What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-25 compared with 2024-03-19 · 217 added, 113 removed, 576 unchanged (36% of the section changed)

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We have audited the accompanying consolidated balance sheets of Corvus Pharmaceuticals, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

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and (iv) evaluating the reasonableness of the significant assumption related to the vendors’ progress towards completion of clinical trials.

Evaluating management’s assumption related to the vendors’ progress towards completion of clinical trials involved (i) confirming patient visits on a test basis;

(ii) obtaining and examining contract terms on a test basis to evaluate the completeness and consistency of the costs in the contract with the costs used in developing the estimate;

Evaluating management’s assumption related to the vendors’ progress towards completion of clinical trials involved (i) obtaining and examining contract terms on a test basis to evaluate the completeness and consistency of the costs in the contract with the costs used in developing the estimate;

(ii) verifying patient visits on a test basis;

and (iii) considering whether this assumption was consistent with evidence obtained in other areas of the audit.

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Accrued and other liabilities

Warrant liability

Total current liabilities

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10,000,000 shares authorized at December 31, 2024 and December 31, 2023;

0 shares issued and outstanding at December 31, 2023 and December 31, 2022

0 shares issued and outstanding at each of December 31, 2024 and December 31, 2023

Common stock:

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Gain from sale of property and equipment

Change in fair value of warrant liability

Sublease income - related party

Loss before equity method investment

Loss from equity method investment

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Other comprehensive loss:

Unrealized gain (loss) on marketable securities

Unrealized gain on marketable securities

Cumulative foreign currency translation adjustment

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Balance at December 31, 2021

Issuance of common stock upon exercise of Exchange Warrants

Issuance of common stock upon follow-on public offering, net

Issuance of common stock in connection with at-the-market offering, net

Common stock issued on exercise of stock options

Stock-based compensation expense

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Balance at December 31, 2022

Issuance of common stock in connection with at-the-market offering, net

Common stock issued on exercise of stock options

Stock-based compensation expense

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Balance at December 31, 2023

Issuance of common stock in connection with at-the-market offering, net

Common stock issued in connection with registered direct offering, net

Pre-funded warrants issued in connection with registered direct offering, net

Issuance of common stock upon exercise of common stock warrants

Common stock issued on exercise of stock options

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Gain from sale of property and equipment

Change in fair value of warrant liability

Loss from equity method investment

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Cash flows from financing activities

Proceeds from issuance of common stock, net (includes $ 4,850 in aggregate gross proceeds from related parties for the year ended December 31, 2021)

Proceeds from issuance of common stock, net (includes $ 1,794 in aggregate gross proceeds from related parties)

Proceeds from issuance of pre-funded warrants, net (includes $ 1,769 in aggregate gross proceeds from related parties)

Proceeds from issuance of common warrants (includes $ 1,472 in aggregate gross proceeds from related parties)

Proceeds from the exercise of common stock warrants

Proceeds from issuance of common stock in connection with at-the-market offering, net

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the period

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Supplemental disclosures of cash flow information

Purchases of property and equipment incurred but not paid

Reclassification of common stock warrant liability into additional paid-in capital upon exercise of common stock warrants

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

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Corvus is a clinical-stage biopharmaceutical company.

The Company’s operations are located in Burlingame, California.

The Company’s operations are located in South San Francisco, California.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Corvus Biopharmaceuticals, Ltd.

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The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses.

Registered Direct Offering

On May 6, 2024, the Company completed a registered direct offering which resulted in gross proceeds of approximately $ 30.6 million.

The financing consisted of the sale of 13,512,699 shares of common stock and accompanying common stock warrants to purchase 13,078,509 shares of common stock (or pre-funded warrants in lieu thereof) at a combined offering price of $ 1.7312 per share, and the sale of pre-funded warrants to purchase 4,144,085 shares of common stock and accompanying common warrants to purchase 4,010,927 shares of common stock (or pre-funded warrants in lieu thereof) at a combined offering price of $ 1.7311 per share.

The common warrants have an exercise price of $ 3.50 per share of common stock (or $ 3.4999 per pre-funded warrant in lieu thereof), are exercisable at any time after the date of issuance, subject to certain ownership limitations, and expire on June 30, 2025.

The pre-funded warrants have an exercise price of $ 0.0001 and are exercisable any time after the date of the issuance, subject to certain

ownership limitations.

During the year ended December 31, 2024, 5,311,198 of common stock warrants were exercised, resulting in aggregate proceeds of approximately $ 18.6 million received by the Company.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations.

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The Company believes that it will continue to expend substantial resources for the foreseeable future as it continues clinical development of, seek regulatory approval for and, if approved, prepare for the commercialization of soquelitinib, ciforadenant and mupadolimab, as well as product candidates under the Company’s other development programs.

These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, obtaining regulatory approvals,

manufacturing and supply, sales and marketing and general operations.

These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, obtaining regulatory approvals, manufacturing and supply, sales and marketing and general operations.

In addition, other unanticipated costs may arise.

Because the outcome of any clinical trial and/or regulatory approval process is highly uncertain, the Company may not be able to accurately estimate the actual amounts necessary to successfully complete the development, regulatory approval process and commercialization of soquelitinib, ciforadenant and mupadolimab or any other product candidates.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception.

The Company had net losses of $ 27.0 million, $ 41.3 million, and $ 43.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company used net cash of $ 23.9 million, $ 27.0 million, and $ 36.7 million through its operating activities for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company had an accumulated deficit of $ 334.7 million and $ 307.7 million as of December 31, 2023 and 2022, respectively.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 397.0 million as of December 31, 2024.

To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from sales of commercial products.

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As of December 31, 2024, the Company had cash, cash equivalents and marketable securities of $ 52.0 million.

The Company’s cash, cash equivalents and marketable securities are not sufficient to fund the Company’s planned operations for a period of 12 months from the date these consolidated financial statements are issued.

The Company’s cash, cash equivalents and marketable securities are not sufficient to fund the Company’s planned operations for a period of at least 12 months from the date these consolidated financial statements are issued.

To fund the Company's planned operations, the Company will need to raise additional capital.

The Company intends to raise additional capital through private and public equity offerings, including its “at-the-market” offering program, debt financings, and potential future collaboration, license and development agreements.

The Company intends to raise additional capital through private and public equity offerings, including its “at-the-market” offering program, debt financings, the potential exercise of common warrants outstanding with an exercise price of $ 3.50 per share and potential future collaboration, license and development agreements.

However, there can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its operations or on terms acceptable to the Company or at all.

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The consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Exchange Warrants

On November 8, 2019, the Company entered into an exchange agreement (the “Exchange Agreement”) with an investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,458,000 shares of the Company’s common stock, par value $ 0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,458,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $ 0.0001 per share.

The Exchange Warrants were exercisable at any time prior to expiration except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would have beneficially owned more than 9.99 % of the Company’s common stock, subject to certain exceptions.

In accordance with Accounting Standards Codification Topic 505, Equity, and Accounting Research Bulletin 43, the Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and elected to record the excess over par value as a debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants were classified as equity in accordance with Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity, and Accounting Standards Codification Topic 815, Derivatives and Hedging, and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

The Company determined that the fair value of the Exchange Warrants was substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange

In September 2021, the Exchange Warrants were fully exercised, resulting in the issuance of 1,457,947 shares of common stock on a net exercise basis.

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business.

Since its inception, the Company has incurred significant losses and negative cash flows from operations.

As of December 31, 2023, the Company had an accumulated deficit of $ 334.7 million and cash, cash equivalents and marketable securities of $ 27.1 million.

The Company has financed its operations primarily with the proceeds from the sale of stock.

The Company will need to raise additional capital to meet its business objectives.

The Company believes that its current cash, cash equivalents and marketable securities will be sufficient to fund its planned expenditures and meet its obligations through at least the next twelve months from the issuance of these financial statements.

Use of Estimates

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If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment, that of the development of and commercialization of drugs and antibodies that target critical elements of the immune system.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment, that of the development and commercialization of drugs and antibodies that target critical elements of the immune system.

See Note 4 Segments for further details.

Cash, Cash Equivalents and Marketable Securities

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The carrying amount of the Company’s financial instruments, including cash equivalents, accounts payable and accrued liabilities, approximate fair value due to their short-term maturities.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.

Warrants that meet all of the criteria for equity classification are required to be recorded as a component of additional paid-in capital at the time of issuance, or when the conditions for equity classification are met, and are not remeasured.

Warrants that do not meet the required criteria for equity classification are classified as liabilities.

The Company adjusts such warrants to fair value at each reporting period until the warrants are exercised or expire.

Any change in fair value is recognized in the Company’s statements of operations and comprehensive loss.

Investments in Equity Securities

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All long-lived assets are maintained in the United States of America.

Research and Development Expenses

The Company records research and development expenses as incurred.

The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made.

Research and development expenses consist of costs incurred by the Company for the discovery and development of the Company’s product candidates and include:

● employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;

● external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;

● costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;

● license fees;

● other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

Clinical Trial Accruals

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In developing these estimates, management estimates vendors’ progress towards completion using data such as clinical site activations, patient enrollment or information provided to the Company by its vendors regarding their actual costs incurred.

Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed.

Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly

from the period in which the services are performed.

The Company determines accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion, or the services completed.

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The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Based on the available evidence, the

Company is unable, at this time, to support the determination that it is more likely than not that its deferred tax assets will be utilized in the future.

Based on the available evidence, the Company is unable, at this time, to support the determination that it is more likely than not that its deferred tax assets will be utilized in the future.

Accordingly, the Company recorded a full valuation allowance for all periods presented.

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Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding and Exchange Warrants outstanding during the period, without consideration of potentially dilutive securities.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , the Exchange Warrants are included in the computation of basic net loss per share because the exercise price is negligible and they are fully vested and exercisable at any time after the original issuance date.

Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares, Exchange Warrants, and potentially dilutive securities outstanding for the period.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , the Prefunded Warrants are included in the computation of basic net loss per share because the exercise price is negligible and they are fully vested and exercisable at any time after the original issuance date.

Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares, Prefunded Warrants, and potentially dilutive securities outstanding for the period.

Diluted net loss per share is the same as basic net loss per share for all periods presented since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 is effective in 2021 and interim periods within that year and permits for an early adoption.

The Company adopted ASU 2019-12 effective January 1, 2021.

The adoption of the guidance did not have a material impact on its financial statements and related disclosures.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

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If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the associated amendment will be removed from the Codification and will not become effective for any entities.

We are currently evaluating the effect of adopting this ASU.

The Company is currently evaluating the effect of adopting this ASU.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.

This ASU requires disclosures to include significant segment expenses that are regularly provided to the CODM, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

The amendments in this update are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted this update effective December 31, 2024, on a retrospective basis.

Refer to Note 4 Segments for further details.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends the guidance in ASC 740, Income Taxes.

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The Company is currently evaluating the impact of this ASU but does not expect any material impacts upon adoption.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expense.

This update requires entities to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted.

ASU 2024-03 may be applied retrospectively or prospectively.

The Company is currently evaluating the impact of ASU 2024-03 on its financial statement presentation and disclosures.

Net Loss per Share

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Net loss - basic and diluted

Weighted average common shares outstanding

weighted average common shares subject to repurchase

Weighted average common shares outstanding used to compute basic and diluted net loss per share

Weighted average common shares and prefunded warrants outstanding used to compute basic and diluted net loss per share

Net loss per share, basic and diluted

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Year Ended December 31,

Common warrants (1)

Outstanding options

Total shares of common stock equivalents

(1) Based on the treasury stock method, such common warrants that are in-the-money should be included in the calculation of diluted earnings per share (“EPS”) if the impact is not anti-dilutive.

Therefore, as the Company was in a net loss position for the year ended December 31, 2024 and other expense from the revaluation of the common warrants was $ 33.4 million for the year ended December 31, 2024, respectively, the impact of including the common warrants in calculating diluted EPS would be antidilutive and the Company has excluded the common warrants from the calculation of diluted net loss per share.

The Company's CODM is made up of the Chief Executive Officer and Chief Financial Officer.

The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net loss that is reported on the consolidated statement of operations and comprehensive loss.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Managing and allocating resources on a consolidated basis enables the CODM to assess the overall level of resources available and how to best deploy these resources across functions and programs that are in line with the Company's long-term company-wide strategic goals.

The following table presents reportable segment net loss, including significant expense categories, attributable to the Company's reportable segment for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Year Ended December 31,

Compensation and benefits, excluding stock-based compensation

Stock-based compensation

Drug manufacturing

Clinical trial

Outside general and administrative

Facilities and insurance

Other segment items (1)

Total segment expense

Non-operating income and expense, net

(1) Includes consulting, non-clinical research and laboratory supplies.

Fair Value Measurements

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These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.

Financial Assets

The following tables present information as of December 31, 2024 and 2023 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

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Marketable securities

As of December 31, 2023, marketable securities had a maximum remaining maturity of eleven months .

As of December 31, 2024, marketable securities had a maximum remaining maturity of less than two years .

As of December 31, 2024 and 2023, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

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Government agency securities

Financial Liabilities

The following tables present information as of December 31, 2024 about the Company’s liabilities that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

December 31, 2024

Fair Value Measured Using

Warrant liability

The Company had no liabilities measured at fair value on a recurring basis as of December 31, 2023.

During the year ended December 31, 2024, the changes in the Company’s warrant liability were as follows (in thousands):

Warrant liability balance as of December 31, 2023

Issuance of warrants

Change in fair value

Exercise of warrants

Warrant liability balance as of December 31, 2024

The Company uses the Black-Scholes pricing model to determine the fair value of its warrant liabilities using Level 3 inputs.

Inputs used to determine estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock.

The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants.

The key inputs into valuation models used to estimate the fair value of the warrant liabilities as of May 6, 2024, the issuance date, and as of December 31, 2024 were as follows:

Risk-free interest rate

Expected volatility

Expected term (in years)

Equity Method Investment

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Angel is not required to make any payments to the Company regarding the licensed compounds or the additional services outlined in the agreement.

Pursuant to the terms of the agreement, during the Exclusive Grant Back Period, Angel grants to Corvus an exclusive, fully paid-up and sublicensable license for sole and jointly owned IP.

Pursuant to the terms of the agreement, during ta 7 -year exclusive grant back period, Angel grants to Corvus an exclusive, fully paid-up and sublicensable license for sole and jointly owned IP.

After the 7 -year exclusive grant back period, the licenses for sole and jointly owned IP that Angel grants to the Company will be non-exclusive, fully paid, and sublicensable.

As a result of the financing, the Company reassessed its interest in Angel and determined that while Angel is a VIE, the Company is not considered the primary beneficiary of such VIE since Corvus does not have the power, through voting or similar rights and the license agreements, to direct the activities of Angel that most significantly impact Angel’s economic performance.

As a result of the financing, the Company reassessed its interest in Angel and determined that while Angel is a Variable Interest Entity (“VIE”), the Company is not considered the primary beneficiary of such VIE since Corvus does not have the power, through voting or similar rights and the license agreements, to direct the activities of Angel that most significantly impact Angel’s economic performance.

Further, the Company determined that as it has a significant influence over Angel, and, therefore, it shall account for its investment in Angel using the equity method starting in October 2020, the date it lost control over Angel.

At the date of loss of control, the Company derecognized all of Angel’s assets and liabilities from its balance sheet, recognized the retained equity interest at its fair value of $ 37.5 million, and recognized a gain of $ 37.5 million, which is included in gain on deconsolidation of Angel Pharmaceuticals on the consolidated statement of operations for the year ended December 31, 2020.

As of December 31, 2023, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

At the date of loss of control, the Company derecognized all of

Angel’s assets and liabilities from its balance sheet, recognized the retained equity interest at its fair value of $ 37.5 million, and recognized a gain of $ 37.5 million, which is included in gain on deconsolidation of Angel Pharmaceuticals on the consolidated statement of operations for the year ended December 31, 2020.

As of December 31, 2024, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel’s Employee Stock Ownership Plan.

The Company recognized its share of losses in Angel for the total amount of $ 3.2 million, $ 5.3 million and $ 10.0 million as loss from equity method investment on the consolidated statement of operations for the years ended December 31, 2024, 2023 and 2022, respectively.

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The Company evaluates its equity method investment in Angel for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable.

For further discussion of the

Company’s impairment policy, see Note 2.

For further discussion of the Company’s impairment policy, see Note 2.

Summary Financial Information

Summary financial information for Angel Pharmaceuticals is as follows:

Summary financial information for Angel is as follows:

Balance Sheet Data

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(in thousands)

Net income (loss)

Share of loss from investments accounted for using the equity method

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The one-time cash payment was recorded as research and development expense as technological feasibility of the asset had not been established and there was no alternative future use.

A minimum annual fee payment is due on each anniversary of the effective date of the agreement for the term of the agreement.

A minimum annual fee payment is due on each anniversary of the effective date of the agreement

for the term of the agreement.

The Company is also required to make performance-based cash payments upon successful completion of clinical and sales milestones.

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The Company’s license agreement with Scripps is terminable by the consent of the parties, at will by the Company upon providing 90 days written notice to Scripps, or by Scripps for certain material breaches, or if the Company undergoes a bankruptcy event.

In addition, Scripps may terminate the license on a

product-by-product basis, or the entire agreement, if the Company fails to meet specified diligence obligations related to the development and commercialization of licensed products.

In addition, Scripps may terminate the license on a product-by-product basis, or the entire agreement, if the Company fails to meet specified diligence obligations related to the development and commercialization of licensed products.

Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period.

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The Company is also required to pay to Monash tiered royalties on net sales of licensed products sold by it, its affiliates and its sublicensees at a rate ranging in the low-single digits.

In addition, should the Company sublicense its rights under the agreement, the Company has

agreed to pay a percentage of sublicense revenue received at specified rates that are currently at low double digit percentages and decrease to single digit percentages based on the achievement of development milestones.

In addition, should the Company sublicense its rights under the agreement, the Company has agreed to pay a percentage of sublicense revenue received at specified rates that are currently at low double digit percentages and decrease to single digit percentages based on the achievement of development milestones.

The term of the Company’s agreement with Monash continues until the expiration of its obligation to pay royalties to Monash thereunder.

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During the years ended December 31, 2024, 2023, and 2022, the Company recorded $ 0.1 million, $ 0.2 million and $ 0.4 million in depreciation expense, respectively.

On May 6, 2024, the Company completed a registered direct offering in which the Company sold an aggregate of 13,512,699 shares of common stock and common warrants to purchase up to 13,078,509 shares of common stock (or pre-funded warrants in lieu thereof) at a combined offering price of $ 1.7312 per share and common warrant, and pre-funded warrants to purchase up to 4,144,085 shares of common stock and common warrants to purchase up to 4,010,927 shares of common stock (or pre-funded warrants in lieu thereof), at a combined offering price of $ 1.7311 per share underlying each pre-funded warrant and common warrant, which equals the offering price per share and common warrant less the $ 0.0001 exercise price per share of the pre-funded warrants.

The pre-funded warrants have an exercise price per share of common stock equal to $ 0.0001 per share.

The exercise price and the number of shares of common stock issuable upon exercise of the pre-funded warrants are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

The pre-funded warrants are exercisable at any time after the date of issuance.

In accordance with accounting guidance discussed in Note 2, the Company recorded $ 5.0 million to additional paid-in capital upon issuance of the pre-funded warrants on May 6, 2024.

As of December 31, 2024, none of the pre-funded warrants have been exercised.

The common warrants have an exercise price per share of common stock equal to $ 3.50 per share (or $ 3.4999 per pre-funded warrant).

The exercise price and the number of shares of common stock (or pre-funded warrants in lieu thereof) issuable upon exercise of the common warrants are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

The common warrants are exercisable at any time after the date of issuance and will expire on June 30, 2025.

In accordance with accounting guidance discussed in Note 2, the Company recorded $ 8.9 million to warrant liability upon issuance of the common warrants on May 6, 2024 and recorded a change in fair value of warrant liability of $ 33.4 million to other income in its consolidated statement of operations and comprehensive loss for the year ended December 31, 2024, respectively.

The value of the common warrants upon issuance on May 6, 2024 has been included within the consolidated statement of cash flows from financing activities.

During the year ended December 31, 2024, 5,311,198 of the common warrants were exercised, resulting in proceeds of $ 18.6 million.

As of December 31, 2024, 11,778,238 of the common warrants are outstanding and the Company’s warrant liability was $ 28.9 million.

As of December 31, 2024, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

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As of December 31, 2024, no dividends on common stock had been declared.

On March 28, 2023, the Company entered into an open market sale agreement (the “2023 Sales Agreement”) with Jefferies to sell shares of the Company’s common stock, from time-to-time, with aggregate gross sales proceeds of up to $ 90,000,000 , through an at-the-market equity offering program under which Jefferies will act as its sales agent.

On August 6, 2024, the Company entered into an open market sale agreement (the “2024 Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, from time-to-time, with aggregate gross sales proceeds of up to $ 100.0 million, through an at-the-market equity offering program under which Jefferies will act as its sales agent.

The issuance and sale of shares of common stock by the Company pursuant to the 2024 Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended.

Jefferies is entitled to compensation for its services equal to 3.0 % of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the year ended December 31, 2023, the Company sold 2,461,903 shares of common stock under its at-the-market offering program resulting in net proceeds of $ 7.8 million.

Jefferies is entitled to compensation for its services up to 3.0 % of the gross proceeds of any shares of common stock sold through Jefferies under the 2024 Sales Agreement.

During the year ended December 31, 2024, the Company did no t sell any shares of common stock under its at-the-market offering program.

As of December 31, 2024, $ 100.0 million remained available for sale under the 2024 Sales Agreement.

The Company has reserved shares of common stock, for issuance as follows:

Pre-funded warrants

Outstanding common warrants

Shares available for future option grants

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Treasury securities with maturity dates commensurate with the expected term of the equity award.

The expected volatility in 2023 was determined based on the Company’s historical stock price volatility.

In 2022 and 2021, the Company utilized the average historical stock price volatility of a peer group of publicly traded companies to represent its expected future stock price volatility, due to the insufficient trading history of the Company’s common stock.

The expected volatility in 2024 and 2023 was determined based on the Company’s historical stock price volatility.

In 2022, the Company utilized the average historical stock price volatility of a peer group of publicly traded companies to represent its expected future stock price volatility, due to the insufficient trading history of the Company’s common stock.

For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies.

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The Company has not paid and does not anticipate paying any dividends in the near future.

At December 31, 2023, 2022 and 2021, the unrecognized compensation expense associated with respect to options granted to employees was $ 4.5 million, $ 3.9 million and $ 5.9 million, respectively, and is expected to be recognized on a straight-line basis over 2.27 , 2.44 , and 2.69 years, respectively.

At December 31, 2024 and 2023, the unrecognized compensation expense associated with respect to options granted to employees was $ 11.8 million and $ 4.5 million, respectively, and is expected to be recognized on a straight-line basis over 2.71 and 2.27 years, respectively.

The components of loss before income tax is as follows (in thousands):

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Share based Compensation

162(m) covered employees compensation limitation

FIN48 Reserve

Investment in Angel

Prior year federal true-up

Warrant liability

Effective income tax rate

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The Company recorded a valuation allowance against its deferred tax assets at December 31, 2024, 2023 and 2022 because Company management believed that it was more likely than not that these assets would not be fully realized in the future.

The valuation allowance increased by approximately $ 6.6 million and $ 9.2 million for the years ended December 31, 2023 and 2022, respectively.

The valuation allowance increased by approximately $ 7.6 million, $ 6.6 million and $ 9.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Changes in the valuation allowance for deferred tax assets relate primarily to the increase in the Company’s net operating loss carryforward.

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Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (“IRC”) Section 382 and similar state provisions.

As of December 31, 2023, the Company also had $ 9.4 million of federal and $ 5.1 million of state research and development tax credit carryforwards available to reduce future income taxes.

As of December 31, 2024, the Company also had $ 10.2 million of federal research and development tax credit, $ 0.5 million of federal orphan drug credit, and $ 5.4 million of state research and development tax credit carryforwards available to reduce future income taxes.

The federal research and development tax credits will begin to expire 2036 , if not utilized.

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This excess totaled approximately $ 12.5 million as of December 31, 2024, which will be indefinitely reinvested;

deferred income taxes have not been provided on such foreign earnings.

deferred income taxes have not been provided on such investments in foreign subsidiaries.

As of December 31, 2024, the Company had unrecognized tax benefits (“UTBs”) of approximately $ 13.1 million.

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Unrecognized tax benefits, end of the period

The Company follows the provisions of ASC 740, Accounting for Income Taxes, and the accounting guidance related to accounting for uncertainty in income taxes.

The Company determines its uncertain tax positions 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 sustained upon examination by the relevant income tax authorities.

The Company follows the provisions of ASC 740, Accounting for Income Taxes, and the accounting guidance

related to accounting for uncertainty in income taxes.

The Company determines its uncertain tax positions 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 sustained upon examination by the relevant income tax authorities.

None of the Company’s unrecognized tax benefits that, if recognized, would affect its effective tax rate.

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As a result of the Company’s net operating loss carryforwards, all of its tax years are subject to federal, state and foreign tax examinations.

Facility Lease

In January 2015, the Company signed an initial operating lease, effective February 1, 2015 for 8,138 square feet of office and laboratory space with a one year term.

Between January 2015 and September 2021, the Company entered into a series of lease amendments to increase the amount of leased space to 27,280 square feet and extend the expiration of the lease to January 2025.

Facility Leases

As of December 31, 2024, the Company had entered into two operating lease agreements and records rent expense on a straight-line basis over the effective term of each lease, including any free rent periods and incentives.

As the interest rate implicit in lease arrangements is typically not readily available, in calculating the present value of the lease payments, the Company has utilized its incremental borrowing rate, which is determined based on the prevailing market rates for collateralized debt with maturity dates commensurate with the term of its leases.

Burlingame Lease

In January 2015, the Company signed an initial operating lease (the “Burlingame Lease”), effective February 1, 2015 for 8,138 square feet of office and laboratory space with a one year term located at 863 Mitten Road, Burlingame, California.

The lease agreement includes annual rent escalations.

Under the lease and subsequent amendments, the landlord provided approximately $ 1.9 million in free rent and lease incentives.

The Company records rent expense on a straight-line basis over the effective term of the lease, including any free rent periods and incentives.

The Company’s facility lease is a net lease, as the non-lease components (i.e.

Under the Burlingame Lease and subsequent amendments, the landlord provided approximately $ 1.9 million in free rent and lease incentives.

The Burlingame Lease is a net lease, as the non-lease components (i.e.

common area maintenance) are paid separately from rent based on actual costs incurred.

Therefore, the non-lease components were not included in the right-of-use asset and liability and are reflected as an expense in the period incurred.

As of December 31, 2023 and 2022, the right-of-use asset under operating lease was $ 1.1 million and $ 2.2 million, respectively.

The elements of lease expense were as follows (in thousands):

As of December 31, 2024, all noncancelable rent payments under the Burlingame Lease had been made and no right-of-use asset under this operating lease remained.

As of December 31, 2023, the right-of-use asset under operating lease was $ 1.1 million.

The elements of lease expense under the Burlingame Lease were as follows (in thousands):

Statements of operations and

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Discount rate

As of December 31, 2023, minimum rental commitments under this lease were as follows (in thousands)

As of December 31, 2023, minimum rental commitments under the Burlingame Lease were as follows (in thousands):

Year Ended December 31 (in thousands)

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imputed interest

As of December 31, 2022, minimum rental commitments under this lease were as follows (in thousands)

South San Francisco Lease

On October 22, 2024, the Company entered into a sub-sublease agreement (the “South San Francisco Lease”), pursuant to which the Company sub-leased approximately 20,916 square feet of office and lab space.

The sub-sublease has a term of three years commencing on February 21, 2025 with an option to extend at fair market value for an

additional 27 months .

The Company’s obligation for the payment of base rent for the Premises begins on the commencement date and will initially be $ 33,833 per month, up to monthly base rent of $ 47,200 during the third year of the sub-sublease.

In addition to base rent, the Company is obligated to pay its proportionate share of taxes, insurance and operating expenses.

In November 2024, the Company paid the Sublandlord $ 231,235 in prepaid rent, which shall be applied to the monthly base rent and the Company’s proportionate share of additional expenses for the first three months of the term of the sub-sublease.

Although the non-cancellable lease term commences on February 1, 2025, for purposes of determining the right-of-use asset balance, in accordance with ASC Topic 842, the Company used November 25, 2024 as the commencement date, the date on which the sublandlord granted the Company access to the premises.

The sub-sublease is a net lease, as the non-lease components (i.e.

common area maintenance) are paid separately from rent based on actual costs incurred.

Therefore, the non-lease components were not included in the right-of-use asset and liability and are reflected as an expense in the period incurred.

As of December 31, 2024, the right-of-use asset under South San Francisco Lease was $ 1.1 million.

The elements of lease expense under the South San Francisco Lease were as follows (in thousands):

Statements of operations and

comprehensive loss location

Costs of operating lease

Operating lease costs

Research and development,

General and administrative

Costs of non-lease components (previously common area maintenance)

Research and development,

General and administrative

Total operating lease cost

Other Information

Operating cash flows used for operating lease

Remaining lease term

Discount rate

As of December 31, 2024, minimum rental commitments under the South San Francisco Lease were as follows (in thousands):

Year Ended December 31 (in thousands)

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imputed interest

In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals.

Pursuant to the sublease, rent is due monthly and is subject to scheduled annual increases and Angel Pharmaceuticals is responsible for certain operating expenses and taxes throughout the life of the sublease.

The sublease expired in January 2023.

Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations.

For the years ended December 31, 2023 and 2022, the Company recognized $ 0.1 million and $ 0.6 million of sublease income, respectively.

Commitments and Contingencies

In August 2015, the Company entered into an agreement for a line of credit of $ 0.1 million for the purpose of issuing its landlord a letter of credit of $ 0.1 million as a security deposit under its facility lease.

The Company pledged money market funds and marketable securities as collateral for the line of credit.

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Pursuant to the Company’s license agreements with each of Vernalis, Scripps and Monash, it has obligations to make future milestone and royalty payments to these parties, respectively.

However, because these amounts are contingent, they have not been included on the Company’s balance sheet.

However, because these amounts are

contingent, they have not been included on the Company’s balance sheet until probable.

For further discussion of the Vernalis, Scripps and Monash licensing agreements, see Note 7.

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

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

There have been no claims to date and the Company has a directors and officers insurance policy that may enable it to recover a portion of any amounts paid for future claims.

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Related Party Transactions

In February 2021, the Company completed a follow-on public offering in which the Company sold 9,783,660 shares of common stock at a price of $ 3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses.

The following aggregate number of shares of common stock were sold to the Company’s owners of more than 10% of our common stock, directors, or executive officers during the February 2021 underwritten public offering:

Owners of More Than 10% of Our Common Stock

On May 6, 2024, the Company closed a registered direct offering which resulted in gross proceeds of approximately $ 30.6 million.

The pre-funded warrants have an exercise price of $ 0.0001 and are exercisable any time after the date of the issuance, subject to certain ownership limitations.

As part of the registered direct offering, the following number of shares of common stock, pre-funded warrants and common warrants were sold to related parties:

OrbiMed Advisors LLC (1)

Board of Directors

Puissance Capital Management (2)

(2) Peter Thompson, M.D., a member of our Board of Directors since November 2014, is a Member of OrbiMed Advisors, LLC.

As more fully described in Note 5, the Company holds a 49.7 % ownership in Angel Pharmaceuticals and, in connection with intellectual property licensing agreements between the Company and Angel Pharmaceuticals, the Company provides operational support and clinical drug supplies to Angel Pharmaceuticals.

Third-party and internal personnel costs incurred by the Company are billed to Angel Pharmaceuticals in the period incurred and recorded as an offset to expenses.

During the years ended December 31, 2023 and 2022, the Company billed Angel for approximately $ 0.0 million and $ 0.1 million in internal personnel costs, respectively, and $ 0.1 million and $ 1.3 million in third-party costs, respectively.

(3) Ted Wang, Ph.D., a Co-Founder, General Manager and Director of Angel Pharmaceuticals, of which the Company holds a 49.7 % ownership interest, is the founder of Puissance Capital Management.

(4) Richard A.

is the Company’s President, Chief Executive Officer and Chairman of the Board.

(5) William B.

is the Company’s Senior Vice President, Pharmaceutical Development.

The Company holds a 49.7 % ownership in Angel and, in connection with intellectual property licensing agreements between the Company and Angel Pharmaceuticals, the Company provides operational support and clinical

drug supplies to Angel.

Third-party and internal personnel costs incurred by the Company are billed to Angel in the period incurred and recorded as an offset to expenses.

During the years ended December 31, 2024 and 2023, there were no internal personnel costs billed to Angel and during the year ended December 31, 2022, the Company billed Angel for approximately $ 0.1 million in internal personnel costs.

During the years ended December 31, 2024, 2023 and 2022 the Company billed Angel for approximately $ 0.0 million, $ 0.1 million and $ 1.3 million in third-party costs, respectively.

Of the third-party costs billed to Angel in the year ending December 31, 2022, approximately $ 0.5 million were associated with clinical drug supply manufactured and expensed in prior years.

The remaining $ 0.1 million and $ 0.8 million in third-party costs were primarily associated with clinical drug supply passthrough costs incurred during the years ended December 31, 2023 and 2022, respectively, and did not have an impact on the Company’s consolidated statements of operations.

In addition to the provision of clinical supplies to Angel Pharmaceuticals, Angel Pharmaceuticals may provide clinical supplies and research services to the Company on an as needed basis.

In addition to the provision of clinical supplies to Angel, Angel may provide clinical supplies and research services to the Company on an as needed basis.

These transactions are recorded as research and development expense.

During the years ended December 31, 2023 and 2022, Angel Pharmaceuticals billed the Company for approximately $ 0.2 million and $ 0.2 million, respectively, associated with clinical drug supply and research services provided to the Company.

In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals.

During the years ended December 31, 2023 and 2022, Angel billed the Company for approximately $ 0.2 million and $ 0.2 million, respectively, associated with clinical drug supply and research services provided to the Company.

There were no clinical supplies or research services billed by Angel to the Company during the year ended December 31, 2024.

In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel.

Pursuant to the sublease, rent is due monthly and is subject to scheduled annual increases and Angel is responsible for certain operating expenses and taxes throughout the life of the sublease.

The sublease expired in January 2023.

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Grais, M.D., J.D., a member of the Company’s Board of Directors, was appointed as a non-executive member of the Board of Directors of ICON plc (“ICON”), effective upon completion of ICON’s acquisition of PRA Health Sciences, Inc.

ICON is a clinical research organization and provides services to support the

Company’s clinical trials.

ICON is a clinical research organization and provides services to support the Company’s clinical trials.

During the years ended December 31, 2024, 2023 and 2022, the Company recorded approximately $ 351,000 , $ 254,000 and $ 429,000 , respectively, in clinical trial expenses under its agreements with ICON.

Subsequent Events

The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K and determined that there have been no events that have occurred that would require adjustments to its disclosures in the consolidated financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data