What changed in this filing

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Item 9A. Controls and Procedures

2022-02-22 compared with 2021-02-16 · 293 added, 248 removed, 755 unchanged (42% of the section changed)

CONTROLS AND PROCEDURES

Inherent Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable 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 judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Index to Financial Statements

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K.

Management based its assessment on the criteria set forth in "Internal Control - Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such required 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 disclosures.

Management Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based our assessment on the criteria set forth in "Internal Control - Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the results of our assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by an independent registered public accounting firm, as stated in their report included in Part IV Item 15, “Exhibits, Financial Statement Schedules” of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting during the most recent fiscal quarter covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for “emerging growth companies.”

There was no change in our internal controls over financial reporting during the year ended December 31, 2021 covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

Index to Financial Statements

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our internal controls will prevent or detect all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

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

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Arcutis Biotherapeutics, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Arcutis Biotherapeutics, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Amgen Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s 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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

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

/s/ Ernst & Young LLP

Los Angeles, California

February 22, 2022

Index to Financial Statements

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference from the applicable information set forth in “Executive Officers,” “Election of Directors,” “Corporate Governance,” and Section 16(a) Beneficial Ownership Reporting Compliance” which will be included in our Proxy Statement for our 2021 Annual Meeting of Stockholders, or the Proxy Statement, to be filed with the SEC.

The information required by this item is incorporated by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.

EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the applicable information set forth in “Executive Compensation,” and “Director Compensation” and “Corporate Governance” which will be included in our definitive Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference from the applicable information set forth in “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” which will be included in our definitive Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference from the applicable information set forth in “Certain Relationships and Related Party Transactions” and “Corporate Governance” which will be included in our definitive Proxy Statement.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Index to Financial Statements

The information required by this item is incorporated by reference from the applicable information set forth in “Ratification of Selection of Independent Registered Public Accounting Firm” which will be included in our definitive Proxy Statement.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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Audited Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets

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(b) Exhibits.

Description of Document Incorporated by Reference Form Date Number Filed Herewith

Description of Document Incorporated by Reference Form Date Number Filed/Furnished Herewith

3.1 Restated Certificate of Incorporation.

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S-1/A 1/21/20 10.4

10.5# 2022 Employment Inducement Incentive Plan and forms of award agreements.

10.6# Offer Letter, dated January 9, 2020, by and between the Registrant and Todd Franklin Watanabe.

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10.24# Offer Letter, dated December 18, 2020, by and between the Registrant and Matthew R.

10-K 2/16/21 10.23

10.25# Severance & Change in Control Agreement, by and between the Registrant and Matthew R.

10-K 2/16/21 10.24

10.26†^ Supply Agreement, dated November 24, 2020, by and between Registrant and Interquim, S.A.

10-K 2/16/21 10.25

10.27†^ Exclusive Distribution Agreement, dated February 8, 2021, by and between the Registrant and Cardinal Health 105, Inc.

10-Q 5/6/21 10.1

10.28# Severance & Change in Control Agreement, by and between the Registrant and Scott L.

10-Q 5/6/21 10.2

10.29 Sales Agreement, dated May 6, 2021, by and between the Registrant and Cowen and Company, LLC.

10-Q 5/6/21 10.3

10.30† Supply and Manufacturing Agreement, dated September 15, 2021, between DPT Laboratories, Ltd.

and the Registrant.

10-Q 11/4/21 10.1

10.31# Offer Letter, dated December 13, 2021, by and between the Registrant and Mas Matsuda.

10.32# Severance & Change in Control Agreement, by and between the Registrant and Mas Matsuda.

10.33^ Loan and Security Agreement, dated December 22, 2021, by and among the Registrant, SLR Investment Corp.

and the lenders party thereto.

23.1 Consent of Independent Registered Public Accounting Firm.

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101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Index to Financial Statements

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

______________

* Filed herewith.

** Furnished herewith.

† Registrant has omitted portions of the exhibit as permitted under Item 601(b)(10) of Regulation S-K.

^ Registrant has omitted schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K.

^ Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K.

The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.

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We have audited the accompanying balance sheets of Arcutis Biotherapeutics, Inc.

(the Company) as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

(the Company) as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, 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 at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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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.

We are a public accounting firm registered with the 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.

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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 include performing procedures to assess the risks of material misstatement on the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Index to Financial Statements

Accrued Clinical Trial Costs

Description of

As of December 31, 2021, the Company recorded $13.2 million for accrued clinical trial costs.

As described in Note 2 to the financial statements, the Company records accrued liabilities for estimated costs of clinical trial research and development activities conducted by third-party clinical research organizations (CROs).

The Company accrues for these costs based on factors such as patient enrollment, estimates of the work completed as patients progress through the trials, and the related costs for the research activities in accordance with terms established with its third-party service providers under the respective service agreements.

Auditing the Company’s accounting for accrued clinical trial costs was challenging because calculating the liability for clinical trial activity includes determining the progress or stage of completion of the activities within each clinical trial based on internal and external information, and involves a high volume of data.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s process for estimating accrued clinical trial costs, including controls over management’s measurement of clinical trial progress and the related estimates of costs incurred.

We also tested controls over management’s review of the completeness and accuracy of data used in determining the accruals.

To test the adequacy of the Company’s accrued clinical trial costs, we performed audit procedures that included, among others, inspecting correspondence between internal clinical trial study managers and external clinical trial service providers for selected clinical trials and performing corroborative inquiries of accounting personnel and internal clinical project managers to validate the progress of clinical trial activities.

To assess the appropriate measurement of accrued clinical trial costs, we reviewed significant agreements, and associated amendments and change orders, obtained external confirmation of key study dates and patient enrollment status directly with the CROs, selected a sample of transactions to inspect invoices, and vouched payments to bank statements.

Additionally, we reviewed payments made subsequent to year-end to evaluate the completeness of the accrued clinical trial costs.

/s/ Ernst & Young LLP

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Total assets $ 408,152 $ 298,269

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Operating lease liability, noncurrent 4,774 4,964

Long-term debt, net 72,350 —

Other long-term liabilities 25 82

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Commitments and contingencies (Note 7)

Convertible preferred stock, $ 0.0001 par value;

no shares and 48,787,898 shares authorized at December 31, 2020 and December 31, 2019, respectively;

no shares and 24,385,388 shares issued and outstanding at December 31, 2020, and December 31, 2019, respectively;

aggregate liquidation preference of $ 166,300 at December 31, 2019

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

10,000,000 and no shares authorized at December 31, 2020 and December 31, 2019, respectively;

10,000,000 shares authorized at December 31, 2021 and December 31, 2020;

no shares issued and outstanding at December 31, 2021 and December 31, 2020;

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Accumulated deficit ( 408,306 ) ( 201,950 )

Total stockholders’ equity (deficit) 270,621 ( 65,029 )

Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 298,269 $ 107,012

Total stockholders’ equity 297,677 270,621

Total liabilities and stockholders’ equity $ 408,152 $ 298,269

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

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Balance—December 31, 2018 16,262,425 $ 72,252 1,557,900 $ — $ 289 $ — $ ( 24,276 ) $ ( 23,987 )

Issuance of Series A convertible preferred stock, net of issuance costs of $ 21 and value of convertible preferred stock liability of $ 891

3,156,784 7,186 — — — — — —

Issuance of Series B convertible preferred stock, net of issuance costs of $ 88

8,880,462 54,912 — — — — — —

Issuance of Series B convertible preferred stock in connection with license agreement 484,388 3,000 — — — — — —

Issuance of common stock upon the exercise of stock options — — 114,225 — 43 — — 43

Vesting of founder shares subject to repurchase — — 360,560 — — — — —

Lapse of repurchase rights related to common stock issued pursuant to early exercises — — 160,493 — 67 — — 67

Stock-based compensation expense — — — — 151 — — 151

Net Loss — — — — — — ( 19,255 ) ( 19,255 )

Balance—December 31, 2018 16,262,425 $ 72,252 1,557,900 $ — $ 289 $ — $ ( 24,276 ) $ ( 23,987 )

Issuance of Series C convertible preferred stock, net of issuance costs of $ 262

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Issuance of common stock upon the exercise of stock options — — 15,885 — 9 — — 9

Issuance of restricted stock units — — 13,245 — 8 — — 8

Issuance of common stock upon the vesting of restricted stock awards — — 13,245 — 8 — — 8

Vesting of founder shares subject to repurchase — — 275,726 — — — — —

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Balance—December 31, 2020 — $ — 43,338,438 $ 4 $ 472,569 $ ( 2 ) $ ( 201,950 ) $ 270,621

Issuance of shares of common stock for public offering, net of issuance costs of $ 603

— — 6,325,000 1 207,489 — — 207,490

Issuance of common stock upon the exercise of stock options — — 257,060 — 1,265 — — 1,265

Issuance of common stock upon the vesting of restricted stock units — — 37,362 — — — — —

Lapse of repurchasing rights related to common stock issued pursuant to early exercises — — 249,239 — 176 — — 176

Shares issued pursuant to the employee stock purchase plan — — 48,515 — 842 — — 842

Stock-based compensation expense — — — — 23,892 — — 23,892

Unrealized loss on marketable securities — — — — — ( 253 ) — ( 253 )

Net loss — — — — — — ( 206,356 ) ( 206,356 )

Balance—December 31, 2021 — $ — 50,255,614 $ 5 $ 706,233 $ ( 255 ) $ ( 408,306 ) $ 297,677

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

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Loss on disposal of property and equipment — 42 —

Issuance of convertible preferred stock in connection with license agreement — — 3,000

Change in fair value of convertible preferred stock liability — — ( 75 )

Changes in operating assets and liabilities:

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Payment of financing costs — — ( 1,401 )

Proceeds from long-term debt, net 73,987 — —

Debt issuance costs ( 1,637 ) — —

Net cash provided by financing activities 281,947 298,145 93,103

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SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Interest expense paid in cash $ 142 $ — $ —

Conversion of preferred stock to common stock and APIC $ — $ 166,491 $ —

Reclassification of convertible preferred stock liability to Series A convertible preferred stock $ — $ — $ 891

Right-of-use asset obtained in exchange for lease liability $ — $ 3,617 $ 391

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Arcutis Biotherapeutics, Inc., or the Company, is a late-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs.

The Company’s current portfolio is comprised of highly differentiated topical treatments with significant promise to treat immune-mediated dermatological diseases and conditions.

The Company’s current portfolio is comprised of highly differentiated topical treatments with significant potential to treat immune-mediated dermatological diseases and conditions.

The Company believes it has built the industry's leading platform for dermatologic product development.

The Company’s strategy is to focus on validated biological targets and to use our platform and deep dermatology expertise to develop differentiated products that have the potential to address the major shortcomings of existing therapies in its targeted indications.

The Company’s strategy is to focus on validated biological targets and to use our drug development platform and deep dermatology expertise to develop differentiated products that have the potential to address the major shortcomings of existing therapies in its targeted indications.

The Company believes this strategy uniquely positions it to rapidly advance its goal of bridging the treatment innovation gap in dermatology, while maximizing its probability of technical success.

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On February 5, 2021, the Company completed a public offering of 6,325,000 shares of stock at an offering price of $ 35.00 per share, including 825,000 shares sold pursuant to the underwriters full exercise of their option to purchase additional shares.

The aggregate net proceeds received by the Company were approximately $ 207.4 million, after deducting underwriting discounts, commissions and estimated offering expenses.

The aggregate net proceeds received by the Company were approximately $ 207.5 million, after deducting underwriting discounts, commissions, and offering related transaction costs.

At-the-Market (ATM) Offerings

On May 6, 2021, the Company entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen), under which the Company may from time to time issue and sell shares of its common stock through ATM offerings for an aggregate offering price of up to $ 100.0 million.

Cowen will act as the Company's sales agent for the ATM program and is entitled to compensation for its services equal to 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

The Company has not yet issued or sold any shares of common stock through the ATM program.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Debt Financing

On December 22, 2021, the Company entered into a loan and security agreement (Loan Agreement) with SLR Investment Corp (SLR) and the lenders party thereto.

The lenders agreed to extend term loans to the Company in an aggregate principal amount of up to $ 225.0 million, of which $ 75.0 million has been funded and is outstanding, and up to $ 150.0 million in additional funding may become available subject to the satisfaction of specified conditions.

The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 408.3 million and $ 202.0 million as of December 31, 2021 and 2020, respectively.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 388.6 million and $ 286.0 million as of December 31, 2021 and 2020, respectively.

In addition, on February 5, 2021, the Company received $ 180.3 million in net proceeds from an equity offering.

Prior to selling common stock in its IPO and follow-on financings, the Company had historically financed its operations primarily through the sale of its convertible preferred stock.

As of December 31, 2021, the Company had $ 75.0 million outstanding under the Loan Agreement and has an aggregate of up to $ 150.0 million in additional funding that may become available subject to the satisfaction of specified conditions.

Prior to selling common stock in its IPO, the Company had historically financed its operations primarily through the sale of its convertible preferred stock.

Management expects operating losses to continue for the foreseeable future.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company believes that its existing capital resources will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of its financial statements.

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In March 2020, the World Health Organization declared a pandemic related to the global novel coronavirus disease 2019 (COVID-19) outbreak.

As of February 16, 2021, the Company’s operations have not been significantly impacted by the COVID-19 pandemic.

The Company is monitoring the impact COVID-19 may have on the clinical development of its product candidates, including potential delays or modifications to its ongoing and planned trials.

However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations, including ongoing and planned clinical trials.

The Company is monitoring the impact COVID-19 may have on the clinical development of its product candidates, including potential delays or modifications to its ongoing and planned trials, as well as its planned commercial activities.

The Company believes that the rapid spread of the Omicron variant in late 2021 and early 2022 has likely had a minor impact on the enrollment of our clinical trials.

Because of this likely impact, along with the inherent challenges of enrolling young children in clinical trials, we have updated our expectation for providing topline data for the INTEGUMENT-PED trial, in atopic dermatitis subjects between two and five years of age, to 2023.

The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations, including ongoing and planned clinical trials.

Summary of Significant Accounting Policies

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Actual results could differ from those estimates.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

JOBS Act Accounting Election

Effective December 31, 2021, the Company is no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) because of an increase in its market capitalization.

Prior to losing this status as an emerging growth company, the JOBS Act allowed the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements were made applicable to private companies, and the Company had elected to use this extended transition period.

The Company can no longer take advantage of this extended transition period.

To date, the Company has viewed its financial information on an aggregate basis for the purposes of evaluating financial performance and allocating the Company’s resources.

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The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents.

Cash equivalents consist primarily of money market funds, commercial paper, and U.S.

Treasury securities.

Cash equivalents consist primarily of money market funds, commercial paper, U.S.

Treasury securities, and short-term corporate debt securities.

Restricted Cash

As of December 31, 2020, the Company held $ 1.5 million of restricted cash as collateral for a letter of credit related to our amended office space lease.

As of December 31, 2019, the Company did no t hold any restricted cash.

As of December 31, 2021 and 2020, the Company held $ 1.5 million of restricted cash as collateral for a letter of credit related to our amended office space lease.

Marketable Securities

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Management determines the appropriate classification of its investments in fixed income securities at the time of purchase.

Available-for-sale securities with original maturities beyond three months at the date of purchase are classified as current based on their availability for use in current operations.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive loss.

Available-for-sale securities with original maturities beyond three months at the date of purchase, including those that have maturity dates beyond one year from the balance sheet date, are classified as current assets on the balance sheets due to their highly liquid nature and availability for use in current operations.

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

Realized gains and losses as well as credit losses, if any, on marketable securities are included in other income, net.

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

As of December 31, 2020, there were net unrealized losses on marketable securities of $ 2,000 , and as of December 31, 2019, there were net unrealized losses on marketable securities of $ 1,000 .

Unrealized gains and losses on marketable securities are reported as a component of accumulated other comprehensive loss on the balance sheets.

Realized gains or losses on investments for the year ended December 31, 2020 were no t material.

There were no realized gains or losses on investments for the year ended December 31, 2019.

Unrealized gains and losses on marketable securities are reported as a component of accumulated other comprehensive income (loss) on the balance sheets.

Interest on marketable securities is included in other income, net.

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Fair Value Measurement

The Company’s financial instruments, in addition to those presented in Note 3, include cash equivalents, accounts payable and accrued liabilities.

The Company’s financial instruments, in addition to those presented in Note 3, include cash equivalents, accounts payable, accrued liabilities, and long-term debt.

The carrying amount of cash equivalents, accounts payable, and accrued liabilities approximate their fair values due to their short maturities.

As the long-term debt is subject to variable interest rates that are based on market rates which regularly reset, the Company believes that the carrying value of the long-term debt approximates its fair value.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Assets and liabilities recorded at fair value on a recurring basis on the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values.

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There were no impairments recognized during the years ended December 31, 2021 and 2020.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company determines if an arrangement is or contains a lease at inception.

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Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to leases with terms of 12 months or less (short-term leases) for all classes of assets.

Preclinical and Clinical Accruals and Costs

The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies, clinical trials and contract manufacturing activities.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Nonclinical and Clinical Accruals and Costs

The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of nonclinical studies, clinical trials, and contract manufacturing activities.

These costs are a significant component of the Company’s research and development expenses.

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Such payments are evaluated for current or long-term classification based on when they will be realized.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company has entered into, and may continue to enter into, license agreements to access and utilize certain technology.

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The Company accounts for forfeitures as they occur.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Income taxes are accounted for using the asset and liability method.

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To date, there have been no interest or penalties incurred in relation to the unrecognized tax benefits.

The United States Congress enacted the Families First Coronavirus Response Act (FFCR Act) on March 18, 2020 and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020.

The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S.

Congress enacted the American Rescue Plan Act on March 10, 2021, Families First Coronavirus Response Act (FFCR Act) on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020.

The American Rescue Plan Act is a follow-up to the CARES Act, which continue the emergency economic stimulus package and includes spending and tax breaks to strengthen the U.S.

economy and fund a nationwide effort to curtail the effect of COVID-19.

The FFCR Act and CARES Act include numerous tax-related provisions including modifications to the limitations on business interest expense and net operating losses (NOLs), certain refundable employee retention credits, as well as a payment delay of employer payroll taxes in 2020 after the date of enactment.

The American Rescue Plan Act, FFCR Act, and CARES Act include numerous tax-related provisions, including modifications to the limitations on business interest expense and net operating losses (NOLs), certain refundable employee retention credits, as well as a payment delay of employer payroll taxes in 2020 after the date of enactment.

On June 29, 2020, the California State Assembly Bill 85 (Trailer Bill) was enacted which suspends the use of California NOL deductions and certain tax credits, including research and development credits, for the 2020, 2021, and 2022 tax years.

The Company does not expect the FFCR Act, CARES Act or Trailer Bill to have a material impact on the Company’s financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company does not expect the American Rescue Plan Act, FFCR Act, CARES Act, or Trailer Bill to have a material impact on the Company’s financial statements.

Variable Interest Entities

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Shares of common stock subject to repurchase are excluded from the weighted-average shares.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, or ASU No.

2018-13, which removes, modifies, and adds various disclosure requirements on fair value measurements in Topic 820.

2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

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

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

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 No.

This update requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations now include forward-looking information in the determination of their credit loss estimates.

Many of the previous loss estimation techniques are still permitted, although the inputs to those techniques have changed to reflect the full amount of expected credit losses.

In addition, this update amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

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

There was no impact on the Company's financial statements from credit losses for the year ended December 31, 2020.

In December 2019, the FASB issued ASU No.

2019-12 , Income Taxes (Topic 740), or ASU No.

2019-12, which amends the existing guidance relating to the accounting for income taxes.

This standard is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.

The standard is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods therein.

Early adoption is permitted.

An entity that elects early adoption in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption should adopt all the amendments in the same period.

The Company early adopted this guidance as of January 1, 2020, and it did not have a material impact on its financial statements.

Fair Value Measurements

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Commercial paper — 119,413 — 119,413

— 45,518 — 45,518

Corporate debt securities — 114,324 — 114,324

Treasury securities 58,177 — — 58,177

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(1) This balance includes cash requirements settled on a nightly basis.

Commercial paper, money market funds and U.S.

Treasury securities are valued taking into consideration valuations obtained from third-party pricing services.

Money market funds and U.S.

Treasury securities are valued based on quoted market prices in active markets, with no valuation adjustment.

Commercial paper and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services.

The pricing services 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 reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads;

These inputs include reported trades of and broker/dealer quotes on the same or similar securities;

issuer credit spreads;

benchmark securities;

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and other observable inputs.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The following table summarizes the estimated value of the Company’s cash, cash equivalents and marketable securities, and the gross unrealized holding gains and losses (in thousands):

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$ 95,145 $ — $ — $ 95,145

Corporate debt securities 1,304 — — 1,304

Total cash and cash equivalents $ 96,449 $ — $ — $ 96,449

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Commercial paper $ 119,413 — — $ 119,413

Corporate debt securities 113,145 ( 125 ) 113,020

Treasury securities 58,307 — ( 130 ) 58,177

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(1) This balance includes cash requirements settled on a nightly basis.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

December 31, 2020

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Cash and cash equivalents:

Commercial paper $ 11,780 $ — $ — $ 11,780

Money market funds (1)

65,082 — — 65,082

Treasury securities 7,998 — — 7,998

Total cash and cash equivalents $ 65,082 $ — $ — $ 65,082

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(1) This balance includes cash requirements settled on a nightly basis.

Realized gains or losses on investments for the year ended December 31, 2020 were no t material.

There were no realized gains or losses on investments for the year ended December 31, 2019.

Realized gains or losses on investments for the years ended December 31, 2021 and 2020 were no t material.

As of December 31, 2021 and 2020, unrealized losses on marketable securities were no t material, and accordingly, no allowance for credit losses were recorded.

As of December 31, 2020 and 2019, all securities have a maturity of one year or less and all securities with gross unrealized losses have been in a continuous loss position for less than one year.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

As of December 31, 2021 and 2020, all securities have a maturity of 18 months or less and all securities with gross unrealized losses have been in a continuous loss position for less than one year.

Balance Sheet Components

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Prepaid expenses and other current assets consist of the following (in thousands):

December 31, 2020 December 31, 2019

Prepaid clinical trial costs $ 5,629 $ 4,865

Tax credits 510 145

Prepaid insurance 518 249

Deferred financing costs — 1,747

Tax credits 362 510

Other prepaid expenses and current assets 7,663 1,219

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Accrued liabilities consist of the following (in thousands):

December 31, 2020 December 31, 2019

Clinical trial accruals $ 13,217 $ 9,754

Accrued compensation 9,130 4,434

Early exercise liability, current

Accrued expenses and other current liabilities 3,193 1,274

Total accrued liabilities $ 25,540 $ 15,462

$ 15,462 $ 3,654

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Property and Equipment, net

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

Useful life (in years) 2020 2019

Computer hardware $ 775 $ 286

Furniture and fixtures 346 230

Software 104 —

Construction in process — 298

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Property and equipment, net $ 2,261 $ 2,016

Leasehold improvements are depreciated over the term of the lease.

Depreciation expense was $ 454,000 , $ 122,000 , and $ 68,000 for the years ended December 31, 2021, 2020, and 2019 respectively.

There was no depreciation expense for the year ended December 31, 2018.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Leasehold improvements are depreciated over the term of the lease, which is the shorter of the improvements' expected useful lives and the lease term.

All other fixed asset depreciation is recorded using the straight-line method over the estimated useful lives of the assets ( two to five years ).

License Agreements

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Under this agreement, the Company has sole responsibility for development, regulatory, and commercialization activities for the AZ-Licensed Products in the Dermatology Field, at its expense, and it shall use commercially reasonable efforts to develop, obtain and maintain regulatory approvals for, and commercialize the AZ-Licensed Products in the Dermatology Field in each of the United States, Italy, Spain, Germany, the United Kingdom, France, China, and Japan.

The Company paid AstraZeneca an upfront non-refundable cash payment of $ 1.0 million and issued 484,388 shares of Series B convertible preferred stock, valued at $ 3.0 million on the date of the AstraZeneca License Agreement.

The Company subsequently paid AstraZeneca the first milestone cash payment of $ 2.0 million upon the completion of a Phase 2b study of roflumilast cream in plaque psoriasis in August 2019 for the achievement of positive Phase 2 data for an AZ-Licensed Product, which was recorded in research and development expense.

The Company has agreed to make additional cash payments to AstraZeneca of up to an aggregate of $ 12.5 million upon the achievement of specified regulatory approval milestones with respect to the AZ-Licensed Products and payments up to an additional aggregate amount of $ 15.0 million upon the achievement of certain aggregate worldwide net sales milestones.

The Company subsequently paid AstraZeneca the first milestone cash payment of $ 2.0 million upon the completion of a Phase 2b study of topical roflumilast cream in plaque psoriasis in August 2019 for the achievement of positive Phase 2 data for an AZ-Licensed Product, which was recorded in research and development expense.

The Company has agreed to make additional cash payments to AstraZeneca of up to an aggregate of $ 12.5 million upon the achievement of specified regulatory approval milestones with respect to the AZ-Licensed Products, which includes $ 7.5 million upon FDA approval of the Company's first product, and payments up to an additional aggregate amount of $ 15.0 million upon the achievement of certain aggregate worldwide net sales milestones.

With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca License Agreement, it will pay AstraZeneca a low to high single-digit percentage royalty rate on the Company’s, its affiliates’ and its sublicensees’ net sales of such AZ-Licensed Products, subject to specified reductions, until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and ten years from the first commercial sale of such AZ-Licensed Product in such country.

There were no payments made or due in connection with AZ-Licensed Products for the year ended December 31, 2020.

For the year ended December 31, 2019, the Company recorded research and development expense of $ 2.0 million related to the milestone payment made upon the completion of a Phase 2B study of ARQ-151 in plaque psoriasis for the achievement of positive Phase 2 data for an AZ-Licensed Product For the year ended December 31, 2018, the Company recorded research and development expense of $ 4.0 million related to the upfront fee payment and the issuance of Series B convertible preferred stock.

There were no payments made or due in connection with AZ-Licensed Products for the years ended December 31, 2021 and 2020.

ARCUTIS BIOTHERAPEUTICS, INC.

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Additionally, the Company is obligated to pay Hengrui a specified percentage, ranging from the low-thirties to the sub-teens, of certain non-royalty sublicensing income it receives from sublicensees of its rights to the licensed products, such percentage decreasing as the development stage of the licensed products advance.

There were no payments made or due in connection with Hengrui for the year ended December 31, 2020.

There were no payments made or due in connection with Hengrui for the years ended December 31, 2021 and 2020.

Hawkeye Collaboration Agreement

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The Hawkeye Agreement grants Hawkeye an exclusive license to certain intellectual property developed under the agreement as it relates to the applications.

Contemporaneously with the execution of the Hawkeye Agreement, the Company entered into a stock purchase agreement, purchasing 995,000 shares of Hawkeye’s common stock at $ 0.0001 per share, representing 19.9 % of the outstanding common stock of Hawkeye.

In the event that Hawkeye issues shares of Series A preferred stock with proceeds over $ 5.0 million, Hawkeye is required to issue to the Company a number of fully-paid fully-vested shares of common stock determined by dividing (i) $ 2,000,000 by (ii) an amount equal to the cash price per share for Series A preferred stock.

In the event that Hawkeye issues shares of Series A convertible preferred stock with proceeds over $ 5.0 million, Hawkeye is required to issue to the Company a number of fully-paid fully-vested shares of common stock determined by dividing (i) $ 2,000,000 by (ii) an amount equal to the cash price per share for Series A convertible preferred stock.

Other than the potential issuance of this common stock, there are no upfront payments, milestones or royalties pursuant to the Hawkeye Agreement.

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Operating Lease

The Company leases a facility in Westlake Village, California under an operating lease that commenced in February 2019.

This lease was amended in April 2020 in order to relocate to a new expanded space comprising 22,643 square feet.

At the time of the amendment, the Company reassessed the lease term of the original space in accordance with the option to terminate if leasing additional space in the same property.

In connection with the reduction of the lease term for the original space, the Company reduced the ROU asset and lease liability balance by $ 123,000 .

The Company leases a facility in Westlake Village, California under an operating lease that commenced in February 2019 and was amended in April 2020 in order to relocate to a new expanded space comprising 22,643 square feet.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company recognized the ROU asset and lease liability for the new space on May 1, 2020, which was determined to be the lease commencement date, or the date on which the new space was made available to the Company for purposes of planning and constructing the leasehold improvements.

The lease payment term for the new space began on December 30, 2020, which was 15 days after the leasehold improvements were substantially complete.

The Company recognized the ROU asset and lease liability for the new space on May 1, 2020.

The lease payment term for the new space began on December 30, 2020.

The lease payments terminate 91 months thereafter, with a renewal option for a term of five years .

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As a result, the Company recognizes rent expense on a straight-line basis for the full amount of the commitment including the minimum rent increases over the life of the lease and the free rent period.

The amended lease agreement provided for a leasehold improvement allowance up to $ 1.25 million.

It also required the Company to have an available letter of credit of $ 1.5 million upon occupying the space, which is allowed to be reduced throughout the lease period as rent obligations are met.

The amended lease agreement provided for a leasehold improvement allowance up to $ 1.25 million, which the Company fully utilized by incurring related costs.

This amount, along with $ 320,000 of additional costs incurred for leasehold improvements beyond the allowance, were capitalized and included in property and equipment as of December 31, 2020.

The amended lease agreement also required the Company to have an available letter of credit of $ 1.5 million upon occupying the space, which is allowed to be reduced throughout the lease period as rent obligations are met.

Accordingly, in November 2020, the Company entered into a letter of credit for $ 1.5 million, which it secured with a restricted cash account in the same amount.

The restricted cash will be reduced by $ 308,000 on the first, second, third, and fourth anniversary and by $ 45,000 on the fifth anniversary from when the lease payment term began on December 30, 2020, with no further reductions thereafter.

In association with commencement of this new lease, the Company recorded lease liabilities and off-setting ROU assets of $ 3.6 million on its balance sheet as of June 30, 2020.

Since the Company was reasonably certain to incur costs equal to or exceeding the leasehold improvement allowance of $ 1.25 million, the allowance was treated as a lease incentive that was payable to the Company at the lease commencement date.

Accordingly, the leasehold improvement allowance was included in the measurement of the consideration in the contract at commencement, and was recognized as a reduction in the ROU asset and lease liability.

Upon completion in December 2020, the leasehold improvements were reclassified from the lease liability to property and equipment and will be depreciated over the term of the lease.

The minimum annual rental payments of the Company’s operating lease liability as of December 31, 2020 are as follows (in thousands):

In association with commencement of this new lease, the Company recorded lease liabilities and ROU assets of $ 3.6 million on its balance sheet as of June 30, 2020.

All leasehold improvements will be depreciated over the remaining term of the lease.

The annual rental payments of the Company’s operating lease liability as of December 31, 2021 are as follows (in thousands):

Thereafter 1,740

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Amounts representing interest ( 1,351 )

Present value of lease payments $ 4,964

Present value of future minimum lease payments $ 5,207

Current portion operating lease liability 433

Operating lease liability, noncurrent 4,774

1 unchanged sentence

Straight-line rent expense recognized for operating leases was $ 686,000 , $ 602,000 , and $ 151,000 for the years ended December 31, 2021, 2020, and 2019, respectively.

Rent expense for the year ended December 31, 2018 was no t material.

There were no significant variable lease payments, including non-lease components such as common area maintenance fees, recognized as rent expense for operating leases for the year ended December 31, 2020.

ARCUTIS BIOTHERAPEUTICS, INC.

1 unchanged sentence

The following information represents supplemental disclosure for the statement of cash flows related to the Company’s operating lease (in thousands):

December 31, 2020

2021 2020 2019

Cash flows from operating activities

4 unchanged sentences

Weighted-average discount rate 7.0 %

Manufacturing Agreements

The Company has entered into manufacturing supply agreements for the commercial supply of roflumilast cream which include certain minimum purchase commitments.

Firm future purchase commitments under these agreements are approximately $ 8.2 million for 2022 and $ 0.6 million per year for 2023, 2024 and 2025.

This amount does not represent all of the Company’s anticipated purchases, but instead represents only the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts.

Indemnification

5 unchanged sentences

The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by California corporate law.

The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid.

The Company believes any potential loss exposure under these indemnification agreements in excess of applicable insurance coverage is minimal.

Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Convertible preferred stock as of December 31, 2019 consisted of the following (in thousands, except share amounts):

Convertible Preferred Stock Shares

13,800,000 6,897,575 $ 14,340 $ 13,800

18,736,270 9,364,850 57,912 58,000

Series C 16,251,628 8,122,963 94,239 94,500

Total 48,787,898 24,385,388 $ 166,491 $ 166,300

In connection with the Company's IPO in February 2020, all of the Company’s outstanding shares of convertible preferred stock were automatically converted into 24,385,388 shares of common stock.

In October 2019, the Company issued 8,122,963 shares of Series C convertible preferred stock at a purchase price of $ 11.63 per share for total net proceeds of $ 94.2 million, some of which were to related parties.

In September 2018, the Company issued 9,364,850 shares of Series B convertible preferred stock at a purchase price of $ 6.19 per share for total net proceeds of $ 54.9 million, some of which were to related parties.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

In April 2017 and March 2018, the Company issued 3,590,845 and 3,156,784 shares, respectively, of Series A convertible preferred stock at a purchase price of $ 2.00 per share for net proceeds of $ 13.4 million.

Additionally, in April 2017, the Company issued 149,946 shares of Series A convertible preferred stock as a result of the conversion of convertible promissory notes.

Long-term debt

On December 22, 2021, the Company entered into a Loan Agreement with SLR and the lenders party thereto.

The lenders agreed to extend term loans to the Company in an aggregate principal amount of up to $ 225.0 million, comprised of (i) a tranche A term loan of $ 75.0 million, (ii) a tranche B-1 term loan of $ 50.0 million, (iii) a tranche B-2 term loan of up to $ 75.0 million, available in minimum increments of $ 15.0 million, and (iv) a tranche C term loan of up to $ 25.0 million (Term Loans).

As security for the obligations under the Loan Agreement, the Company granted SLR, for the benefit of the lenders, a continuing security interest in substantially all of the Company's assets, including its intellectual property, subject to certain exceptions.

The tranche A term loan under the Loan Agreement was funded on December 22, 2021 in the amount of $ 75.0 million.

Each tranche B term loan is available following delivery to SLR of satisfactory evidence that the Company has received FDA approval of roflumilast cream for an indication relating to the treatment of patients with plaque psoriasis (FDA Approval).

The tranche B-1 term loan will remain available for funding until the earlier of (i) 15 days after the Company has received FDA Approval and (ii) June 30, 2023.

The tranche B-2 term loan will remain available for funding until June 30, 2023.

The tranche C term loan is available following the achievement of a net product revenue milestone of $ 110.0 million, calculated on a trailing six month basis.

The tranche C term loan will remain available for funding until September 30, 2024.

Principal amounts outstanding under the Term Loans will accrue interest at a floating rate equal to the applicable rate in effect from time to time, as determined by SLR on the third business day prior to the funding date of the applicable Term Loan and on the first business day of the month prior to each payment date of each Term Loan.

The applicable rate is a per annum interest rate equal to 7.45 % plus the greater of (a) 0.10 % and (b) the per annum rate published by the Intercontinental Exchange Benchmark Administration Ltd.

(or on any successor or substitute published rate) for a term of one month, subject to a replacement with an alternate benchmark rate and spread in certain circumstances.

On December 31, 2021, the rate was 7.55 %.

The maturity date for each term loan is January 1, 2027.

Commencing on February 1, 2022, interest payments are payable monthly following the funding of any Term Loan.

Any principal amounts outstanding under the Term Loans, if not repaid sooner, are due and payable on January 1, 202, or the Maturity Date.

The Company may voluntarily prepay principal amounts outstanding under the Term Loans in minimum increments of $ 5.0 million, subject to a prepayment premium of (i) 3.0 % of the principal amount of such Term Loan so prepaid prior to December 22, 2022, (ii) 2.0 % of the principal amount of such Term Loan so prepaid after December 22, 2022 and prior to December 22, 2023, or (iii) 1.0 % of the principal amount of such Term Loan so prepaid after December 22, 2023 and prior to December 22, 2025.

If the Term Loans are accelerated due to, among others, the occurrence of a bankruptcy or insolvency event, the Company is required to make mandatory prepayments of (i) all principal amounts outstanding under the Term Loans, plus accrued and unpaid interest thereon through the prepayment date, (ii) any fees applicable by reason of such prepayment, (iii) the prepayment premiums set forth in the paragraph above, plus (iv) all other obligations that are due and payable, including expenses and interest at the Default Rate (as defined below) with respect to any past due amounts.

The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on the Company’s ability to dispose of its business or property, to change its line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on its property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock.

The Company has also agreed to a financial covenant whereby, beginning with the month ending December 31, 2023, the Company must generate net product revenue in excess of specified amounts for applicable measuring periods;

provided, however, that such financial covenant shall not apply if the Company’s average market capitalization over the trailing five day period prior to the last day of any measurement month is equal to or in excess of $ 400.0 million.

The Company was in compliance with all covenants under the Loan Agreement as of December 31, 2021.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

In addition, the Loan Agreement contains customary events of default that entitle the lenders to cause any indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loans.

Under the Loan Agreement, an event of default will occur if, among other things, the Company fails to make payments under the Loan Agreement, the Company breaches any of our covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, the lenders determine that a material adverse change has occurred, or the Company or the Company's assets become subject to certain legal proceedings, such as bankruptcy proceedings.

Upon the occurrence and for the duration of an event of default, an additional default interest rate, or the Default Rate, equal to 4.0 % per annum will apply to all obligations owed under the Loan Agreement.

The prepayment upon default and other potential additional interest provisions under the Loan Agreement were determined to be a compound embedded derivative instrument to be bifurcated from the loan and accounted for as a separate liability for accounting purposes under the guidance in ASC 815, Derivatives and Hedging.

At the inception of the Loan Agreement and through December 31, 2021, the fair value of the embedded derivative was determined to be immaterial and will be remeasured at fair value each reporting period with any future changes in fair value reported in earnings.

I n connection with the Loan Agreement, the Company paid a closing fee of $ 1.0 million on December 22, 2021, and is further obligated to pay (i) a final fee equal to 6.95 % of the aggregate original principal amount of the Term Loans funded upon the earliest to occur of the Maturity Date, the acceleration of any Term Loan and the prepayment, refinancing, substitution or replacement of any Term Loan and (ii) a certain amount of lenders’ expenses incurred in connection with the execution of the Loan Agreement.

Additionally, in connection with the Loan Agreement, the Company entered into an Exit Fee Agreement, whereby the Company agreed to pay an exit fee in the amount 3.0 % of each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a trailing six month basis.

Notwithstanding the prepayment or termination of the Term Loan, the exit fee will expire 10 years from the date of the Loan Agreement.

As of December 31, 2021, the carrying value of the Term Loans consists of $ 75.0 million principal outstanding less the debt issuance costs of approximately $ 2.7 million, including the closing fee.

The debt issuance costs have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the term loan.

Interest expense is calculated using the effective interest method, and is inclusive of non-cash amortization of debt issuance costs.

The final maturity payment of $ 5.2 million is recognized over the life of the term loan through interest expense.

As of December 31, 2021 the amortization of the deferred final fee and debt issuance costs was not material.

At December 31, 2021, the effective interest rate was 9.64 %.

Interest expense relating to the term loan for the year ended December 31, 2021 was $ 140,000 .

As of December 31, 2020 the Company had no outstanding long-term debt.

The following summarizes additional information related to our long-term debt (in thousands):

Long-term debt, gross $ 80,213

Deferred final fee ( 5,213 )

Debt issuance costs ( 2,650 )

Long-term debt, net $ 72,350

Convertible Preferred Stock and Stockholders’ Equity

Convertible Preferred Stock

In connection with the Company's IPO in February 2020, all of the Company’s outstanding shares of convertible preferred stock were automatically converted into 24,385,388 shares of common stock.

The holders of the Company’s common stock have one vote for each share of common stock.

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As of December 31, 2021, no dividends had been declared by the board of directors.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

The Company reserved the following shares of common stock for issuance as follows:

Convertible preferred stock outstanding — 24,385,388

Options issued and outstanding 5,757,957 3,655,945

Common stock awards available for grant under employee benefit plans 2,501,329 1,550,150

Common stock awards available for grant under employee incentive plans 2,068,004 2,501,329

Restricted stock units outstanding 335,196 162,930

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In January 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (2020 Plan), which became effective January 30, 2020 in connection with the IPO.

The 2020 Plan serves as the successor incentive award plan to the Company’s 2017 Equity Incentive Plan, (2017 Plan), and has 2,134,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards and other stock-based awards, plus 1,550,150 shares of common stock that were reserved for issuance pursuant to future awards under the 2017 Plan at the time the 2020 Plan became effective, plus shares represented by awards outstanding under the 2017 Plan that are forfeited, lapsed or unexercised, and which following the effective date of the 2020 Plan are not issued under the 2017 Plan.

In addition, the 2020 Plan reserve will increase on January 1, 2021 and each subsequent anniversary through 2030, by an amount equal to the lesser of (a) four percent of the shares of stock outstanding (on an as-converted basis) on the day immediately prior to the date of increase and (b) such smaller number of shares of stock as determined by our board of directors;

The 2020 Plan serves as the successor incentive award plan to the Company’s 2017 Equity Incentive Plan (2017 Plan) and has 2,134,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, and other stock-based awards, plus 1,550,150 shares of common stock that were reserved for issuance pursuant to future awards under the 2017 Plan at the time the 2020 Plan became effective, plus shares represented by awards outstanding under the 2017 Plan that are forfeited or lapsed unexercised and which following the effective date of the 2020 Plan are not issued under the 2017 Plan.

In addition, the 2020 Plan reserve will increase on January 1 of each year beginning in 2021 through 2030, by an amount equal to the lesser of (a) four percent of the shares of stock outstanding (on an as converted basis) on the day immediately prior to the date of increase and (b) such smaller number of shares of stock as determined by our board of directors;

provided, however, that no more than 11,000,000 shares of stock may be issued upon the exercise of incentive stock options.

Accordingly, on January 1, 2021, the plan reserve increased by 1,747,112 shares.

Accordingly, on January 1, 2022 and 2021, the plan reserve increased by 2,013,830 and 1,747,112 shares, respectively.

As of December 31, 2021, the Company had 1,362,929 shares available for future grant under the 2020 Plan.

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However, all outstanding awards under the 2017 Plan will continue to be governed by their existing terms.

In December 2021, the Company’s board of directors approved the 2022 Employment Inducement Incentive Plan (2022 Plan).

The 2022 Plan has 1,250,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, RSU awards, and other stock-based awards.

No awards have been made out of this plan as of December 31, 2021.

ARCUTIS BIOTHERAPEUTICS, INC.

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Exercised ( 257,060 ) 4.88

Balance—December 31, 2018 391,098 0.82 9.56 334

Granted 2,421,221 3.59

Exercised ( 250,865 ) 1.02

Forfeited ( 288,858 ) 22.11

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Balance—December 31, 2021 5,757,957 19.06 8.37 34,887

Granted 1,368,825 26.83

Exercised ( 197,228 ) 2.67

Forfeited ( 32,122 ) 22.82

Balance—December 31, 2020 3,655,945 12.09 8.78 59,274

Exercisable—12/31/2021 (1)

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The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of December 31, 2021.

As of December 31, 2019, prior to the Company's IPO, the estimated fair value of the Company's common stock was determined by the board of directors.

As of December 31, 2020, prior to the Company's IPO in January 2020, the estimated fair value of the Company's common stock was determined by the board of directors.

The intrinsic value of options exercised for the year ended December 31, 2021 was $ 5.8 million.

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Granted 225,900 $ 30.51

Vested ( 37,362 ) $ 27.19

Forfeited ( 16,272 ) $ 31.23

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As of December 31, 2021, there was $ 7.1 million of total unrecognized compensation cost related to RSUs that is expected to vest, which is expected to be recognized over a weighted-average period of 3.0 years.

In March 2021, in connection with the retirement of the former Chief Financial Officer, the Company modified the terms of this individual’s historical stock awards.

As a result of the modifications, the Company recognized approximately $ 5.3 million of incremental stock-based compensation expense during the period, which is included in general and administrative expenses.

In determining the fair value of the stock options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below.

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(v) the Company’s operating results and financial condition, including the Company’s levels of available capital resources;

and (vi) equity market conditions affecting comparable public companies;

(vi) equity market conditions affecting comparable public companies;

(vii) general U.S.

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The Company used the simplified method (based on the mid-point between the vesting date and the end of the contractual term) to determine the expected term.

Expected Volatility —Since the Company does not have sufficient trading history for its common stock, the expected volatility was estimated based on the average historical volatilities for comparable publicly traded pharmaceutical companies over a period equal to the expected term of the stock option grants.

Expected Volatility —The Company does not yet have sufficient trading history for its common stock to solely use its own historical volatility.

Therefore, the expected volatility was estimated based on a combination of its own historical common stock volatility as well as the average historical volatilities for comparable publicly traded pharmaceutical companies over a period equal to the expected term of the stock option grants.

The comparable companies were chosen based on their similar size, stage in the life cycle, and area of specialty.

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Founder Awards

In August 2016, the Company issued 1,187,738 shares of restricted common stock to founders of which 1,102,903 shares vest under a service condition and 84,835 shares vest under a performance condition.

In August 2016, the Company issued 1,187,738 shares of restricted common stock to founders, of which 1,102,903 shares would vest under a service condition, and 84,835 shares would vest under a performance condition.

The shares were issued under the terms of the respective restricted stock purchase agreements, or the Stock Purchase Agreement, and unvested shares were subject to repurchase by the Company at the original purchase price per share upon the holder’s termination of his relationship with the Company.

The restricted shares were not considered outstanding for accounting purposes until they vested and are therefore excluded from shares used in determining loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature.

One-fourth of the 1,102,903 shares of restricted common stock were vested on the first-anniversary date and the remaining 827,177 shares will vest on a monthly basis thereafter.

In July 2018, performance conditions prescribed by the Stock Purchase Agreement were met and 84,835 shares of the restricted common stock were fully vested.

As of December 31, 2019, 1,049,875 shares subject to the award had vested, and an additional 137,863 shares vested during the year ended December 31, 2020.

As of December 31, 2020, all shares of restricted stock subject to the award had been vested.

One-fourth of the 1,102,903 shares of restricted common stock were vested on the first-anniversary date and the remaining 827,177 shares vested on a monthly basis thereafter.

All shares of restricted stock subject to the award were vested as of June 30, 2020.

2020 Employee Stock Purchase Plan

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provided, however, no more than 5,265,000 shares of the Company’s common stock may be issued under the ESPP.

Accordingly, on January 1, 2021, the ESPP reserve increased by 436,778 shares.

The Company commenced an offering period on January 31, 2020, which ended on May 31, 2020, and resulted in 19,862 shares of stock being issued under the ESPP.

The Company also commenced an offering period on June 1, 2020, which ended on November 30, 2020, and resulted in 14,326 shares of stock being issued under the ESPP.

In addition, the Company commenced an offering period on December 1, 2020, which will end on May 31, 2021.

Stock-based compensation expense related to the ESPP was $ 346,000 for the year ended December 31, 2020.

Accordingly, on January 1, 2022 and 2021, the ESPP reserve increased by 503,457 and 436,778 shares, respectively.

Stock-based compensation expense related to the ESPP was $ 442,000 and $ 346,000 for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, 82,703 shares of stock have been issued under the ESPP.

No provision for income taxes was recorded for the years ended December 31, 2021, 2020 and 2019.

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Permanent differences

Fair value adjustment

162(m) limitation 757 — —

Other ( 10 ) ( 6 ) —

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Stock-based compensation 4,126 1,122

Property and equipment — 2

Gross deferred tax assets $ 91,440 $ 46,780

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Under the Tax Cuts and Jobs Act of 2017, the remaining $ 357.8 million of NOLs generated after December 31, 2017 will be carried forward indefinitely.

On March 27, 2020, the CARES Act was signed into law in response to the economic challenges facing US businesses.

Of the $ 365.4 million in state net operating loss carryforwards $ 3.2 million can be carried forward indefinitely and the remaining start to expire in 2022.

On March 27, 2020, the CARES Act was signed into law in response to the economic challenges facing U.S.

Under the CARES Act, the Internal Revenue Code was amended to allow for federal NOL carrybacks for five years to offset previous years income, or can be carryforward indefinitely to offset 100% of taxable income for the tax year 2020 and 80% of taxable income for tax years 2021 and thereafter.

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Uncertain Tax Benefits

No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions.

No liability related to uncertain tax positions is recorded on the financial statements.

The following table summarizes the activity related to the unrecognized benefits (in thousands):

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$ 20,274 $ 6,448 $ 2,241

Increases related to tax positions taken during a prior year

Increases (decreases) related to tax positions taken during a prior year ( 6 ) 5 4

Increases related to tax positions taken during the current year

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The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.

Income tax returns are filed in the U.S.

and California.

Income tax returns are filed in the United States and California.

The Company is not currently under audit by the Internal Revenue Service or similar state or local authorities.

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Included in unrecognized tax benefits of $ 38.9 million at December 31, 2021 was $ 31.9 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to valuation allowance.

We do not expect that there will be a significant change in the unrecognized tax benefits over the next 12 months.

We are subject to taxation in the United States and state jurisdictions where applicable.

The Company does not expect that there will be a significant change in the unrecognized tax benefits over the next 12 months.

The Company is subject to taxation in the United States and state jurisdictions where applicable.

Our tax years for 2016 and forward are subject to examination by the U.S.

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It is our practice to recognize interest and/or penalties related to income tax matters in income tax expense.

For the years ended December 31, 2020, 2019 and 2018, we have no t recognized any interest or penalties related to income taxes.

For the years ended December 31, 2021, 2020 and 2019, the Company has no t recognized any interest or penalties related to income taxes.

Net Loss Per Share

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Total 6,195,518 4,161,993 27,660,774

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Financial Statements

Selected Quarterly Financial Data (Unaudited)

The following table contains unaudited financial information on a quarterly basis for 2020 and 2019.

The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Year Ended December 31, 2020

Total operating expenses $ 28,651 $ 35,627 $ 38,303 $ 34,064

Other income, net 638 215 99 15

Net loss ( 28,013 ) ( 35,412 ) ( 38,204 ) ( 34,049 )

Net loss per share, basic and diluted $ ( 1.15 ) $ ( 0.94 ) $ ( 1.01 ) $ ( 0.79 )

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Year Ended December 31, 2019

Total operating expenses $ 6,952 $ 8,538 $ 14,648 $ 12,994

Other income, net 294 248 168 426

Net loss ( 6,658 ) ( 8,290 ) ( 14,480 ) ( 12,568 )

Net loss per share, basic and diluted $ ( 4.08 ) $ ( 4.69 ) $ ( 7.56 ) $ ( 6.13 )

Subsequent Event

On February 5, 2021, the Company completed a public offering of 6,325,000 shares of common stock at an offering price of $ 35.00 per share, which included 825,000 shares sold pursuant to the underwriters' full exercise of their option to purchase additional shares, receiving approximately $ 207.4 million in aggregate net proceeds, after deducting underwriting discounts, commissions and estimated offering expenses.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each Todd Franklin Watanabe and John W.

Smither, his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Todd Franklin Watanabe, Scott L.

Burrows and Mas Matsuda, his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S.

Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or their, his or her substitutes or substitutes, may lawfully do or cause to be done by virtue hereof.

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Todd Franklin Watanabe

Smither Chief Financial Officer

Burrows Chief Financial Officer

(Principal Accounting and Financial Officer) February 22, 2022

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Terrie Curran

/s/ Hallie E.

/s/ Halley E.

Gilbert Director February 22, 2022

/s/ Jonathan T.

Silverstein Director February 16, 2021

Silverstein, J.D.

/s/ Ricky Sun Director February 16, 2021

Ricky Sun, Ph.D.

Leonard Director February 22, 2022

/s/ Sue-Jean Lin Director February 22, 2022

/s/ Joseph Turner Director February 22, 2022

3 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 9A. Controls and Procedures