What changed in this filing

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Item 9A. Controls and Procedures

2023-03-13 compared with 2022-03-31 · 501 added, 443 removed, 654 unchanged (59% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officers and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022.

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Management’s Annual Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm as permitted in this transition period under the rules of the SEC for newly public companies.

Remediation of Prior Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the consolidated financial statements will not be prevented or detected on a timely basis.

We previously identified and disclosed in our Registration Statement on Form S-1 filed with the SEC on December 16, 2021, a material weakness related to deficiencies in the design of controls over the expenditures process.

Specifically, our information technology controls related to the expenditures cycle were not designed to post invoices approved in the correct period, and our controls over the review of the completeness of operating expenses during our close cycle were not appropriately designed, as we lacked sufficient personnel in our Finance and IT organizations to review and provide reasonable assurance that transactions were being recorded timely and completely.

During 2021, we implemented the following changes to our processes to improve our internal controls over financial reporting with respect to the expenditures cycle as follows:

a) Corrected the system issue to post invoices in the proper period;

b) Added IT and Finance personnel to our organization;

c) Augmented our controls addressing the completeness of operating expenses.

These actions resulted in an improved internal control environment that was in place for a period of time to allow for our management to conclude, based on evidence obtained in validating the design and implementation of these controls, that we have fully remediated this material weakness as of December 31, 2021.

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.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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 of compliance with the policies or procedures may deteriorate.

As of December 31, 2022, we assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting under the 2013 “Internal Control—Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Based on such assessment, our management concluded that we maintained effective internal control over financial reporting as of December 31, 2022.

Changes in Internal Control over Financial Reporting

Other than the changes noted above related to the remediation of our material weakness, there was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During the year ended December 31, 2022, we began generating revenue from the sale of ALBRIOZA in Canada and RELYVRIO in the U.S.

We consider the accounting for our product revenue to be material to our results of operations in future periods, and believe that the additional internal controls and procedures relating to the accounting for product revenue, and related commercial inventory, have a material effect on our internal control over financial reporting.

Other than described

above, there was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

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333-261703) filed with the Securities and Exchange Commission on December 16, 2021).

Description of Securities.

Description of Securities (Incorporated by reference to Exhibit 4.3 to the Registrant’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).

2015 Stock Option and Incentive Plan, and form of award agreements thereunder (Incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/A (File No.

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333-261703) filed with the Securities and Exchange Commission on December 16, 2021).

Amendment to Employment Agreement, effective as of December 1, 2022, by and between the Company and Patrick Yeramian (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2022).

Form of Employment Agreement, between the Registrant and Gina Mazzariello

List of Subsidiaries of Registrant.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document –

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Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

+ Furnished herewith.

This certification will not be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

Such certification will not be deemed to be

incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

# Indicates a management contract or any compensatory plan, contract or arrangement.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

AMYLYX PHARMCEUTICALS, INC.

AMYLYX PHARMACEUTICALS, INC.

March 13, 2023

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Paul Fonteyne, M.S., M.B.A.

/s/ Isaac Cheng

March 31, 2022

Isaac Cheng, M.D.

/s/ Daphne Quimi

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Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’

Equity (Deficit )

Consolidated Statements of Cash Flows

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and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’

deficit, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the 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 each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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Prepaid expenses and other current assets

Accounts receivable, net

Deferred offering costs

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Property and equipment, net

Restricted cash

Restricted cash equivalents

Operating lease right-of-use assets

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Current liabilities:

Accounts payable

Accrued expenses

Accrued expenses and other current liabilities

Operating lease liabilities, current portion

Total current liabilities

Operating lease liabilities, net of current portion

Deferred rent

Accrued interest

Proceeds received in advance of issuance of 2021 Notes

Total liabilities

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Series A redeemable convertible preferred stock, $ 0.0001 par value;

shares authorized as of December 31, 2021 and 2020;

6,289,609 shares issued

and outstanding as of December 31, 2021 and 2020;

aggregate liquidation

preference of $7,730

0 and 6,289,609

shares authorized, issued and outstanding as of December 31, 2022 and 2021, respectively

Series B redeemable convertible preferred stock, $ 0.0001 par value;

shares authorized as of December 31, 2021 and 2020;

14,496,835 shares issued

and outstanding as of December 31, 2021 and 2020;

aggregate liquidation

preference of $246,070

Series C-1 redeemable convertible preferred stock, $0.0001 par value;

0 and 15,100,000

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shares issued and outstanding as of December 31, 2022 and 2021, respectively

aggregate liquidation preference of $135,000 and $0 as of December 31, 2021 and

2020, respectively

Series C-1 redeemable convertible preferred stock, $ 0.0001 par value;

and 0 shares authorized as of December 31, 2021 and 2020, respectively;

3,170,585 and 0 shares issued and outstanding as of December 31, 2021 and

2020, respectively;

aggregate liquidation preference of $27,666 and $0 as of

December 31, 2021 and 2020, respectively

0 and 13,150,430

shares authorized, issued and outstanding as of December 31, 2022 and 2021, respectively

Series C-2 redeemable convertible preferred stock, $ 0.0001 par value;

0 and 3,170,585

shares authorized, issued and outstanding as of December 31, 2022 and 2021, respectively

Stockholders’

equity (deficit):

Preferred stock, $ 0.0001 par value;

10,000,000 and 0 shares authorized as of

December 31, 2022 and 2021, respectively;

0 shares issued

or outstanding as of December 31, 2022 and 2021

Common stock, $ 0.0001 par value;

300,000,000 and 56,500,000 shares

authorized as of December 31, 2021 and December 31, 2020, respectively;

7,020,487 and 6,137,206 shares issued and outstanding as of December 31,

2021 and 2020, respectively

authorized as of December 31, 2022 and 2021, respectively;

66,512,011 and 7,020,487

shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Accumulated other comprehensive (loss) income

Total stockholders’

equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’

equity (deficit)

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

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Year Ended December 31,

Product revenue, net

Grant revenue

Total revenues

Operating expenses:

Cost of sales

Research and development

General and administrative

Selling, general and administrative

Total operating expenses

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Interest income

Interest expense

Change in fair value of derivative liability

Change in fair value of convertible notes

Other (expense) income, net

Total other expense, net

Other expense, net

Total other income (expense), net

Loss before income taxes

Provision for income taxes

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

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Year Ended December 31,

Other comprehensive income (loss):

Foreign currency translation adjustment, net of tax of $0 for the years

ended December 31, 2021 and 2020

Unrealized loss on short-term investments, net of tax of $0 for the years

ended December 31, 2021 and 2020

Other comprehensive loss

Other comprehensive (loss) income:

Foreign Currency translation adjustment

Unrealized loss on short-term investments

Other comprehensive (loss) income

Comprehensive loss

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CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’

EQUITY (DEFICIT)

(in thousands, except share data)

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Stockholders’

Income (Loss)

Equity (Deficit)

Balance as of

December 31, 2020

Issuance of Series B

Issuance of Series C-1

redeemable convertible

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notes and accrued

interest into Series B

redeemable convertible

preferred stock

Recognition of contingent

beneficial conversion

interest into Series

C-2 redeemable

convertible preferred

stock, net of issuance cost

Issuance of common

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compensation expense

Other comprehensive loss

Balance as of

December 31, 2021

Issuance of Series C-1

redeemable convertible

preferred stock, net of

issuance costs of $209

Conversion of convertible

notes and accrued

interest into Series

C-2 redeemable

convertible preferred

stock, net of issuance cost

Conversion of preferred stock into common stock upon initial public offering

Issuance of common stock upon initial public offering, net of issuance costs of $ 19,639

Issuance of common stock upon follow-on offering, net of issuance costs of $ 15,719

Issuance of common

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Adjustments to reconcile net loss to net cash used in operating activities:

Change in fair value of derivative liability

Non-cash interest expense

Stock-based compensation expense

Depreciation expense

Net amortization of premiums and discounts on investments

Gain on extinguishment of convertible notes

Amortization (accretion) of investment premiums (discounts)

Change in fair value of convertible notes

Changes in operating assets and liabilities:

Accounts receivable, net

Interest receivable

Prepaid expenses and other current assets

Operating lease right-of-use assets

Accounts payable

Accrued expenses and deferred rent

Operating lease liabilities

Accrued interest and accrued interest—related parties

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Purchases of investments

Investment matured

Proceeds from maturities of short-term investments

Net cash used in investing activities

Cash flows from financing activities:

Cash flows provided by financing activities:

Repayment and proceeds from PPP loan

Proceeds from initial public offering

Proceeds from follow-on offering

Initial public offering costs paid

Follow-on offering costs paid

Proceeds from issuance of convertible notes—related parties

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Issuance costs related to conversion of convertible notes

Proceeds from issuance of Series B redeemable convertible preferred

stock, net of issuance costs

Proceeds from issuance of Series C-1 redeemable convertible preferred

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Proceeds from exercise of stock options

Proceeds received in advance of issuance of 2021 Notes

Payment of deferred offering costs

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents

Net increase in cash, cash equivalents and restricted cash equivalents

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

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

Supplemental disclosure of cash flow information:

Recognition of initial derivative liability and associated debt discount

Conversion of convertible notes into Series B redeemable convertible

preferred stock

Conversion of convertible notes and accrued interest into Series C-2

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Purchases of property and equipment included in accounts payable

Deferred offering costs included in accounts payable and accrued

Deferred offering costs included in accounts payable and accrued expenses

Right-of-use assets and liabilities upon ASC 842 adoption

Right-of-use assets obtained in exchange for lease liabilities

Movement of deferred offering costs to equity

Follow-on offering costs included in accounts payable and accrued expenses

Conversion of preferred stock to common stock upon initial public offering

Income taxes paid

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

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Nature of Business

Amylyx Pharmaceuticals, Inc.

(“Amylyx”) was incorporated under the laws of the State of Delaware on January 10, 2014.

The Company has two subsidiaries, Amylyx Pharmaceuticals Canada, Inc.

(“Amylyx Canada”) and Amylyx Pharmaceuticals EMEA B.V ("Amylyx EU", and together with “Amylyx”

and "Amylyx Canada", the “Company”).

The Company is headquartered in Cambridge, Massachusetts.

The Company is a clinical stage biotechnology company with a goal to improve the quality and length of life of patients suffering from neurodegenerative disease.

The Company is pursuing commercialization of its asset, AMX0035, which it believes is the first drug candidate to show both a functional and survival benefit in a large-scale clinical trial of patients with amyotrophic lateral sclerosis, or ALS.

The Company believes AMX0035 has the potential to be a foundational therapy, meaning a that it could be used alone or in conjunction with other therapies to change the treatment paradigm across a broad range neurodegenerative diseases.

The Company has designed AMX0035 to target two key pathways of neuron death, specifically endoplasmic reticulum, or ER, stress and mitochondrial dysfunction.

The Company is focused on the development of and potential commercialization of AMX0035 for ALS globally.

In addition, the Company is developing AMX0035 for other neurodegenerative diseases by leveraging its unique knowledge and relationships in the neurodegenerative space.

Amylyx Pharmaceuticals, Inc., together with its wholly owned subsidiaries, known as Amylyx or the Company, is a commercial-stage biotechnology company with a mission to one day end the suffering caused by neurodegenerative diseases.

The Company is focused on the development and potential global commercialization of its product candidate, AMX0035 (sodium phenylbutyrate and taurursodiol, also known as ursodoxicoltaurine) for the treatment of amyotrophic lateral sclerosis, or ALS.

Our first product, RELYVRIO® (sodium phenylbutyrate and taurursodiol), previously known as AMX0035 in the U.S., is approved in the U.S.

for the treatment of ALS in adults.

AMX0035 is also approved with conditions by Health Canada and marketed as ALBRIOZA for the treatment of ALS in Canada.

The Company’s Marketing Authorisation Application, or MAA, for AMX0035 for the treatment of ALS remains under review by the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA.

The Company is developing AMX0035 for other neurodegenerative diseases by leveraging its unique knowledge and relationships in the neurodegenerative space.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, the outcome of clinical trials, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, ability to secure additional capital to fund operations, and risks associated with the COVID-19 global pandemic, including potential delays associated with the Company’s ongoing and anticipated trials.

COVID-19 may have an adverse impact on the Company’s operations, supply chains and distribution systems or those of its contractors, and increase expenses, including as a result of impacts associated with preventive and precautionary measures that are being taken, such as restrictions on travel and border crossings, quarantine polices and social distancing.

The Company and its contractors may experience disruptions in supply of items that are essential for its research and development activities, including, for example, raw materials and bulk drug substances that the Company imports from Europe and Canada used in the manufacturing of AMX0035, and any future product candidates.

In addition, the spread of COVID-19 has disrupted global healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially delay, U.S.

Food and Drug Administration (“FDA”) approval and approval by other health authorities worldwide with respect to AMX0035 and any future product candidates.

Furthermore, the Company’s clinical trials may be negatively affected by the COVID-19 outbreak.

Site initiation, patient enrollment and patient follow-up visits may be delayed, for example, due to prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions, the inability to access sites for initiation and monitoring, and difficulties recruiting or retaining patients in the Company’s ongoing and planned clinical trials.

There can be no assurance that the Company will be able to successfully complete the development of, or receive regulatory approval for, any products developed, and if approved, that any products will be commercially viable.

Any products resulting from the Company’s current research and development efforts will require significant additional research and development, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.

These efforts will require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance reporting capabilities.

The Company has not generated any revenues from the sale of any products to date.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company is subject to risks and uncertainties common to companies in the biotechnology industry, including, but not limited to, the outcome of preclinical studies and clinical trials, market acceptance and the successful commercialization of ALBRIOZA, which received marketing authorization with conditions in Canada in June 2022, and RELYVRIO, which was approved by the FDA in the U.S.

in September 2022, potential difficulties with or delays in timing with respect to the regulatory approval processes of the EMA and other comparable foreign authorities, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, ability to secure additional capital to fund operations, and risks associated with the economic challenges caused by the COVID-19 pandemic and economic uncertainty in various global markets caused by geopolitical instability and conflict.

The Company and its contractors may experience disruptions in supply of items that are essential for its research and development and commercial activities, including, for example, raw materials and bulk drug substances that the Company imports from Europe and Canada used in the manufacturing of AMX0035, and any future product candidates.

Going Concern

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued.

Since its inception, the Company has devoted substantially all of its efforts to research and development activities, including recruiting management and technical staff, raising capital, producing materials for non-clinical and clinical studies, and building infrastructure to support such activities.

Expenses have primarily been for research and development and related general and administrative costs.

The Company has generated revenues through five grants from ALS Association, ALS Finding a Cure Foundation, Cure Alzheimer’s Fund, Alzheimer’s Drug Discovery Foundation and Alzheimer’s Association (collectively, the “Grantors”).

In addition to money received from its grants, the Company has also financed its operations through the issuance of redeemable convertible preferred stock and convertible notes (see Notes 9 and 7, respectively).

In addition, the Company has financed its operation pursuant to the loan under the Paycheck Protection Program, or the PPP, of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (the “PPP Loan”) as administered by the SBA (See Note 6).

Subsequently in January 2021, the Company completed an initial public offering of its common stock (see Note 17).

In accordance with Accounting Standards Update, or ASU, 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued.

Since its inception, the Company has devoted substantially all of its efforts to research and development and pre-commercialization activities, including recruiting management and technical staff, raising capital, producing materials for preclinical studies and clinical trials, and building infrastructure to support such activities.

Expenses have primarily been for research and development and related general and administrative costs, and we anticipate that our selling, general and administrative expenses will continue to increase in the future as we further increase our headcount to support our continued research activities and development of AMX0035 and as we continue to increase headcount and incur other significant costs related to our commercialization activities.

The Company has generated revenues through five grants from the ALS Association, ALS Finding a Cure Foundation, Cure Alzheimer’s Fund, Alzheimer’s Drug Discovery Foundation and Alzheimer’s Association, or Grantors.

In addition to money received from its grants, the Company has also financed its operations through the public offering of its common stock, private sales of preferred stock, and convertible notes, and more recently through revenue from sales of RELYVRIO and ALBRIOZA in the U.S.

and Canada, respectively.

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has incurred recurring losses and negative cash flows from operations since inception.

As of December 31, 2021, the Company had an accumulated deficit of $155.8 million.

The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to build capabilities and develop AMX0035, and any future product candidates.

The Company expects that its cash, cash equivalents and short-term investments as of December 31, 2021 will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these consolidated financial statements.

As of December 31, 2022, the Company

had an accumulated deficit of $ 354.2 million .

The Company expects its operating losses and negative operating cash flows may continue into the future as it continues initial sales of ALBRIOZA in Canada and RELYVRIO in the U.S., and continues to build capabilities and develop AMX0035, and any future product candidates.

The Company expects that its cash, cash equivalents and short-term investments as of December 31, 2022 , and product revenue from RELYVRIO and ALBRIOZA sales, will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these consolidated financial statements.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation—

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP, and include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASU of the Financial Accounting Standards Board (“FASB”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and ASU of the Financial Accounting Standards Board, or FASB.

Use of Estimates—

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Estimates are used in the following areas, among others:

determining the fair value of the Company’s common stock;

determining the fair value of derivative liabilities;

determining the fair value of convertible notes;

accrued expenses;

stock option valuations;

valuation allowance for deferred tax assets and research and development expenses.

Gross-to-net, or GTN, adjustments, inventory, determining the fair value of convertible notes, accrued expenses, stock-based compensation, operating lease right-of-use assets and lease liabilities, valuation allowance for deferred tax assets and research and development expenses.

Revenue recognition—

In June 2022, AMX0035 received marketing authorization with conditions as ALBRIOZA by Health Canada for the treatment of ALS, and the Company launched ALBRIOZA in Canada in July 2022.

In September 2022, AMX0035 received approval as RELYVRIO by the FDA for the treatment of ALS in adults, and the Company launched RELYVRIO in the U.S.

in October 2022.

The Company enters into arrangements with wholesalers, specialty pharmacies and specialty distributors, or Customers, to distribute ALBRIOZA, RELYVRIO and future approved products.

In accordance with ASC Topic 606 - Revenue from Contracts with Customers , or Topic 606, revenue is recognized when the customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services.

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

(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will collect the consideration the Company expects to be entitled to in exchange for the goods or services the Company transfers to its customer.

At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

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.

Product Revenue, Net

The Company sells its approved products to its Customers.

These Customers subsequently resell our products to specialty pharmacy providers, other retail pharmacies, health care providers, certain medical centers or hospitals, and patients.

In addition to agreements with the Customers, the Company enters into arrangements with specialty pharmacies, health care providers and payors that provide for government mandated and/or privately negotiated rebates with respect to the purchase of our products.

The Company’s customer identification process considers a number of factors, including contractual and legal factors, and who controls the Company’s product and bears inventory risk.

The Company evaluates

these factors on a customer-by-customer basis to determine the appropriate customer for revenue recognition purposes.

In some cases, the Company may use a third-party logistics providers to deliver the Company’s product to its customers, but the Company recognizes revenue upon delivery to the customer, as its determined that the third-party logistics provider is acting as our agent.

Changes in these factors or our assumptions regarding these factors could impact our revenue recognition

The Company recognizes revenue on product sales when the Customer obtains control of our product, which occurs at a point in time (upon delivery).

Product revenues are recorded net of applicable GTN adjustments, which are described below.

If taxes should be collected from Customers relating to product sales and remitted to governmental authorities, they will be excluded from revenue.

The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less.

However, no such costs were incurred during the years ended December 31, 2022 and 2021.

GTN Adjustments

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration related to certain GTN adjustments.

Components of GTN adjustments include trade discounts and allowances, product returns, third-party payor rebates, and other allowances that are offered within contracts between the Company, its Customers and payors relating to the sale of our products.

These GTN adjustments, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer).

These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

In certain circumstances, the Company applies the most likely method in Topic 606 .

The determination to use the expected value method or the most likely method is based on the type of GTN adjustment and what method better predicts the amount of consideration we expect to be entitled to.

Overall, these GTN adjustments reflect in the transaction price the amount of consideration to which the Company expects to be entitled to in exchange for transferring promised goods or services to its Customers.

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.

Actual amounts of consideration ultimately received may differ from our estimates.

If actual results in the future vary from our estimates, the Company will adjust these estimates, which would affect product revenue, net and earnings in the period such variances become known.

Trade Discounts and Allowances

The Company generally provides Customers with prompt payment discounts and pay fees for distribution services and for certain data that distributors provide to us that are explicitly stated in our contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.

Payment from Customers is typically due within 30 calendar days of the invoice date, without consideration to the prompt payment discounts.

Product Returns

Consistent with industry practice, the Company generally offers Customers a limited right of return for product that has been purchased from the Company based on the product’s expiration date, which is set to lapse within a specified period stated in the contract.

Additionally, our limited right of return policy allows for eligible returns from Customers in circumstances where product was shipped in error or was damaged in shipping, or product was returned pursuant to an official drug recall.

The Company estimates the amount of product sales that may be returned by our Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as reductions to accounts receivable, net on the consolidated balance sheets.

The Company currently estimates returns using quantitative and qualitative information including, but not limited to, expected experience with returns, projected demand, levels of inventory in the distribution channel, product dating and expiration period, and whether products have been discontinued, among

The Company has received an immaterial amount of returns to date and believe that returns of product in future periods will be minimal.

Provider Chargebacks and Discounts

Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company.

Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers.

These GTN adjustments are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable, net.

GTN adjustments for chargebacks consist of credits that Customers have not claimed, but for which we expect to issue for units that remain in the distribution channel inventories at each reporting period-end that we expect will be sold to qualified healthcare providers, and chargebacks that Customers have claimed, but for which we have not yet issued a credit.

Payor Rebates

The Company contracts with certain government and private payor organizations, primarily government and commercial health insurance companies, for the payment of rebates with respect to utilization of our products.

The Company is subject to discount obligations under state Medicaid programs and Medicare.

These GTN adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets.

For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program.

The Company's liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.

Other Incentives

Other incentives which the Company offers include voluntary patient assistance programs, such as its co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payors.

The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue for each reporting period.

The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities on the consolidated balance sheets.

Grant Revenue—

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Alternatively, if the Company is not required to repay, or if it is required to repay the grant funds only if the research and development activities are successful, then the grant agreement is accounted for as a contract to perform research and development services for others, in which case, grant revenue is recognized as the related research and development expenses are incurred.

The Company obtained funding from the Grantors of $0.3 million and $0.7 million during the years ended December 31, 2021 and 2020, respectively, which was recorded as grant revenue in the Company’s consolidated statements of operations.

The Company obtained funding from the Grantors of zero and $ 0.3 million during the years ended December 31, 2022 and 2021 , respectively, which was recorded as grant revenue in the Company’s consolidated statements of operations.

Under the terms of the grants, the Company will be required to pay royalties upon occurrence of contingent future events (see Note 18).

Comprehensive Income (Loss)—

Comprehensive Loss—

Comprehensive loss includes net loss, as well as other changes in stockholders’

deficit that result from transactions and economic events other than those with stockholders.

Comprehensive loss is composed of net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) consists of unrealized gains and losses on marketable securities and foreign currency translation.

equity (deficit) that result from transactions and economic events other than those with stockholders.

Comprehensive loss is composed of net loss and other comprehensive (loss) income.

Other comprehensive (loss) income consists of unrealized gains and losses on marketable securities and foreign currency translation.

Cash and Cash Equivalents—

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Cash equivalents represent funds invested in readily available checking and money market funds.

Restricted Cash—

As of December 31, 2021 and 2020, the Company maintained a restricted cash account with a balance of $0.2 million.

The restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate office.

The lease expires in October 2026 at which time the cash will be released from restriction.

Restricted Cash Equivalents—

Restricted cash equivalents consist of $ 0.2 million of cash serving as collateral for a letter of credit issued for the Company’s office space, and $ 0.5 million as collateral for a corporate credit card program.

As of December 31, 2022 and 2021, the Company’s restricted cash equivalents balance was $ 0.7 million and $ 0.2 million, respectively.

Accounts receivable, net—

The Company’s accounts receivable consists of amounts due from Customers related to product sales and have standard payment terms.

The Company analyzes accounts that are past due for collectability.

Given the nature collectability of the Company’s accounts receivable to-date, an allowance for doubtful accounts is not deemed necessary at December 31, 2022 and 2021 .

Short-Term Investments—

Short-term investments are composed of corporate debt securities and commercial paper with maturities of less than one year from the balance sheet date.

Short-term investments are composed of treasury notes and bills, corporate debt securities, commercial paper and agency bonds with maturities of less than one year from the balance sheet date.

The Company classifies all of its short-term investments as available-for-sale.

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The cost of short-term investments is adjusted for amortization of premiums and accretion of discounts until maturity.

Such amortization and accretion are included in other income, net.

Realized gains and losses are included in other income, net.

Such amortization and accretion are included in interest income.

Realized gains and losses are included in other expense, net.

The Company evaluates short-term investments for other-than-temporary impairment at the balance sheet date.

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When assessing short-term investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, and the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general.

As of December 31, 2021, there were no impairment charges on short-term investments.

As of December 31, 2022 and 2021 , there were no impairment charges on short-term investments.

Concentrations of Credit Risk—

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable, net.

The Company maintains its cash in financial institutions that it believes have high credit quality.

The Company has not experienced any losses on such accounts, and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company’s accounts receivable, net at December 31, 2022, represents amounts due to the Company from customers.

Amylyx performs ongoing credit evaluations of its customers and generally does not require collateral.

The Company monitors its exposure and records a reserve against uncollectible amounts as necessary.

Four customers individually accounted for approximately 97 % of total gross product revenue in 2022 and three customers individually accounted for approximately 98 % of total accounts receivable, net as of December 31, 2022.

Convertible Note—Derivative—

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Convertible Note—Beneficial Conversion Feature—

If the conversion feature is not treated as a derivative, the Company assesses whether it is a beneficial conversion feature (“BCF”).

If the conversion feature is not treated as a derivative, the Company assesses whether it is a beneficial conversion feature, or BCF.

A BCF exists if the conversion price of the convertible note is less than the price of the stock into which it is convertible to on the commitment date.

This typically occurs when the conversion price is less than the fair value of the stock on the date the instrument was issued.

The value of a BCF is equal to the intrinsic value of the feature, the difference between the effective conversion price and the fair value of the stock into which it is convertible to and is recorded as additional paid-in capital and as a debt discount in the consolidated

balance sheets.

The Company amortizes the debt discount as non-cash interest expense over the life of the underlying convertible note using the effective interest method.

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s financial instruments consist of cash, cash equivalents, restricted cash, short-term investments, accounts payable, accrued expenses and convertible notes.

The Company’s short-term investments are carried at fair value, determined according to Level 2 inputs to the fair value hierarchy described above.

The Company’s 2021 Notes (as defined in Note 7) and derivative liability is carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above (see Note 8).

The Company’s financial instruments consist of cash, cash equivalents, restricted cash equivalents, short-term investments, accounts receivable, net, accounts payable and accrued expenses.

The Company’s short-term investments are carried at fair value, determined according to Level 1 and Level 2 inputs to the fair value hierarchy described above.

The Company’s 2021 Notes (as defined in Note 8) were carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above.

The remaining financial instruments are stated at their respective carrying amounts, which approximate fair value due to the short-term nature of these assets and liabilities.

Inventories—

The Company values its inventories at the lower of cost or estimated net realizable value.

The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified.

Such impairment charges, should they occur, are recorded within cost of sales.

The determination of whether inventory costs will be realizable requires estimates by management.

If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as cost of sales in the consolidated statements of operations.

The Company capitalizes inventory costs associated with the Company’s products after regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized.

Inventory acquired prior to receipt of regulatory approval of a product candidate is expensed as research and development expense as incurred.

Inventory that can be used in either the production of clinical or commercial product is initially capitalized and subsequently expensed as research and development expense when materials are released to production for use in the manufacture of drugs still in development.

Deferred Offering Costs—

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings, including the initial public offering (IPO), as deferred costs until such financings are consummated.

until such financings are consummated.

After consummation of the equity financing, these costs are recorded in stockholders’

deficit as a reduction of proceeds generated as a result of the offering.

Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and consolidated statements of comprehensive loss.

The Company recorded deferred offering costs of $3.4 million, which are included in the consolidated balance sheet as of December 31, 2021.

equity (deficit) as a reduction of proceeds generated as a result of the offering.

Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

After consummation of equity financings, the Company recorded deferred offering costs in stockholders’

equity (deficit) of $ 5.5 million and zero for the years ended December 31, 2022 and 2021 , respectively.

The Company recorded deferred offering costs of zero and $ 3.4 million, which are included in the consolidated balance sheet as of December 31, 2022 and 2021 , respectively.

Property and Equipment, net—

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value.

The Company has not recognized any impairment losses in the years ended December 31, 2021 and 2020.

The Company has no t recognized any impairment losses in the years ended December 31, 2022 and 2021 .

Research and Development—

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In addition, research and development-related salaries and benefits, facility, and overhead costs, supplies and other related costs are included in research and development expense.

Sales and Marketing Costs—

Sales and marketing expenses consist primarily of wages and benefits for sales and marketing personnel, professional and consulting fees, administrative travel expenses, and marketing and advertising costs such as marketing literature, promotional activities, conferences and seminars and branding.

Sales and marketing costs are expensed as incurred and included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Patent-Related Costs—

Patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

Amounts incurred are classified as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

Amounts incurred are classified as selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

Stock-Based Compensation Expense—

The Company accounts for stock-based compensation under the provisions of ASC 718-10, Compensation—Stock Compensation , which requires all share-based payments to employees, non-employees and directors, including grants of stock options and restricted stock, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values on the date of grant over the requisite service period, which is generally the vesting period of the respective award.

The Company accounts for stock-based compensation under the provisions of ASC 718-10, Compensation—Stock Compensation , which requires all share-based payments to employees, non-employees and directors, including grants of stock options and restricted stock, to be recognized in the consolidated statements of operations based on their fair values on the date of grant over the requisite service period, which is generally equal to the vesting period of the respective award.

Forfeitures are accounted for as they occur.

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends.

As there is no public market for the Company’s common stock, the estimated fair value of common stock was determined by the Company’s Board of Directors as of the date of each option grant, with input from management, considering third-party valuations of its common stock as well as the Company’s Board of Directors’

assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’

Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation .

The Company estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies.

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There is no expected dividend yield since the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The stock price of the Company is based on the closing price on the date of grant.

Prior to the IPO, as there was no public market for the Company’s common stock, the estimated fair value of common stock was determined by the Company’s Board of Directors as of the date of each option grant, with input from management, considering third-party valuations of its common stock as well as the Company’s Board of Directors’

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’

Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation .

Contingencies—

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Leases—

The Company adopted the FASB, ASC 842, Leases, or ASC 842, on January 1, 2022.

ASC 842 allows the Company to elect a package of practical expedients, which include:

(i) an entity need not reassess whether any expired or existing contracts are or contain leases;

(ii) an entity need not reassess the lease classification for any expired or existing leases;

and (iii) an entity need not reassess any initial direct costs for any existing leases.

Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset.

The Company has elected to utilize this package of practical expedients and has not elected the hindsight methodology in its implementation of ASC 842.

The Company leases its offices, and may from time to time, enter into other lease agreements in conducting its business.

At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease in accordance with ASC 840, Leases (ASC 840) .

When any one of the four test criteria in ASC 840 is met, the lease then qualifies as a capital lease.

If the lease agreements contain renewal options, tenant

improvement allowances, rent holidays or rent escalation clauses, the Company records a deferred rent asset or liability equal to the difference between the rent expense and future minimum lease payments due.

The rent expense related to operating leases is recognized on a straight-line basis in the statements of operations over the term of each lease.

The Company did not have capital leases as of December 31, 2021 and 2020.

The Company determines if an arrangement includes a lease at the inception of the agreement.

For each of the Company’s lease arrangements, the Company records a right-of-use asset representing the Company’s right to use an underlying asset for the lease term and a lease liability representing the Company’s obligation to make lease payments.

Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the net present value of the remaining future minimum lease payments over the lease term.

If the interest rate implicit in the Company’s leases is not readily determinable, in determining the weighted-average discount rate used to calculate the net present value of lease payments, the Company utilizes an estimate of its incremental borrowing rate based on market sources including interest rates for companies with similar credit quality for agreements of similar duration, determined by class of underlying asset, to discount the lease payments.

Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term and variable lease costs are expensed as incurred.

The Company elected the practical expedient not to apply the recognition and measurement requirements to short-term leases, which is any lease with a term of one year or less as of the lease commencement date.

The lease may require the Company to pay additional amounts for taxes, insurance, maintenance, and other expenses, which are generally referred to as non-lease components.

The Company has elected the practical expedient to combine lease and non-lease components.

If a lease includes options to extend the lease term, the Company does not assume the option will be exercised in its initial lease term assessment unless there is reasonable certainty that the Company will renew based on an assessment of economic factors present as of the lease commencement date.

Prior to the adoption of ASC 842, at the inception of each lease, the Company evaluated the lease agreement to determine whether the lease was an operating or capital lease in accordance with ASC 840, Leases (ASC 840) .

When any one of the four test criteria in ASC 840 was met, the lease then qualified as a capital lease.

If the lease agreements contained renewal options, tenant improvement allowances, rent holidays or rent escalation clauses, the Company recorded a deferred rent asset or liability equal to the difference between the rent expense and future minimum lease payments due.

expense related to operating leases was recognized on a straight-line basis in the statements of operations over the term of each lease.

The Company did not have financing leases as of December 31, 2022 and 2021 .

Income Taxes—

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To date, the Company has not incurred interest and penalties related to uncertain tax positions.

Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of December 31, 2022 , we continued to maintain a full valuation allowance against all of our deferred tax assets based on management’s evaluation of all available evidence, including our history of incurring significant losses from operations.

Our evaluation of all available evidence also includes consideration of regulatory approvals of ALBRIOZA and RELYVRIO, including revenue generated from the sale these products in 2022.

Given the early stage of our product launch, we are uncertain about the timing and amount of future sales.

We may release all or a portion of the valuation allowance in the near-term;

however, the release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, our level of profitability, revenue growth, clinical program progression and expectations regarding future profitability.

Segment Information—

An operating segment is defined as a component of a business that engages in business activities for which it may earn revenues and incur expenses and for which discrete financial information is available that is evaluated regularly by the chief operating decision maker or makers in order to make decisions about resources to be allocated to the segment and assess its performance.

The Company has determined that its chief executive officers are the chief operating decision maker (“CODM”).

The Company has determined that its CO-Chief Executive Officers are the chief operating decision makers, or CODM.

The CODM reviews consolidated operating results to make decisions about allocating resources or capital to specific compounds or projects in line with the Company’s overall strategies and goals.

The Company's entire business is managed by a single management team, which reports to the Chief Executive Officers.

The Company's entire business is managed by a single management team, which reports to the CO-Chief Executive Officers.

The Company has one operating segment which is the business of researching and developing therapeutics for neurodegenerative disorders.

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Emerging Growth Company Status—

The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs.

The Company is an emerging growth company, or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, and may take advantage of certain exemptions

from various reporting requirements that are applicable to other public companies that are not EGCs.

The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards.

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New Accounting Pronouncements Not Yet Adopted—

In February 2016, the FASB issued ASU No.

2016-02, Leases , as subsequently amended (collectively “ASC 842”).

The guidance amends the existing accounting standards for lease accounting, including requirements for lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expanding disclosure requirements regarding leasing arrangements.

Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statement of operations.

In July 2018, the FASB issued additional guidance, which offers a transition option to entities adopting ASC 842 in which entities can elect to apply the new guidance using a modified retrospective approach at the beginning of the year in which the new lease standard is adopted.

The Company currently expects to utilize this transition option whereby financial information for prior periods presented before the ASC 842 effective date will not be updated.

In November 2019, the FASB issued ASU 2019-10 deferring the effective date for private entities for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021.

In June 2020, the FASB issued ASU 2020-05 which further defers the effective date for private entities for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.

The Company expects to elect the available package of practical expedients which allows it to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of its leases, and the treatment of initial direct costs.

The Company also expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet.

The Company is continuing to evaluate developments within the new lease guidance and is finalizing its evaluation of its existing population of contracts to ensure all contracts that meet the definition of a lease contract under the new standard are identified.

The Company has assessed the impact that the adoption of this guidance will have on its financial statements and footnote disclosures.

The standard will have a material impact on the consolidated balance sheet related to the recognition of right-of-use assets and lease liabilities for operating leases.

The standard will not have a material impact on the consolidated statement of operations.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments , or ASU 2016-13.

The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

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Effective Dates , which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except Securities and Exchange Commission filers that are not smaller reporting companies.

ASU 2016-13 will be effective for the Company beginning January 1, 2023.

ASU 2016-13 will be effective for the Company for the period beginning January 1, 2023.

The Company intends to adopt the ASU when it becomes effective.

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Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”) , which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements.

The Company adopted this standard on January 1, 2020 and it did not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, " Income Taxes (Topic 740) :

Simplifying the Accounting for Income Taxes ," which is intended to enhance and simplify various aspects of the accounting for income taxes.

The amendments in this update remove certain exceptions to the general principles in ASC Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill.

The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements.

In August 2020, the FASB issued Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, (“ASU 2020-06”) .

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

ASU 2020-06 removes from U.S.

GAAP the separation models for (i) convertible debt with a cash conversion feature and (ii) convertible instruments with a beneficial conversion feature.

As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt.

Instead, the entity will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium.

In addition, the ASU also states that entities must apply the if-converted method to all convertible instruments for calculation of diluted earnings per share and the treasury stock method is no longer available.

The Company early adopted ASU 2020-06 on January 1, 2021 using the modified retrospective transition approach.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which provided codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements.

Additionally, changes to clarify the codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities were also included in this update.

The adoption of ASU 2020-10 on January 1, 2021 did not have a material effect on our consolidated financial statements.

Effective January 1, 2022, the Company adopted the requirements under the ASC 842 using the cumulative effect adjustment transition option.

Comparative periods have not been restated.

This standard requires entities that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on the balance sheet.

The Company elected the available package of practical expedients which allows it to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of its leases, and the treatment of initial direct costs.

The Company has made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet.

ASC 842 was issued in order to increase transparency and comparability of financial reporting related to leasing arrangements.

The main difference between previous GAAP, or ASC 840, and ASC 842 is the recognition of right-of-use lease assets and lease liabilities by lessees for those leases that were classified as operating leases under ASC 840.

At January 1, 2022, the Company recorded right-of-use assets of $ 2.2 million and operating lease liabilities of $ 2.2 million.

Adoption of the standard did not have a material impact on the consolidated statements of operations.

For additional information regarding how the Company is accounting for leases under ASC 842, refer to Note 10.

PRODUCT REVENUE, NET

To date, the Company’s only source of product revenue has been from the sales of RELYVRIO, known as ALBRIOZA in Canada, which it began shipping to Customers in Canada and the U.S.

in July 2022 and October 2022, respectively.

Significant judgment is required in estimating GTN adjustments considering historical experience, payer channel mix, current contract prices, unbilled claims, processing time lags, inventory levels in the distribution channel and estimated product returns.

The following table reconciles gross product revenue to net product revenue:

Year Ended December 31,

(in thousands)

Product revenue, gross

GTN adjustments

Product revenue, net

SHORT-TERM INVESTMENTS

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(in thousands)

Treasury notes

Treasury bills

Commercial paper

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Total short-term investments

As of December 31, 2021, all investments had contractual maturities within one year.

December 31, 2021

(in thousands)

Commercial paper

Corporate debt securities

Total short-term investments

As of December 31, 2022 and 2021 , all investments had contractual maturities within one year .

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts until maturity.

Such amortization and accretion are included in interest income.

There were no realized gains and losses recognized during the years ended December 31, 2022 and 2021.

The Company evaluates short-term investments for other-than-temporary impairment at the balance sheet date.

Declines in fair value, if any, determined to be other-than-temporary are also included in other income, net.

The Company has the ability to hold its investments until maturity and generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position.

As of December 31, 2022 and 2021 , there were no impairment charges on short-term investments.

Inventories consisted of the following:

(in thousands)

Raw materials

Work in process

Finished goods

Total inventories

Inventory on hand determined to not have a future economic benefit and acquired prior to receipt of the marketing authorization for ALBRIOZA in Canada, totaling approximately $ 22.9 million , was expensed as research and development expense as incurred.

The Company began to capitalize the costs determined to have a probable future economic benefit associated with the production of ALBRIOZA upon receipt of Health Canada approval in June 2022.

Finished goods have a shelf life of 12 - 15 months from the date of manufacture.

Of the inventories reported on balance sheet at December 31, 2022, the Company had $ 3.2 million of long-term raw materials that are not expected to be realized in cash, sold or consumed during the next 12 months.

Property and equipment, net

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Payroll and employee related expenses

Accrued legal and other professional fees

Manufacturing

Accrued consulting and other professional fees

Rebates and other GTN adjustments

Royalty payable

Other accrued expenses

Total accrued expenses

In April 2020, the Company obtained a PPP Loan from First Republic Bank in the aggregate amount of $0.3 million, which was established under the CARES Act.

Under the terms of the CARES Act and the PPP, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of the PPP Loan, the Company uses those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels.

The PPP Loan is unsecured, guaranteed by the SBA, and has a two-year term, maturing in April 2022.

Interest accrues on the PPP Loan beginning with the initial disbursement.

The application for the forgiveness of the PPP Loan can be made during an 8-week period beginning from the date of initial disbursement.

Unless forgiven in whole or in part in accordance with the PPP regulation, the terms of the PPP Loan provide for the Company to make monthly payments of the principal and interest on the outstanding principal balance of the PPP Loan equal to the balance of the PPP Loan amortized over the term of the PPP Loan beginning seven (7) months from the initial disbursement until maturity.

The terms of the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events.

The Company has determined to account for the PPP Loan as debt under ASC 470, Debt .

The PPP loan was repaid in full in October 2021.

As of December 31, 2021 and 2020, the outstanding balance of the PPP Loan was $0 and $0.3 million, respectively.

CONVERTIBLE NOTES

Convertible Notes

There were no convertible notes outstanding as of December 31, 2021 and 2020.

Issuance of the 2017 Notes, 2018 Notes, 2019 Notes and 2020 Notes (collectively, the “Notes”)

In July 2017, the Company commenced an offering to issue $2.3 million convertible notes (“2017 Notes”) to certain investors with a maturity date of December 31, 2021.

These 2017 Notes carried both a voluntary conversion feature and an automatic conversion feature.

The 2017 Notes were secured and carried an interest rate of 6%.

In November 2018, the Company commenced an offering to issue $13.0 million convertible notes (“2018 Notes”) with a maturity date of December 31, 2021.

These 2018 Notes carried both a voluntary conversion feature and an automatic conversion feature.

The 2018 Notes were secured and carried an interest rate of 6%.

In December 2019, the Company issued $0.6 million of convertible notes (“2019 Notes”) to certain investors with a maturity date of December 31, 2021.

These 2019 Notes carried an automatic conversion feature only.

The 2019 Notes were secured and carried an interest rate of 2%.

In January, February and April 2020, the Company issued, in aggregate, $15.4 million in convertible notes (“2020 Notes”) to certain investors with a maturity date of December 31, 2021.

These 2020 Notes carried an automatic conversion feature only.

The 2020 Notes were secured and carried an interest rate of 2%.

The Notes contained the following features:

Automatic Conversion Features —The Notes were to automatically convert into Conversion Shares upon (i) the sale of substantially all of the assets of the Company (“Asset Sale”), (ii) the occurrence of a transaction or series of transactions in which holders of 100% of the Company’s outstanding shares of stock immediately before such transaction held 50% or less of the outstanding shares of the Company’s stock or the surviving corporation immediately after such transaction (“Stock Sale”), and (iii) sale of equity securities of any kind after the issuance of the Notes for which the Company had received consideration of at least $5.0 million (“Financing”, and together with the Asset Sale and Stock Sale, collectively, “Triggering Events”).

In the event of an Asset Sale or Stock Sale, the Conversion Shares would be Common Stock of the Company.

In the event of a Financing event, the Conversion Shares would be the class of equity shares issued in such transaction.

Conversion Price —Upon the occurrence of a Triggering Event, the 2017 Notes would convert based on the amount equal to the lesser of (i) 85% of the share price paid by the investors in the Financing, Asset Sale or Stock Sale and (ii) $25.0 million divided by the fully diluted capital.

Upon the occurrence of a Triggering Event, the 2018 Notes, would convert based on the amount equal to the lesser of (i) 85% of the share price paid by the investors in the Financing, Asset Sale or Stock Sale and (ii) $30.0 million divided by the fully diluted capital.

Upon the occurrence of a Triggering Event, the 2019 and 2020 Notes would convert based on the amount equal to 90% of the share price paid by the investors in the Financing, Asset Sale or Stock Sale.

Voluntary Conversion Feature —Under the terms of the 2017 Notes, the holders of the 2017 Notes had the option to convert their notes at any time prior to maturity into shares of the Company’s common stock at a conversion price equal to the $25.0 million divided by the fully diluted capital, provided their notes had not been previously converted pursuant to a Triggering Event.

Under the terms of the 2018 Notes, the holders of the 2018 Notes had the option to convert their notes at any time prior to the maturity into shares of the Company’s common stock at a conversion price equal to the $30.0 million divided by the fully diluted capital, provided their notes had not been previously converted pursuant to a Triggering Event.

Embedded Derivatives

The Company assessed all the terms of the Notes in order to identify any potential embedded features and determined that the redemption features included in the Notes required bifurcation and separate accounting as derivatives.

The Company bundled these features together and accounted for the features as a single, compound embedded derivative.

The Company determined the fair value of the embedded derivative as the difference between the estimated fair value of the respective Notes with and without the redemption features, which resulted in the Company recording the respective Notes at a discount.

The fair value of the bifurcated embedded derivatives as of the respective issuance dates of the 2017 Notes, 2018 Notes, 2019 Notes and 2020 Notes was determined to be $0.3 million, $0.9 million, $0.2 million, and $4.6 million, respectively.

The Company amortized the debt discount over the contractual life of the Notes as a non-cash interest expense utilizing the effective interest method.

At each financial reporting period, and immediately prior to conversion, the Company remeasured the fair value of the derivative liability bifurcated from the Notes and recognized changes in the fair value of derivative liability in the statements of operations.

As of December 31, 2020, there was no derivative liability due to the conversion of the Notes in June 2020.

Conversion of the Notes

In June 2020, the Company consummated a financing transaction in which it issued shares of Series B redeemable convertible preferred stock.

The consummation of this financing transaction resulted in the automatic conversion of the Notes into shares of Series B redeemable convertible preferred stock pursuant to their original terms.

Immediately prior to

conversion of the Notes, the Company remeasured the fair value of the derivative liability bifurcated from the Notes and recognized changes in the fair value of derivative liability.

The Company recognized $1.3 million of net loss related to change in fair value of derivative liability in its consolidated statement of operations for the year ended December 31, 2020.

The 2017 Notes and 2018 Notes contained contingent beneficial conversion features, which were not readily determinable upon the issuance of the notes because the conversion features were contingent upon the occurrence of an undetermined future financing transaction and neither the timing, including the type of security that would be issued in such transaction, nor the value of such transaction could be estimated at the time the notes were issued.

Upon the automatic conversion of the 2017 Notes in connection with the consummation of the financing transaction that resulted in the issuance of the Series B redeemable convertible preferred stock, the Company initially recorded $0.6 million as a debt discount that was immediately recognized through interest expense with an offset to additional paid-in capital to reflect the contingent beneficial conversion feature associated with the conversion of the 2017 Notes into Series B redeemable convertible preferred stock.

The intrinsic value of the beneficial conversion feature was calculated as the difference between (i) the effective conversion price for the 2017 Notes, which was represented by the price at which the 2017 Notes converted into Series B redeemable convertible preferred stock and (ii) the fair value of the existing Series A redeemable convertible preferred stock at the original commitment date (which is the only class available to benchmark to).

Additionally, as the 2017 Notes included a contingent beneficial conversion feature, the Company recognized all of the unamortized discount remaining at the date of conversion relating to the original allocation of proceeds to the bifurcated derivative to interest expense.

This amounted to $0.1 million and resulted in an increase in the carrying value of the 2017 Notes and an immediate charge to non-cash interest expense in the consolidated statements of operations.

Also, there were no beneficial conversion features recorded for the Series B redeemable convertible preferred stock, which are convertible into common stock at any time, issued upon the conversion of the 2017 Notes as there was no intrinsic value.

Upon the automatic conversion of the 2018 Notes in connection with the consummation of the financing transaction that resulted in the issuance of the Series B redeemable convertible preferred stock, the Company did not record a beneficial conversion feature for the 2018 Notes as there was no intrinsic value attributed to the contingent beneficial conversion feature.

The fair value of the Series B redeemable convertible preferred stock issued upon conversion of the 2017 Notes and the proceeds allocated to the 2017 Notes were $46.5 million and $2.6 million, respectively.

The fair value of the Series B redeemable convertible preferred stock issued upon conversion of the 2018 Notes and the proceeds allocated to the 2018 Notes were $151.6 million and $13.7 million, respectively.

The Series B redeemable convertible preferred stock issued upon conversion of the Notes and in exchange for cash payment did not contain a recognized beneficial conversion feature at the time of issuance, but the shares do contain a contingent beneficial conversion feature to the extent the security’s conversion price decreases below the commitment date fair value of the Company’s common stock.

Upon conversion of the 2017 Notes and 2018 Notes, the Company derecognized the carrying values of these notes including accrued interest of $16.4 million and recognized Series B redeemable convertible preferred stock.

The Company accounted for the conversion of the 2019 Notes and 2020 Notes as an extinguishment as these notes converted pursuant to redemption features that were bifurcated as embedded derivatives at the original commitment date.

The Company recorded a gain on extinguishment of convertible notes of $0.3 million, which is included in other income, net in the consolidated statement of operations for the year ended December 31, 2020.

The gain on extinguishment of convertible notes is the excess of (i) the total carrying value of the 2019 Notes and 2020 Notes including accrued interest of $12.2 million and the derivative liability of $6.1 million over (ii) the fair value of the shares of Series B redeemable convertible preferred stock into which the 2019 Notes and 2020 Notes converted of $18.0 million.

Issuance of the 2021 Notes (the “2021 Notes”)

In January 2021, the Company issued, in aggregate, $27.3 million in convertible notes (“2021 Notes”) to certain investors, including related parties, of which proceeds of $1.2 million were received in advance of issuance of the 2021 Notes in December 2020 and the remaining proceeds of $26.1 million were received in January and February 2021.

Issuance of the 2021 Notes

In January 2021, the Company issued, in aggregate, $ 27.3 million in convertible notes, or 2021 Notes, to certain investors, including related parties, of which proceeds of $ 1.2 million were received in advance of issuance of the 2021 Notes in December 2020 and the remaining proceeds of $ 26.1 million were received in January and February 2021.

The 2021 Notes were to mature on June 30, 2022 and carried both automatic and optional conversion features.

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The 2021 Notes contained the following features:

Automatic Conversion Features —The 2021 Notes were to automatically convert into Conversion Shares upon (i) an IPO, (ii) any transaction in which the Company merges with, consolidates with or enters into other similar transaction with a Special Purpose acquisition Corp (“SPAC”), resulting in some or all of its shares being registered for sale under applicable securities laws and listed for trading on a national or foreign exchange (“De-SPAC transaction”), (iii) the acquisition of the Company by another person or entity by means of any transaction in which holders of the outstanding voting securities of the Company immediately before such transaction held less than 50% of the voting securities of the Company or the surviving corporation after such transaction or a sale of all or substantially all of the assets of the Company but excluding De-SPAC transaction, IPO, and the occurrence of equity financing in which the Company sold shares of its preferred stock for new money and which was neither an IPO or a Qualified Financing (“Change of Control”) and (iv) the closing of a sale of an equity transaction in which the Company sold shares with an aggregate gross proceeds of at least $10.0 million (“Qualified Financing”).

Automatic Conversion Features —The 2021 Notes were to automatically convert into Conversion Shares upon (i) an IPO, (ii) any transaction in which the Company merges with, consolidates with or enters into other similar transaction with a Special Purpose acquisition Corp, or SPAC, resulting in some or all of its shares being registered for sale under applicable securities laws and listed for trading on a national or foreign exchange, or De-SPAC transaction, (iii) the acquisition of the Company by another person or entity by means of any transaction in which holders of the outstanding voting securities of the Company immediately before such transaction held less than 50 % of the voting securities of the Company or the surviving corporation after such transaction or a sale of all or substantially all of the assets of the Company but excluding De-SPAC transaction, IPO, and the occurrence of equity financing in which the Company sold shares of its preferred stock for new money and which was neither an IPO or a Qualified Financing, or Change of Control, and (iv) the closing of a sale of an equity transaction in which the Company sold shares with an aggregate gross proceeds of at least $ 10.0 million, or Qualified Financing.

In the event of a Change of Control, De-SPAC transaction, or an IPO, the Conversion Shares would be common stock of the Company.

In the event of a Qualified Financing, the Conversion Shares would be shares of preferred stock issued in such transaction.

Optional Conversion Feature —The holders of the 2021 Notes had the option to elect to convert their notes into Conversion Shares at the Conversion Price upon the occurrence of an equity financing in which the Company sold shares of its preferred stock for new money and which was neither an IPO or a Qualified Financing (“Non-Qualified Financing”

and together with the IPO, De-SPAC transaction, Change of Control, and the Qualified Financing, collectively, the “Conversion Events”).

In the event of a Non-Qualified Financing, the Conversion Shares would be the class of equity shares issued in such transaction.

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In July 2021, the Company consummated a financing transaction in which it issued shares of Series C-1 redeemable convertible preferred stock.

The consummation of this financing transaction resulted in the automatic conversion of the 2021 Notes into shares of Series C-2 redeemable convertible preferred stock (together with the Series C-1 redeemable convertible preferred stock, the “Series C Preferred Stock”) pursuant to their original terms.

preferred stock, the “Series C Preferred Stock”) pursuant to their original terms.

The Series C Preferred Stock was determined to have a fair value of $ 10.265809 .

2 unchanged sentences

The 2021 Notes converted into 3,170,585 shares of Series C-2 redeemable convertible preferred stock at the effective conversion price of $ 8.725938 .

There were no convertible notes outstanding as of December 31, 2022 and 2021.

Convertible Notes—Related Parties

2 unchanged sentences

These notes were issued under the same terms and conditions as the 2021 Notes.

Valuation of the 2021 Notes

At the issuance date of the 2021 Notes, the Company determined that the fair value of the 2021 Notes approximated the principal amounts of the 2021 Notes as the transaction was deemed to be at arm’s length.

Subsequent measurement of fair value of the 2021 Notes at each reporting period was estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The Company used a scenario-based analysis to incorporate estimates and assumptions concerning the Company’s prospects and market indications into a model to estimate the value of the 2021 Notes.

The most significant estimates and assumptions used as inputs were those concerning timing, probability of possible scenarios for conversion or settlement of the 2021 Notes and discount rates.

The fair value of the 2021 Notes upon settlement in July 2021 was determined based on the fair value of the Series C-1 redeemable convertible preferred stock issued.

This method was selected as the Company concluded that the contemporaneous financing transaction was an arm’s length transaction.

The issuance of the Series C-1 redeemable convertible preferred stock was considered to be a Qualified Financing (see Note 11) pursuant to the original terms of the 2021 Notes.

Accordingly, the fair value calculation for the 2021 Notes immediately before conversion considered both the fair value of the Series C-1 redeemable convertible preferred stock and the conversion price, which was 85 % of the fair value of the Series C-1 redeemable convertible preferred stock.

The fair value of the 2021 Notes as of June 30, 2021 was determined to be the same as that on the settlement date in July 2021 based on management’s determination of no material changes to the assumptions underlying the determination of the fair value of the 2021 Notes.

FAIR VALUE MEASUREMENTS

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(in thousands)

Money market funds

Cash equivalents

Short-term investments:

Treasury notes

Treasury bills

Commercial paper

Corporate debt securities

Restricted cash

Total short-term investments

Restricted cash equivalents

Total financial assets

2 unchanged sentences

Money market funds

Short-term investments:

Commercial paper

Corporate debt securities

Total short-term investments

Restricted cash

4 unchanged sentences

These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs.

The Company validates the prices provided by our third-party

pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

Valuation of Derivative Liabilities

The fair value of the derivative liabilities was measured using a with-and-without valuation methodology.

Inputs used to determine the estimated fair value of the derivative instruments include the probability estimates of potential settlement scenarios for the convertible promissory notes, a present value discount rate and an estimate of the expected timing of settlement.

Certain unobservable inputs used in the fair value measurement of the derivative instruments associated with the convertible promissory notes are the scenario probabilities and the discount rate estimated at the valuation date.

Generally, an increase or decrease in the discount rate would result in a directionally opposite impact to the fair value measurement of the derivative instruments.

Also, a change in the probability scenarios would have varying impacts depending on the weighting of each specific scenario.

Heavier weighting toward a qualified financing would result in an increase in the fair value of the derivative liability.

Changes in these assumptions can materially affect the fair value.

An initial fair value valuation was performed at each date of issuance of the outstanding convertible notes and subsequently remeasured as of each reporting period and immediately prior to conversion.

The change in fair value between measurement dates was determined to be a loss of $1.3 million the years ended December 31, 2020, which was recognized in the consolidated statements of operations.

The following table sets forth the significant inputs to the probability weighted valuation model used to value the derivative liability at issuance of the 2020 Notes:

Type of Event

Expected Date

Convertible Notes

Qualified Financing

June 30, 2020

Stock or Asset Sale

March 31, 2021

Note Reaches Maturity

December 31, 2021

The following table sets forth the significant inputs to the probability weighted valuation model used to value the derivative liability upon conversion of the Notes in June 2020:

Type of Event

Expected Date

Convertible Notes

Qualified Financing

June 18, 2020

2017, 2018, 2019 and 2020 Notes

Stock or Asset Sale

2017, 2018, 2019 and 2020 Notes

Note Reaches Maturity

2017, 2018, 2019 and 2020 Notes

Valuation of the 2021 Notes

The Company used a scenario-based analysis to incorporate estimates and assumptions concerning the Company’s prospects and market indications into a model to estimate the value of the 2021 Notes.

The most significant estimates and assumptions used as inputs were those concerning timing, probability of possible scenarios for conversion or settlement of the 2021 Notes and discount rates.

The fair value of the 2021 Notes upon settlement in July 2021 was determined based on the fair value of the Series C-1 redeemable convertible preferred stock issued.

This method was selected as the Company concluded that the contemporaneous financing transaction was an arm’s length transaction.

The issuance of the Series C-1 redeemable convertible preferred stock was considered to be a Qualified Financing (see Note 7) pursuant to the original terms of the 2021 Notes.

Accordingly, the fair value calculation for the 2021 Notes immediately before conversion considered both the fair value of the Series C-1 redeemable convertible preferred stock and the conversion price, which was 85% of the fair value of the Series C-1 redeemable convertible preferred stock.

The fair value of the 2021 Notes as of June 30, 2021 was determined to be the same as that on the settlement date in

July 2021 based on management’s determination of no material changes to the assumptions underlying the determination of the fair value of the 2021 Notes.

The following table represents changes in the derivative liabilities and 2021 Notes with significant unobservable inputs (Level 3):

(in thousands)

Balance as of December 31, 2019

Increase in derivative liability resulting from issuance of convertible

Increase in derivative liability resulting from change in estimated

Derivative liability settled upon conversion of convertible notes

Balance as of December 31, 2020

Initial fair value of convertible notes

Change in fair value of convertible notes

Conversion of convertible notes

Balance as of December 31, 2021

The Company validates the prices provided by our third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

The Company does no t hold any short-term investments classified as Level 3, which are securities valued using unobservable inputs.

The Company has not transferred any investment securities between the classification levels .

There were no other assets or liabilities that were measured at fair value on a recurring basis as of December 31, 2022 and 2021 .

The Company leases its office facilities under non-cancelable operating leases that expire at various dates through October 2026.

The Company entered into an office space lease at 121 First Street in Cambridge, Massachusetts on January 10, 2022, for 36 months , with an option to extend the lease for 3 years .

Because the Company was not reasonably certain to exercise the option to extend the lease at inception, the option to extend was not considered in determining the lease term.

The Company initially recognized a right-of-use asset of $ 5.0 million and a lease liability of $ 5.0 million upon commencement of the lease.

Components of lease expense required by ASC 842 are presented below for the year ended December 31, 2022:

(in thousands)

Operating lease cost

Total lease cost

Lease liabilities are measured by calculating the present value of remaining lease payments under the lease arrangement.

Since the rates implicit in our leases are not readily determinable, the Company uses estimated incremental borrowing rates in determining the discount rate used to calculate the present value of remaining lease payments.

The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term equal to the lease term in a similar economic environment.

The incremental borrowing rate is based on the information available at commencement date.

As the Company has no recent external borrowings, the incremental borrowing is a hypothetical rate based on our understanding of what our credit rating would be and adjusted to reflect a collateralized borrowing.

The Company’s leases contain renewal options that can extend the lease for additional years.

Because the Company is not reasonably certain to exercise these renewal options, they are not considered in determining the lease terms, and associated potential additional payments are excluded from lease payments.

The Company has elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only.

The Company has existing net leases in which the non-lease components (e.g., common area maintenance) are paid separately from rent based on actual costs incurred and therefore are not included in the operating lease right-of-use assets and lease liabilities and are reflected as an expense in the period incurred.

The following table summarizes the presentation in the Company’s consolidated balance sheet of its operating leases (in thousands):

December 31, 2022

Operating lease right-of-use assets

Operating lease right-of-use liabilities, current

Operating lease right-of-use liabilities, net of current portion

Total operating lease liabilities

During the year ended December 31, 2022, the Company made cash payments of $ 1.4 million for operating leases.

Future minimum lease payments under non-cancelable leases as of December 31, 2022, were as detailed below (in thousands):

December 31, 2022

Total undiscounted lease payments

imputed interest

Total operating lease liabilities

As of December 31, 2022, the weighted average remaining lease term was 2.9 years and the weighted average incremental borrowing rate used to determine the operating lease right-of-use assets was 7.3 % .

ASC 840 Disclosures

Future minimum lease payments under non-cancelable leases as of December 31, 2021, were as detailed below (in thousands):

December 31, 2021

Total operating lease liabilities

Redeemable Convertible Preferred Stock

In August 2016, the Company consummated a financing transaction in which it issued Series A redeemable convertible preferred stock.

The issuance of the Series A redeemable convertible preferred stock occurred pursuant to the Series A Preferred Stock Purchase Agreement the Company entered into with certain investors (the “Series A Agreement”).

In connection with the issuance of the Series A redeemable convertible preferred stock, certain convertible notes issued by the Company including interest accrued on such notes also converted into 2,333,276 shares of Series A redeemable convertible preferred stock.

In connection with the conversion of these notes, the Company recorded a loss on extinguishment of convertible notes of $0.6 million, which is calculated as the difference between the fair value of the Series A redeemable convertible preferred stock and the carrying value of the notes.

At the initial closing of the issuance of the Series A redeemable convertible preferred stock, the Company issued 3,000,731 shares of Series A redeemable convertible preferred stock at $1.22907 per share for a total consideration of $3.7 million.

Between November 2016 and November 2017, the Company issued, in aggregate, an additional 955,602 shares of Series A redeemable convertible preferred stock at $1.22907 per share for a total consideration of $1.2 million.

The aggregate purchase price of the Series A redeemable convertible preferred stock was $7.7 million and incurred issuance costs of $0.1 million, recorded as a reduction to Series A redeemable convertible preferred stock carrying value.

In June 2020, the Company entered into a Series B Preferred Stock Purchase Agreement (the “Series B Agreement”) with certain investors in which the Company issued 1,767,401 shares of Series B redeemable convertible preferred stock, $0.0001 par value, for a total consideration of $30.0 million.

In connection with the issuance of these shares, the carrying value including accrued interest of the Notes totaling $34.7 million automatically converted into 12,729,434 shares of Series B redeemable convertible preferred stock.

On June 18, 2020, the Company amended its certificate of incorporation in which (i) the Company authorized 15,100,000 of shares of Series B redeemable convertible preferred stock and (ii) the authorized number of Series A redeemable convertible preferred stock was decreased to 6,289,609 shares.

On July 1, 2021, the Company amended its certificate of incorporation in which it authorized 13,150,430 shares of Series C-1 redeemable convertible preferred stock and 3,170,585 shares of Series C-2 redeemable convertible preferred stock.

In July 2021, the Company consummated a financing transaction in which it issued 13,150,430 shares of Series C-1 redeemable convertible preferred stock.

In connection with the issuance of these shares, the principal including accrued interest of the 2021 Notes totaling $ 27.7 million automatically converted into 3,170,585 shares of Series C-2 redeemable convertible preferred stock.

The Company’s redeemable convertible preferred stock consisted of the following:

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Series C-2 preferred stock

December 31, 2020

(dollars in thousands)

Preferred Shares

Issuable Upon

Series A preferred stock

Series B preferred stock

As of December 31, 2021, the holders of the Series C Preferred Stock (together with the “Series A redeemable convertible preferred stock”

and “Series B redeemable convertible preferred stock”, collectively, the “Preferred Stock”) have the following rights and preferences:

As of December 31, 2021, the holders of the Series C Preferred Stock, or together with the Series A redeemable convertible preferred stock and the Series B redeemable convertible preferred stock, collectively, the Preferred Stock, had the following rights and preferences:

Conversion—

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The initial conversion price for the Series C-1 redeemable convertible preferred stock and Series C-2 redeemable convertible preferred stock is the respective original issue prices.

The conversion price for the Preferred Stock is subject to adjustments for stock splits, stock dividends, or similar recapitalization, and subject to adjustments in accordance with the anti-dilution provisions.

The shares of Preferred Stock will automatically convert into common stock of the Company immediately upon either (a) the closing of the sale of shares of common stock to the public in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in at least $75.0 million of proceeds, net of the underwriting discount and commissions, to the Company (a “Qualified IPO”) or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Preferred Stock.

The conversion price for the Preferred Stock was subject to adjustments for stock splits, stock dividends, or similar recapitalization, and subject to adjustments in accordance with the anti-dilution provisions.

The shares of Preferred Stock were to automatically convert into common stock of the Company immediately upon either (a) the closing of the sale of shares of common stock to the public in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in at least $ 75.0 million of proceeds, net of the underwriting discount and commissions, to the Company, or Qualified IPO, or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Preferred Stock.

Dividends —Dividends may be paid to the holders of the Series A redeemable convertible preferred stock.

The holders the Series A redeemable convertible preferred stock are entitled to receive non-cumulative dividends at a rate per annum of $ 0.073744 per share when and if declared by the Board of Directors.

The holders of the Series B redeemable convertible preferred stock are entitled to receive a non-cumulative dividend at the rate of 6% per annum of the Series B original issue price per share when and if declared by the Board of Directors.

As of December 31, 2021 and 2020, no cash dividends were declared or paid.

From and after the date of issuance of the Series C Preferred Stock, the Company will not set, declare, pay or set aside unless holders of the Series C Preferred Stock then outstanding shall first receive, or simultaneously receive, dividends on each outstanding share of Series C Preferred Stock in an amount equal to (i) in the case of dividends being distributed to common stock or any class or series of capital stock that is convertible into common stock, the equivalent dividend on an as-converted basis or (ii) in the case of dividends being distributed on a series or class not convertible into common stock, an additional dividend equal to a dividend rate calculated based on the respective original issue price of the Series C Preferred Stock.

The original issue price per share for the Series C-1 redeemable convertible preferred stock and Series C-2 redeemable convertible preferred stock was $ 10.265809 and $8.725938, respectively.

The holders of the Series B redeemable

convertible preferred stock were entitled to receive a non-cumulative dividend at the rate of 6 % per annum of the Series B original issue price per share when and if declared by the Board of Directors.

As of December 31, 2021, no cash dividends were declared or paid.

From and after the date of issuance of the Series C Preferred Stock, the Company was not to set, declare, pay or set aside unless holders of the Series C Preferred Stock then outstanding shall first receive, or simultaneously receive, dividends on each outstanding share of Series C Preferred Stock in an amount equal to (i) in the case of dividends being distributed to common stock or any class or series of capital stock that is convertible into common stock, the equivalent dividend on an as-converted basis or (ii) in the case of dividends being distributed on a series or class not convertible into common stock, an additional dividend equal to a dividend rate calculated based on the respective original issue price of the Series C Preferred Stock.

The original issue prices per share for the Series C-1 redeemable convertible preferred stock and Series C-2 redeemable convertible preferred stock were $ 10.265809 and $ 8.725938 , respectively.

Voting Rights —

The holders of the Preferred Stock are entitled to vote on any matter presented to stockholders of the Company for consideration.

Each holder of the Preferred Stock will be entitled to cast the number of votes equal to the number of shares of common stock into which the shares of the Preferred Stock held by such holder are convertible on such date.

The holders of the Preferred Stock were entitled to vote on any matter presented to stockholders of the Company for consideration.

Each holder of the Preferred Stock was entitled to cast the number of votes equal to the number of shares of common stock into which the shares of the Preferred Stock held by such holder were convertible on such date.

Redemption—

The Preferred Stock does not contain any mandatory redemption features.

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480), preferred stock issued with redemption provisions that are outside of the control of the Company or that contain certain redemption rights in a deemed liquidation event is required to be presented outside of stockholders’

deficit on the face of the consolidated balance sheets.

The Preferred Stock did not contain any mandatory redemption features.

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity , preferred stock issued with redemption provisions that are outside of the control of the Company or that contain certain redemption rights in a deemed liquidation event is required to be presented outside of stockholders’

equity (deficit) on the face of the consolidated balance sheets.

The Company classified the Preferred Stock outside of the stockholders’

deficit as mezzanine equity because in the event of certain deemed liquidation events, which included events such as a sale or merger, that were not solely within the control of the Company, the shares of the Preferred Stock would become redeemable at the option of the holders.

As of December 31, 2021 and 2020, the Company did not adjust the carrying values of the Preferred Stock to the redemption values of such shares since a deemed liquidation event did not occur and the shares were not probable of becoming redeemable in the future as of the consolidated balance sheet dates.

equity (deficit) as mezzanine equity because in the event of certain deemed liquidation events, which included events such as a sale or merger, that were not solely within the control of the Company, the shares of the Preferred Stock would have become redeemable at the option of the holders.

The Company did not adjust the carrying values of the Preferred Stock to the redemption values of such shares since a deemed liquidation event did not occur and the shares were not probable of becoming redeemable in the future as of the consolidated balance sheet dates.

Liquidation—

In the event of a liquidation, deemed liquidation, dissolution or winding up of the Company, holders of the Preferred Stock will be entitled to be paid out of the assets of the Company that are available for distribution before any payment is made to the holders of common stock.

The amount to paid will be the greater of (i) respective original issue prices plus any dividends declared but unpaid or (ii) the amount that would have been payable had all shares of Preferred Stock been converted into common stock immediately before such event.

If upon any such liquidation, deemed liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of Preferred Stock the full amount to which they shall be entitled, the holders of Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

After the payment of all preferential amounts required to be paid to the holders of Preferred Stock, the remaining assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of common stock on a pro rata basis based on the number of shares held by each such holder.

In the event of a liquidation, deemed liquidation, dissolution or winding up of the Company, holders of the Preferred Stock would have been entitled to be paid out of the assets of the Company that were available for distribution before any payment is made to the holders of common stock.

The amount to paid would have been the greater of (i) respective original issue prices plus any dividends declared but unpaid or (ii) the amount that would have been payable had all shares of Preferred Stock been converted into common stock immediately before such event.

If upon any such liquidation, deemed liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to its stockholders would have been insufficient to pay the holders of Preferred Stock the full amount to which they would have been entitled, the holders of Preferred Stock would have shared ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

After the payment of all preferential amounts required to be paid to the holders of Preferred Stock, the remaining assets of the Company available for distribution to its stockholders would have been distributed among the holders of the shares of common stock on a pro rata basis based on the number of shares held by each such holder.

In January 2022, upon the completion of the Company’s IPO, all of the Company's outstanding shares of preferred stock were converted into shares of its common stock.

There were no redeemable convertible preferred stock outstanding as of December 31, 2022 .

Stockholders’

EQUITY (Deficit )

Common Stock—

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders provided, however, that, except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the Corporation’s Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the Delaware General Corporation Law.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders provided, however, that, except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the Company’s Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the Delaware General Corporation Law.

Common stockholders are entitled to receive dividends, as may be declared by the Company’s Board of Directors, if any, subject to the preferential dividend rights of the Preferred Stock.

No dividends have been declared or paid during the years ended December 31, 2021 and 2020.

No dividends were declared or paid during the years ended December 31, 2022 and 2021.

The Company had reserved shares of common stock for issuance in connection with the following:

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Common stock reserved for the exercise of stock options

Common stock reserved for the unvested restricted stock units

Common stock reserved for future issuance of share-based awards

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Unreserved common stock available for future issuance

In January 2022, the Company completed its IPO in which the Company issued and sold 11,369,369 shares of its common stock at a price of $ 19.00 per share.

After deducting underwriting discounts and commissions and estimated offering expenses, the Company received net proceeds of approximately $ 196.4 million.

Upon the completion of the IPO, all of the Company’s outstanding shares of preferred stock were converted into shares of its common stock.

In October 2022, the Company completed a follow-on public offering in which the Company issued 7,697,812 shares of its common stock at a price of $ 32.00 per share.

After deducting underwriting discounts and commissions and estimated offering expenses, the Company received net proceeds of approximately $ 230.6 million.

Stock Option and Grant Plan

2015 Plan—

The Company sponsors the 2015 Plan to encourage and enable the officers, employees, directors, consultants, and other key persons to acquire a proprietary interest in the Company.

The 2015 Plan provides for the granting of incentive stock options, non-statutory stock options, and restricted stock awards to eligible employees, officers, directors, consultants, and advisors as determined by the Board of Directors.

Terms of restricted stock awards and stock option agreements, including vesting requirements, are determined by the Board of Directors or compensation committee of the Board of Directors, subject to the provisions of the 2015 Plan.

The options issued the 2015 Plan expire ten years from the grant date.

The options generally vest over four or five years, with 25% vesting on the first anniversary and the balance vesting ratably over the remaining three to four years.

Through amendments on December 9, 2015, July 30, 2016, February 15, 2019, February 26, 2020 and July 1, 2021, the total number of share-based awards authorized for issuance was increased to a total of 8,474,374.

As of December 31, 2021 and 2020, there were 1,444,492 and 1,170,692 common shares available for future grant under the 2015 Plan, respectively.

Stock Incentive Plan—

In January 2022, the Company’s board of directors adopted, and its stockholders approved the 2022 Stock Option and Incentive Plan, or 2022 Plan, which became effective on January 5, 2022, at which point no further grants would be made under the 2015 Stock Option and Restricted Stock Plan, or 2015 Plan.

Under the 2022 Plan, the Company may grant incentive stock options, or ISOs, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and other stock-based awards.

As of December 31, 2022, there were 2,817,751 shares available for future issuance under the 2022 Plan.

The options issued under the 2022 Plan expire 10 years following the date of grant.

Stock options and restricted stock units typically vest over 4 years.

We recognize the compensation cost of awards subject to service-based vesting conditions over the requisite service period, which is generally equal to the vesting period of the respective award.

Initially, subject to adjustment as provided in the 2022 Plan, the aggregate number of shares of the Company’s common stock available for issuance under the 2022 Plan is 7,650,000 .

The number of shares of the Company’s common stock reserved for issuance under the 2022 Plan will automatically increase on January 1 of each year commencing January 1, 2023, by 5 % of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors.

The maximum current number of shares that may be issued pursuant to the exercise of ISOs under the 2022 Plan is 7,650,000 .

The maximum number of shares of the Company’s common stock subject to awards granted under the 2022 Plan or otherwise during a single calendar year to any individual nonemployee director, taken together with any cash fees paid by the Company to such nonemployee director during the calendar year for serving on the Company’s board of directors, will not exceed $ 750,000 in total value, or, with respect to the calendar year in which a nonemployee director is first appointed or elected to the Company’s board of directors, $ 1,000,000 .

All options and awards granted under the 2015 Plan consisted of the Company’s common stock.

As of January 6, 2022, no additional stock awards have been or will be granted under the 2015 Plan.

Although the 2015 Plan was terminated as to future awards in January 2022, it continues to govern the terms of options that remain outstanding under the 2015 Plan.

General Option Information

The Company estimates the fair value of stock option awards on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

Year Ended December 31,

Fair value of underlying common stock

Risk-free interest rate

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The per share weighted average grant date fair value of stock options granted during the year ended December 31, 2022 and 2021 was $ 15.10 and $ 5.25 , respectively.

As of December 31, 2021, total unrecognized compensation expense related to stock options totaled $17.1 million which is expected to be recognized over a weighted average period of 2.6 years.

The following table summarizes the activity under the Company’s stock option activity under the 2015 Plan during the years ended December 31, 2021:

A summary of option activity for the year ended December 31, 2022, is as follows:

(in thousands)

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The total fair value of stock options vested during the years ended December 31, 2022 and 2021 was $ 8.8 million and $ 1.3 million , respectively.

There were no restricted shares granted, vested, or forfeited during the year ended December 31, 2021 and 2020.

Restricted Stock Unit Activity

A summary of restricted stock unit activity for the year ended December 31, 2022, is as follows:

Number of shares

Weighted Average Grant Date Fair Value

Nonvested as of December 31, 2021

Nonvested as of December 31, 2022

Stock-Based Compensation Expense—

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Research and development expenses

General and administrative expenses

Selling, general and administrative expenses

Total stock-based compensation

The following table summarizes stock-based compensation by type of award:

Year Ended December 31,

(in thousands)

Stock options

Restricted stock units

Total stock-based compensation expense

The following table summarizes unrecognized stock-based compensation expense as of December 31, 2022, by type of awards, and the weighted-average period over which that expense is expected to be recognized.

The total unrecognized stock-based compensation expense will be adjusted for actual forfeitures as they occur.

As of December 31, 2022

Unrecognized Expense

Weighted-average Recognition Period

(in thousands)

Stock options

Restricted stock units

The components of net loss before the provision for income taxes are as follows:

(in thousands)

Income before income taxes

There was no provision for (benefit) from income taxes for the years ended December 31, 2021 and 2020.

Loss before income taxes

The provision for income taxes for the years ended December 31, 2022 and 2021 is as follows:

(in thousands)

Current income tax provision

Provision for income taxes

A reconciliation of the Company’s effective income tax rate to the U.S.

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State income tax benefit

Permanent items

Provision to Return

ASC 740-10 liability

Prior year adjustments

Research and development tax credits

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Deferred tax liabilities:

Prepaid Expenses

Total deferred tax liabilities

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The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

The Company has considered its history of cumulative net losses incurred since inception and has concluded that it is more likely than not that it will not realize the benefits of the deferred tax assets.

The Company has considered its history of cumulative losses, including significant losses incurred in every year since inception, including 2022, and has concluded that it is more likely than not that it will not realize the benefits of the deferred tax assets.

Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2022 and 2021.

The Company reevaluates the positive and negative evidence at each reporting period.

On a periodic basis the Company reassess the valuation allowance that has been established, weighing positive and negative evidence.

In 2022, the Company reassessed the valuation allowance and considered negative evidence, including cumulative losses over the three years ended December 31, 2022, and positive evidence, including regulatory approvals of ALBRIOZA and RELYVRIO.

After assessing both the negative and positive evidence, the Company concluded that a full valuation should be retained against the net deferred tax assets as of December 31, 2022.

It is possible that all or a portion of the valuation allowance will be released in the near-term.

The release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, levels of profitability, revenue growth, clinical program progression and expectations regarding future profitability.

As of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards of approximately $ 203.2 million and $ 115.7 million , respectively, and state net operating loss carryforwards of approximately $ 164.1 million and $ 102.9 million , respectively, which are available to reduce future taxable income.

1 unchanged sentence

Of the $ 164.1 million state net operating loss carryforwards, $ 113.0 million of Massachusetts net operating loss carryforwards begin to expire in 2034 .

As of December 31, 2021 and 2020, the Company also had federal tax credits of $2.7 million and $1.6 million, respectively, and state tax credits of $1.2 million and $0.7 million, respectively.

As of December 31, 2022 and 2021, the Company also had federal tax

credits of $ 4.6 million and $ 2.7 million , respectively, and state tax credits of $ 1.2 million .

The tax credit carryforwards will expire at various dates beginning in 2034.

The utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) due to ownership changes that have occurred previously or that could occur in the future.

The utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, 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.

The Company has not conducted a formal 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 and 383 of the Code, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards may be subject to an annual limitation under Section 382 and 383 of the Code, 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.

If the Company has experienced a change of control, as defined by Section 382 and 383 of the Code, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards may be subject to an annual limitation, 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.

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to be sustained by the taxing authority.

The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As of December 31, 2021 and 2020, the Company has recorded an unrecognized tax benefit of $0.6 million and $0.3 million, respectively.

The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlemen t.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the years ended December 31, 2022 and 2021 is as follows:

(in thousands)

Balance at beginning of the period

Settlement/decreases related to tax positions taken during prior years

Increases (decreases) related to tax positions taken during prior years

Increases related to tax positions taken during the prior years

2 unchanged sentences

Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the benefits recognized in the consolidated financial statements.

As of December 31, 2021 and 2020, the Company had $0.6 million and $0.3 million respectively, of net unrecognized tax benefits, related to tax credit carryforwards.

The Company does not expect the amount of unrecognized tax benefits to change over next 12 months.

The Company accrues interest and penalties related to unrecognized tax benefits as a component of its “Provision for (benefit from) income taxes.”

The Company did not recognize any interest or penalties related to uncertain tax positions during the two years ended December 31, 2021 and 2020.

The Company accrues interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes.

The Company did no t recognize any interest or penalties related to uncertain tax positions during the two years ended December 31, 2022 and 2021.

The Company files U.S.

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Plan participants are able to defer eligible compensation subject to applicable annual Internal Revenue Code limits.

The Company provides a safe-harbor contribution of 3% of employee compensation to employees who satisfy the minimum service requirements.

The Company made $0.3 million of safe-harbor contributions for the year ended December 31, 2021.

The Company made no safe-harbor contributions for the year ended December 31, 2020.

The Company provides a safe-harbor contribution o f 3 % of employee compensation to employees who satisfy the minimum service requirements.

The Company made $ 1.2 million and $ 0.3 million of safe-harbor contributions for the years ended December 31, 2022 and 2021 , respectively.

NET LOSS PER SHARE

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Because the Company reports a net loss attributable to common stockholders, basic and diluted net loss per share attributable to common stockholders are the same for both periods presented.

All preferred stock and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

All preferred stock, stock options and restricted stock units have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

The following common stock equivalents outstanding at each period end have been excluded from the calculation of diluted net loss per share because their inclusion would have been antidilutive:

Options to purchase common stock

Restricted stock units

Redeemable convertible preferred stock

Total excluded common stock equivalents

Related party transactions

1 unchanged sentence

In connection with the issuance of the 2021 Notes, the Company issued, in aggregate, $ 14.3 million of convertible promissory notes to Morningside Ventures Investments Limited, and certain members of the board of directors of the Company.

Morningside Ventures Investments Limited is a 5% significant stockholder and has appointed representatives to the board of directors of the Company.

Morningside Ventures Investments Limited is a 5 % significant stockholder of the Company.

These notes were issued under the same terms and conditions as the 2021 Notes (see Note 8).

4 unchanged sentences

Operating Leases—

In October 2018, the Company entered into a lease agreement (“Original Lease”) for its office space in Cambridge, Massachusetts.

The lease commenced in December 2018 and was set to expire in December 2023.

The Original Lease did not include an option to renew at the end of the term.

The Original Lease called for a security deposit of less than $0.1 million.

The annual rent was subject to fixed annual increases.

The security deposit is included in other assets on the consolidated balance sheet as of December 31, 2021.

The Company analyzed the terms of the Original Lease and determined that it was an operating lease.

In January 2020, the Company entered into an amendment (“Lease Amendment”) to extend the lease term of the Original Lease and to lease an additional office space (“Expansion Space”).

The extension of the term of the Original Lease and the lease term for the Expansion Space is six years from the date the Expansion Space was delivered to the Company, which occurred in October 2020.

As a result of the Lease Amendment, the lease term of the Original Lease and the Expansion Space will expire in October 2026.

In August 2021, the Company entered into a lease agreement (the “Amsterdam Lease”) for additional office space in Amsterdam, Netherlands.

The Amsterdam Lease commenced in September 2021 and is set to expire in August 2022.

Amsterdam Lease includes an option to renew for successive one-year terms at the end of each term at the then prevailing market rate.

The Amsterdam Lease called for security deposits of less than $0.1 million in total.

The security deposits are included in other assets on the consolidated balance sheet as of December 31, 2021.

The Company analyzed the terms of the Amsterdam Lease and determined that they were both operating leases.

Rent expense, including common area maintenance, parking and other rental fees for the years ended December 31, 2021 and 2020, was $0.6 million and $0.2 million, respectively.

Future minimum payments under the noncancelable operating lease as of December 31, 2021 are as follows:

Minimum Lease

(in thousands)

Years Ending December 31,

The Company leases its facilities under non-cancelable operating leases that expire at various dates through October 2026.

The Company entered into an office space lease at 121 First Street in Cambridge, Massachusetts on January 10, 2022, for 36 months , with an option to extend the lease for 3 years .

As of January 1, 2022, the Company adopted ASC 842 which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases.

As a result of this adoption, the Company recorded a right-of-use asset and corresponding lease liability on the consolidated balance sheet.

The Company continues to recognize rent expense, which is calculated as the remaining cost of the lease allocated over the remaining lease term on a straight-line basis.

See Note 10 for additional information regarding the Company's operating leases .

Letter of Credit—

Restricted cash consists of cash serving as collateral for a letter of credit issued for the Company’s office space.

As of December 31, 2021 and 2020, the Company’s restricted cash balance was $0.2 million and $0.2 million on its consolidated balance sheets, respectively.

As of December 31, 2022 and 2021, the Company’s restricted cash equivalents balance was $ 0.7 million and $ 0.2 million, respectively

Legal Proceedings—

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Under the terms of the agreements, the Company was granted, in aggregate, $ 4.3 million.

These grants were provided to the Company for the purpose of furthering the research and development of AMX0035 as a therapeutic benefit for ALS disease and Alzheimer’s diseases.

These grants were provided to the Company for the purpose of furthering the research and development of AMX0035 as a therapeutic benefit for ALS disease and Alzheimer’s disease.

Under the terms of the arrangements, the Company would receive a tranche of funds as it completes certain milestones.

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(i) an annual installment payment of 3 % of net sales of any products developed under the project for which the grant was used for and (ii) 3 % of cash proceeds resulting from revenue generating transaction under the project for which the grants are used for.

During the year ended December 31, 2022, the Company recorded $ 1.4 million in royalty expense, which is included in cost of sales in the consolidated financial statements.

Under the terms of the respective grant agreements among the Company, Alzheimer’s Drug Discovery Foundation, the Alzheimer’s Association, and Cure Alzheimer’s Fund, the Company will make royalty payments up to the maximum amount of $ 15.0 million to each Grantor (or $ 45.0 million in aggregate).

1 unchanged sentence

(i) 4 % of annual net sales of any product commercialized from the project for which the grant was used for and directly related to the treatment of the Alzheimer’s disease and (ii) 15 % of all royalties and cash proceeds resulting from revenue generating transactions associated with the projects for which the grants were used for under the grant agreements.

As the achievement and timing of these future royalty payments were not probable or estimable, such amounts have not been included in the consolidated balance sheets as of December 31, 2021 and 2020.

As the conditions that would trigger royalty payments under the agreements have not occurred, no amounts have been recorded in the consolidated financial statements for the year ended December 31, 2022 .

Subsequent Events

The Company has evaluated all subsequent events after December 31, 2021, and there were no material subsequent events requiring disclosure, except the following.

Leases —In January 2022, the Company entered into a lease agreement for additional office space in Cambridge, Massachusetts.

The lease commenced in January 2022 and is set to expire in July 2025.

The lease includes an option to extend the lease term for one period of three years at the then prevailing market rate.

The lease called for a security deposit of $0.5 million.

The lease was amended in March 2022 to increase the monthly minimum rent payment amount.

Total minimum rental payments over the initial lease term are expected to be $5.7 million.

Initial Public Offering —In January 2022, the Company completed an initial public offering of its common stock, in which the Company issued and sold 11,369,369 shares, at $19.00 per share.

After deducting underwriting discounts and commissions and estimated offering expenses, the Company received net proceeds of approximately $196.9 million.

Upon the completion of the Company's initial public offering, all of the Company's outstanding shares of preferred stock were converted into shares of its common stock.

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, except as described below.

Silicon Valley Bank (“SVB”) was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver.

At the time of closing, the Company maintained less than $1.0 million of its cash in deposit accounts with SVB and held sufficient liquid assets at Bank of America to manage its operational needs.

The vast majority of the Company’s cash, cash equivalents and short-term investments reside in custodial accounts held by U.S.

Bank for which SVB Asset Management is the advisor.

The Company’s investment portfolio currently does not contain any securities of SVB.

On March 12, 2023, the U.S.

Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023.

The Company does not believe it will be impacted by the closure of SVB and will continue to monitor the situation as it evolves.

On March 13, 2023, the Company announced the appointment of Karen Firestone, Chairman, CEO, and co-founder of Aureus Asset Management and prior fund manager at Fidelity Investments, to the company’s Board of Directors.

Firestone's appointment to the Board of Directors is effective as of March 16, 2023.

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