a weighted average exercise price of $ 12.06 per share and an aggregate of 22,987 shares of common stock were issuable upon the exercise of outstanding stock options under the 2014 Plan at a weighted average exercise price of $ 1.61 per share.

The 2017 Plan and 2018 Plan

As of December 31, 2022 , the number of shares of common stock available for grant under the 2017 Plan and 2018 Plan is 2,656,933 shares.

As of December 31, 2022 , an aggregate of 3,798,935 shares of common stock were issuable upon the exercise of outstanding stock options under the 2017 Plan and 2018 Plan at a weighted average exercise price of $ 14.88 per share.

Additionally, as of December 31, 2022 , there were 194,375 restricted stock units and 3,205 performance stock units outstanding under the 2017 and 2018 Plan.

2018 Employee Stock Purchase Plan

On January 1, 2022, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 Employee Stock Purchase Plan (ESPP) automatically increased from 524,775 shares to 922,144

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2022 and 2021, 46,597 shares and 15,667 shares were issued under the 2018 ESPP, respectively.

As of December 31, 2022 , 859,880 shares of common stock were available for issuance under the 2018 ESPP.

Inducement Grants

As of December 31, 2022 , the number of shares of common stock available for grant under the Inducement Plan is 96,600 shares and an aggregate of 903,400 shares of common stock were issuable upon the exercise of inducement grants of stock options, approved by the Company in accordance with Nasdaq listing Rule 5635(c)(4) and granted under the Inducement Plan, at a weighted average exercise price of $ 15.00 per share.

In addition, as of December 31, 2022 , an aggregate of 498,503 shares of common stock were issuable upon the exercise of inducement grants of stock options, approved by the Company in accordance with Nasdaq listing Rule 5635(c)(4) prior to establishing the Inducement Plan, at a weighted average exercise price of $ 15.38 per share.

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

Year Ended December 31,

Net loss attributable to common stockholders

Weighted-average shares used in computing net loss

per share attributable to common stockholders,

basic and diluted

Net loss per share attributable to common stockholders,

basic and diluted

The Company's potentially dilutive shares, which include outstanding stock options, unvested RSUs, and unexercised warrants 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.

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

Net loss - basic and diluted

Weighted-average shares used in computing net loss per share, basic and diluted

Net loss per share, basic and diluted

The Company's potentially dilutive shares as of December 31, 2022 and 2021, which include outstanding stock options and unvested RSUs, 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.

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the period presented because including them would have been antidilutive:

As of December 31,

Options to purchase common stock

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The components of the provision for (benefit from) income taxes are as follows (in thousands):

Years Ended December 31,

Total current

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Provision for (benefit from) income taxes

Income tax benefit of $ 0.1 million for the year ended December 31, 2021 is primarily due to the adjustment in deferred tax liability arising from the impairment charge of $ 1.2 million of acquired IPR&D.

In contrast, the income tax benefit of $ 2.8 million for the year ended December 31, 2020 was primarily due to a the recognition of a net operating loss carryback under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which was enacted on March 27, 2020 in response to the COVID-19 pandemic.

For the rate table below the (provision for) benefit from income taxes differ from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

There was no income tax expense nor benefit for the year ended December 31, 2022 .

For the rate table below the (provision for) benefit from income taxes differ from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

Year Ended December 31,

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State income taxes

Federal benefit from NOL carryback

Change in valuation allowance

Change in fair value of redeemable convertible preferred stock tranche liability and TRDF liability

162m limitation

Stock-based compensation

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Accruals and reserves

Sec 174 Capitalized R&D

Research and development credit carryforwards

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The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

IRC Section 174, as modified by the Tax Cuts and Jobs Act of 2017, no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are incurred.

As a result the Company capitalized such costs in its 2022 income tax provision, resulting in an increase in deferred tax assets.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.”

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Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

The valuation allowance increased by $ 15.5 million during 2021 and $ 37.9 million during 2020.

The valuation allowance increased by $ 16.3 million and $ 15.5 million during the years ended December 31, 2022 and 2021, respectively.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022 , the Company had net operating loss carryforwards of $ 271.2 million, $ 143.2 million, and $ 17.8 million to reduce future taxable income, if any, for federal, state and foreign income tax purposes, respectively.

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The state carryforwards will begin to expire in 2035.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

The Company also had approximately $ 5.5 million of federal and $ 3.4 million of California research and development tax credit carryforwards available to offset future taxable income as of December 31, 2022.

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Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period.

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

Further, until a study is completed and any limitation is known, no liability related to uncertain tax positions is recorded in the consolidated financial statements.

The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.

If the Company has experienced an ownership change, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation.

As of December 31, 2022, the ownership change analysis has not been completed, however no material tax attributes are expected to be limited for full use before their respective carryforward periods expires.

The Company files income tax returns in the United States federal jurisdiction, California, Massachusetts, New York and Israel.

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Balance at the beginning of the year

Adjustment based on tax positions related to prior year

Adjustment based on tax positions related to current year

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Management determined that no accrual for interest and penalties was required as of December 31, 2022 .

Defined Contribution Plan

The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time United States employees.

Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations.

During the year ended December 31, 2021 the Company made aggregate matching contributions of $ 0.3 million.

The Company did no t make contributions to the 401(k) plan during 2020.

Related Party Transactions

As of December 31, 2022, Regeneron owned 883,568 shares of the Company's common stock.

Regeneron became a related party in July 2019 as a result of Series B redeemable convertible preferred stock financing.

Upon closing the Merger, 7,125,552 shares of the redeemable convertible preferred stock converted into 883,568 shares of the Company’s common stock.

Regeneron became a related party in July 2019 as a result of a Series B redeemable convertible preferred stock financing.

For the years ended December 31, 2022 and 2021, the Company recorded revenue related to the Regeneron Agreement of $ 25.0 million and $ 9.7 million, respectively.

As of December 31, 2021, the Company recorded less than $ 0.2 million in accounts receivable and has deferred revenue of $ 4.8 million related to the Regeneron Agreement (See Note 10).

Subsequent Events

Regeneron Option

At-the-Market (ATM) Offering

On March 12, 2021, the Company entered into a Sales Agreement (Initial Sales Agreement) with JonesTrading Institutional Services LLC, as sales agent, to provide for the offering, issuance and sale of up to an aggregate amount of $ 75.0 million of common stock from time to time in ATM offerings under a registration statement on Form S-3 (File No.

333-254193) filed with the SEC, which was declared effective on March 30, 2021.

On November 8, 2022, the Initial Sales Agreement was amended (Amended Sales Agreement) to cover the offer and sales of up to $ 100.0 million of shares of the Company’s common stock.

The Amended Sales Agreement includes $ 30.0 million of shares of the Company’s common stock not sold pursuant to the Initial Sales Agreement and up to an additional $ 70.0 million of shares of the Company’s common stock.

In August 2022, pursuant to the Initial Sales Agreement and subject to the limitations thereof, the Company sold an aggregate of 2,611,723 shares of common stock at $ 17.23 per share resulting in net proceeds to the Company of $ 43.4 million after deducting sales agent commissions and expenses.

Adicet Bio, Inc.

Notes to Consolidated Financial Statements

On January 28, 2022, Regeneron exercised its option to license the exclusive, worldwide rights to ADI-002, an allogeneic gamma delta chimeric antigen receptor (CAR) T cell therapy directed against Glypican-3, pursuant to the Regeneron Agreement.

In conjunction with the exercise of the Option, Regeneron paid an exercise fee of $ 20.0 million to the Company on January 28, 2022.

Pursuant to the Regeneron Agreement, upon Regeneron’s exercise of the option, the Company had a specified period of time to elect to co-fund ADI-002’s future development costs, and to participate in any potential profits with Regeneron up to a specified co-funding percentage in various geographic regions, including on a worldwide basis (Co-Funding Option).

Adicet elected not to exercise its Co-Funding Option for ADI-002.

Defined Contribution Plan

The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time United States employees.

Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations.

During the years ended December 31, 2022 and December 31, 2021, the Company made aggregate matching contributions of $ 0.8 million and $ 0.3 million, respectively.

Subsequent Events

On March 13, 2023, the Company and PacWest executed a letter agreeing that, notwithstanding the covenants included in the 2022 Loan Amendment, until June 30, 2023 (i) the Company and its subsidiaries will not be required to maintain the lesser of $200 million or seventy percent (70%) of its combined balances in demand deposit accounts, money market funds and/or insured cash sweep (ICS) accounts with PacWest and (ii) the Company must maintain its combined balances at PacWest or its affiliates, including Pacific Western Asset Management (the “Letter”).

At all times following June 30, 2023, the Company will again be required to comply with the terms of the 2022 Loan Amendment.

Upon executing the Letter, the Company wired $ 187.2 million from its ICS accounts at PacWest to Pacific Western Asset Management who subsequently invested the funds into money market funds held in custody with U.S.

Bank National Association.

The Company’s remaining balance of approximately $ 10.0 million of funds held in demand deposit accounts and ICS accounts with PacWest represents approximately 4 % of its cash and cash equivalents as of the issuance date of these consolidated financial statements.

EXHIBIT INDEX

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333-222373) filed with the SEC on December 29, 2017).

Specimen Common Stock Certificate

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

Stock Purchase Agreement, dated February 12, 2021, by and among the Registrant and the Investors named therein (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form 8-K, as amended (File No.

001-38359) filed with the SEC on February 16, 2021).

Loan and Security Agreement, dated as of April 28, 2020, by and between Pacific West Bank and Adicet Therapeutics, Inc.

Loan and Security Agreement, dated as of April 28, 2020, by and between Pacific Western Bank and Adicet Therapeutics, Inc.

(incorporated by reference to Exhibit 10.26 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

First Amendment to Loan and Security Agreement, dated as of July 8, 2020, by and between Pacific West Bank and Adicet Therapeutics, Inc.

First Amendment to Loan and Security Agreement, dated as of July 8, 2020, by and between Pacific Western Bank and Adicet Therapeutics, Inc.

(incorporated by reference to Exhibit 10.32 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

Second Amendment to Loan and Security Agreement, dated as of September 14, 2020, by and between Pacific West Bank and Adicet Therapeutics, Inc.

Second Amendment to Loan and Security Agreement, dated as of September 14, 2020, by and between Pacific Western Bank and Adicet Therapeutics, Inc.

(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

Third Amendment to Loan and Security Agreement, dated as of September 15, 2020, by and between Pacific West Bank and Adicet Therapeutics, Inc.

Third Amendment to Loan and Security Agreement, dated as of September 15, 2020, by and between Pacific Western Bank and Adicet Therapeutics, Inc.

(incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

Change Order No.

1, dated September 23, 2021, by and between Adicet Therapeutics, Inc.

and CP Enterprises, Inc.

d/b/a CP Construction (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on March 24, 2022).

Change Order No.

2, dated March 18, 2022, by and between Adicet Therapeutics, Inc.

and CP Enterprises, Inc.

d/b/a CP Construction (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on March 24, 2022).

Change Order No.

3, dated March 18, 2022, by and between Adicet Therapeutics, Inc.

and CP Enterprises, Inc.

d/b/a CP Construction (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on March 24, 2022).

Second Amendment to Lease, dated as of June 16, 2022, between Adicet Therapeutics, Inc.

as Tenant, and Westport Office Park, LLC, as Landlord (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on June 21, 2022).

Antibody Discovery Agreement, dated as of March 23, 2021, by and between the Registrant and Twist Bioscience Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38359) filed with the SEC on November 8, 2022).

First Amendment to Antibody Discovery Agreement, dated as of November 8, 2022, by and between the Registrant and Twist Bioscience Corporation.

Fourth Amendment to Loan and Security Agreement, dated as of October 21, 2021, between Adicet Therapeutics, Inc.

1 unchanged sentence

001-38359) filed with the SEC on October 25, 2021).

Fifth Amendment to Loan and Security Agreement, dated as of December 2, 2022, between Adicet Therapeutics, Inc.

and Pacific Western Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on December 8, 2022).

Form of Warrant to Purchase Common Stock issued to Beech Hill Securities, dated September 15, 2020 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K (File No.

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001-38359) filed with the SEC on October 25, 2021).

Amended and Restated 2018 Stock Option and Incentive Plan and forms of award agreements thereunder.

Amended and Restated 2018 Stock Option and Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

2017 Stock Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1, as amended, (File No.

333-222373) filed with the SEC on January 16, 2018) .

Adicet Therapeutics, Inc.

2015 Stock Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.13 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

Amended and Restated 2018 Employee Stock Purchase Plan.

Adicet Bio, Inc.

2022 Inducement Plan and forms of award agreements thereunder.

Form of Employment Agreement.

Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.

Amended and Restated Non-Employee Director Compensation Policy.

Amended and Restated Senior Executive Cash Incentive Bonus Plan.

Lease Agreement, dated as of October 31, 2018, by and between Adicet Therapeutics, Inc.

Amended and Restated 2018 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

2022 Inducement Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

First Amendment to the 2022 Inducement Plan.

Form of Employment Agreement (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 15, 2022).

Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

Amended and Restated Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K (File No.

001-38359) filed with the SEC on March 15, 2022).

Lease Agreement, dated as of October 31, 2018, by and between Adicet Bio, Inc.

as Tenant, and Westport Office Park, LLC as Landlord (incorporated by reference to Exhibit 10.23 to the Registrant’s Current Report on Form 8-K (File No.

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001-38359) filed with the SEC on January 5, 2021).

Office Lease Agreement, dated as of January 8, 2018, by and between the Registrant and 500 Boylston and 222 Berkeley Owner (DE) LLC (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1, as amended, (File No.

Third Amendment to Lease, dated as of January 9, 2023, by and between Adicet Therapeutics, Inc.

as Tenant, and Westport Office Park, LLC as Landlord.

Office Lease Agreement, dated as of January 8, 2018, by and between resTORbio, Inc.

and 500 Boylston and 222 Berkeley Owner (DE) LLC (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1, as amended, (File No.

333-222373) filed with the SEC on January 16, 2018).

First Amendment to Office Lease, dated as of April 1, 2019, by and between the Registrant and 500 Boylston and 222 Berkeley Owner (DE) LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

First Amendment to Office Lease, dated as of April 1, 2019, by and between resTORbio, Inc.

and 500 Boylston and 222 Berkeley Owner (DE) LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38359) filed with the SEC on May 15, 2019).

Sublease Agreement, dated as of July 19, 2021, between the Registrant and RFS Opco LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

Sublease Agreement, dated as of July 19, 2021, by and between Adicet Bio, Inc.

and RFS Opco LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on July 23, 2021).

Third Amendment to Business Park Lease, dated as of June 25, 2021, between the Registrant and Facebook, Inc.

Third Amendment to Business Park Lease, dated as of June 25, 2021, by and between Adicet Bio, Inc.

and Facebook, Inc.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on July 1, 2021).

Second Amendment to Business Park Lease, dated as of October 19, 2020, between the Registrant and Facebook, Inc.

Second Amendment to Business Park Lease, dated as of October 19, 2020, by and between Adicet Bio, Inc.

and Facebook, Inc.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on July 1, 2021).

Amendment to Business Park Lease, dated as of September 2019, between Adicet Therapeutics, Inc.

Amendment to Business Park Lease, dated as of September 2019, by and between Adicet Bio, Inc.

Bohannon Organization (incorporated by reference to Exhibit 10.25 to the Registrant’s Current Report on Form 8-K (File No.

001-38359) filed with the SEC on September 16, 2020).

Business Park Lease, dated as of September 30, 2015, by and between Adicet Therapeutics, Inc.

Business Park Lease, dated as of September 30, 2015, by and between Adicet Bio, Inc.

Bohannon Organization (incorporated by reference to Exhibit 10.24 to the Registrant’s Current Report on Form 8-K (File No.

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001-38359) filed with the SEC on September 16, 2020).

License and Collaboration Agreement, dated as of July 29, 2016, by and between Adicet Therapeutics, Inc.

License and Collaboration Agreement, dated as of July 29, 2016, by and between Adicet Bio, Inc.

and Regeneron Pharmaceuticals, Inc.

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Amendment No.

1 to License and Collaboration Agreement, dated as of April 24, 2019, by and between Adicet Therapeutics, Inc.

1 to License and Collaboration Agreement, dated as of April 24, 2019, by and between Adicet Bio, Inc.

and Regeneron Pharmaceuticals, Inc.

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Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

Not applicable.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures