What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-25 compared with 2024-03-29 · 82 added, 107 removed, 214 unchanged (47% of the section changed)

5 unchanged sentences

See also the section titled “Special Note Regarding Forward-Looking Statements.”

We are a clinical-stage biopharmaceutical company developing treatments for rare, chronic, and serious infectious diseases with high unmet needs.

Our initial product candidate is epetraborole, a once-daily, oral treatment for patients with non-tuberculous mycobacterial (“NTM”) lung disease.

NTM lung disease is a rare, chronic and progressive infectious disease caused by bacteria known as mycobacteria that leads to irreversible lung damage and can be fatal.

Epetraborole has broad spectrum antimycobacterial activity through inhibition of an essential and universal step in bacterial protein synthesis.

We are a biopharmaceutical company focused on discovering and developing novel small molecule therapeutics derived from our boron chemistry platform.

AN2 has a pipeline of boron-based compounds in development for Chagas disease, non-tuberculous mycobacterial (“NTM”) and melioidosis, along with early-stage programs focused on targets in infectious diseases and oncology.

Our lead candidate is epetraborole, which we are studying as a potential once-daily, oral treatment with a novel mechanism of action for patients with non-tuberculous mycobacterial (“NTM”) lung disease, a rare, chronic and progressive infectious disease caused by bacteria known as mycobacteria, which leads to irreversible lung damage and can be fatal.

Epetraborole is designed to produce broad-spectrum antimycobacterial activity through inhibition of an essential and universal step in bacterial protein synthesis.

Its novel mechanism of action is enabled by boron chemistry, our core technology approach.

We received Fast Track designation by the U.S.

Food and Drug Administration (the “FDA”) to investigate epetraborole for treatment-refractory Mycobacterium avium complex (“MAC”) lung disease.

Epetraborole has also been designated as a Qualified Infectious Disease Product (“QIDP”) for treatment-refractory MAC lung disease by the FDA and has received orphan drug designation from the FDA and orphan medicinal product designation from the European Commission for the treatment of NTM lung disease.

Based on clinical and preclinical data generated with epetraborole, its novel mechanism of action, and the convenience associated with once-daily, oral dosing, we believe that epetraborole has the potential to become an important component of a multi-drug treatment regimen for patients suffering from NTM lung disease.

We are conducting a Phase 2/3 seamless design trial to study epetraborole for treatment-refractory MAC lung disease.

In February 2024, we paused enrollment of the Phase 3 portion of trial pending review of further study data and discussion with the FDA after observing potentially lower than anticipated efficacy in blinded aggregate data from the Phase 2 portion of the trial.

While the Phase 3 part of the trial is paused for new enrollment, we are continuing to dose existing patients enrolled in the Phase 2/3 trial under the existing protocol.

We continue to progress in areas that will allow for timely commercialization of epetraborole, if approved.

We have completed the manufacturing of active pharmaceutical ingredient (“API”) for registration batches, and plan to initiate drug product registration batches in the first half of 2024.

We have completed a Phase 1 clinical trial required for registration of a thorough QT study (EBO-104).

Since launching operations in November 2019, we have devoted substantially all of our resources to developing our initial product candidate.

We in-licensed the exclusive worldwide development and commercialization rights for epetraborole from Pfizer Inc.

Our lead development target in NTM is treatment-refractory MAC lung disease, a condition with high unmet need where the mycobacterial infection persists despite standard front-line therapies.

These patients represent complex cases for treatment, often presenting with structural lung damage, high levels of resistance to background therapies, and persistent symptoms that can significantly degrade quality of life.

In 2023, the FDA issued a Guidance for Industry recommending that new potential therapies demonstrate evidence of symptom improvement, measured with patient-reported outcome tools, as the primary endpoint for approval.

To date, no drugs have been approved by the FDA based on symptom improvement in a treatment refractory population.

The only approved therapy for treatment-refractory MAC lung disease received accelerated approval based on the surrogate endpoint of sputum culture conversion without demonstrating symptom improvement.

On August 8, 2024, we announced topline results from the Phase 2 part of EBO-301, a Phase 2/3 study evaluating epetraborole on top of optimized background regimen (“OBR”) in treatment-refractory MAC lung disease, and terminated the Phase 3 portion of the trial with 97 patients enrolled.

The Phase 2 part of the study met its primary objective of demonstrating the potential validation of a novel patient-reported outcome (PRO) tool and a higher PRO-based clinical response rate in the epetraborole + OBR arm (39.5%) vs.

placebo + OBR (25.0%;

treatment difference 13.9%, p=0.19).

However, sputum culture conversion at Month 6, a key secondary endpoint, was similar between treatment arms (13.2% in epetraborole + OBR vs.

10.0% placebo + OBR;

treatment difference 3.4%, p=0.64).

Epetraborole was generally well tolerated in the trial.

Consistent with the FDA’s 2023 Guidance, the primary purpose of the Phase 2 part of the EBO-301 study was to test the validity of multiple patient-reported outcome tools in a treatment refractory population, with the goal of identifying a PRO-based primary endpoint for the Phase 3 portion of the trial.

To that end, we recently submitted an amended statistical analysis plan to the FDA selecting the Quality of Life – Bronchiectasis (QOL-B) respiratory domain patient reported outcome (PRO) instrument as the primary efficacy endpoint for the Phase 3 part of the EBO-301 trial.

We anticipate releasing top-line Phase 3 data from the 97 Phase 3 patients in the second quarter of 2025.

If these Phase 3 data confirm the Phase 2 findings, we plan to meet with the FDA to discuss potential registrational pathways in TR-MAC.

We are also studying epetraborole for the treatment of acute melioidosis.

We completed enrollment in a 200-patient observational trial (non-epetraborole treatment) in October 2024 and expect to announce topline data in the second half of 2025.

These data will inform a Phase 2 proof of concept study that is planned to initiate start up activities in the second half of 2025.

Melioidosis is a deadly bacterial infection and global bioterrorism threat with a 90-day mortality rate of approximately 50% using standard of care (SOC) drugs ceftazidime or meropenem.

The aim of the program is to meaningfully lower the expected mortality rate by dosing epetraborole on top of SOC.

Beyond epetraborole, we are conducting Phase-1-enabling studies with AN2-502998 (formerly known as AN15368), an investigational, boron-based small molecule in development for the treatment of chronic Chagas disease, and have several research programs targeting the development of novel compounds in oncology and infectious disease based on our boron chemistry platform.

In October 2023, we announced an exclusive license agreement with the University of Georgia Research Foundation to advance the development of AN2-502998, originally discovered by researchers at Anacor, in close collaboration with the University of Georgia.

AN2-502998 is the only compound of which we are aware to have demonstrated curative activity in preclinical studies across multiple species, including in non-human primates with long-term, naturally acquired chronic infections of diverse T.

cruzi genetic types.

We anticipate initiating a Phase 1 study in 2025.

We also anticipate 1 to 2 new development candidates in oncology in 2025.

In August 2024, we also announced a reduction of approximately 50% of our workforce, which was approved by the Board in connection with our restructuring following discontinuation of the EBO-301 study and to further extend our operating capital.

In connection with the workforce reduction, we recognized severance and other charges of $2.2 million, primarily consisting of severance payments and other employee termination-related expenses.

We have incurred significant operating losses to date.

21 unchanged sentences

We do not currently have a sales force.

If we obtain regulatory approval for epetraborole or any of our other product candidates, we intend to hire and deploy a specialty sales force, which will increase our operating costs.

If we obtain regulatory approval for any of our product candidates, we intend to hire and deploy a specialty sales force, which will increase our operating costs.

Due to ongoing developments in our business and clinical development and regulatory efforts, among other factors, our results of operations may vary substantially from year to year and from quarter to quarter and, as a result, we believe that period to period comparisons of our operating results may not be meaningful and should not be relied upon as being indicative of our future performance.

7 unchanged sentences

We expense both internal and external research and development expenses as they are incurred.

We expect our research and development expenses to increase substantially in the future, as we advance epetraborole and any other product candidates into and through additional clinical trials and pursue regulatory approval.

We expect our research and development expenses to increase substantially in the future, as we advance our product candidates into and through clinical trials and pursue regulatory approval.

The process of conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming.

6 unchanged sentences

Other general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, and professional service fees for auditing, tax, general legal services, and other external consulting and vendor services.

We expect our general and administrative expenses to continue to increase in the future, including expenses related to legal, accounting, regulatory and tax-related services associated with maintaining compliance with requirements of The Nasdaq Stock Market LLC and the SEC, directors and officers liability insurance premiums and investor relations activities.

Other Income, Net

Other income, net consists of interest income and investment income earned on our cash, cash equivalents and investments and income associated with foreign currency fluctuations.

We expect our general and administrative expenses to continue to increase in the future, including expenses related to legal, accounting, regulatory, and tax-related services associated with maintaining compliance with requirements of the Nasdaq Global Select Market and the Securities and Exchange Commission ("SEC"), directors and officers liability insurance premiums, and investor relations activities.

Restructuring Charges

Our restructuring charges consist primarily of employee severance payments and other employee termination-related expenses.

Interest Income

Interest income consists of interest income and investment income earned on our cash, cash equivalents, and investments.

Other income consists of income associated with foreign currency fluctuations.

Results of Operations

4 unchanged sentences

Research and development

Research and development—related party

General and administrative

Restructuring charges

Total operating expenses

Loss from operations

Other income, net

*Change not meaningful

Interest income

Research and Development Expenses

Research and development expenses, including related-party research and development expenses, were $40.5 million for the year ended December 31, 2024 compared to $54.9 million for the year ended December 31, 2023.

The increase of $25.4 million was primarily due to increases in clinical trial costs, personnel-related expenses, chemistry manufacturing and controls (“CMC”) expenses, and consulting and outside services, partially offset by lower licensing fees.

Clinical trials expenses increased by $11.6 million due to increased costs associated with our Phase 2/3 clinical trial in 2023, partially offset by the elimination of costs associated with our three Phase 1 clinical trials conducted in 2022.

Personnel-related costs increased by $8.3 million due to increased research and development headcount, higher bonuses based on target performance achievement and stock-based compensation expense.

Costs related to CMC activities increased by $3.6 million due to pre-registration manufacturing activities.

Consulting and outside services increased by $1.9 million for clinical trial activities.

Costs related to research and preclinical studies increased by $0.1 million.

Other expenses, including rent, utilities and information technology expenses, increased by $0.9 million to support our increased headcount, offset by lower licensing fees paid in the prior year of $1.0 million to Anacor upon achievement of a milestone.

During the year ended December 31, 2023, a total reimbursement of $2.5 million of operating expenses was recognized related to our funding arrangements.

The decrease of $14.4 million was primarily due to decreases in clinical trial costs, chemistry manufacturing and controls (“CMC”) expenses, personnel-related expenses, allocated facilities and miscellaneous expenses, licensing fees, and consulting and outside services, partially offset by an increase in preclinical and research expenses.

Clinical trials expenses decreased by $5.6 million due to decreased costs associated with the termination of our Phase 2/3 clinical trial in treatment refractory NTM lung disease in August 2024 and completion of our Phase 1 clinical trials in 2023.

Costs related to CMC activities decreased by $4.4 million due to completion of certain activities related to epetraborole and the timing of non-dilutive funding expense offsets.

Personnel-related costs decreased by $3.3 million due to our restructuring activities.

Allocated facilities and miscellaneous expenses decreased by $0.9 million due to recognition of our qualified small business payroll tax credit and our non-dilutive funding expense offset.

Licensing fees decreased by $0.2 million and consulting and outside services decreased by $0.1 million.

These decreases were partially offset by $0.1 million increase due to the prioritization of certain research programs.

During the years ended December 31, 2024 and 2023, a total reimbursement of $3.7 million and $2.5 million, respectively, of operating expenses were recognized related to our funding arrangements.

The following table shows our research and development expenses by type of activity:

(in thousands)

Clinical trials

Chemistry manufacturing and controls expenses

Research and preclinical studies

Research and development—related party

Other expenses

(in thousands, except percentages)

Clinical trials expenses

Personnel-related expenses

Consulting and outside services

Preclinical and research study expenses

Chemistry manufacturing and controls

Other expenses

Total research and development expenses

1 unchanged sentence

General and administrative expenses were $14.1 million for the year ended December 31, 2024 compared to $14.8 million for the year ended December 31, 2023.

The increase of $2.0 million was primarily attributable to a $1.9 million increase in personnel-related costs primarily related to stock-based compensation expense and a $1.0 million increase in legal and accounting services.

These increases were partially offset by a $0.9 million decrease, primarily related to directors and officers liability insurance premiums.

Other Income, Net

Other Income, Net was $4.9 million for the year ended December 31, 2023 compared to $1.3 million for the year ended December 31, 2022.

The increase of $3.6 million was due to higher interest rates and higher cash, cash equivalents and short and long-term investment balances in 2023 as compared to 2022.

The decrease of $0.7 million was primarily attributable to $0.4 million decrease in professional services expenses, $0.4 million decrease in facilities and miscellaneous expenses and $0.2 million decrease in D&O insurance expenses.

These decreases were partially offset by $0.3 million increase in personnel related expenses, primarily related to stock-based compensation expense.

Restructuring Charges

Restructuring charges were $2.2 million for the year ended December 31, 2024 consisting of severance payments and other employee termination-related expenses.

We had no restructuring charges for the year ended December 31, 2023.

Interest Income

Interest Income was $5.5 million for the year ended December 31, 2024 compared to $4.9 million for the year ended December 31, 2023.

The increase of $0.6 million was due to higher interest rates despite lower cash, cash equivalents and short and long-term investment balances in 2024 as compared to 2023.

Liquidity and Capital Resources

1 unchanged sentence

We have incurred net losses since our inception.

For the year ended December 31, 2023 and 2022, we had net losses of $64.7 million and $41.0 million, respectively, and we expect to incur substantial additional losses in future periods.

For the years ended December 31, 2024 and 2023, we had net losses of $51.3 million and $64.7 million, respectively, and we expect to incur substantial additional losses in future periods.

As of December 31, 2024, we had an accumulated deficit of $205.8 million.

1 unchanged sentence

Based on our current business plan, we believe that our available cash will be sufficient to fund our planned operations for at least 12 months following the date of this Form 10-K.

To date, we have funded our operations primarily through our Underwritten Offering, ATM Offering, IPO and private placements of our redeemable convertible preferred stock.

To date, we have funded our operations primarily through our Underwritten Offering, ATM Offering, IPO and private placements of our then existing redeemable convertible preferred stock.

In August 2023, we generated approximately $65.5 million from the Underwritten Offering, after deducting commissions and offering expenses.

In June 2023, we generated

approximately $19.1 million in net proceeds from the ATM Offering, after deducting commissions and offering expenses.

In June 2023, we generated approximately $19.1 million in net proceeds from the ATM Offering, after deducting commissions and offering expenses.

In March and April 2022, we generated aggregate net proceeds of approximately $70.4 million from our IPO, after deducting underwriting discounts and commissions and offering expenses.

Prior to our IPO, we raised $91.6 million from the issuance of our redeemable convertible preferred stock.

Upon the closing of our IPO, all then outstanding shares of redeemable convertible preferred stock were converted into shares of our common stock.

Upon the closing of our IPO, all outstanding shares of our then existing redeemable convertible preferred stock were converted into shares of our common stock.

Future Funding Requirements

2 unchanged sentences

Historically, we have incurred operating losses and negative cash flows as a result of ongoing efforts to develop our initial drug product candidate, epetraborole, including conducting ongoing preclinical and nonclinical studies, clinical trials, registration API and drug product materials manufacturing, and providing general and administrative support for these operations.

We expect our negative cash flows to increase significantly over the next several years as we advance epetraborole and any other product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, and continue our research and development efforts.

We expect our negative cash flows to increase significantly over the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, and continue our research and development efforts.

We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.

14 unchanged sentences

• the timing of, and the costs involved in, obtaining regulatory approvals for our drug product candidates;

• the timing of enrollment of our current and any future clinical trials;

• the timing of enrollment of any future clinical trials;

• the scope and costs of development and commercial manufacturing activities;

16 unchanged sentences

Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials or we may also be required to terminate rights to our current and future product candidates.

If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

4 unchanged sentences

Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Net (decrease) increase in cash

Net increase (decrease) in cash and cash equivalents

Cash Used in Operating Activities

Net cash used in operating activities was $49.3 million for the year ended December 31, 2024, which consisted of a net loss of $51.3 million, primarily due to the use of funds to develop our product candidates, and a net decrease of $3.0 million in our net operating assets and liabilities offset by a net increase of $5.0 million in non-cash charges.

The net decrease in our operating assets and liabilities was primarily due to a decrease of $4.5 million in accrued compensation and accrued liabilities due to a decrease in accrued research and development expenses, partially offset by an increase of $0.8 million in prepaid expenses and other current assets, an increase of $0.6 million in accounts payable and an increase of $0.1 million in other current liabilities.

The non-cash charges consisted of stock-based compensation expense of $8.3 million, partially offset by net accretion of discounts on investments of $3.3 million.

Net cash used in operating activities was $53.3 million for the year ended December 31, 2023, which consisted of a net loss of $64.7 million, due to the use of funds to develop our initial drug product candidate offset by a net increase of $5.8 million in our net operating assets and liabilities and $5.6 million in non-cash charges.

1 unchanged sentence

The non-cash charges consisted of stock-based compensation expense of $8.4 million and non-cash operating lease expense of $0.1 million, partially offset by net accretion of discounts on investments of $2.9 million.

Net cash used in operating activities was $33.5 million for the year ended December 31, 2022, which consisted of a net loss of $41.0 million, due to the use of funds to develop our initial drug product candidate offset by a net increase of $3.7 million in our net operating assets and liabilities and $3.8 million in non-cash charges.

The net increase in our operating assets and liabilities was primarily due to an increase of $5.5 million in accounts payable, accrued compensation and accrued liabilities due to an increase in accrued research and development expenses, partially offset by an increase of $1.7 million in prepaid expenses and other current assets and a decrease of $0.1 million in operating lease liabilities.

The non-cash charges consisted of stock-based compensation expense of $4.4 million and non-cash operating lease expense of $0.1 million, partially offset by net accretion of discounts on investments of $0.7 million.

Cash Used in Investing Activities

Net cash used in investing activities was $43.3 million for the year ended December 31, 2023, which primarily consisted of $132.2 million in purchases of investments, partially offset by $88.9 million in proceeds from maturities of investments.

Net cash provided by investing activities was $54.6 million for the year ended December 31, 2024, which primarily consisted of $101.3 million in proceeds from maturities of investments, partially offset by $46.7 million in purchases of investments.

Cash Provided by Financing Activities

Net cash provided by financing activities was $0.4 million for the year ended December 31, 2024, which primarily consisted of net proceeds from the issuance of common stock under the ESPP and from the exercises of stock options.

Net cash provided by financing activities was $85.0 million for the year ended December 31, 2023, which primarily consisted of net proceeds from the issuance of common stock in our Underwritten Offering and ATM Offering.

Net cash provided by financing activities was $70.4 million for the year ended December 31, 2022, which primarily consisted of net proceeds from the issuance of common stock in our IPO.

Contractual Obligations and Commitments

47 unchanged sentences

These assumptions include:

estimating the length of time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of our common stock price over the expected term (expected volatility), risk-free interest rate, and expected dividends.

the estimated length of time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of our common stock price over the expected term (expected volatility), risk-free interest rate, and expected dividends.

See Note 9—Equity Incentive Plan and Stock-Based Compensation to our audited financial statements included elsewhere in this Form 10-K for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2024 and 2023.

14 unchanged sentences

Accordingly, we estimate the dividend yield to be zero.

For the years ended December 31, 2023 and 2022, there was an insignificant amount of cash received and no cash received upon exercise of stock options, respectively.

Common Stock Valuations

Prior to our IPO, in the absence of a public trading market for our common stock, the estimated fair value of the common stock underlying our stock options was determined at each grant date by our Board, with input from management.

All options to purchase shares of our common stock are intended to be exercisable at a price per share not less than the per-share fair value of our common stock underlying those options on the date of grant.

On each grant date, we developed an estimate of the fair value of our common stock based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock, and valuations from an independent third-party valuation firm.

The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

The assumptions used to determine the estimated fair value of our common stock are based on numerous objective and subjective factors, combined with management judgment, including:

• external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

• our stage of development and business strategy;

• the rights, preferences and privileges of our redeemable convertible preferred stock relative to those of our common stock;

• the prices at which we sold shares of our redeemable convertible preferred stock;

• our financial condition and operating results, including our levels of available capital resources;

• equity market conditions affecting comparable public companies;

• general U.S.

market conditions and the lack of marketability of our common stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date.

In accordance with the Practice Aid, we considered the following methods:

• Option Pricing Method .

Under the option pricing method (the “OPM method”), shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class.

The estimated fair values of the preferred and common stock are inferred by analyzing these options.

• Current Value Method .

Under the current value method (the “CVM method”), the Company’s current value is allocated among various equity holders based on liquidation preferences and other rights under the assumption that all capital owners act to maximize their financial return.

• Probability-Weighted Expected Return Method .

The probability-weighted expected return method (the “PWERM method”), is a scenario-based analysis that estimates value per share based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

• Hybrid Method .

Under the Hybrid Method the Company’s current value is estimated based on a combination of the OPM, PWERM, and CVM methods, whereby each valuation method is applied to a different scenario.

The different scenarios are then weighted based on their probable outcomes.

Subsequent to December 31, 2021 and through March 23, 2022, prior to the availability of a market price for our common stock on the Nasdaq Global Select Market, we used the Hybrid Method to determine our enterprise value.

We took into account our estimated equity value of our anticipated IPO, the estimated present value of the assumed IPO price per share, the estimated time to IPO and a discount for lack of marketability.

We also factored in the non-IPO Scenario, assumed that we will stay private and used a hybrid backsolve method to conclude our equity value based on our most recent arms-length financing transaction, adjusted for market trends.

The non-IPO Scenario also involved making assumptions for the expected time to liquidity, volatility, and risk-free rate.

Subsequent to December 31, 2021 and through March 23, 2022, we determined that the Hybrid Method was also the most appropriate method for allocating our enterprise value to determine the estimated fair value of our common stock.

The OPM and CVM methods were used based on the future IPO Scenario, equity value and the expected future allocation to the preferred and common stockholders.

The CVM and OPM methods were combined and weighted to reflect our estimation of the occurrence of each scenario.

In determining the estimated fair value of our common stock, our Board also considered the fact that our stockholders could not freely trade our common stock in the public markets.

Accordingly, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity.

The estimated fair value of our common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

There are significant judgments and estimates inherent in the determination of our enterprise value and the fair value of our common stock, such as those regarding our discount rates, the selection of comparable companies, and the probability of possible future events.

Such estimates involve inherent uncertainties and the application of significant judgment.

As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Changes in judgements could have a material impact on our results of operation.

Following the completion of the IPO, the fair value of our common stock is based on the closing quoted market price of our common stock on the date of grant.

Redeemable Convertible Preferred Stock

We recorded all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs.

The redeemable convertible preferred stock was recorded outside of permanent equity because while it is not mandatorily redeemable, in certain events considered not solely within our control, such as a merger, acquisition, or sale of all or substantially all of our assets (each, a deemed liquidation event), the redeemable convertible preferred stock would have become redeemable at the option of the holders of at least a majority of the then outstanding shares.

In addition, shares of preferred stock must be redeemed by the Company at a price of $2.55 and $15.00 per share for Series A and Series B redeemable convertible stock, respectively, plus any accrued dividends (whether or not declared) in three annual installments on or after the seventh anniversary of the Series B original issue date (on or after March 5, 2028) upon a written request by at least two-thirds of the holders of the Series A and Series B redeemable convertible preferred stock, voting together as a single class.

During the year ended December 31, 2022, we accreted $1.8 million to the redemption value of the redeemable convertible preferred stock representing cumulative dividends.

Immediately prior to the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock were converted into shares of common stock and the related carrying value was reclassified to common stock and additional paid-in capital.

There were no shares of redeemable convertible preferred stock outstanding as of December 31, 2023 and 2022.

For the years ended December 31, 2024 and 2023, there was $0.2 million and an insignificant amount of cash received upon exercise of stock options, respectively.

Indemnification Agreements

22 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis