Black Diamond Therapeutics, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 139 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data BLACK DIAMOND THERAPEUTICS, INC. Index to Consolidated Financial Statements Page No. Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 141 Consolidated Balance Sheets 142 Consolidated Statements of Operations and Comprehensive Loss 143 Consolidated Statements of Cash Flows 144 Consolidated Statements of Stockholders' Equity 145 140 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Black Diamond Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Black Diamond Therapeutics, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of Matter As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations. Management’s evaluation of the events and conditions and plans to mitigate this matter are also described in Note 1. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 9, 2023 We have served as the Company’s auditor since 2019. 141 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 34,315 $ 65,799 Investments 88,492 143,987 Prepaid expenses and other current assets 4,899 5,917 Total current assets 127,706 215,703 Property and equipment, net 2,587 3,035 Restricted cash 1,168 1,223 Right-of-use assets 24,794 27,705 Other non-current assets — 16 Total assets $ 156,255 $ 247,682 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,877 $ 4,107 Accrued expenses and other current liabilities 13,384 19,535 Total current liabilities 15,261 23,642 Non-current operating lease liability 25,299 28,140 Total liabilities 40,560 51,782 Commitments and contingencies (Note 12) — — Stockholders' equity (deficit): Preferred stock, $ 0.0001 par value; 10,000,000 shares and 10,000,000 shares authorized at December 31, 2022 and 2021, respectively; no shares issued or outstanding at December 31, 2022 and 2021 — — Common stock; $ 0.0001 par value; 500,000,000 shares authorized at December 31, 2022 and 500,000,000 shares authorized at December 31, 2021; 36,434,297 shares issued and outstanding at December 31, 2022 and 36,234,624 shares issued and outstanding at December 31, 2021 5 5 Additional paid-in capital 452,503 440,129 Accumulated other comprehensive (loss) income ( 1,824 ) ( 414 ) Accumulated deficit ( 334,989 ) ( 243,820 ) Total stockholders' equity 115,695 195,900 Total liabilities and stockholders' equity $ 156,255 $ 247,682 The accompanying notes are an integral part of these consolidated financial statements. 142 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) Year Ended December 31, 2022 2021 Operating expenses: Research and development $ 64,437 $ 96,829 General and administrative 28,391 30,043 Total operating expenses 92,828 126,872 Loss from operations ( 92,828 ) ( 126,872 ) Other income (expense): Interest income 2,031 3,464 Other income (expense) ( 354 ) ( 2,188 ) Gain on sale of IP 2,232 — Total other income (expense), net 3,909 1,276 Equity in (losses) of unconsolidated entities ( 2,250 ) — Net loss $ ( 91,169 ) $ ( 125,596 ) Net loss per share, basic and diluted $ ( 2.52 ) $ ( 3.47 ) Weighted average common shares outstanding, basic and diluted 36,325,586 36,189,002 Comprehensive loss: Net loss $ ( 91,169 ) $ ( 125,596 ) Other comprehensive (loss) income: Change in unrealized (loss) gain on investments, net ( 1,410 ) ( 1,028 ) Comprehensive loss $ ( 92,579 ) $ ( 126,624 ) The accompanying notes are an integral part of these consolidated financial statements. 143 Table of Contents Black Diamond Therapeu tics, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 91,169 ) $ ( 125,596 ) Adjustment to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 12,197 14,037 Depreciation expense 508 205 Amortization of premium on investments 536 2,186 Noncash rent expense 2,730 2,012 Gain on sale of investments — ( 10 ) Other non-cash items — ( 5 ) Loss on disposal of property and equipment — 3 Gain on sale of property and equipment ( 1 ) — Gain on sale of IP ( 2,232 ) — Equity in (losses) of unconsolidated entities 2,250 — Changes in operating assets and liabilities: Prepaid expenses and other current assets 1,018 ( 1,628 ) Other non-current assets 16 90 Accounts payable ( 2,230 ) 1,569 Accrued expenses and other current liabilities ( 5,864 ) 8,714 Non-current operating lease liability ( 2,841 ) ( 1,725 ) Net cash used in operating activities ( 85,082 ) ( 100,148 ) Cash flows from investing activities: Purchases of equipment ( 192 ) ( 2,710 ) Proceeds from disposal of equipment 9 — Proceeds from sales and maturities of investments 113,690 182,831 Purchases of investments ( 60,141 ) ( 49,508 ) Net cash provided by investing activities 53,366 130,613 Cash flows from financing activities: Proceeds from exercise of common stock options and ESPP 177 729 Net cash provided by financing activities 177 729 Net increase (decrease) in cash and cash equivalents ( 31,539 ) 31,194 Cash, cash equivalents and restricted cash, beginning of year 67,022 35,828 Cash, cash equivalents and restricted cash, end of year $ 35,483 $ 67,022 Cash and cash equivalents, end of year $ 34,315 $ 65,799 Restricted cash, end of year 1,168 1,223 Cash, cash equivalents and restricted cash, end of year $ 35,483 $ 67,022 Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for operating lease obligation $ ( 181 ) $ 21,505 Right-of-use asset derecognized upon early lease termination $ — $ 476 Purchases of equipment included in accounts payable and accrued expenses $ — $ 148 Equity method investment acquired for non-cash consideration $ 18 $ — The accompanying notes are an integral part of these consolidated financial statements. 144 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Statements of Stockholders' Equity (in thousands, except share data) Common stock Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity Shares Par Value BALANCE - December 31, 2020 36,078,383 $ 5 $ 425,363 $ 614 $ ( 118,224 ) $ 307,758 Exercise of common stock options 110,621 — 665 — — 665 Vesting of restricted stock units 27,002 — — — — — Issuance of common stock related to ESPP 6,162 — 64 — — 64 Stock-based compensation 12,456 — 14,037 — — 14,037 Unrealized (loss) gains on investments — — — ( 1,028 ) — ( 1,028 ) Net loss — — — — ( 125,596 ) ( 125,596 ) BALANCE - December 31, 2021 36,234,624 $ 5 $ 440,129 $ ( 414 ) $ ( 243,820 ) $ 195,900 Exercise of common stock options 4,973 — 16 — — 16 Vesting of restricted stock units 62,196 — — — — — Surrender of shares for taxes ( 11,428 ) — ( 28 ) — — ( 28 ) Issuance of common stock related to ESPP 53,662 — 189 — — 189 Stock-based compensation 90,270 — 12,197 — — 12,197 Unrealized (loss) gains on investments — — — ( 1,410 ) — ( 1,410 ) Net loss — — — — ( 91,169 ) ( 91,169 ) BALANCE - December 31, 2022 36,434,297 $ 5 $ 452,503 $ ( 1,824 ) $ ( 334,989 ) $ 115,695 The accompanying notes are an integral part of these consolidated financial statements. 145 Table of Contents Black Diamond Therapeutics, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share amounts) 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Black Diamond Therapeutics, Inc. (the Company) is a precision oncology medicine company pioneering the discovery and development of MasterKey therapies. The Company was originally organized as a limited liability company in December 2014 under the name ASET Therapeutics LLC. In September 2016 the Company was converted to a corporation under the laws of the State of Delaware under the name ASET Therapeutics, Inc. The Company changed its name to Black Diamond Therapeutics, Inc. in January 2018. Since its inception, the Company has devoted substantially all of its efforts to raising capital, obtaining financing, and incurring research and development costs related to the development of its mutation, allostery, and pharmacology drug discovery engine. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any products, if approved, will be commercially viable. The Company operates in an environment of rapid technological innovation and substantial competition from pharmaceutical and biotechnological companies. In addition, the Company is dependent upon the services of its employees, consultants and service providers. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. On November 14, 2022, the Company filed a shelf registration statement on Form S-3 (the Shelf Registration Statement), with the Securities and Exchange Commission (the SEC), which covers the offering, issuance and sale of the Company’s common stock, preferred stock, debt securities, warrants and/or units of any combination thereof up to a maximum offering price of $ 500 million. The Company simultaneously entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies), as sales agent, to provide for the issuance and sale by the Company of up to $ 150 million of its common stock from time to time through Jefferies (the ATM Program). The Shelf Registration Statement became effective on November 22, 2022. As of December 31, 2022, no sales have been made pursuant to the ATM Program. The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. Historically, the Company has funded its operations primarily with proceeds from the sale of preferred stock and common stock. The Company expects to continue to generate operating losses for the foreseeable future. As of March 9, 2023, the issuance date of the consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its currently planned operations for at least the next 12 months from the filing date of these audited consolidated financial statements. The Company will seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, and reduce headcount and general and administrative costs, which could adversely affect its business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. 146 Table of Contents 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of the Company and its wholly owned subsidiaries, Black Diamond Therapeutics (Canada), Inc. and Black Diamond Therapeutics Security Corporation, after elimination of all significant intercompany accounts and transactions. Use of estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions. The Company continues to monitor the impact of the COVID-19 pandemic on all aspects of its business and has considered the impact of COVID-19 on estimates within its financial statements. The extent to which future COVID-19 developments may impact the Company’s business, results of operations or financial condition are uncertain and cannot be predicted with confidence and there may be changes to its estimates in future periods. As of the date of issuance of these consolidated financial statements, the Company has not experienced material business disruptions or incurred impairment losses in the carrying value of its assets as a result of the pandemic and is not aware of any specific related event or circumstance that would require it to update its estimates. Subsequent events The Company considers events or transactions that occur after the balance sheet date but before the final financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Foreign currency and currency translation The functional currency for the Company’s wholly owned foreign subsidiary, Black Diamond Therapeutics (Canada), Inc. is the United States Dollar. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other income (expense), net in the consolidated statements of operations and comprehensive loss, as incurred. Cash and cash equivalents The Company classifies deposits in banks, money market funds and cash invested temporarily in various instruments with maturities of three months or less at the time of purchase as cash and cash equivalents. At December 31, 2022 and 2021, cash and cash equivalents includes cash on deposit at commercial banks and a money market fund that invests in U.S. Government securities. 147 Table of Contents Investments Investments consist of marketable securities with original maturities greater than 90 days. The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale. Accordingly, these investments are recorded at fair value, which is based on quoted market prices. Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’ equity. Amortization and accretion of premiums and discounts are recorded in other income (expense). Realized gains or losses on debt securities are included in interest income or interest expense, respectively. If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s consolidated statements of operations and comprehensive loss. Equity method investment The Company utilizes the equity method to account for an investment when it possesses the ability to exercise significant influence, but not control, over the operating and financial decisions of the investee. Generally, the ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is not present. The Company applies the equity method to an investment in common stock of a nonconsolidated entity. In applying the equity method, the Company’s investment was initially recorded at fair value on the consolidated balance sheet. The Company contributed IPR&D in exchange for its investment, so it also recognized a gain on sale of IPR&D in the consolidated statements of operations and comprehensive loss on the transaction date. The Company subsequently adjusted the carrying amount of the investment by the Company’s proportionate share of the net losses of the investee based on the Company’s percentage of common stock ownership during the reporting period. The Company recorded its share of the losses of the investee as losses from investment in equity method investee in the consolidated statements of operations and comprehensive loss. The Company then evaluated whether there was a basis difference between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets. The investee was not deemed a business as defined in ASC 805 – Business Combinations, so the Company immediately expensed the basis difference to the extent it related to IPR&D. The Company is not obligated to make additional capital contributions for its equity method investment and does not have guaranteed obligations or additional financial support requirements to the investee. Therefore, it only recorded losses up to the amount of its total investment. The Company’s share of losses of the equity method investee on a cumulative basis exceeded its total investment amount, so the Company discontinued equity method loss recognition. The Company will resume recording its share of losses in future periods if the investee subsequently reports net income and the Company’s share of the earnings of the equity method investee equals the Company’s share of losses not recognized during the suspended period. Equity method investments are reviewed for indicators of other-than-temporary impairment at each reporting period and are written down to fair value if there is evidence of a loss in value that is other-than-temporary. The Company presents income/losses from equity investments and any impairment related to equity method investments as losses from investments in equity method investees on the consolidated statements of operations and comprehensive loss. The carrying value of the Company’s equity method investment was zero as of December 31, 2022, therefore, an impairment assessment is not required. See Note 6 to our consolidated audited financial statements for additional information on the Company’s equity method investment. 148 Table of Contents Restricted cash In connection with its operating lease commitments, the Company maintains certain balances for security deposits that are classified as restricted cash on the consolidated balance sheets . As of December 31, 2022 and 2021, the Company had $ 1,168 and $ 1,223 , respectively, of restricted cash, which has been classified as a non-current asset on the consolidated balance sheet. Concentrations of credit risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains accounts for all cash and cash equivalents at accredited financial institutions, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Property and equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows: Estimated useful life Laboratory equipment 5 years Furniture and fixtures 5 years Computer and office equipment 3 years Leasehold improvements Shorter of the useful life or remaining lease term When assets are retired or otherwise disposed of, the cost of assets disposed of and the related accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the consolidated statements of operations and comprehensive loss in the period of disposal. Expenditures for repairs and maintenance are charged to expense as incurred. Impairment of long-lived assets Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. The Company did not record any impairment losses on long-lived assets during the periods presented. 149 Table of Contents Fair value measurements Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1 — Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities. • Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: • quoted prices for similar assets and liabilities in active markets • quoted prices for identical or similar assets or liabilities in markets that are not active • observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals) • inputs that are derived principally from or corroborated by observable market data by correlation or other means • Level 3 — Unobservable inputs for the assets or liabilities (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). The carrying values of the Company’s prepaid expenses and other current assets, and accounts payable and accrued expenses, approximate their fair values due to the short-term nature of these assets and liabilities. Segment information The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is the development of selective medicines for patients with genetically defined cancers driven by oncogenes activated by allosteric mutations. Research and development costs Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs of outside vendors engaged to conduct preclinical and clinical development activities. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. 150 Table of Contents Research contract costs and accruals The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. The related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. Patent costs All patent-related costs incurred in connection with filing and prosecuting patent applications to operations are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Stock-based compensation The Company measures all stock-based awards granted to employees, non-employees and directors based on the fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock options and restricted stock units with only service-based vesting conditions and records the expense for these awards using the straight-line method. For stock options or restricted stock units issued with performance-based vesting conditions, the stock compensation expense related to these awards is recognized based on the grant date fair value when achievement of the performance condition is deemed probable. The Company would apply the graded-vesting method to all stock-based awards with performance-based vesting conditions or to awards with both service-based and performance based vesting conditions. Forfeitures are accounted for as they occur. The fair value of each stock option grant is estimated on the date of grant using the Black- Scholes option-pricing model. The Company lacks sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company uses the simplified method prescribed by Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term of options granted to employees, non-employees and directors. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. 151 Table of Contents Income taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. To date, the Company has not taken any uncertain tax positions or recorded any reserves, interest or penalties. Comprehensive loss Comprehensive loss is composed of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on investments. Net income (loss) per share The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated, and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common stock. For purposes of this calculation, outstanding options, unvested restricted common stock and shares issuable under the employee stock purchase plan are considered potentially dilutive common stock and are excluded from the computation of net income (loss) per share when their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2022 and 2021. 152 Table of Contents Leases The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments. The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in the Company’s operating lease assets in the Company’s consolidated balance sheets. The Company’s operating leases are reflected in the right-of-use operating asset; operating lease liability, current portion; and non-current operating lease liability in the Company’s consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Variable lease payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities costs for facility leases and maintenance. Variable lease payments are expensed when incurred. Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease. 3. FAIR VALUE MEASUREMENTS The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values: Fair value measurements at December 31, 2022 using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 32,278 $ — $ — $ 32,278 Investments: Commercial paper — 3,747 — 3,747 Corporate bonds — 45,643 — 45,643 U.S. Government agencies — 39,102 — 39,102 Total $ 32,278 $ 88,492 $ — $ 120,770 153 Table of Contents Fair value measurements at December 31, 2021 using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 63,730 $ — $ — $ 63,730 Investments: Corporate bonds — 104,066 — 104,066 U.S. Government agencies — 39,921 — 39,921 Total $ 63,730 $ 143,987 $ — $ 207,717 When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. There were no transfers in or out of Level 3 categories in the periods presented. 4. INVESTMENTS As of December 31, 2022, investments were comprised of the following: Amortized Cost Unrealized Gains Unrealized Losses Fair Value Commercial paper $ 3,748 $ — $ ( 1 ) $ 3,747 Corporate bonds 46,443 — ( 800 ) 45,643 U.S. Government agencies 40,125 — ( 1,023 ) 39,102 Total $ 90,316 $ — $ ( 1,824 ) $ 88,492 As of December 31, 2021, investments were comprised of the following: Amortized Cost Unrealized Gains Unrealized Losses Fair Value Corporate bonds $ 104,261 $ 47 $ ( 242 ) $ 104,066 U.S. Government agencies 40,140 — ( 219 ) 39,921 Total $ 144,401 $ 47 $ ( 461 ) $ 143,987 As of December 31, 2022, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for U.S. government agencies, corporate bonds and commercial paper with a fair value of $ 13,687 that had maturities of one to three years. As of December 31, 2022, all marketable securities held by the Company were in a loss position. As of December 31, 2021, the marketable securities held by the Company in a loss position had remaining contractual maturities of one year or less, except for U.S. government agencies and corporate bonds with a fair value of $ 86,187 that had maturities of one to three years. 154 Table of Contents As of December 31, 2022, the Company reviewed its investment portfolio to assess whether the unrealized losses on its available-for-sale investments were temporary. In determining whether the decline in fair value of these securities was temporary, the Company evaluated whether it intended to sell the security and whether it was more likely than not that the Company would be required to sell the security before recovering its amortized cost basis. There have been no impairments of the Company’s assets measured and carried at fair value during the years ended December 31, 2022 and 2021. 5. PROPERTY AND EQUIPMENT Property and equipment, net consisted of the following: December 31, 2022 2021 Laboratory equipment $ 770 $ 682 Furniture and fixtures 17 17 Computer and office equipment 38 120 Leasehold improvements 2,512 2,437 Construction in process — 148 Property and equipment 3,337 3,404 Less: accumulated depreciation ( 750 ) ( 369 ) Total Property and Equipment, net $ 2,587 $ 3,035 Depreciation expense for the years ended December 31, 2022 and 2021 was $ 508 and $ 205 , respectively. 6. EQUITY METHOD INVESTMENT In December 2022, the Company received 9,000,000 shares of common stock in a newly formed antibody-focused precision oncology company, Launchpad Therapeutics, Inc. (Launchpad), in exchange for contributing early discovery-stage antibody programs and granting Launchpad a license to use its MAP drug discovery engine to discover, develop and commercialize large molecule therapeutics. As of the transaction date and as of December 31, 2022, the Company has a 39.1 % voting interest in Launchpad and one seat on Launchpad’s Board of Directors which provide the Company with significant influence over Launchpad. The remaining voting interest in Launchpad is held by Versant Ventures and New Enterprise Associates (NEA), who are shareholders of the Company. The Company accounted for the transaction under the equity method and recorded the carrying value of the Company’s investment in Launchpad common shares of $ 2,250 in equity method investments in the consolidated balance sheets. The contributed IPR&D had zero basis on the Company’s books prior to the transaction, therefore the Company recognized a gain on sale of IPR&D of $ 2,232 in the consolidated statements of operations and comprehensive loss. The Company also recognized a loss from investments in equity method investee of $ 1,540 in the consolidated statement of operations and comprehensive loss, associated with the Company’s proportionate share of Launchpad’s losses. The assets contributed by the Company were principally IPR&D and were not deemed a business by Launchpad, therefore the Company determined its remaining basis difference of $ 710 was substantially related to IPR&D and immediately expensed it. As of December 31, 2022, the carrying value of the investment in Launchpad was reduced to zero . Since the Company has no obligation to provide financing support to Launchpad, the Company is not required to record further losses exceeding the carrying value of the investment. The Company also determined that its investment in Launchpad is not material or significant to its operations or financial position. 155 Table of Contents 7. ACCRUED EXPENSES Accrued expenses and other current liabilities consisted of the following: December 31, 2022 2021 Contracted research services $ 4,713 $ 12,192 Payroll and related expenses 4,648 5,088 Professional and consulting fees 1,182 1,935 Current portion of operating lease liability 2,841 320 Total accrued expenses and other current liabilities $ 13,384 $ 19,535 8. STOCK-BASED COMPENSATION 2017 Equity Incentive Plan The Company’s 2017 Employee, Director and Consultant Equity Incentive Plan, as amended (the 2017 Plan), provided for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock. Upon the effectiveness of the 2020 Plan (as defined below), no further issuances were made under the 2017 Plan. 2020 Stock Option and Incentive Plan The 2020 Stock Option and Incentive Plan (the 2020 Plan) was approved by the Company’s board of directors on December 5, 2019, and the Company’s stockholders on January 14, 2020 and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, directors and consultants. The number of shares initially reserved for issuance under the 2020 Plan was 6,665,891 , which was cumulatively increased on January 1, 2021 and each January 1 thereafter by 4 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. As of December 31, 2022, 5,764,159 shares remained available for issuance under the 2020 Plan. The number of authorized shares reserved for issuance under the 2020 Plan was increased by 1,457,371 shares effective as of January 1, 2023. 2020 Employee Stock Purchase Plan The 2020 Employee Stock Purchase Plan (the 2020 ESPP) was approved by the Company’s board of directors on December 5, 2019, and the Company’s stockholders on January 14, 2020, and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. A total of 326,364 shares of common stock were initially reserved for issuance under this plan, which was cumulatively increased on January 1, 2021 and each January 1 thereafter by 1 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. As of December 31, 2022, 592,904 shares remained available for issuance under the 2020 Plan. The number of authorized shares reserved for issuance under the 2020 Plan was increased by 326,364 shares effective as of January 1, 2023. 156 Table of Contents Option valuation The assumptions that the Company used to determine the grant-date fair value of options granted were as follows, presented on a weighted-average basis: December 31, 2022 2021 Risk-free interest rate 2.49 % 0.93 % Expected term (in years) 6.0 5.6 Expected volatility 76.2 % 76.0 % Expected dividend yield 0 % 0 % Options The following table summarizes the stock option activity under the Company’s equity awards plans: Options Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Intrinsic Value (in thousands) Outstanding December 31, 2021 4,903,839 $ 17.38 7.6 $ 847 Granted 2,155,650 $ 3.16 Exercised ( 4,973 ) $ 3.20 Cancelled or forfeited ( 1,453,647 ) $ 15.18 Expired ( 241,469 ) $ 14.58 Outstanding December 31, 2022 5,359,400 $ 12.40 7.8 $ 76 Options vested or expected to vest at December 31, 2022 5,359,400 $ 12.40 7.8 $ 76 Options exercisable at December 31, 2022 2,518,748 $ 16.03 6.9 $ 30 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2022 and 2021 was $ 2.11 and $ 12.93 , respectively. The total fair value of options vested during the years ended December 31, 2022 and 2021 was $ 15,392 and $ 11,438 , respectively. Restricted stock Under terms of the restricted stock agreements covering the common stock, shares of restricted common stock are subject to a vesting schedule. The majority of restricted stock vests over a three-year period during which time all unvested stock will immediately be forfeited to the Company if the relationship between the recipient and the Company ceases. Subject to the continued employment (or other engagement of the recipient by the Company as described in the restricted stock agreements), all shares of restricted common stock become fully vested within three years of the vesting commencement date. 157 Table of Contents The following table summarizes restricted stock activity since January 1, 2021: Number of shares Weighted average grant date fair value Unvested restricted common stock as of January 1, 2021 54,336 $ 29.68 Granted 10,000 $ 28.69 Vested ( 27,002 ) $ 26.46 Cancelled or forfeited ( 6,667 ) $ 1.21 Unvested restricted common stock as of December 31, 2021 30,667 $ 29.53 Granted 185,795 $ 2.31 Vested ( 62,196 ) $ 8.93 Cancelled or forfeited ( 52,869 ) $ 3.38 Unvested restricted common stock as of December 31, 2022 101,397 $ 5.92 The aggregate fair value of restricted stock that vested during the years ended December 31, 2022 and 2021 was $ 556 and $ 714 , respectively. The Company had 19,000 performance restricted stock units outstanding at the beginning of the year ended December 31, 2022. For the year ended December 31, 2022, the Company granted 248,125 performance restricted stock units to its employees related to the achievement of certain clinical development, research and/or financing milestones and had 27,650 performance restricted stock units forfeited. As of December 31, 2022, the Company had 239,475 performance restricted stock units outstanding. Recognition of stock-based compensation expense associated with performance restricted stock units commences when the performance conditions are considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones. As of December 31, 2022 and 2021, for performance-based restricted stock units that were outstanding, the achievement of milestones was considered probable for 3,063 shares and no shares, respectively. During the year ended December 31, 2022, one milestone for outstanding performance restricted stock units was achieved and the Company recognized stock-based compensation expense related to this milestone of $ 7 . The milestones that had not been met were considered not probable, and therefore no expense has been recognized related to these awards in the years ended December 31, 2022 and 2021. Stock-based compensation expense The Company recorded stock-based compensation expense in the following award type categories included within its consolidated statements of operations and comprehensive loss: December 31, 2022 2021 Stock options $ 11,365 $ 12,964 Restricted stock units 559 812 Employee Stock Purchase Plan and Other 273 261 $ 12,197 $ 14,037 158 Table of Contents For the years ended December 31, 2022 and 2021, the Company issued 90,270 and 12,456 shares, respectively, of common stock out of the 2020 Plan under the Company’s policy where non-employee directors may elect to receive their compensation in the form of common stock in lieu of cash. The Company recorded stock-based compensation expense related to stock options and restricted stock units in the following expense categories of its consolidated statements of operations and comprehensive loss: December 31, 2022 2021 Research and development $ 5,277 $ 6,324 General and administrative 6,920 7,713 $ 12,197 $ 14,037 As of December 31, 2022, total unrecognized compensation cost related to the unvested stock options was $ 14,814 , which is expected to be recognized over a weighted average period of 1.9 years. As of December 31, 2022, total unrecognized compensation cost related to the unvested restricted stock units was $ 326 , which is expected to be recognized over a weighted average period of 0.9 years. Employee stock purchase plan The 2020 ESPP enables eligible employees to purchase shares of the Company's common stock at the end of each six -month offering period at a price equal to 85 % of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. Eligible employees generally includes all employees. Offering periods begin on the first trading day of January and July of each year and end on the last trading day in June and December of each year. Share purchases are funded through payroll deductions of up to 10 % of an employee’s eligible compensation for each payroll period, up to $ 25 each calendar year. For the years ended December 31, 2022 and 2021, there were 53,662 and 6,162 shares, respectively, issued under the 2020 ESPP. 9. INCOME TAXES Income (loss) before income tax expense consists of the following: December 31, 2022 2021 Domestic $ ( 91,270 ) $ ( 125,328 ) Foreign 101 ( 268 ) Total loss before income taxes $ ( 91,169 ) $ ( 125,596 ) 159 Table of Contents For the years ended December 31, 2022 and 2021, the Company recorded no income tax benefit for the net operating losses incurred each year, due to its uncertainty of realizing a benefit from those items. A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations as of December 31, 2022 and 2021, respectively, is as follows: December 31, 2022 2021 U.S. federal statutory income tax rate 21.0 % 21.0 % State and local taxes, net of federal benefit 4.4 % 4.1 % Permanent differences 0.0 % ( 0.1 ) % Stock compensation ( 1.7 ) % ( 0.4 ) % Research and development credits 2.7 % 2.6 % Change in valuation allowance ( 26.5 ) % ( 27.2 ) % Other 0.1 % 0.0 % Effective income tax rate 0.0 % 0.0 % The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows: Tax year ended December 31, 2022 2021 Deferred tax assets (liabilities): Net operating loss carryforwards $ 60,651 $ 52,568 Research and development tax credits 7,934 5,439 Capitalized R&D 11,559 — Operating lease liabilities 7,194 7,172 Accruals and other 1,463 1,251 Stock-based compensation 5,275 3,835 Total deferred tax assets 94,076 70,265 Valuation Allowance ( 87,496 ) ( 63,014 ) Subtotal 6,580 7,251 Right-of-use assets ( 6,387 ) ( 7,236 ) Net fixed assets ( 193 ) ( 15 ) Net deferred tax assets $ — $ — On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was signed into law. Under the TCJA provisions, effective with tax years beginning on or after January 1, 2022, taxpayers can no longer immediately expense qualified research and development expenditures. Taxpayers are now required to capitalize and amortize these costs over five years for research conducted within the United States or 15 years for research conducted abroad. As a result, the Company capitalized $ 49,991 of research and development expenses for the year ended December 31, 2022. As of December 31, 2022, the Company had gross federal net operating loss carryforwards of $ 241,019 , of which $ 2,556 begin to expire in 2036 and the remainder do not expire but are subject to 80% limitation. As of December 31, 2022, the Company had state net operating loss carryforwards of $ 158,917 that begin to expire in 2036. The Company also has net operating loss carryforwards in Canada of $ 471 that are set to expire beginning in 2039. Additionally, the Company had federal research and development tax credit carryforwards of $ 7,566 that expire at various dates through 2042. 160 Table of Contents In assessing the realizability of the net deferred tax asset, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Management believes that it is more likely than not that the Company’s deferred income tax assets will not be realized. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2022 and 2021. The valuation allowance increased by $ 24,482 during the year ended December 31, 2022 primarily as a result of net operating losses generated during the period along with capitalized research and development expenses. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. The Company also has not conducted a study of its research and development credit carryforwards, which may result in an adjustment to research and development credit carryforwards. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2022 and 2021, the Company had no unrecognized tax benefits. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. As of December 31, 2022 and 2021, the Company’s tax years are still open under statute from 2019 to the present. The Company’s foreign subsidiary has incurred losses since inception and the Company had no undistributed earnings as of December 31, 2022. 161 Table of Contents 10. NET LOSS PER SHARE Net loss per share The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands, except share and per share amounts): December 31, 2022 2021 Net loss attributable to common stockholders $ ( 91,169 ) $ ( 125,596 ) Weighted average common shares outstanding, basic and diluted 36,325,586 36,189,002 Net loss per share, basic and diluted $ ( 2.52 ) $ ( 3.47 ) The Company’s unvested restricted common shares at December 31, 2022 and 2021 have been excluded from the computation of basic net loss per share attributable to common stockholders. The Company’s potentially dilutive securities, which include options, unvested restricted stock, shares issuable under the employee stock purchase plan and warrants to purchase common stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: December 31, 2022 2021 Options to purchase common stock 5,359,400 4,903,839 Unvested restricted stock 101,397 30,667 Shares issuable under employee stock purchase plan 48,805 24,806 Unvested performance restricted stock units 239,475 19,000 Warrants to purchase shares of common stock 10,757 10,757 5,759,834 4,989,069 11. LEASES The Company has historically entered into lease arrangements for its facilities. As of December 31, 2022, the Company had two operating leases with required future minimum payments. In applying the transition guidance under ASC 842, the Company determined the classification of these leases to be operating leases and recorded right-of-use assets and lease liabilities as of the effective dates. The Company’s leases generally do not include termination or purchase options. Operating Leases In July 2020, the Company entered into a seven-year agreement with an option to extend for five additional years to lease two floors totaling approximately 25,578 square feet of office space for its principal office, which is located in Cambridge, MA. The lease on the first floor commenced on August 1, 2020 and the lease on the second floor commenced March 9, 2021. The Company recognized the respective lease balances on the consolidated balance sheets when the lease of each floor commenced. Under the terms of the lease, the Company was required to issue a $ 1,168 letter of credit as security for the lease. In December 2022, the Company entered into an agreement to sublease 14,439 square feet of its Cambridge office to a subtenant through August 2028. Sublease income is recognized on a straight-line basis over the term of the sublease agreement. The Company was not relieved of its primary obligation under the Cambridge office lease as a result of the sublease. 162 Table of Contents The Company previously leased an office space in Cambridge, MA under a lease that commenced in February 2019 for approximately 2,357 square feet of office space, which was set to expire on April 30, 2022, subject to an option to extend the lease for three additional years. Effective June 15, 2021, the lease was terminated, and the remaining right-of-use asset and lease liability were derecognized. A gain of $ 5 was recognized for the termination of the lease. In December 2020, the Company entered into an eleven-year agreement with an option to extend for five additional years to lease approximately 18,120 square feet of office and laboratory space in New York, NY. The Company has an option to extend the lease for five additional years. The lease commenced August 26, 2021 and the related lease balance was recognized on the consolidated balance sheet. The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating lease for the years ended December 31, 2022 and 2021: December 31, 2022 2021 Lease Cost Operating lease cost $ 4,228 $ 3,032 Short-term lease cost 88 886 Variable lease cost 1,012 444 Total lease cost $ 5,328 $ 4,362 December 31, Other Operating Lease Information 2022 2021 Cash paid for amounts included in the measurement of lease liability $ 2,935 $ 2,464 Weighted-average remaining lease term 7.8 8.8 Weighted-average discount rate 5.3 % 5.3 % The variable lease costs for the year ended December 31, 2022 include common area maintenance and other operating charges. As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Future minimum lease payments under the Company’s operating leases as of December 31, 2022 were as follows: 2023 $ 4,244 2024 4,359 2025 4,477 2026 4,599 2027 4,724 Thereafter 12,250 Total lease payments 34,653 Less: interest ( 6,513 ) Total lease liability $ 28,140 Rent expense for the years ended December 31, 2022 and 2021 was $ 5,342 and $ 3,921 , respectively. 163 Table of Contents 12. COMMITMENTS AND CONTINGENCIES The Company enters into contracts in the normal course of business with contract research organizations (CROs), contract manufacturing organizations (CMOs) and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. These contracts do not contain minimum purchase commitments and are cancelable upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of service providers, up to the date of cancellation. License Agreements The Company is party to license agreements, which include contingent payments. These payments will become payable if and when certain development, regulatory and commercial milestones are achieved. As of December 31, 2022, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable. Indemnification agreements In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any indemnification arrangements that could have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2022 or 2021. Legal proceedings The Company is not currently party to and is not aware of any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings. 13. BENEFIT PLANS The Company has a tax-qualified 401(k) and Profit Sharing defined contribution plan (the 401(k) Plan). Under the 401(k) Plan, the Company provides an employer safe harbor matching contribution equal to 100 % of a participant’s eligible contributions of up to 6 % of eligible compensation, subject to limits established by the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the Code). All matching contributions are fully vested when made. During the years ended December 31, 2022 and 2021, the Company contributed $ 1,146 and $ 927 , respectively, to the 401(k) Plan. * * * * * * 164 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.