Amylyx Pharmaceuticals, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures 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. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officers and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d‑15(f) under the Exchange Act. 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 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 130 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 The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, 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. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting. Item 9B. Other Information. None. Item 9C . Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 131 PART III Item 10 . Directors, Executive Officers and Corporate Governance. The information required by this Item 10 will be included in the Proposal No. 1, Corporate Governance and Executive Officers section of our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Item 11 . Executive Compensation. The information required by this Item 11 will be included in the Executive Compensation and Director Compensation sections of our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in the Security Ownership of Certain Beneficial Owners and Management sections of our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Item 13 . Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in the Certain Relationships and Related Party Transactions and Corporate Governance sections of our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14 . Principal Accountant Fees and Services. Our independent public accounting firm is Deloitte & Touche, LLC , Boston, Massachusetts , PCAOB Auditor ID: 34 . The information required by this Item 14 will be included in the Proposal No. 2 section of our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. 132 PART IV Item 15 . Exhibits, Financial Statement Schedules. a) Financial Statements For a list of the consolidated financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report, which is incorporated into this Item by reference. b) Exhibits Exhibit Number Description 3.1 Fourth Amended and Restated Certificate of Incorporation of Amylyx Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2022). 3.2 Second Amended and Restated Bylaws of Amylyx Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2022). 4.1 Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 4.2 Second Amended and Restated Investors’ Rights Agreement, dated as of July 1, 2021, among the Registrant and the parties thereto (Incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 4.3 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). 10.1# 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. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.2# 2022 Stock Option and Incentive Plan, and form of award agreements thereunder (Incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.3# Non-Employee Director Compensation Policy (Incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.4# Executive Cash Incentive Bonus Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.5# 2022 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.6# Lease Agreement, dated as of October 23, 2018, as amended, by and between the Registrant and Bullfinch Square Limited Partnership (Incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.7# Form of Employment Agreement, between the Registrant and Josh Cohen (Incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.8# Form of Employment Agreement, between the Registrant and Justin Klee (Incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.9# Form of Employment Agreement, between the Registrant and James Frates (Incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 133 10.10# Form of Employment Agreement, between the Registrant and Margaret Olinger (Incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.11# Form of Employment Agreement, between the Registrant and Patrick D. Yeramian, M.D. (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-261703) filed with the Securities and Exchange Commission on January 3, 2022). 10.12# Form of Director Indemnification Agreement (Incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.13# Form of Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.14† Master Manufacturing Services Agreement, dated as of November 12, 2019, by and between the Registrant and Patheon Inc. (Incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.15† Supply Agreement, dated as of October 29, 2019, by and between the Registrant and CU Chemie Uetikon GmbH (Incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.16† Research, Development and Supply Agreement, dated as of December 9, 2019, and Deed of Amendment, dated as of July 26, 2021, by and between the Registrant and ICE S.p.A. (formerly Prodotti Chimici e Alimentari S.p.A.), as amended (Incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (File No. 333-261703) filed with the Securities and Exchange Commission on December 16, 2021). 10.17# 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). 10.18#* Form of Employment Agreement, between the Registrant and Gina Mazzariello 21.1* List of Subsidiaries of Registrant. 23.1* Consent of Deloitte & Touche LLP, independent registered public accounting firm. 31.1* Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.3* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 + Certification of Co-Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 + Certification of Co-Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.3 + Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 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 134 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. † Portions of this exhibit (indicated by asterisks) have been omitted in accordance with Item 601(b)(10) of Regulation S-K. c) Financial Statement Schedules No financial statements have been submitted because they are not required or are not applicable or because the information required is included in the consolidated financial statements or the notes thereto. Item 16 . Form 10-K Summary None. 135 SIGNATURES 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 PHARMACEUTICALS, INC. Date: March 13, 2023 By: /s/ Joshua B. Cohen Joshua B. Cohen Co-Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Joshua B. Cohen Co-Chief Executive Officer and Director (Principal Executive Officer) March 13, 2023 Joshua B. Cohen /s/ Justin B. Klee Co-Chief Executive Officer and Director (Principal Executive Officer) March 13, 2023 Justin B. Klee /s/ James M. Frates Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 13, 2023 James M. Frates /s/ George Mclean Milne Jr. Director March 13, 2023 George Mclean Milne Jr. Ph.D. /s/ Paul Fonteyne Director March 13, 2023 Paul Fonteyne, M.S., M.B.A. /s/ Daphne Quimi Director March 13, 2023 Daphne Quimi, M.B.A. 136 Amylyx Pharmaceuticals, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets F- 3 Consolidated Statements of Operations F- 4 Consolidated Statements of Comprehensive Loss F- 5 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit ) F- 6 Consolidated Statements of Cash Flows F- 7 Notes to Consolidated Financial Statements F- 8 F- 1 REPORT of independent registered public accounting firm To the stockholders and the Board of Directors of Amylyx Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Amylyx Pharmaceuticals, Inc. 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’ 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. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Boston, Massachusetts March 13, 2023 We have served as the Company’s auditor since 2020. F- 2 AMYLYX PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 62,526 $ 50,191 Short-term investments 284,419 45,927 Prepaid expenses and other current assets 10,113 5,392 Accounts receivable, net 15,306 — Inventories 9,769 — Deferred offering costs — 3,441 Total current assets 382,133 104,951 Property and equipment, net 2,611 474 Restricted cash equivalents 719 189 Operating lease right-of-use assets 5,524 — Other assets 466 — Total assets $ 391,453 $ 105,614 Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $ 6,257 $ 4,372 Accrued expenses and other current liabilities 38,312 13,024 Operating lease liabilities, current portion 2,040 — Total current liabilities 46,609 17,396 Operating lease liabilities, net of current portion 4,237 — Deferred rent — 35 Total liabilities 50,846 17,431 Commitments and contingencies (Note 18) Series A redeemable convertible preferred stock, $ 0.0001 par value; 0 and 6,289,609 shares authorized, issued and outstanding as of December 31, 2022 and 2021, respectively — 7,675 Series B redeemable convertible preferred stock, $ 0.0001 par value; 0 and 15,100,000 shares authorized as of December 31, 2022 and 2021, respectively; 0 and 14,496,835 shares issued and outstanding as of December 31, 2022 and 2021, respectively — 64,387 Series C-1 redeemable convertible preferred stock, $ 0.0001 par value; 0 and 13,150,430 shares authorized, issued and outstanding as of December 31, 2022 and 2021, respectively — 134,791 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 — 32,498 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, 2022 and 2021, respectively; 66,512,011 and 7,020,487 shares issued and outstanding as of December 31, 2022 and 2021, respectively 7 1 Additional paid-in capital 694,906 4,667 Accumulated deficit ( 354,220 ) ( 155,845 ) Accumulated other comprehensive (loss) income ( 86 ) 9 Total stockholders’ equity (deficit) 340,607 ( 151,168 ) Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 391,453 $ 105,614 The accompanying notes are an integral part of these consolidated financial statements. F- 3 AMYLYX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended December 31, 2022 2021 Revenues: Product revenue, net $ 22,230 $ — Grant revenue — 285 Total revenues 22,230 285 Operating expenses: Cost of sales 2,993 — Research and development 93,450 44,040 Selling, general and administrative 127,128 38,933 Total operating expenses 223,571 82,973 Loss from operations ( 201,341 ) ( 82,688 ) Other income (expense), net: Interest income 4,291 36 Change in fair value of convertible notes — ( 5,228 ) Other expense, net ( 551 ) ( 51 ) Total other income (expense), net 3,740 ( 5,243 ) Loss before income taxes ( 197,601 ) ( 87,931 ) Provision for income taxes 774 — Net loss $ ( 198,375 ) $ ( 87,931 ) Net loss per share attributable to common stockholders —basic and diluted $ ( 3.39 ) $ ( 13.35 ) Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted 58,495,587 6,586,349 The accompanying notes are an integral part of these consolidated financial statements. F- 4 AMYLYX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year Ended December 31, 2022 2021 Net loss $ ( 198,375 ) $ ( 87,931 ) Other comprehensive (loss) income: Foreign Currency translation adjustment ( 69 ) 14 Unrealized loss on short-term investments ( 26 ) ( 5 ) Other comprehensive (loss) income ( 95 ) 9 Comprehensive loss $ ( 198,470 ) $ ( 87,922 ) The accompanying notes are an integral part of these consolidated financial statements. F- 5 AMYLYX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) Series A Redeemable Convertible Preferred Stock Series B Redeemable Convertible Preferred Stock Series C-1 Redeemable Convertible Preferred Stock Series C-2 Redeemable Convertible Preferred Stock Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance as of December 31, 2020 6,289,609 $ 7,675 14,496,835 $ 64,387 — $ — — $ — 6,137,206 $ 1 $ 1,188 $ — $ ( 67,914 ) $ ( 66,725 ) Issuance of Series C-1 redeemable convertible preferred stock, net of issuance costs of $ 209 — — — — 13,150,430 134,791 — — — — — — — — Conversion of convertible notes and accrued interest into Series C-2 redeemable convertible preferred stock, net of issuance cost of $ 50 — — — — — — 3,170,585 32,498 — — — — — — Issuance of common stock upon exercise of stock options — — — — — — — — 883,281 — 343 — — 343 Stock-based compensation expense — — — — — — — — — — 3,136 — — 3,136 Other comprehensive loss — — — — — — — — — — — 9 — 9 Net loss — — — — — — — — — — — — ( 87,931 ) ( 87,931 ) Balance as of December 31, 2021 6,289,609 $ 7,675 14,496,835 $ 64,387 13,150,430 $ 134,791 3,170,585 $ 32,498 7,020,487 $ 1 $ 4,667 $ 9 $ ( 155,845 ) $ ( 151,168 ) Conversion of preferred stock into common stock upon initial public offering ( 6,289,609 ) ( 7,675 ) ( 14,496,835 ) ( 64,387 ) ( 13,150,430 ) ( 134,791 ) ( 3,170,585 ) ( 32,498 ) 39,474,330 4 239,347 - - $ 239,351 Issuance of common stock upon initial public offering, net of issuance costs of $ 19,639 — — — — — — — — 11,369,369 1 196,378 - - $ 196,379 Issuance of common stock upon follow-on offering, net of issuance costs of $ 15,719 — — — — — — — — 7,697,812 1 230,611 - - $ 230,612 Issuance of common stock upon exercise of stock options — — — — — — — — 950,013 - 2,189 - - $ 2,189 Stock-based compensation expense — — — — — — — — - - 21,714 - - $ 21,714 Other comprehensive loss — — — — — — — — - - - ( 95 ) - $ ( 95 ) Net loss — — — — — — — — - - - - ( 198,375 ) $ ( 198,375 ) Balance as of December 31, 2022 — $ — — $ — — $ — — $ — 66,512,011 $ 7 $ 694,906 $ ( 86 ) $ ( 354,220 ) $ 340,607 The accompanying notes are an integral part of these consolidated financial statements. F- 6 AMYLYX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2022 2021 Cash flows used in operating activities: Net loss $ ( 198,375 ) $ ( 87,931 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 21,714 3,136 Depreciation expense 487 52 Amortization (accretion) of investment premiums (discounts) ( 2,056 ) 121 Change in fair value of convertible notes — 5,228 Changes in operating assets and liabilities: Accounts receivable, net ( 15,306 ) — Inventories ( 9,769 ) — Interest receivable 487 ( 144 ) Prepaid expenses and other current assets ( 5,221 ) ( 4,486 ) Operating lease right-of-use assets 1,635 — Other assets ( 456 ) 125 Accounts payable 1,854 670 Accrued expenses and deferred rent 26,052 8,432 Operating lease liabilities ( 917 ) — Accrued interest and accrued interest—related parties — ( 2 ) Net cash used in operating activities ( 179,871 ) ( 74,799 ) Cash flows used in investing activities: Purchases of property and equipment ( 2,526 ) ( 353 ) Purchases of investments ( 415,873 ) ( 49,053 ) Proceeds from maturities of short-term investments 179,411 3,000 Net cash used in investing activities ( 238,988 ) ( 46,406 ) Cash flows provided by financing activities: Repayment and proceeds from PPP loan — ( 263 ) Proceeds from initial public offering 200,897 — Proceeds from follow-on offering 231,550 — Initial public offering costs paid ( 2,044 ) — Follow-on offering costs paid ( 803 ) — Proceeds from issuance of convertible notes—related parties — 14,272 Proceeds from issuance of convertible notes, net of issuance costs — 11,887 Issuance costs related to conversion of convertible notes — ( 50 ) Proceeds from issuance of Series C-1 redeemable convertible preferred stock — 135,000 Issuance costs related to issuance of Series C-1 redeemable convertible preferred stock — ( 209 ) Proceeds from exercise of stock options 2,189 343 Payment of deferred offering costs — ( 2,474 ) Net cash provided by financing activities 431,789 158,506 Effect of exchange rate changes on cash, cash equivalents and restricted cash equivalents ( 65 ) 13 Net increase in cash, cash equivalents and restricted cash equivalents 12,865 37,314 Cash, cash equivalents and restricted cash equivalents, beginning of period 50,380 13,066 Cash, cash equivalents and restricted cash equivalents, end of period $ 63,245 $ 50,380 Supplemental disclosure of cash flow information: Conversion of convertible notes and accrued interest into Series C-2 redeemable convertible preferred stock $ — $ 32,548 Unrealized loss on short-term investments $ 26 $ 5 Purchases of property and equipment included in accounts payable $ 98 $ 22 Deferred offering costs included in accounts payable and accrued expenses $ — $ 967 Right-of-use assets and liabilities upon ASC 842 adoption $ 2,201 $ — Right-of-use assets obtained in exchange for lease liabilities $ 4,958 $ — Movement of deferred offering costs to equity $ 5,457 $ — Follow-on offering costs included in accounts payable and accrued expenses $ 136 $ — Conversion of preferred stock to common stock upon initial public offering $ 239,351 $ — Income taxes paid $ 27 $ — The accompanying notes are an integral part of these consolidated financial statements. F- 7 AMYLYX PHARMACEUTICALS, INC. NOTES TO Consolidated FINANCIAL STATEMENTS 1. Nature of Business 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 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, 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, 2022, the Company F- 8 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. 2. 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 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, or ASC, and ASU of the Financial Accounting Standards Board, or FASB. Use of Estimates— The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: 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 F- 9 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 F- 10 others. 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— Grant revenue consists of amounts earned from performing contracted research and development services. The grants between the Company and the Grantors generally provide for the Company to meet certain research milestones in order for funds to be provided. The Company accounts for grants received to perform research and development services in accordance with ASC 730-20, Research and Development Arrangements , which requires an assessment, at the inception of the grant, of whether the grant is a liability or a contract to perform research and development services for others. If the Company is obligated to repay the grant funds to the Grantor regardless of the outcome of the research and development activities, then the Company is required to estimate and recognize that liability. 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 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 Loss— Comprehensive loss includes net loss, as well as other changes in stockholders’ 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. F- 11 Cash and Cash Equivalents— The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents represent funds invested in readily available checking and money market funds. 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 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. Accordingly, these investments are recorded at fair value, which is determined based on quoted market prices. Unrealized gains and losses on available-for-sale securities are included as a separate component of other accumulated comprehensive loss. 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 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. Declines in fair value, if any, determined to be other than temporary-than-temporary are also included in other income, net. 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, 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, 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— The Company reviews the terms of the convertible note issued to determine whether there are features, including redemption and conversion features, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at the end of each reporting period and immediately prior to the conversion or the extinguishment of the convertible note. Changes in the fair value are reported in the consolidated statement of operations. When the convertible note contains embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those host instruments being recorded at a discount from their face value. The discount from the face value of the convertible note, together with the stated interest on the host instrument, is amortized over the life of the host instrument through periodic charges to interest expense. The Company’s convertible notes, as further discussed in Note 8, had embedded derivatives that required bifurcation from the host instrument. F- 12 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, 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. If the convertible note is retired early, the associated debt discount is then recognized immediately as non-cash interest expense in the consolidated statements of operations. If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible note is treated as traditional debt. Fair Value Measurements— Assets and liabilities recorded at fair value on a recurring basis on the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows: • Level 1 —Quoted prices in active markets for identical assets or liabilities. • Level 2 —Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3 —Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 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, or IPO, as deferred costs F- 13 until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ 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— Property and equipment are stated at cost, net of accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not improve or extend the life of the assets are expensed when incurred. Upon sale or retirement of assets, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized. The range of useful lives of property and equipment is as follows: Estimated Useful Life Leasehold improvements Lesser of the estimated life or remaining lease term Furniture and fixtures 4 years Computer hardware and software 3 years Construction in progress Not depreciated Impairment of Long-Lived Assets— The Company evaluates assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. 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 no t recognized any impairment losses in the years ended December 31, 2022 and 2021 . Research and Development— Research and development expenses include costs directly attributable to the conduct of research and development activities. Expenditures relating to research and development are expensed in the period incurred. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. 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 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 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. Generally, the Company issues stock option awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company classifies stock-based compensation expense in the same manner in which the awards recipient’s payroll or service provider’s costs are classified. The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date. F- 14 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. The Company estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. 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’ 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 . Contingencies— From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the Company’s consolidated balance sheets. The Company does not accrue for contingent losses that, in its judgement, are considered to be reasonably possible, but not probable; however, it discloses the range of reasonably possible losses. There were no loss or gain contingencies recorded in the Company’s consolidated financial statements as of and during the years ended December 31, 2022 and 2021 . 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. 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. The rent F- 15 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— The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities represent future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities and for loss carryforwards using enacted tax rates expected to be in effect in the years in which the differences reverse. A valuation allowance is established to reduce deferred tax assets to the amounts expected to be realized. The Company also recognizes a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. 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 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 CO-Chief Executive Officers. The Company has one operating segment which is the business of researching and developing therapeutics for neurodegenerative disorders. For the years ended December 31, 2022 and 2021 , all of the Company's long-lived assets were held within the U.S. Net income (loss) per share— The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, stock options, convertible notes, and redeemable convertible preferred stock are considered potential dilutive common shares. The Company’s redeemable convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Emerging Growth Company Status— 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 F- 16 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. As a result of this election, the Company’s consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates. The Company intends to take advantage of the reduced reporting requirements and exemptions up until the last day of the fiscal year following the fifth anniversary of an offering or such earlier time that it is no longer an EGC. Recent Accounting Pronouncements New Accounting Pronouncements Not Yet Adopted— In June 2016, the FASB issued ASU No. 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. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. ASU 2016-13 requires a cumulative effect adjustment to the consolidated balance sheet as of the beginning of the first reporting period in which the guidance is effective. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): 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 for the period beginning January 1, 2023. The Company intends to adopt the ASU when it becomes effective. The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements 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. 3. 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, 2022 2021 (in thousands) Product revenue, gross $ 27,104 $ — GTN adjustments ( 4,874 ) — Product revenue, net $ 22,230 $ — 4. SHORT-TERM INVESTMENTS F- 17 Short-term investments, which are classified as available-for-sale, consisted of the following: December 31, 2022 Amortized Cost Basis Unrealized Gain Unrealized Loss Fair Values (in thousands) Treasury notes $ 27,173 $ — $ ( 14 ) $ 27,159 Treasury bills 59,326 10 ( 2 ) 59,334 Commercial paper 134,375 — — 134,375 Corporate debt securities 58,795 13 ( 55 ) 58,753 Agency bonds 4,781 17 0 4,798 Total short-term investments $ 284,450 $ 40 $ ( 71 ) $ 284,419 December 31, 2021 Amortized Cost Basis Unrealized Loss Fair Values (in thousands) Commercial paper $ 33,979 $ ( 1 ) $ 33,978 Corporate debt securities 11,953 ( 4 ) 11,949 Total short-term investments 45,932 ( 5 ) 45,927 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. 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. 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. 5. INVENTORIES Inventories consisted of the following: December 31, 2022 2021 (in thousands) Raw materials $ 7,151 $ — Work in process 1,681 — Finished goods 937 — Total inventories $ 9,769 $ — 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 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. F- 18 6. Property and equipment, net Property and equipment, net consisted of the following: December 31, 2022 2021 (in thousands) Furniture and fixtures $ 362 $ 88 Computer hardware and software 1,810 250 Leasehold improvements 176 50 Construction in progress 803 139 Total property and equipment 3,151 527 Less: accumulated depreciation ( 540 ) ( 53 ) Total property and equipment, net $ 2,611 $ 474 7. Accrued Expenses Accrued expenses consisted of the following: December 31, 2022 2021 (in thousands) External research and development $ 8,424 $ 5,666 Payroll and employee related expenses 15,231 4,280 Manufacturing 4,596 — Accrued consulting and other professional fees 4,116 2,820 Rebates and other GTN adjustments 3,582 — Royalty payable 1,358 — Other accrued expenses 1,005 258 Total accrued expenses $ 38,312 $ 13,024 8. CONVERTIBLE NOTES 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. The 2021 Notes were secured and carried an interest rate of 3 %. The Company recorded the $1.2 million of proceeds received in December 2020 as proceeds received in advance of issuance of 2021 Notes in the consolidated balance sheet as of December 31, 2020, as the subscription agreement and commitment to issue the 2021 Notes was not effective until January 2021. 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, 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. F- 19 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, or 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. The 2021 Notes would be deemed to have converted into the Conversion Shares if no election was made by the holders of the 2021 Notes. Conversion Price —Upon the occurrence of an IPO, the 2021 Notes would convert into shares of common stock at the conversion price equal to the lesser of (i) 85 % of the price at which the Company offered each share of common stock in the IPO without deducting any amount for discounts, commissions, fees, or other costs and (ii) $ 600.0 million divided by the fully diluted capital. Upon the occurrence of a De-SPAC transaction, the 2021 Notes would convert into shares of common stock at the conversion price equal to the lesser of (i) 85 % of the common stock price in the De-SPAC transaction, which would be determined by dividing (x) the total consideration to be paid to common stockholders upon a De-SPAC transaction less the principal amount of the 2021 Notes including accrued and unpaid interest by (y) the common stock issued and outstanding immediately prior to the De-SPAC transaction and that would be exchanged as a result of the De-SPAC transaction including common stock that would be issued upon the exercise of stock options immediately before the Change of Control transaction but excluding the common stock issuable upon conversion of the 2021 Notes and (ii) $ 600.0 million divided by the fully diluted capital. Upon the occurrence of a Change of Control, the 2021 Notes would convert into shares of common stock at the conversion price equal to the lesser of (i) 85 % of the common stock price in the Change of Control, which would be determined by dividing (x) the total consideration to be paid to common stockholders upon a Change of Control less the principal amount of the 2021 Notes including accrued and unpaid interest by (y) the common stock issued and outstanding immediately prior to the Change of Control and that would be exchanged upon a Change of Control including common stock that would be issued upon the exercise of stock options before the Change of Control but excluding the common stock issuable upon conversion of the 2021 Notes and (ii) $ 600.0 million divided by the fully diluted capital. Upon a Qualified Financing, the 2021 Notes would convert into shares of preferred stock issued in the Non-Qualified Financing at the conversion price equal to the lesser of (i) 85 % of the lowest price at which the Company sold shares of its stock in the Qualified Financing and (ii) $ 600.0 million divided by the fully diluted capital. Repayment —Each holder of the 2021 Notes had the option to elect to receive a payment in the amount equal to the principal amount plus accrued and unpaid interests upon a Change of Control. If a Change of Control occurred and no election was made by the holder, the principal amount and accrued and unpaid interest would be deemed to have automatically be converted into shares of the Company’s common stock of the Company immediately prior to the close of the Change of Control. The Company qualified for and elected to account for the 2021 Notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. The Company believes that the fair value option better reflects the underlying economics of the 2021 Notes. As a result, the 2021 Notes were recorded at fair value upon issuance, which was determined to be equal to principal amounts of these notes of $ 27.3 million. At each financial reporting period, and immediately prior to conversion, the Company remeasured the fair value of the 2021 Notes. The change in fair value of the 2021 Notes from issuance date to the conversion date totaled $ 5.2 million, which is recorded as change in fair value of convertible notes in the consolidated statement of operations for the year ended December 31, 2021. Conversion of the 2021 Notes 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 F- 20 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 . Under the fair value option, the 2021 Notes were remeasured to fair value immediately prior to conversion at a price per share equal to the fair value of the Series C-1 redeemable convertible preferred stock. The Company recorded $ 5.2 million loss related to change in fair value of the 2021 Notes in its consolidated statement of operations for the year ended December 31, 2021. 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 There were no convertible notes issued to related parties that were outstanding as of December 31, 2022 and 2021 . In connection with the issuance of the 2021 Notes, the Company issued, in aggregate, $ 14.3 million of convertible notes to certain related parties. 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. 9 . FAIR VALUE MEASUREMENTS The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values: December 31, 2022 Level 1 Level 2 Level 3 Total (in thousands) Assets: Cash equivalents $ 23,567 $ 9,989 $ — $ 33,556 Short-term investments: Treasury notes 27,159 — — 27,159 Treasury bills 59,334 — — 59,334 Commercial paper — 134,375 — 134,375 Corporate debt securities — 58,753 — 58,753 Agency bonds — 4,798 — 4,798 Total short-term investments 86,493 197,926 — 284,419 Restricted cash equivalents 719 — — 719 Total financial assets $ 110,779 $ 207,915 $ — $ 318,694 F- 21 December 31, 2021 Level 1 Level 2 Level 3 Total (in thousands) Assets: Money market funds $ 49,271 $ — $ — $ 49,271 Short-term investments: Commercial paper — 33,978 — 33,978 Corporate debt securities — 11,949 — 11,949 Total short-term investments — 45,927 — 45,927 Restricted cash 189 — — 189 Total financial assets $ 49,460 $ 45,927 $ — $ 95,387 Valuation of Short-Term Investments The Company estimates the fair values of the short-term investments by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 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. 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 . 10. LEASES 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: Year ended December 31, 2022 (in thousands) Lease cost Operating lease cost $ 2,136 Total lease cost $ 2,136 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. F- 22 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): As of December 31, 2022 Assets Operating lease right-of-use assets $ 5,524 Liabilities Operating lease right-of-use liabilities, current $ 2,040 Operating lease right-of-use liabilities, net of current portion 4,237 Total operating lease liabilities $ 6,277 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): As of December 31, 2022 2023 $ 2,417 2024 2,478 2025 1,586 2026 476 2027 — Total undiscounted lease payments 6,957 Less: imputed interest ( 680 ) Total operating lease liabilities $ 6,277 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): As of December 31, 2021 2022 $ 532 2023 541 2024 555 2025 563 2026 476 Total operating lease liabilities $ 2,667 F- 23 11. Redeemable Convertible Preferred Stock 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: December 31, 2021 (dollars in thousands) Preferred Shares Authorized Preferred Shares Issued and Outstanding Carrying Value Liquidation Preference Common Stock Issuable Upon Conversion Series A preferred stock 6,289,609 6,289,609 $ 7,675 $ 7,730 6,407,256 Series B preferred stock 15,100,000 14,496,835 $ 64,387 $ 246,070 16,746,059 Series C-1 preferred stock 13,150,430 13,150,430 $ 134,791 $ 135,000 13,150,430 Series C-2 preferred stock 3,170,585 3,170,585 $ 32,498 $ 27,666 3,170,585 37,710,624 37,107,459 $ 239,351 $ 416,466 39,474,330 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— On June 18, 2020, in connection with the conversion of the 2017 Notes, the Company adjusted the conversion price for the Series A redeemable convertible preferred stock of $ 1.229073 per share to $ 1.2065 . The adjustment was made in accordance with the anti-dilution provisions in the certificate of incorporation then in effect immediately prior to the conversion of the 2017 Notes. The adjustment to the conversion price resulted in neither modification nor extinguishment of the Series A redeemable convertible preferred stock as the terms of the Series A redeemable convertible preferred stock were not amended. The adjustment to the conversion price resulted in additional 117,650 shares of common stock to be issued to holders of the Series A redeemable convertible preferred stock upon conversion of such shares into common stock. As of December 31, 2020, these additional shares of common stock were not issued and outstanding. In July 2021, in connection with the conversion of the 2021 Notes, the Company adjusted the conversion price for the Series B redeemable convertible preferred stock of $ 16.974077 per share to $ 14.6942 . The adjustment was made in accordance with the anti-dilution provisions in the certificate of incorporation then in effect immediately prior to the conversion of the 2021 Notes. The adjustment to the conversion price resulted in additional 2,249,224 shares of common stock into which Series B redeemable convertible preferred stock would be convertible. As of December 31, 2021, these additional shares were not issued and outstanding. Each share of Preferred Stock is convertible into an equivalent number of common stock, at any time, at the option of the holder. 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 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 F- 24 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 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 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’ 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 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 . 12. 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 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 were declared or paid during the years ended December 31, 2022 and 2021. F- 25 The Company had reserved shares of common stock for issuance in connection with the following: December 31, 2022 2021 Common stock authorized 300,000,000 56,500,000 Common stock issued and outstanding 66,512,011 7,020,487 Common stock authorized and reserved for future issuances: Series A redeemable convertible preferred stock — 6,407,256 Series B redeemable convertible preferred stock — 16,746,059 Series C-1 redeemable convertible preferred stock — 13,150,430 Series C-2 redeemable convertible preferred stock — 3,170,585 Common stock reserved for the exercise of stock options 8,480,950 5,339,011 Common stock reserved for the unvested restricted stock units 740,297 — Common stock reserved for future issuance of share-based awards 2,817,751 1,444,492 Total common stock authorized and reserved for future issuance 12,038,998 46,257,833 Unreserved common stock available for future issuance 221,448,991 3,221,680 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. 13. Stock Option and Grant Plan 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 F- 26 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, 2022 2021 Grant price $ 20.29 $ 7.69 Risk-free interest rate 1.97 % 1.01 % Expected term (in years) 6.07 5.73 Expected volatility 88.75 % 81.61 % Dividend yield 0.00 % 0.00 % 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. A summary of option activity for the year ended December 31, 2022, is as follows: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2021 5,339,011 $ 5.54 8.7 $ 15,627 Granted 4,237,720 $ 20.29 Exercised ( 950,013 ) $ 2.33 Cancelled or forfeited ( 145,768 ) $ 10.98 Outstanding at December 31, 2022 8,480,950 $ 13.19 8.2 $ 201,765 Exercisable at December 31, 2022 2,055,416 $ 6.03 7.0 $ 63,408 Unvested at December 31, 2022 6,425,534 $ 15.47 8.6 $ 138,357 The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of options exercised during the years ended December 31, 2022 and 2021, was $ 14.2 million and $ 6.2 million , respectively. 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. 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 — $ — Granted 752,613 $ 19.98 Vested — $ — Forfeited ( 12,316 ) $ 17.82 Nonvested as of December 31, 2022 740,297 $ 20.02 Stock-Based Compensation Expense— The Company recorded stock-based compensation expense in the following expense categories of its statements of operations: F- 27 Year Ended December 31, 2022 2021 (in thousands) Research and development expenses $ 5,639 $ 888 Selling, general and administrative expenses 16,075 2,248 Total stock-based compensation $ 21,714 $ 3,136 The following table summarizes stock-based compensation by type of award: Year Ended December 31, 2022 2021 (in thousands) Stock options $ 18,844 $ 3,136 Restricted stock units 2,870 — Total stock-based compensation expense $ 21,714 $ 3,136 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) (in years) Stock options $ 61,049 2.79 Restricted stock units $ 11,950 3.25 14. Income Taxes The components of net loss before the provision for income taxes are as follows: Year Ended December 31, 2022 2021 (in thousands) U.S. $ ( 198,704 ) $ ( 87,904 ) Non-U.S. 1,103 ( 27 ) Loss before income taxes $ ( 197,601 ) $ ( 87,931 ) The provision for income taxes for the years ended December 31, 2022 and 2021 is as follows: Year Ended December 31, 2022 2021 (in thousands) Current income tax provision U.S. - Federal $ — $ — U.S. - State — — Non-U.S. 774 — Provision for income taxes $ 774 $ — F- 28 A reconciliation of the Company’s effective income tax rate to the U.S. statutory federal income tax rate of 21 % for the years ended December 31, 2022 and 2021 is as follows: Year Ended December 31, 2022 2021 Tax at U.S. statutory tax rate 21.0 % 21.0 % State income tax benefit 3.9 % 4.0 % Research and development tax credits 1.4 % 1.5 % Valuation allowances ( 25.5 )% ( 24.4 )% Other ( 1.2 )% ( 2.1 )% Effective income tax rate ( 0.4 )% 0.0 % Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands) Deferred tax assets: Federal net operating loss carryforwards $ 42,673 $ 24,303 State net operating loss carryforwards 10,628 5,474 Capitalized research and development costs 18,079 6,205 Inventory 5,721 — Tax credits 5,581 2,808 Accruals and other 9,284 1,556 Total deferred tax assets $ 91,966 $ 40,346 Valuation allowance ( 90,587 ) ( 40,346 ) Net total deferred tax assets $ 1,379 $ — Deferred tax liabilities: Other ( 1,379 ) — Total deferred tax liabilities $ ( 1,379 ) $ — Net deferred tax assets $ — $ — 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 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. 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. Of the $ 203.2 million federal net operating loss carryforwards, $ 1.3 million begin to expire in 2034 and the remaining $ 201.9 million net operating losses carryforward indefinitely. 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, 2022 and 2021, the Company also had federal tax F- 29 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, 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, 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. The Company has not yet conducted a study of its research and development credit carryforward. Such a study, once undertaken by the Company, may result in an adjustment to the Company’s research and development credit carryforward. A full valuation allowance has been provided against the Company’s research and development credit and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, the Company has recorded a valuation allowance against its deferred tax assets as of December 31, 2022 and 2021, because the Company’s management has determined that it is more likely than not that these assets will not be fully realized. The increase in the valuation allowance recorded during the year primarily relates to the net operating loss incurred by the Company as well as the increase in research and development credits. The following table reflects the roll-forward of the Company’s valuation allowance: Year Ended December 31, 2022 2021 (in thousands) Valuation allowance at beginning of year $ 40,346 $ 18,900 Increases recorded to income tax provision 50,241 21,446 Valuation allowance at end of year $ 90,587 $ 40,346 The Company accounts for uncertainty in income taxes under the provisions of ASC 740 which defines the thresholds for recognizing the benefits of tax return positions in the consolidated financial statements as “more likely than not” 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 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: Year Ended December 31, 2022 2021 (in thousands) Balance at beginning of the period $ 564 $ 349 Increases (decreases) related to tax positions taken during prior years ( 32 ) — Increases related to tax positions taken during the prior years 481 215 Balance at end of the period $ 1,013 $ 564 The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the benefits recognized in the consolidated financial statements. 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 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. F- 30 The Company files U.S. federal, foreign and state income tax returns in various jurisdictions. The status of limitations varies by jurisdiction. There are currently no federal or state audits or examinations in process. 15. EMPLOYEE BENEFIT PLANS The Company maintains a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Plan participants are able to defer eligible compensation subject to applicable annual Internal Revenue Code limits. 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. 16. NET LOSS PER SHARE Net Loss per Share Attributable to Common Stockholders— 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, 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: December 31, 2022 2021 Options to purchase common stock 8,480,950 5,339,011 Restricted stock units 740,297 — Redeemable convertible preferred stock — 39,474,330 Total excluded common stock equivalents 9,221,247 44,813,341 17. Related party transactions Convertible Notes 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 of the Company. These notes were issued under the same terms and conditions as the 2021 Notes (see Note 8). Supplier Agreements In the ordinary course of business, the Company may purchase materials or supplies or services from entities that are associated with a party that meets the criteria of a related party of the Company. These transactions are reviewed quarterly and to date have not been material to the Company’s consolidated financial statements. 18. Commitments and Contingencies Operating Leases— 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 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 F- 31 Legal Proceedings— The Company is not currently a party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or potential range of loss is probable and reasonably estimated under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company recognizes expenses for its costs related to its legal proceedings, as incurred. Royalty Payments— Between August 2016 and February 2019, the Company entered into agreements with the Grantors. 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 disease. Under the terms of the arrangements, the Company would receive a tranche of funds as it completes certain milestones. Pursuant to the terms of the grant agreements, the Company has certain payment obligations that are contingent upon future events such as the achievement of commercialization or the receipt of proceeds from a revenue generating transaction resulting from the projects for which the grants are used for. Pursuant to the terms of the respective grant agreements among the Company, ALS Association and ALS Finding a Cure, the Company will be required to make royalty payments to each Grantor in the total amount equal to 150 % of the grant received. The royalty payments will be achieved through a combination of the following payment methods: (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). The royalty payment will be made through a combination of the following payment methods: (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 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 . 19 . Subsequent Events 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. Ms. Firestone's appointment to the Board of Directors is effective as of March 16, 2023. F- 32