What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-17 · 308 added, 227 removed, 523 unchanged (51% of the section changed)

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Evaluation of Disclosure Controls and Procedures

The Company has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, or Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), to allow timely decisions regarding required disclosure.

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.

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Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective at the reasonable assurance level as of December 31, 2022.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

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These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring.

Management’s assessment included extensive documentation, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting.

Based on management’s processes and assessment, as described above, management has concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

Management’s assessment included extensive documentation, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting.

Based on management’s processes and assessment, as described above, management has concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

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.”

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, since March 2020, many of our employees have been working remotely.

We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment.

We are continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

Other Information.

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Not applicable.

Directors, Executive Officers and Corporate Governance.

Directors, Executive Off icers and Corporate Governance.

Except as set forth below, the information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2021 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022.

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We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Business Conduct and Ethics by posting such information on our website, at the address and location specified above and, to the extent required by the listing standards of The Nasdaq Global Select Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information.

Executive Compensation.

Executiv e Compensation.

The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022 and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.

The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022 and is incorporated herein by reference.

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The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022 and is incorporated herein by reference.

Principal Accounting Fees and Services.

Principal Accoun ting Fees and Services.

The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022 and is incorporated herein by reference.

Our independent public accounting firm is Ernst & Young, Philadelphia, PA, PCAOB Auditor ID 42 .

Exhibits, Financial Statement Schedules.

Exhibits, Financ ial Statement Schedules.

(a) The following documents are filed as part of this Annual Report on Form 10-K:

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Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and 2021

Statements of Convertible Preferred Stock and Stockholders’ E quity for the Years Ended December 31, 2021 and 2020

Statements of Stockholders’

Equity for the Years Ended December 31, 2022 and 2021

Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

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Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and 2021

Statements of Stockholders’ E quity for the Years Ended December 31, 2021 and 2020

Statements of Stockholders’

Equity for the Years Ended December 31, 2022 and 2021

Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Regist ered Public Accounting Firm

To the Stockholders and the Board of Directors of Cabaletta Bio, Inc.

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We have audited the accompanying balance sheets of Cabaletta Bio, Inc.

(the Company) as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

(the Company) as of December 31, 2022 and 2021, the related statements of operations and comprehensive loss, stockholders’

equity and cash flows for the years then ended, 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, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

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Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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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.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018

Philadelphia, Pennsylvania

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Property, plant and equipment, net

Liabilities and stockholders’ equity

Operating lease right-of-use assets

Liabilities and stockholders’

Current liabilities:

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Accrued and other current liabilities

Operating lease liabilities, current portion

Total current liabilities

Operating lease liabilities, net of current portion

Total Liabilities

Commitments and contingencies (see Note 7)

Stockholders’ equity:

Stockholders’

Preferred stock, $ 0.00001 par value:

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December 31, 2022 and 2021;

28,927,129 ( 24,614,629 voting and 4,312,500 non-voting) shares issued and outstanding as of December 31, 2021 and 24,062,775 ( 19,387,160 voting and 4,675,615 non-voting) shares issued and outstanding as of December 31, 2020

29,445,134 ( 27,584,375 voting and

1,860,759 non-voting) shares issued and outstanding as of

December 31, 2022 and 28,927,129 ( 24,614,629 voting and

4,312,500 non-voting) shares issued and outstanding as

of December 31, 2021

Additional paid-in capital

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Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’

Total liabilities and stockholders’

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

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Interest income

Other comprehensive income:

Net unrealized gain on available-for-sale investments, net of tax

Other comprehensive loss:

Net unrealized loss on available-for-sale investments, net of tax

Net comprehensive loss

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CABALETTA BIO, INC.

Statements of Stockholders’ Equity

Statements of Stockholders’

(in thousands, except share and per share amounts)

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Loss

Accumulated Deficit

Total Stockholders’ Equity

Balance—December 31, 2019

Total Stockholders’

Balance—December 31, 2020

Common stock issuance, net of issuance costs of

Issuance of common stock in connection with

exercise of stock options

Issuance of common stock under employee stock purchase plan

Net unrealized gains on available-for-sale

Issuance of common stock under employee stock

purchase plan

Net unrealized losses on available-for-sale securities

Stock-based compensation

Balance—December 31, 2020

Common stock issuance, net of $ 1,492 of issuance

Balance—December 31, 2021

Issuance of common stock and pre-funded warrants

for the purchase of common stock, net of issuance

costs of $ 2,438

Issuance of common stock upon exercise of

pre-funded warrants

Issuance of common stock in connection with

exercise of stock options

Issuance of common stock under employee stock purchase plan

Net unrealized losses on available-for-sale

Issuance of common stock under employee stock

purchase plan

Net unrealized losses on available-for-sale securities

Stock-based compensation

Balance—December 31, 2021

Balance—December 31, 2022

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

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Stock-based compensation

Amortization of premium on investments

Non-cash lease expense

Accretion of lease liabilities

Gain on derecognition of embedded lease upon lease amendment

Amortization of (discount) premium on investments

Changes in operating assets and liabilities:

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Accrued and other current liabilities

Lease liabilities

Net cash used in operating activities

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Proceeds from maturities of investments

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock and pre-funded warrants,

net of issuance costs

Proceeds from issuance of common stock in connection with

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stock purchase plan

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents—beginning of year

Cash and cash equivalents—end of year

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents—beginning of year

Cash and cash equivalents—end of year

Supplemental disclosures of non-cash investing and

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Property and equipment purchases included in accounts payable

Right-of use assets obtained in exchange for lease obligations

Derecognition of embedded lease upon lease amendment

Offering costs included in accounts payable

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

CABALETTA BIO, INC.

Notes to the Financial Statements

Notes to the Fina ncial Statements

(in thousands, except share and per share amounts)

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The Company is headquartered in Philadelphia, Pennsylvania.

Cabaletta is a clinical-stage biotechnology company focused on the discovery and development of engineered T cell therapies for B cell-mediated autoimmune diseases.

Principal operations commenced in April 2018, when the Company executed two sponsored research agreements with the Trustees of the University of Pennsylvania (Penn).

On October 29, 2019, the Company completed its initial public offering (IPO) of 6,800,000 shares of Common Stock at an offering price of $ 11.00 per share.

The Company received net proceeds of $ 66,156 after deducting underwriting discounts, commissions and estimated offering expenses.

In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 12,904,534 shares of Common Stock.

In November 2019, the underwriters partially exercised their option and purchased an additional 475,501 shares of Common Stock resulting in net proceeds to the Company of $ 4,864 , after deducting underwriting discounts and commissions.

Cabaletta is a clinical-stage biotechnology company focused on the discovery and development of engineered T cell therapies for autoimmune diseases.

Principal operations commenced in April 2018.

Risks and Uncertainties

The Company does not expect to generate revenue from sales of engineered T cell therapies for B cell-mediated autoimmune diseases or any other revenue unless and until the Company completes preclinical and clinical development and obtains regulatory approval for one or more product candidates.

The Company does not expect to generate revenue from sales of engineered T cell therapies for autoimmune diseases or any other revenue unless and until the Company completes preclinical and clinical development and obtains regulatory approval for one or more product candidates.

If the Company seeks to obtain regulatory approval for any of its product candidates, the Company expects to incur significant commercialization expenses.

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As a result, the Company is unable to predict the timing or amount of increased expenses or when or if the Company will be able to achieve or maintain profitability.

Further, the Company is currently dependent on Penn for much of its preclinical research, clinical research and development activities and initial manufacturing activities (Note 6).

Further, the Company is dependent on third parties including Penn and certain Penn-affiliated entities for certain research and development activities, including manufacturing services (Note 6 and Note 7).

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization.

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If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce its operations.

In December 2019, a novel strain of coronavirus (COVID-19) surfaced in Wuhan, China and has since reached multiple other regions and countries.

The COVID-19 pandemic has continued to evolve as new variants of COVID-19 have been identified and spread, which has led to various responses, including government-imposed quarantines, travel restrictions and other public health safety measures in response to the emergence of new variants.

The extent to which COVID-19 will continue to impact the Company’s operations or those of its third party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, new information that may emerge concerning the severity of COVID-19, the impact of new strains of the virus, the effectiveness, availability and utilization of vaccines and the actions to contain COVID-19 or treat its impact, among others.

The Company’s financial results to date have not been significantly impacted by COVID-19, however, the Company cannot at this time predict the specific extent, duration, or full impact that the ongoing COVID-19 pandemic will have on its financial condition, operations, and business plans, including its ability to raise additional capital, the timing and enrollment of patients in its ongoing and planned clinical trials, future financings and other expected milestones of its product candidates.

In December 2019, a novel strain of coronavirus (COVID-19) surfaced in Wuhan, China and proceeded to spread globally.

Although many activities have returned to normal, new variants of COVID-19 have been identified and spread, which have led to various responses, including government-imposed quarantines, travel restrictions and other public health safety measures.

The extent to which COVID-19 will continue to impact the Company’s operations or those of its third party partners will depend on future developments, which are uncertain and cannot be predicted with confidence, including new information that may emerge concerning the severity of COVID-19, the impact of new strains of the virus, the effectiveness, availability and utilization of vaccines and treatments and the actions to contain COVID-19 or treat its impact, among others.

The Company has sustained annual operating losses since inception and expects to continue to generate operating losses for the foreseeable future.

The Company’s ultimate success depends on the outcome of its research and development activities.

The Company had cash and cash equivalents of $ 122,222 as of December 31, 2021.

The Company’s ultimate success depends on the outcome of its research and development activities.

The Company had cash and cash equivalents and investments of $ 106,547 as of December 31, 2022.

Through December 31, 2022, the Company has incurred an accumulated deficit of $ 165,562 .

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However, if such financing is not available at adequate levels and on a timely basis, or such agreements are not available on favorable terms, or at all, as and when needed, the Company will need to reevaluate its operating plan and may be required to delay or discontinue the development of one or more of its product candidates or operational initiatives.

The Company expects that its cash and cash equivalents as of December 31, 2021 will be sufficient to fund its projected operations for at least 12 months following the date the Company files this Annual Report on Form 10-K with the Securities and Exchange Commission (SEC).

The Company expects that its cash and cash equivalents and investments as of December 31, 2022 will be sufficient to fund its projected operations for

at least 12 months following the date the Company files this Annual Report on Form 10-K with the Securities and Exchange Commission (SEC).

Summary of Significant Accounting Policies

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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period.

Significant estimates and assumptions made in the accompanying financial statements include but are not limited to the fair value of stock-based compensation, the valuation allowance on the Company’s deferred tax assets and certain accruals.

Significant estimates and assumptions made in the accompanying financial statements include but are not limited to the valuation allowance on the Company’s deferred tax assets and certain accruals.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

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Off-Balance Sheet Risk and Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist of cash and cash equivalents, which are primarily invested in U.S.

treasury-based money market funds.

As of December 31, 2020, the Company held available-for-sale debt securities, which were invested in investment grade corporate bonds with high credit quality issuers.

These investments matured in 2021 .

A portion of the Company’s cash is maintained at a federally insured financial institution.

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cash equivalents, which are primarily invested in U.S.

treasury-based money market funds, and available-for-sale debt securities, which are invested in U.S.

government securities.

A portion of the Company’s cash is maintained at a federally insured financial institution.

The deposits held at this institution are in excess of federally insured limits.

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institution in which those deposits are held.

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk.

The cash in this account is swept daily into U.S.

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government-based money market funds.

The Company has no off‑balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

Cash and Cash Equivalents

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Investments are available-for-sale and carried at estimated fair value.

The Company’s valuations of available-for-sale debt securities are generally derived from independent pricing services based upon quoted prices in active markets for similar securities, with prices adjusted for yield and number of days to maturity, or based on industry models using data inputs, such as interest rates and prices that can be directly observed or corroborated in active

Management determines the appropriate classification of its investments in debt securities at the time of purchase and at the end of each reporting period.

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The Company periodically evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary.

This evaluation consists of several qualitative and quantitative factors including the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the available-for-sale security until a forecasted recovery occurs.

Additionally, the Company assesses whether it has plans to sell the security or if more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis.

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The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability.

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability.

These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company has leases related to its facilities used for office and laboratory space, which are classified as operating leases.

These leases result in operating right-of-use (ROU) assets, current operating lease liabilities, and non-current operating lease liabilities in the balance sheets and have remaining lease terms up to 2.5 years.

The Company does not have any financing leases.

Leases with a term of 12 months or less are considered short-term and a ROU asset and lease obligation are not recognized.

Payments associated with short-term leases are expensed on a straight-line basis over the lease term.

ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent an obligation to make lease payments arising from the lease, measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the life of the lease term.

To determine the present value, the implicit rate is used when readily determinable.

For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate based on information available at the lease commencement date.

The operating lease ROU assets also include any prepaid lease payments made and any other indirect costs and excludes any lease incentives received.

Lease terms may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that

Lease cost for operating leases is recognized on a straight-line basis over the lease term.

The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease componen t .

Research and Development Expenses

Research and development costs include costs incurred for internal and external research and development activities and are expensed as incurred in the accompanying statements of operations.

Research and development costs consist of salaries and benefits, including associated stock-based compensation, and laboratory supplies and facility costs, as well as fees paid to entities that conduct certain research and development activities on the Company’s behalf.

The Company records accrued liabilities for estimated costs of research and development activities conducted by service providers, which include activities under agreements with Penn (Note 6), the conduct of sponsored research, preclinical studies and contract manufacturing activities.

The Company records the estimated costs of research and development activities based upon the estimated amount of services provided and includes these costs in accrued and other current liabilities and prepaid expenses and other current assets in the accompanying balance sheets and within research and development expense in the accompanying statements of operations.

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Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base.

Deferred tax assets and liabilities, which relate primarily to the carrying amount of the Company’s property and equipment and its net operating loss carryforwards, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities.

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The rights, including the liquidation and dividend rights, of the holders of the voting and non-voting common stock are identical, except with respect to voting.

Each share of non-voting common stock may be converted at any

time into one share of voting common stock at the option of its holder by providing written notice to the Company, subject to the limitations provided for in the amended and restated certificate of incorporation.

The Company also considers its unvested shares of common stock held by the Company’s founders and, prior to its conversion to common stock, its convertible preferred stock to be participating securities as, in the event a dividend is paid on common stock, the holders of convertible preferred stock and unvested shares of common stock would be entitled to receive dividends on a basis consistent with the common stockholders.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock, which excludes unvested shares of common stock.

Each share of non-voting common stock may be converted at any time into one share of voting common stock at the option of its holder by providing written notice to the Company, subject to the limitations provided for in the amended and restated certificate of incorporation.

The undistributed loss for each year is allocated to common stockholders based on the contractual participation rights of the voting and non-voting common stock as if the losses for the year had been distributed.

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Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance.

The Company’s CODM is its Chief Executive Officer.

The Company has determined it operates in a single operating segment and has one reportable segment.

Deferred Offering Costs

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

After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of stockholders’

equity as a reduction of additional paid-in capital or equity generated as a result of such offering.

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

Emerging Growth Company Status

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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 Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases.

The update requires lessees to recognize the liabilities related all leases, including operating leases, with a term greater than 12 months on the balance sheet.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize right of use assets and corresponding lease liabilities on the balance sheet for all leases (with the exception of short-term leases).

This update also requires lessees and lessors to disclose key information about their leasing transactions.

This guidance will be effective for public companies for annual and interim periods beginning after December 15, 2018.

For all other entities, including Emerging Growth Companies, this standard is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

Early adoption is permitted.

As an Emerging Growth Company, the Company expects to adopt Topic 842 in 2022 and has not yet finalized the assessment of the impact that Topic 842 will have on its financial statements or financial statement disclosures.

Topic 842 is effective for public companies for annual and interim periods beginning after December 15, 2018.

In June 2020, the FASB granted a one-year effective date delay for certain companies applying leases guidance to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

As permitted for emerging growth companies, the Company adopted Topic 842 under the private company transition guidance for the annual period ended December 31, 2022.

The Company adopted the standard effective January 1, 2022 using the modified retrospective approach to not restate comparative periods and recognized operating lease right-of-use assets and operating lease liabilities of $8,282 and $8,297, respectively.

The adoption of Topic 842 did not result in a material impact to the Company’s statement of operations and comprehensive loss for the year ended December 31, 2022.

There was no impact to the financial statements for the prior periods presented due to the transition method elected.

The Company elected the package of practical expedients permitted under the transition guidance, which, among other things, allowed the Company to carry forward the historical lease classification.

Additionally, the Company elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes.

Fair Value Measurements

As of December 31, 2021 and 2020, the Company’s financial instruments included cash and cash equivalents, accounts payable and accrued expenses.

As of December 31, 2020, the Company also had available-for-sale debt securities.

The carrying amounts for cash and cash equivalents, accounts payable and accrued expenses reported in

the Company’s financial statements for these instruments approximate their respective fair values because of the short-term nature of these instruments.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

As of December 31, 2022 and 2021, the Company’s financial instruments included cash and cash equivalents, available-for-sale debt securities, accounts payable and accrued expenses.

The carrying amounts for cash and cash equivalents, accounts payable and accrued expenses reported in the Company’s financial statements for these instruments approximate their respective fair values because of the short-term nature of these instruments.

December 31, 2022

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Money market funds

Short-term investments:

Government securities

December 31, 2021

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Money market funds

Short-term investments:

Corporate bonds

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1.

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Included in cash and cash equivalents

Corporate bonds - due in one year or less

Government securities - due in one year or less

Included in short-term investments

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Collaborations, Licensing Agreements and other Agreements

Amended and Restated License Agreement with the Trustees of the University of Pennsylvania and Children’s Hospital of Philadelphia

In August 2018, the Company entered into a license agreement with Penn, as amended and restated in July 2019 to include the Children’s Hospital of Philadelphia (CHOP) as a party, and as amended in May 2020 and October 2021 (the License Agreement) pursuant to which the Company obtained (a) a non-exclusive, non-sublicensable worldwide license to certain of Penn’s intellectual property to conduct research, product development, clinical trials, cell manufacturing and other activities, and (b) an exclusive, worldwide, royalty-bearing right and license, with a right to sublicense, on a target-by-target basis, under certain of Penn’s intellectual property to make, use, sell, offer for sale, import, and otherwise commercialize products for the treatment of autoimmune and alloimmune diseases.

Unless earlier terminated, the License Agreement expires on the expiration or abandonment or other termination of the last valid claim in Penn’s intellectual property licensed by the Company.

Amended and Restated License Agreement with the Trustees of the University of Pennsylvania and Children’s Hospital of Philadelphia

Unless earlier terminated, the License Agreement expires on the expiration or abandonment or other termination of the last valid claim in Penn’s intellectual property licensed by the Company.

The Company may terminate the License Agreement at any time for convenience upon 60 days written notice.

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The Company is required to pay certain milestone payments upon the achievement of specified clinical and commercial milestones.

Milestone payments are reduced by a certain percentage for the second product that achieves

a milestone, by an additional percentage for the third product that achieves a milestone, and so on, for each subsequent product that achieves a milestone.

Milestone payments are reduced by a certain percentage for the second product that achieves a milestone, by an additional percentage for the third product that achieves a milestone, and so on, for each subsequent product that achieves a milestone.

In the event that the Company is able to successfully develop and launch multiple products under the License Agreement, total milestone payments could be approximately $ 21,000 .

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Sponsored Research Agreements

The Company has sponsored research agreements, or SRA, with two faculty members at Penn, who are also scientific co-founders of the Company and members of the Company’s scientific advisory board.

In May 2020, one of the SRAs was amended to expand the scope of sponsored research.

In August 2020, the same SRA was further amended to extend the term of the original research plan.

In December 2021, the Company further amended this SRA to extend the term and expand the workplan to include additional correlative studies related to the DesCAARTes TM trial.

The Company has sponsored research agreements with two faculty members at Penn, who are also scientific co-founders of the Company and members of the Company’s scientific advisory board.

In May 2020, one of the agreements was amended to expand the scope of sponsored research.

In August 2020, this agreement was further amended to extend the term of the original research plan.

In December 2021, the Company further amended this SRA to extend the term through December 2024 and expand the workplan to include additional correlative studies related to the DesCAARTes TM trial.

In December 2022, the Company signed a budget amendment to this SRA.

In April 2021 and October 2021, the other SRA was amended to extend the term of the original research plan.

Under the amended SRAs, the Company has committed to funding defined research plans through December 2024 and November 2022 , respectively.

The total estimated cost of $ 12,483 under the SRAs satisfies the Company’s annual obligation under the License Agreement (see Amended and Restated License Agreement with the Trustees of the University of Pennsylvania above).

As of December 31, 2021, $ 9,930 of cost has been incurred pursuant to these SRAs.

Under the amended SRAs, the Company had committed to funding defined research plans through December 2024, or through completion of research activities, and November 2022 , respectively.

The total estimated cost of $ 12,560 under the SRAs satisfies the Company’s annual obligation under the License Agreement (see Amended and Restated License Agreement with the Trustees of the University of Pennsylvania above).

As of December 31, 2022, the full cost of these SRAs has been incurred pursuant to the agreements.

For the years ended December 31, 2022 and 2021, the Company recognized research and development expense of $ 2,624 and $ 2,840 , respectively, related to these SRAs in the accompanying statements of operations.

As of December 31, 2021 and 2020, $ 346 and $ 1,851 respectively, of advance payments are included in Prepaid expenses and other current assets in the accompanying balance sheets and there was $ 36 and $ 217 included in Accrued and other current liabilities in the accompanying balance sheets as of December 31, 2021 and 2020.

In December 2021, the Company entered into a SRA with Penn for the laboratory of Dr.

Drew Weissman, or the Weissman SRA.

Under the Weissman SRA, discovery-stage proof of concept studies for lipid nanoparticle mRNA for the delivery and/or enhancement of CAAR technology is being conducted.

Under the Weissman SRA, Penn granted the Company a non-transferable, non-exclusive license to use certain intellectual property for specific internal research purposes and further grants the Company the first option to negotiate to acquire, subject to agreement on commercial terms, an exclusive or non-exclusive worldwide license to certain patent rights for specific CAAR products developed under the Weissman SRA.

Unless earlier terminated, the Weissman SRA will expire in December 2023.

Pursuant to the Weissman SRA, the Company also entered into an Option Agreement with Penn, or the Weissman Option, which grants the Company the option to negotiate to acquire a non-exclusive worldwide license to certain patent rights in connection with the Weissman SRA.

As of December 31, 2022 and 2021, there was $ 77 and $ 36 included in Accrued and other current liabilities in the accompanying balance sheets as of December 31, 2022 and 2021.

Master Translational Research Services Agreement

I n October 2018, the Company entered into a services agreement (the Services Agreement) with Penn for additional research and development services from various laboratories within Penn.

In October 2018, the Company entered into a services agreement (the Services Agreement) with Penn for additional research and development services from various laboratories within Penn.

The research and development activities are detailed in separately executed Penn organization-specific addenda.

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Research and development expense related to executed addenda under the master translational research service agreement with Penn recognized in the accompanying statements of operations for the years ended December 31, 2022 and 2021 was $ 2,623 and $ 1,933 , respectively.

The Company may incur additional expenses up to $ 1,360 through the remaining term of the CAROT Amended Addendum.

Subscription and Technology Transfer Agreement

In July 2019, the Company entered into a subscription and technology transfer agreement pursuant to which the Company owed Penn an upfront subscription fee, which was paid in 2019, and a nominal non-refundable royalty on the net sales of products, a portion of which will be credited toward milestone payments and royalties, respectively, under the Amended License Agreement.

Technology transfer activities will be at the Company’s cost and subject to agreement as to the technology to be transferred.

The Company recognized $ 150 of research and development expense under this agreement for the year ended December 31, 2021.

No expense was recognized under this agreement for the year ended December 31, 2020.

The Company may incur additional expenses of approximately $ 1,100 through the remaining term of the CAROT Amended Addendum.

Exclusive License Agreement with IASO Biotherapeutics

On October 7, 2022, the Company entered into an Exclusive License Agreement (the IASO Agreement) with Nanjing IASO Biotherapeutics Co., Ltd.

Pursuant to the IASO Agreement, the Company received an exclusive, worldwide license under certain IASO intellectual property to use a novel clinical-stage anti-CD19 binder to develop, manufacture, commercialize and otherwise exploit T cell products directed to CD19 for the purpose of diagnosis, prevention or treatment of any autoimmune or alloimmune indications in humans.

As partial consideration for the exclusive license, IASO received an upfront payment of $ 2,500 .

IASO is also eligible to receive up to mid double digit millions in milestone payments based upon the achievement of specified pre-clinical, development and regulatory milestones, and up to an additional low triple digit millions in milestone payments based upon achievement of specified sales milestones, for a total consideration, inclusive of the upfront payment, of up to $ 162,000 , along with tiered mid-single digit royalties on future net sales for licensed products that may result from the IASO Agreement.

IASO has the right of first negotiation if the Company desires to grant a third party an exclusive license to develop, manufacture, commercialize or otherwise exploit the licensed products in the Greater China region.

Pursuant to the IASO Agreement, each of IASO and the Company have agreed, subject to certain exceptions, to refrain from engaging in certain competitive activities with respect to certain programs.

The Company also may sublicense through multiple tiers the rights granted to it by IASO under the IASO Agreement at any time, however, it must pay IASO a low double-digit percentage of any revenue obtained from sublicenses or options to third parties, subject to certain customary exclusions.

The IASO Agreement will continue on a country-by-country, licensed product-by-licensed product basis until the expiration of the royalty term as identified in the IASO Agreement, unless earlier terminated.

Each of the Company and IASO may terminate the Agreement for a material, uncured breach or insolvency of the other party.

The Company may also terminate the Agreement at will upon advance written notice and in the event IASO rejects the Agreement due to bankruptcy-related matters.

IASO may also terminate the Agreement if the Company fails to achieve certain specified diligence milestones in a timely manner and/or if the Company commences any patent challenges with respect to the patents and patent applications relating to the licensed sequence, in each case upon advance written notice.

Artisan Collaboration and License Agreement

In July 2020, the Company entered into a collaboration and license agreement with Artisan Bio, Inc.

(Artisan), wherein the Company and Artisan agreed to collaborate to potentially enhance certain pipeline products of the Company at specific targets using Artisan’s gene editing and engineering technology.

If the Artisan technology is applied to any of the Company’s products, the Company will be responsible for the development, manufacturing, and commercialization of any such products.

In July 2020 and as amended in January 2023, the Company entered into a collaboration and license agreement with Artisan Bio, Inc.

If the Artisan technology is applied to any of the Company’s products, the Company will be responsible for the development, manufacturing, and commercialization of any such products.

Under the terms of the agreement, the Company was required to pay Artisan a nominal upfront fee, as well as costs associated with research and development activities.

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Licence and Supply Agreement with Oxford Biomedica

In December 2021, the Company entered into a Licence and Supply agreement (LSA) with Oxford Biomedica (UK) Limited, wherein the LSA grants the Company a non-exclusive license to Oxford’s LentiVector® platform for its application in the Company’s DSG3-CAART program and puts in place a multi-year vector supply agreement.

Under the terms of the agreement, the Company is required to pay Oxford an upfront fee, as well as costs associated with initial vector manufacturing activities for a total cost of up to approximately $ 4,000 .

As of December 31, 2022, a total project to date expense of $ 1,100 has been recognized.

Oxford is eligible to receive regulatory and sales milestones in the low tens of millions and royalties in the low single digits on net sales of products that incorporate the Oxford technology.

The Company can terminate the agreement at will upon advance written notice and subject to certain manufacturing slot cancellation fees.

As of December 31, 2021, the Company has recognized expenses of approximately $ 1,100 in the accompanying statements of operations under this LSA.

Commitments and Contingencies

Operating Lease Agreement

In February 2019, the Company entered into an operating lease agreement for new office space in Philadelphia, Pennsylvania.

The lease term commenced in May 2019 and will expire in July 2022 .

The initial annual base rent is $ 261 , and such amount will increase by 2 % annually on each anniversary of the commencement date.

The Company records rent expense on a straight-line basis over the lease term.

Rent expense related to this lease agreement recognized in the accompanying statement of operations was $ 272 and $ 266 for the years ended December 31, 2021 and 2020.

In February 2022, the Company amended this lease for an additional 35 months, through June 30, 2025 .

The annual base rent is $ 279 , starting on January 1, 2023 and such amount will increase by 2.5 % annually.

Manufacturing Agreement

In January 2021, the Company entered into a Development and Manufacturing Services Agreement (WuXi Agreement) with WuXi Advanced Therapies, Inc.

(WuXi) to serve as the Company’s cell processing manufacturing partner for the planned MuSK-CAART Phase 1 clinical trial, or MusCAARTes TM trial.

The Company concluded the WuXi Agreement has an embedded lease as a dedicated manufacturing suite is used for the Company’s cell processing manufacturing.

The monthly fee of $ 125 for this suite is included in the minimum lease payment table below.

During the year ended December 31, 2021, the Company recognized $ 480 of expense related to this lease in the accompanying statements of operations.

The WuXi Agreement will expire the later of January 2024 , or upon completion of WuXi’s services related to the MusCAARTes TM trial.

(WuXi) to serve as the Company’s cell processing manufacturing partner for the MuSK-CAART Phase 1 clinical trial, or MusCAARTes TM trial.

The WuXi Agreement will expire the later of January 2024 , or upon completion of WuXi’s services related to the MusCAARTes TM trial.

The Company has the right to terminate the WuXi Agreement for convenience or other reasons specified in the WuXi Agreement upon prior written notice.

If the Company terminates the WuXi Agreement, it will be obligated to pay an early termination fee of up to $ 1,500 .

As of December 31, 2021, the future minimum payments for operating leases are as follows:

Leases for disclosure on an embedded lease in the WuXi Agreement that was derecognized in August 2022.

Research Service Agreement

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In May 2021, this agreement was amended to provide additional vector manufacturing services.

Research and development expense related to this research service agreement with CHOP recognized in the accompanying statements of operations was $ 1,071 for the year ended December 31, 2021.

No expense was recognized for the year ended December 31, 2020.

There was $ 166 recorded in Accrued and other current liabilities in the accompanying balance sheets as of December 31, 2021.

This agreement has a remaining cost of approximately $ 646 , expected to be incurred through the first half of 2023.

Manufacturing Agreement

In August and October 2021, the Company entered into agreements with a contract manufacturing organization for the purchase of plasmids to be used in vector manufacturing for a total cost of approximately $ 1,620 , expected to be incurred during 2021 and 2022.

As of December 31, 2021, $ 1,310 of expense related to these agreements has been recognized in the accompanying statements of operations.

There was $ 827 recorded in Accrued and other current liabilities in the accompanying balance sheets as of December 31, 2021.

Research and development expense related to this research service agreement with CHOP recognized in the accompanying statements of operations was $ 166 and $ 1,071 for the years ended December 31, 2022 and 2021, respectively.

The Company may incur additional costs of approximately $ 480 under this agreement.

Other Purchase Commitments

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The Company enters into certain types of contracts that contingently requires the Company to indemnify various parties against claims from third parties.

These contracts primarily relate to (i) the Company’s bylaws, under which the Company must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship, (ii) contracts under which the Company must indemnify directors and certain officers and consultants for liabilities arising out of their relationship, (iii) contracts under which the Company may be required to indemnify partners against certain claims, including claims from third parties asserting, among other things, infringement of their intellectual property rights, and (iv) procurement, consulting, or license agreements under which the Company may be required to indemnify vendors, consultants or licensors for certain claims, including claims that may be brought against them arising from the Company’s acts or omissions with respect to the supplied products, technology or services.

From time to time, the Company may receive indemnification claims under these contracts in the normal course of business.

In addition, under these contracts, the Company may have to modify the accused infringing intellectual property and/or refund amounts received.

In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on the Company’s future business, operating results or financial condition.

It is not possible to determine the maximum potential amount under these contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.

Pending Litigation

On February 28, 2022, a purported stockholder of the Company filed a complaint against the Company and certain of the Company’s current officers and certain of the Company’s current and former directors in the United States District Court for the Eastern District of Pennsylvania captioned Patterson v.

Cabaletta Bio, Inc., et al..

2:22-cv-00737 (E.D.

The complaint was filed on behalf of a putative class of persons and entities who purchased or otherwise acquired (a) Cabaletta common stock pursuant and/or traceable to the offering documents issued in connection with the Company’s October 24, 2019 initial public offering;

and/or (b) Cabaletta securities between October 24, 2019 and December 13, 2021 both dates inclusive.

The complaint alleges claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and under Sections 11 and 15 of the Securities Act based upon allegedly false or misleading statements and omissions regarding our DesCAARTes TM Phase 1 clinical trial of DSG3-CAART, clinical data for the DesCAARTes TM trial, the efficacy of DSG3-CAART, and the clinical and/or commercial prospects for DSG3-CAART.

The complaint seeks damages, prejudgment and post-judgment interest, and reasonable attorneys’ fees, expert fees and other costs.

The Company may also become subject to additional securities class action lawsuits in the future.

The Company intends to vigorously defend the lawsuit.

At this time, no assessment can be made as to its likely outcome or whether the outcome will be material to the Company.

No information is available to indicate that it is probable that a loss has been incurred and can be reasonably estimated as of the date of the financial statements and, as such, no accrual for the loss has been recorded within the financial statements.

Pursuant to the Company’s Third Amended and Restated Certificate of Incorporation filed in October 2019, the Company is authorized to issue 143,590,481 shares of voting common stock and 6,409,519 shares of non-voting common stock.

The complaint alleged claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and under Sections 11 and 15 of the Securities Act based upon allegedly false or misleading statements and omissions regarding our DesCAARTes TM Phase 1 clinical trial of DSG3-CAART, clinical data for the DesCAARTes TM trial, the efficacy of DSG3-CAART, and the clinical and/or commercial prospects for DSG3-CAART.

The complaint sought damages, prejudgment and post-judgment interest, and reasonable attorneys’

fees, expert fees and other costs.

On October 17, 2022, this complaint was voluntarily dismissed by the plaintiff.

The Company may become subject to additional securities class action lawsuits in the future.

The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement.

The Company leases office and laboratory space under operating leases that have a weighted average remaining term of 2.5 years as of December 31, 2022.

The Company also leases office space under short-term leases that provide for either party to terminate the lease without cause and with 30 days’

The Company’s operating leases include rent escalations and are subject to additional variable charges, including common area maintenance, property taxes and property insurance.

Given the variable nature of such costs, they are recognized as expense as incurred.

Additionally, some of the Company’s leases are subject to certain fixed fees which the Company has determined to be non-lease components.

The Company has elected the practical expedient to account for lease and non-lease components as a single-lease component and has included fixed payments related to non-lease components in calculating the operating lease liability.

In January 2021, the Company entered into the WuXi Agreement.

The Company concluded the WuXi Agreement had an embedded lease as a dedicated manufacturing suite was to be used for the Company’s cell processing manufacturing.

The Company classified the embedded lease as an operating lease and recognized a right-of-use asset and lease liability of $ 7,563 as of January 1, 2022.

In August 2022, the Company's dedicated suite arrangement was converted into a shared suite arrangement.

The Company concluded the WuXi Agreement no longer contained an embedded lease and recognized a gain on derecognition of this lease asset and liability of $ 149 for the year ended December 31, 2022.

The weighted average discount rate for the Company’s operating leases as of December 31, 2022 is 8.3 %, representing the Company's incremental borrowing rate.

For the year ended December 31, 2022, total lease cost was $ 3,849 , consisting of $ 3,042 operating lease cost, $ 36 of variable lease costs and $771 of short-term lease cost.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 2,910 for the year ended December 31, 2022.

Rent expense for the year ended December 31, 2021 was $ 752 .

Future lease payments under the non-cancelable operating leases as of December 31, 2022 are as follows :

Total undiscounted lease payments

Less imputed interest

Total lease liability

Holders of voting common stock shall have the exclusive right to vote for the election of directors of the Company and on all other matters requiring stockholder action.

Each share of the Company’s non-voting common stock may be converted at any time into one share of common stock at the option of its holder by providing written notice to the Company, subject to the limitations provided for in the amended and restated certificate of incorporation.

The Company has a Sales Agreement with Cowen and Company, LLC, to provide for the offering, issuance and sale of up to an aggregate amount of $ 75.0 million of common stock from time to time in “at-the-market” offerings (the ATM Program) pursuant to its shelf registration statement on Form S-3 (File No.

Each share of the Company’s non-voting common stock may be converted at any time into one share of common stock at the option of its holder by providing written notice to the Company , subject to the limitations provided for in the amended and restated certificate of incorporation.

December 2022 Financing

In December 2022, the Company issued 126,815 shares of its common stock at a price of $ 5.52 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase 6,213,776 shares of common stock at a price of $ 5.51999 per pre-funded warrant.

The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, minus the $ 0.00001 per share exercise price of such pre-funded warrant.

Aggregate net proceeds were $ 32,562 after deducting underwriting discounts and commissions and offering expenses.

As of December 31, 2022, 271,739 pre-funded warrants had been exercised.

An additional 1,811,594 pre-funded warrants were exercised subsequent to December 31, 2022.

The pre-funded warrants were classified as a component of permanent stockholders’

equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method.

The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria.

In addition, such pre-funded warrants do not provide any guarantee of value or return.

At-the-Market Offering

offerings (the ATM Program) pursuant to its shelf registration statement on Form S-3 (File No.

333-250006) and subject to the limitations thereof.

During the year ended December 31, 2021, the Company sold 4,792,562 shares pursuant to the ATM Program for net proceeds of $ 48.3 million, after deducting commissions of $ 1.4 million.

No shares were sold pursuant to the ATM Program in 2022.

2018 Stock Option and Grant Plan

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Stock options granted under the 2018 Plan generally vest over three to four years .

There were 1,959,411 options granted under the 2018 Plan prior to the Company’s IPO in October 2019.

No further grants may be made under the 2018 Plan subsequent to the IPO.

2019 Stock Option and Incentive Plan

The 2019 Stock Option and Incentive Plan (2019 Plan) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019.

The 2019 Plan provides for the grant of incentive stock options, nonqualified 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 2019 Plan was 2,342,288 , which will be increased 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.

The 2019 Stock Option and Incentive Plan (2019 Plan) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019.

On January 1, 2023, the total number of shares under the 2019 Plan was increased by 1,177,805 shares.

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Options Exercisable at December 31, 2022

The aggregate intrinsic value of options granted is calculated as the difference between the exercise price of the options and the estimated fair value of the Company’s common stock.

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2022 and 2021 was $ 2.15 and $ 7.45 , respectively.

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Risk-free interest rate

1.47 %—

0.63 %—

Expected term

5.5—6.1 years

5.7—6.1 years

Expected volatility

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These assumptions include:

Expected term —The expected term represents the period that stock-based awards are expected to be outstanding.

The expected term for option grants is determined using the simplified method, which is the midpoint between the vesting period and the contractual term of the option.

Expected volatility —As a privately held company prior to the Company’s IPO in October 2019, the Company has limited trading history for its common stock and, as such, the expected volatility is estimated based on the average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock-based awards.

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

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate —The risk-free interest rate is based on the U.S.

Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of a stock-based award.

Expected dividend —The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.

Therefore, the Company used an expected dividend yield of zero.

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2019 Employee Stock Purchase Plan

The 2019 Employee Stock Purchase Plan (2019 ESPP) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019.

A total of 234,229 shares of common stock were initially reserved for issuance under the 2019 ESPP, and will be increased each January 1 thereafter through January 1, 2029 by the least of (i) 234,229 shares of common stock, (ii) 1 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or (iii) such lesser number of shares determined by the 2019 ESPP’s administrator.

The 2019 Employee Stock Purchase Plan (2019 ESPP) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019.

On January 1, 2023, there was no increase to the total number of shares under the 2019 ESPP.

Employee contributions are made through payroll deductions of up to 15 % of eligible compensation over the offering period.

A participant may not accrue rights to purchase more than $ 25 worth of the Company’s common stock for each calendar year in which such right is outstanding.

At the end of each offering period, shares of the Company’s common stock may be purchased at 85 % of the lesser of the Company’s common stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period.

A participant may not accrue rights to purchase more than $ 25 worth of the Company’s common stock for each calendar year in which such right is outstanding.

The first offering period commenced on July 1, 2020 and ended on November 30, 2020.

Thereafter, offerings will be six months in duration and will commence on each December 1 and June 1.

The reconciliation of federal statutory income tax rate to the Company’s effective income tax rate is as follows:

For the Year Ended December 31,

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Non-deductible items and other

Change in state tax rate

Change in valuation allowance

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The principal components of the Company’s deferred tax assets consisted of the following:

The principal components of the Company’s deferred tax assets and liabilities consisted of the following:

Deferred tax assets:

Federal, state and local net operating loss carryforwards

License fee deductions

Research and development tax credits

Capitalized research and development costs

Stock-based compensation deductions

License fee deductions

Operating lease liabilities

Accrued expenses

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Deferred tax liabilities:

Operating lease assets

Net deferred tax assets

The Company increased its valuation allowance by $ 13,465 for the year ended December 31, 2022 in order to maintain a full valuation allowance against its deferred tax assets.

Based on the Company’s history of losses, the Company recorded a full valuation allowance against its deferred tax assets as of December 31, 2021.

The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support a reversal of the allowance.

Based on the Company’s history of losses, the Company recorded a full valuation allowance against its deferred tax assets as of December 31, 2022.

intends to maintain a valuation allowance until sufficient positive evidence exists to support a reversal of the allowance.

As of December 31, 2022, the Company had federal, state and local net operating loss carryforwards of $ 99,174 , $ 101,359 and $ 82,179 , respectively;

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The local net operating losses begin to expire in 2023 .

As of December 31, 2021, the Company had federal research and development tax credit carryforwards of $ 3,359 , which begin to expire in 2038 .

As of December 31, 2022, the Company had federal and state research and development tax credit carryforwards of $ 5,753 and $ 106 , respectively, which begin to expire in 2038 .

Under the provisions of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the IRC), these net operating losses, credit carryforwards and other tax attributes may be subject to limitation based on previous significant changes in ownership and upon future significant changes in ownership of the Company, as defined by the IRC.

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The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50 % likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.

As of December 31, 2021, the Company had no unrecognized income tax benefits that would affect the Company’s effective tax rate if recognized.

As of December 31, 2022, the Company had no unrecognized income tax benefits that would affect the Company’s effective tax rate if recognized.

Net Loss Per Share

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Since the rights of the voting and non-voting common stock are identical, except with respect to voting, the undistributed losses of the Company have been allocated on a proportionate basis to the two classes.

Basic net loss per share of common stock is computed by dividing the net loss per share of common stock by the weighted average number of shares of common stock outstanding for the period.

The weighted-average shares of common stock outstanding as of December 31, 2022 included outstanding pre-funded warrants to purchase up to an aggregate of 5,942,036 shares of common stock.

Diluted net loss per share is calculated using the if-converted method, which assumes conversion of all non-voting common stock to voting common stock.

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Stock options to purchase common stock

Non-vested founder stock

401(k) Savings Plan

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The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis.

In 2019, the Company made a safe harbor nonelective contribution of 3 % of eligible compensation on behalf of all employees.

Effective January 1, 2020, the Plan provided for matching contributions on a portion of participant contributions pursuant to the 401(k) Savings Plan’s matching formula, up to 4 % of eligible compensation.

All matching contributions and participant contributions vest immediately.

Contributions totaled $ 351 and $ 256 for the years ended December 31, 2022 and 2021, respectively, and have been recorded in the statements of operations.

Subsequent Event

In January 2023, the Company entered into an Option and License Agreement (Autolus Agreement) with Autolus Holdings (UK) Limited (Autolus), wherein the Autolus Agreement grants the Company a non-exclusive license to access Autolus' RQR8 technology in its CD19-CAR T cell therapy program, and subject to additional nominal option exercise fees, up to four additional targets.

Under the terms of the Autolus Agreement, the Company is required to pay Autolus an upfront license fee of $ 1,200 , of which $ 800 was paid in February 2023 and $ 100 will be paid at the end of each calendar quarter in 2023.

Autolus is also eligible to receive regulatory milestones of up to $ 12,000 for each licensed target, sales milestones of up to a total of $ 15,000 and royalties in the low single digits on net sales of all products that incorporate the RQR8 technology.

The Autolus Agreement will continue on a country-by-country, licensed product-by-licensed product basis until the expiration of the royalty term as identified in the Autolus Agreement, unless earlier terminated.

The Company can terminate the Autolus Agreement at will upon advance written notice.

Each of the Company and Autolus may terminate the Agreement for a material, uncured breach or insolvency of the other party.

EXHIBIT INDEX

Third Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No.

001-39103) filed on October 30, 2019)

Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (File No.

001-39103) filed on October 30, 2019)

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No.

Amendment No.

1 to the Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q (File No.

001-39103) filed with the SEC on May 12, 2022)

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No.

333-234017) filed on October 16, 2019 )

Amended and Restated Investors' Rights Agreement among the Registrant and certain of its stockholders, dated January 2, 2019 (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No.

333-234017) filed on September 30, 2019)

Description of Securities (incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 30, 2020)

2018 Stock Option and Grant Plan, as amended, and form of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (File No.

Description of Securities

2018 Stock Option and Grant Plan, as amended, and form of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (File No.

333-234017) filed on September 30, 2019)

2019 Stock Option and Incentive Plan, and form of award agreements thereunder.

(incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1/A (File No.

333-234017) filed on October 16, 2019)

2019 Employee Stock Purchase Plan.

(incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1/A (File No.

333-234017) filed on October 16, 2019)

Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q filed on December 5, 2019)

Form of Indemnification Agreement between the Registrant and each of its directors (incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Form of Indemnification Agreement between the Registrant and each of its executive officers (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Amended and Restated License Agreement, dated as of July 23, 2019, among the Registrant, the Trustees of the University of Pennsylvania and the Children’s Hospital of Philadelphia (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Sponsored Research Agreement, dated as of April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Sponsored Research Agreement, dated as of April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Master Translational Research Services Agreement, dated as of October 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

CAROT Master Services Addendum to Master Translational Research Services Agreement, dated as of February 4, 2019, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

CVPF Master Services Addendum to Master Translational Research Services Agreement, dated as of October 22, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q filed on December 5, 2019)

Lease, dated as of February 11, 2019, between the Registrant and Brandywine Cira, L.P.

(incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Employment Agreement between the Registrant and Steven Nichtberger (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Employment Agreement between the Registrant and Anup Marda (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Employment Agreement between the Registrant and Gwendolyn Binder (incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Employment Agreement between the Registrant and David Chang (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Amended and Restated Non-Employee Director Compensation Policy

(incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on September 30, 2019)

Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Amendment No.

1, dated May 27, 2020, to the Sponsored Research Agreement, dated April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-39103) filed on May 28, 2020)

First Amendment, dated May 27, 2020, to the Amended and Restated License Agreement, dated July 23, 2019, among the Registrant, the Trustees of the University of Pennsylvania and the Children’s Hospital of Philadelphia (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No.

001-39103) filed on May 28, 2020)

Amendment to CAROT Master Services Addendum to Master Translational Research Services Agreement, dated as of May 18, 2020 between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on August 6, 2020)

1 unchanged sentence

2, dated August 17, 2020, to the Sponsored Research Agreement, dated April 23, 2018, as amended by Amendment No.

1 dated May 27, 2020, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

1 dated May 27, 2020, between the Registrant and the Trustees of the

University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on November 10, 2020)

Amendment No.

1, dated April 27, 2021, to the Sponsored Research Agreement, dated April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on May 3, 2021 )

Amendment No.

2, dated October 19, 2021, to the Sponsored Research Agreement, dated April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on November 1, 2021 )

Second Amendment, dated October 19, 2021, to the First Amended and Restated License Agreement, dated May 27, 2020, among the Registrant, the Trustees of the University of Pennsylvania and the Children’s Hospital of Philadelphia (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on November 1, 2021)

First Amendment, dated February 15, 2022, to the Lease, dated as of February 11, 2019, between the Registrant and Brandywine Cira, L.P.

(incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Amendment No.

3, dated December 17, 2021, to the Sponsored Research Agreement, dated April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Form of Employment Agreement (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Sponsored Research Agreement, dated as of December 23, 2021, between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Option Agreement, dated December 23, 2021, by and between the Registrant and the Trustees of the University of Pennsylvania (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Licence and Supply Agreement, dated December 30, 2021, by and between the Registrant and Oxford Biomedica (UK) Limited (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K (File No.

001-39103) filed on March 17, 2022)

Exclusive License Agreement, dated October 7, 2022, by and between the Registrant and Nanjing IASO Biotherapeutics Co., LTD.(incorporated by reference to Exhibit 10.31 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-39103) filed on November 10, 2022 )

Amendment No.

4, dated December 1, 2022, to the Sponsored Research Agreement, dated April 23, 2018, between the Registrant and the Trustees of the University of Pennsylvania

Form of Employment Agreement

Sponsored Research Agreement, dated as of December 23, 2021, between the Registrant and the Trustees of the University of Pennsylvania

Option Agreement, dated December 23, 2021, by and between Registrant and the Trustees of the University of Pennsylvania

Licence and Supply Agreement, dated December 30, 2021, by and between the Registrant and Oxford Biomedica (UK) Limited

Development, Manufacturing, and Testing Services Agreement, dated January 11, 2021, between the Registrant and WuXi Advanced Therapies Inc.

List of Subsidiaries of the Registrant

8 unchanged sentences

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

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Inline XBRL Instance Document –

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Inline XBRL Taxonomy Extension Schema Document

7 unchanged sentences

* Filed herewith.

The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

** The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

27 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