What changed in this filing

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Item 9A. Controls and Procedures

2024-03-18 compared with 2023-03-24 · 266 added, 265 removed, 717 unchanged (43% of the section changed)

11 unchanged sentences

Attestation Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to the deferral allowed under the JOBS Act.

This Annual Report does not include an attestation report of our independent registered public accounting firm due to our status as a smaller reporting company and non-accelerated filer.

Changes in Internal Control Over Financial Reporting

1 unchanged sentence

Other Information .

Not applicable.

N o t a pplicable.

Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

31 unchanged sentences

Certificate of Designation of Preferences, Rights and Limitations of Series X Non-Voting Convertible Preferred Stock filed with the Secretary of State of the State of Delaware on January 17, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 23, 2023).

Certificate of Amendment to the Certificate of Designation of Special Voting Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8 - K, as filed on March 16, 2023).

Certificate of Elimination of the Series X Non - Voting Convertible Preferred Stock of the Company (incorporated by reference to Exhibit 3.2 to the Company Quarterly Report on Form 10 - Q for the quarter ended September 30, 2023).

Form of Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to Amendment No.

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Description of the Registrant’s Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed on March 16, 2020).

Form of Warrant, dated May 6, 2020, by and among the Flame Biosciences, Inc.

and the Warrantholders (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8 - K, as filed on May 15, 2023).

Exclusive Option and License Agreement dated as of January 3, 2020, by and between the Company and BeiGene, Ltd.

9 unchanged sentences

and the purchasers identified on the schedule thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on November 17, 2017).

Purchase Agreement dated as of July 11, 2019, by and between the Company and Lincoln Park Capital Fund, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on July 11, 2019).

Purchase Agreement dated as of July 10, 2019, by and between the Company and Lincoln Park Capital Fund, LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed on July 11, 2019).

Securities Purchase Agreement, dated January 3, 2020, by and among the Company and the institutional investors named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on January 7, 2020).

32 unchanged sentences

2022 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company’s registration statement on Form S-8, as filed on August 17, 2022).

Amendment No.

1 to Leap Therapeutics, Inc.

2022 Equity Incentive Plan

Continuing Clinical Collaboration Letter Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K, filed with the SEC on March 16, 2023.

Second Amendment to Executive Employment Agreement, by and between the Company and Dr.

Cynthia Sirard, dated April 3, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K, filed with the SEC on April 7, 2023).

Strategic Partnership and License Agreement, dated August 13, 2021, by and between NovaRock Biotherapeutics Ltd.

and Flame Biosciences, Inc.

(incorporated by reference to Exhibit 10.1 to the Company Quarterly Report on Form 10 - Q for the quarter ended March 31, 2023).

Collaboration Agreement, dated August 10, 2020, by and between Adimab, LLC and Flame Biosciences, Inc.

(incorporated by reference to Exhibit 10.2 to the Company Quarterly Report on Form 10 - Q for the quarter ended March 31, 2023).

Second Amendment to Executive Employment Agreement, dated April 3, 2023, by and between the Company and John Mark O’Mahony (incorporated by reference to Exhibit 10.5 to the Company Quarterly Report on Form 10 - Q for the quarter ended March 31, 2023).

Executive Employment Agreement, by and between the Company and Jason S.

(incorporated by reference to Exhibit 10.6 to the Company Quarterly Report on Form 10 - Q for the quarter ended March 31, 2023).

First Amendment to Executive Employment Agreement, dated April 3, 2023, by and between the Company and Jason S.

(incorporated by reference to Exhibit 10.7 to the Company Quarterly Report on Form 10 - Q for the quarter ended March 31, 2023).

Subsidiaries of Leap Therapeutics, Inc.

4 unchanged sentences

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

Leap Therapeutics, Inc.

Compensation Clawback Policy

The following materials from Leap Therapeutics, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in XBRL (Extensible Business Reporting Language):

(i) Consolidated Balance Sheets at December 31, 2022 and 2021, (ii) Consolidated Statements of Operations for the year ended December 31, 2022 and December 31, 2021, (iii) Consolidated Statements of Shareholders’ Equity (Deficit) at December 31, 2022 and December 31, 2021

(iv) Consolidated Statements of Cash Flows for the year ended December 31, 2022 and December 31, 2021, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

(i) Consolidated Balance Sheets at December 31, 2023 and 2022, (ii) Consolidated Statements of Operations for the year ended December 31, 2023 and December 31, 2022, (iii) Consolidated Statements of Shareholders’ Equity (Deficit) at December 31, 2023 and December 31, 2022 (iv) Consolidated Statements of Cash Flows for the year ended December 31, 2023 and December 31, 2022, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.

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

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/s/ CHRISTOPHER K.

MIRABELLI, PH.D.

Chairman of the Board of Directors

1 unchanged sentence

Christopher K.

Mirabelli, Ph.D.

/s/ JAMES CAVANAUGH, PH.D.

/s/ JAMES CAVANAUGH

March 15, 2024

James Cavanaugh, Ph.D.

/s/ THOMAS DIETZ, PH.D.

James Cavanaugh

/s/ THOMAS DIETZ

March 15, 2024

Thomas Dietz, Ph.D.

/s/ WILLIAM LI, M.D.

/s/ WILLIAM LI

March 15, 2024

William Li, M.D.

/s/ JOSEPH LOSCALZO, M.D., PH.D.

/s/ JOSEPH LOSCALZO

March 15, 2024

Joseph Loscalzo, M.D., Ph.D.

Joseph Loscalzo

/s/ PATRICIA MARTIN

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/s/ RICHARD L.

SCHILSKY, M.D.

March 15, 2024

Richard L Schilsky, M.D

Richard L Schilsky

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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We also made direct inquiries of financial and clinical trial client personnel regarding status and progress towards completion of clinical trials and description of future commitments.

We compared the current estimate of expenses incurred to estimates previously made by management and assessed the historical accuracy of management’s previous estimates.

We also examined invoices issued and payments made to service providers after the consolidated balance sheet date.

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EISNERAMPER LLP

Iselin, New Jersey

Philadelphia, Pennsylvania

March 15, 2024

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Right of use assets, net

Deferred tax assets, net

Deferred costs

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Stockholders’ equity:

Preferred stock, $ 0.001 par value;

10,000,000 shares authorized;

0 shares issued and outstanding

Common stock, $ 0.001 par value;

2 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

7 unchanged sentences

Year Ended December 31,

License revenue

Operating expenses:

7 unchanged sentences

Foreign currency loss

Change in fair value of Series X preferred stock warrant liability

Loss before income taxes

Benefit from (provision for) income taxes

Provision for income taxes

Net loss attributable to common stockholders

Net loss per share

Basic & diluted

Basic and diluted

Weighted average common shares outstanding

Basic & diluted

Basic and diluted

See notes to consolidated financial statements

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Year Ended December 31,

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustments

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Stockholders’

Income (Loss)

Balances at December 31, 2021

Issuance of common stock upon exercise of warrants

Issuance of common stock upon exercise of prefunded warrants

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with September 2021 Public Offering, net of issuance costs of $ 6,733

Foreign currency translation adjustment

Issuance of common stock upon exercise of prefunded warrants

Stock-based compensation

6 unchanged sentences

(In thousands, except share amounts)

Mezzanine Equity

Stockholders Equity

Series X Non Voting Convertible

Preferred Stock

Comprehensive

Stockholders’

Income (Loss)

Balances at December 31, 2022

Issuance of Series X Preferred Stock in connection with Flame merger

Issuance of common stock in connection with Flame merger

Issuance of common stock warrants in connection with Flame merger

Redemption of 2019 Warrants

Issuance of common stock upon vest of restricted stock units

Conversion of Series X preferred stock to common stock

Reclassification of Series X preferred stock warrants to equity

Fractional shares paid in cash

Foreign currency translation adjustment

Issuance of common stock upon exercise of prefunded warrants

Stock-based compensation

7 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash

used in operating activities:

In-process research and development costs acquired in connection with the acquisition of Flame

Depreciation expense

Amortization of contract asset

Change in right-of-use asset

1 unchanged sentence

Foreign currency loss

Change in fair value of restricted stock liability

Changes in operating assets and liabilities:

2 unchanged sentences

Research and development incentive receivable

Deferred costs

Accounts payable and accrued expenses

Deferred revenue

Lease liability

Net cash used in operating activities

Cash flows from investing activities:

Cash acquired in connection with the acquistion of Flame

Payment of direct and incremental costs of the asset acquisition

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock and prefunded warrants, net of offering costs - September 2021 Public Offering

Proceeds from the exercise of common stock warrants

Proceeds from the exercise of stock options

Payment of redemption of 2019 warrants

Payment of fractional shares

Payment of deferred costs

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of non-cash financing activities:

Deferred costs in accounts payable and accrued expense - January 2023 Flame Merger

Deferred costs in accounts payable and accrued expense - September 2021 Public Offering

Remeasurement of right-of-use asset and lease liability

Remeasrement of right-of-use asset and lease liability

Issuance and conversion of Series X Preferred Stock issued in connection with the acquisition of Flame to common stock

Reclassification of Series X Preferred Stock Warrants from liability to equity

Issuance of common stock in connection with the acquisition of Flame

Issuance of warrants for the purchase of common stock in connection with the acquisition of Flame

Net liabilities assumed from acquistion of Flame

See notes to consolidated financial statements

6 unchanged sentences

Leap Therapeutics, Inc.

was incorporated in the state of Delaware on January 3, 2011.

(“the Company”) was incorporated in the state of Delaware on January 3, 2011.

During 2015, HealthCare Pharmaceuticals Pty Ltd.

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In March 2023, BeiGene notified the Company that it did not intend to exercise its option, and the agreement is continuing as a clinical collaboration.

The Company intends to apply its extensive experience identifying and developing transformational products to build a pipeline of programs that have the potential to change the practice of cancer medicine.

The Company intends to apply its experience identifying and developing products to build a pipeline of programs relating to the practice of cancer medicine.

Basis of Presentation

The accompanying consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities.

The Company does not yet have a product that has been approved by the Food and Drug Administration (the “FDA”), has not generated any product sales revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flows from operations.

There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis.

Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s products.

LEAP THERAPEUTICS, INC.

2 unchanged sentences

(Amounts in thousands, except share and per share amounts)

Reverse Stock Split

On June 21, 2023, the Company effected a one -for-ten reverse stock split of its issued and outstanding shares of common stock, which also adjusted the conversion ratio of its Series X Preferred Stock such that each share of Series X Preferred Stock became convertible into 100 shares of common stock.

Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

All fractional shares resulting from the reverse stock split were paid in cash.

Nature of Business, Basis of Presentation and Liquidity (continued)

Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities.

There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

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The Company expects to continue to generate operating losses for the foreseeable future.

In connection with the merger with Flame and pursuant to the Certificate of Designation of the Series X non-voting convertible preferred stock (the “Series X Preferred Stock”), if stockholder approval for the conversion of the Series X Preferred Stock to common stock (the “Stockholder Approval”) is not obtained from the holders of the Company’s common stock within six months from the date of issuance of the Series X Preferred Stock, the holders of Series X Preferred Stock may require the Company to settle all of the then-outstanding shares of Series X Preferred Stock for cash at fair value.

The Company fully expects the vote to pass and for the Series X Preferred Stock to convert into common stock.

However, there can be no assurance that the Stockholder Approval will be received.

If the Company fails to receive Shareholder Approval within six months from the date of issuance of the Series X Preferred Stock and the Company is required to settle then-outstanding shares of Series X Preferred Stock for cash at fair value, the Company’s financial position would be materially adversely affected and the Company would be forced to seek additional funding, which may not be available on acceptable terms or at all, or reduce or eliminate certain clinical trials, programs and operating expenses, which would adversely affect its business prospects.

The Company believes that its cash and cash equivalents of $ 65,500 as of December 31, 2022, along with the approximately $ 50,000 in cash and cash equivalents that it acquired through its merger with Flame, will be sufficient to fund its operating expenses for at least 12 months from the issuance of these financial statements.

The Company believes that its cash and cash equivalents of $ 70,643 as of December 31, 2023 will be sufficient to fund its operating expenses for at least 12 months from the issuance of these financial statements.

In addition, to support its future operations, the Company will likely seek additional funding through public or private equity financings or government programs and will seek funding or development program cost-sharing through collaboration agreements or licenses with larger pharmaceutical or biotechnology companies.

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(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Cash equivalents consisted of overnight investments and money market funds.

Summary of Significant Accounting Policies (continued)

Research and Development Expense

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This estimate is also reviewed by external tax advisors on an annual basis.

Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia are reimbursed.

Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia is reimbursed.

This percentage was 43.5 % for the years ended December 31, 2023 and 2022.

5 unchanged sentences

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

The following table shows the change in the research and development incentive receivable from January 1, 2022 to December 31, 2023:

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Balance at December 31, 2023

Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk

15 unchanged sentences

The income tax returns of the Company for the year ended December 31, 2020 and subsequent years are subject to examination by the Internal Revenue Service and other taxing authorities, generally for three years after the return is filed.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Foreign Currency Translation

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Foreign currency transaction gains and losses are included in the results of operations.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

Property and Equipment

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Expenditures for repairs and maintenance are charged to expense as incurred.

Summary of Significant Accounting Policies (continued)

Impairment of Long-Lived Assets

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Deposits as of December 31, 2023 and 2022 included $ 966 and $ 1,108 , respectively, of deposits made by the Company with certain service providers that are to be applied to future payments due under the service agreements or returned to the Company if not utilized.

The Company will recognize on a prospective basis the value of the effect of the down round feature in the warrants to purchase shares of common stock that were issued in a private placement in November 2017 (the “2017 Warrants”) when it is triggered (i.e., when the exercise price is adjusted downward).

This value is measured as the difference between (1) the financial instrument’s fair value (without the down round feature) using the pre-trigger exercise price and (2) the financial instrument’s fair value (with the down round feature) using the reduced exercise price.

The value of the effect of the down round feature will be treated as a dividend and a reduction to income available to common stockholders in the basic EPS calculation.

LEAP THERAPEUTICS, INC.

2 unchanged sentences

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

The value of the effect of the down round feature will be treated as a dividend and a reduction to income available to common stockholders in the basic EPS calculation.

Fair Value of Financial Instruments

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● Level 1—Quoted prices in active markets for identical assets or liabilities.

Summary of Significant Accounting Policies (continued)

● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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Cash equivalents of $ 39,065 and $ 62,074 as of December 31, 2023 and 2022, respectively, consisted of overnight investments and money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

The carrying value of the research and development incentive receivable, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these assets and liabilities.

LEAP THERAPEUTICS, INC.

2 unchanged sentences

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

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

Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities.

All leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities.

The Company has elected not to recognize on the balance sheet leases with terms of one year or less.

8 unchanged sentences

Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

Summary of Significant Accounting Policies (continued)

Although separation of lease and non-lease components is required, certain practical expedients are available.

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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

The Company historically has been a private company and lacks company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

The expected volatility is based on the historical volatility of the Company.

The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

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Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Revenue Recognition

The Company records revenue in accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue From Contracts with Customers.

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

License revenue.

The Company’s performance obligations under its license agreements may include providing intellectual property licenses, performing technology transfer, performing research and development consulting services and notifying the customer of any enhancements to licensed technology or new technology that it discovers, among others.

The Company determined that its performance obligations under its license agreements as evaluated at contract inception were not distinct and represented a single performance obligation.

Upfront payments are amortized to revenue on a straight line basis over the performance period.

Upfront payment contract liabilities resulting from the Company’s license agreements do not represent a financing component as the payment is not financing the transfer of goods or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by the Company.

Generally, all amounts received or due other than sales-based milestones and royalties are classified as license revenues.

Sales-based milestones and royalties under the Company’s license agreements will be recognized as royalty revenue in the period the related sale occurred.

The Company generally invoices its licensees upon the completion of the effort or achievement of a milestone, based on the terms of each agreement.

Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as performance obligations are satisfied.

Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

Research and Development Services.

The promises under the Company’s license agreements may include research and development services to be performed by the Company on behalf of the customer.

Payments or reimbursements resulting from the Company’s research and development efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

Customer Options.

If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise.

The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount.

If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement.

The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option.

Amounts allocated to a material right are not recognized as revenue until (1) the option is exercised and the additional goods or services are transferred or (2) the option expires.

Milestone Payments.

At the inception of each arrangement that includes research or development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Collaborative Arrangements

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808).

This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606.

For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.

Amounts that are owed to collaboration partners are recognized as an offset to collaboration revenues as such amounts are incurred by the collaboration partner.

Where amounts owed to a collaboration partner exceed the Company’s collaboration revenues in each quarterly period, such amounts are classified as research and development expense.

Reimbursements from and payments to the customer that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction to research and development expense.

For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company applies the five-step model described above under ASC 606.

See Note 3 for a complete discussion of the revenue recognition for the Company’s license agreement.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Summary of Significant Accounting Policies (continued)

Net Loss per Share

4 unchanged sentences

Subsequent events have been evaluated as required.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are early adopted by the Company or adopted as of the specified effective date.

Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on its consolidated financial statements or disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, or ASC 740, which simplifies the accounting for income taxes.

The new standard was effective in the first quarter of fiscal 2021.

The Company adopted ASC 740 effective in the first quarter of fiscal 2021 and the Company’s adoption of this standard did not have an effect on the Company’s consolidated financial statements.

In May 2021, FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

1 unchanged sentence

The updated guidance is effective for the Company for annual periods beginning after December 15, 2021, including interim periods within those fiscal years.

The Company adopted ASU 2021-04 in the first quarter of fiscal 2022 and the Company’s adoption of this standard did not have an effect on the Company’s financial statements.

The Company adopted ASU 2021-04 in the first quarter of fiscal 2022 and the Company’s adoption of this standard did not have an effect on the Company’s consolidated financial statements.

In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options, or ASC 470 and Derivatives and Hedging—Contracts in Entity’s Own Equity, or ASC 815.

1 unchanged sentence

The updated guidance is effective for the Company for annual periods beginning after December 15, 2021, including interim periods within those fiscal years.

The Company adopted ASC 470 in the first quarter of fiscal 2022 and the Company’s adoption of this standard did not have an effect on the Company’s financial statements.

BeiGene Exclusive Option and License Agreement

Terms of Agreement

On January 3, 2020, the Company entered into an exclusive option and license agreement (the “BeiGene Agreement”) with BeiGene, Ltd.

(“BeiGene”) pursuant to which BeiGene was granted an option to obtain an exclusive license from the Company for the clinical development and commercialization of DKN-01, in Asia (excluding Japan), Australia, and New Zealand.

The Company retained exclusive rights for the development, manufacturing, and commercialization of DKN-01 for the rest of the world.

Pursuant to the BeiGene Agreement, the Company received an upfront cash payment of $ 3,000 from BeiGene in exchange for granting BeiGene an option to an exclusive license to develop and commercialize DKN-01 in Asia (excluding Japan), Australia, and New Zealand.

In March 2023, BeiGene notified the Company that it did not intend to exercise its option under the BeiGene Agreement.

The Company adopted ASC 470 in the first quarter of fiscal 2022 and the Company’s adoption of this standard did not have an effect on the Company’s consolidated financial statements.

LEAP THERAPEUTICS, INC.

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(Amounts in thousands, except share and per share amounts)

BeiGene Exclusive Option and License Agreement (continued)

Revenue Recognition

The Company evaluated the BeiGene Agreement to determine whether it is a collaborative arrangement for purposes of ASC 808.

The Company concluded that because both parties were active participants and were exposed to the risks and rewards of the BeiGene Agreement, that such activities are under the scope of ASC 808.

The Company concluded that BeiGene was a customer with regard to the combined license and research and development activities and as such the contract should be evaluated under ASC 606.

In determining the appropriate amount of revenue to be recognized under ASC 606 as the Company fulfills its obligations under the Agreement, the Company performs the following steps:

(i) identifies the promised goods or services in the contract;

(ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measures the transaction price, including any constraints on variable consideration;

(iv) allocates the transaction price to the performance obligations;

and (v) recognizes revenue when (or as) the Company satisfies each performance obligation.

The Company identified the following material promises under the BeiGene Agreement:

(1) option to an exclusive license to develop and commercialize DKN-01 in Asia (excluding Japan), Australia, and New Zealand, (2) participation in a joint development committee, (3) technology transfer services and (4) pre-option research and development services.

The Company determined that the option to an exclusive license in the territory does not represent a material right.

Additionally, the Company determined that the participation in the joint development committee, research and development services and technology transfer services are not distinct from each other, as each has limited value without the other.

As such, for the purposes of ASC 606, the Company determined that these four material promises, described above, should be combined into a single performance obligation.

The Company determined the transaction price is equal to the up-front fee of $ 3,000 .

The transaction price was fully allocated to the single performance obligation and is recognized as revenue on a straight-line basis over the performance period of the research and development services.

During the year ended December 31, 2021, the Company recognized $ 1,500 of license revenue related to the up-front fee received from BeiGene.

During the year ended December 31, 2022, the Company did no t recognize any such revenue as the upfront payment was fully recognized as of December 31, 2021.

Cost of Contract Acquisition

The Company incurred contract acquisition costs of $ 270 which were capitalized under ASC 340-40 as incremental costs of obtaining the contract with BeiGene.

This cost is amortized on a straight-line basis over the performance period of the research and development services.

The total amount of amortization expense during the year ended December 31, 2021 was $ 135 .

During the year ended December 31, 2022, the Company did no t recognize any such amortization expense as the contract acquisition costs were fully amortized as of December 31, 2021.

As the license is deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur.

No royalty revenue was recognized during the years ended December 31, 2022 and 2021.

Acquisition of Flame Biosciences

On January 17, 2023 (the “Effective Date”), Leap acquired 100 % of the outstanding equity of Flame, in accordance with the terms of the Agreement and Plan of Merger, dated as of the Effective Date (the “Merger Agreement”), by and among Leap, Fire Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Leap (“First Merger Sub”), Flame Biosciences LLC, a Delaware limited liability company and wholly owned subsidiary of Leap (“Second Merger Sub”), Flame, and the Stockholder Representative named therein.

Pursuant to the Merger Agreement, First Merger Sub merged with and into Flame, and Flame was the surviving corporation of such merger and became a wholly owned subsidiary of Leap (the “First Merger”).

Immediately following the First Merger, Flame merged with and into Second Merger Sub, and Second Merger Sub was the surviving entity of such merger (together with the First Merger, the “Merger”).

Pursuant to the Merger, Leap agreed to issue to the stockholders of Flame (the “Flame Stockholders”) 1,972,901 shares of common stock, and 136,248 shares of Series X Preferred Stock, which was a newly designated series of preferred stock that was intended to have economic rights equivalent to the common stock, but with limited voting rights, and issued to the warrant holders of Flame (the “Flame Warrant Holders”) the right to acquire 6,530 shares of common stock (the “January 2023 Common Stock Warrants”) and 443 shares of Series X Preferred Stock (the “January 2023 Series X Preferred Stock Warrants”).

Each share of Series X Preferred Stock converted into 100 shares of common stock during the year ended December 31, 2023, as a result of the one -for-ten reverse stock split approved by the stockholders and effected by the Board of Directors.

Under the terms of the Merger Agreement, Leap held back approximately 15,604 Series X Preferred shares (the “Holdback Shares”), which converted into 1,560,400 shares of common stock out of the aggregate number of shares that the Flame Stockholders otherwise would be entitled to receive pursuant to the Merger so that Leap can have recourse to the Holdback Shares for purposes of satisfying certain claims for indemnification that Leap may have against the Flame Stockholders in connection with the Merger.

On June 16, 2023, the Company obtained Stockholder Approval to convert the Series X Preferred Stock into shares of its common stock, which occurred on June 21, 2023.

LEAP THERAPEUTICS, INC.

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(Amounts in thousands, except share and per share amounts)

Acquisition of Flame Biosciences (continued)

The Company accounted for the acquisition of Flame as an asset acquisition allocating the purchase price under GAAP of $ 79,016 to net assets acquired.

Although there is a presumption under SEC Rule 11-01(d) (“11-01(d)”) that when a legal entity is acquired, it represents a business acquisition, the Company concluded that, in this case, the transaction did not represent the acquisition of a business.

After considering the criteria set forth in 11-01(d), the Company concluded that the acquisition of Flame by the Company was an acquisition of assets and not an acquisition of a business in accordance with 11-01(d).

Specifically, the Company concluded that 1) the entity did not generate revenue and 2) there was not sufficient continuity of Flame’s operations prior to and following the transaction, in that no facilities, employees, sales force, distribution system, customer base, trade names or production techniques remained with the entity after the acquisition.

Leap primarily acquired cash of $ 50,362 , certain working capital items ($ 928 ) and a portfolio of clinical- and pre-clinical-stage intellectual property, in connection with the acquisition of Flame.

The Company accounted for the acquisition of Flame by recording the cash and any other assets and liabilities of Flame on its consolidated balance sheet at their historical carrying values, which approximated fair values.

The remaining fair value of the consideration transferred was allocated to the in-process research and development (“IPR&D”) assets acquired.

Certain transaction costs that were not deemed to meet the criteria of costs directly attributable to the issuance of securities were capitalized in accordance with ASC 805-50-30-1 and recognized as part of fair value of assets acquired.

As the Company concluded that such IPR&D did not have an alternative future use, the relative fair value allocated to acquired IPR&D of $ 29,582 was expensed in research and development expenses within the Company’s consolidated statement of operations during the year ended December 31, 2023.

The following table summarizes the net assets acquired based on their estimated fair values as of January 17, 2023 (in thousands):

Acquired IPR&D

Cash and cash equivalents

Accounts payable and accrued liabilities

Total acquisition value

The fair value assigned to each component of the purchase consideration, including direct costs of the acquisition of $ 1,393 , as of the Effective Date is set forth in the table below (in thousands, except share and per share amounts):

Leap common stock (par value $0.0001 per share)

Leap Series X Preferred Stock (100:1)

Warrants on Leap common stock

Warrants on Leap Series X Preferred Stock (100:1)

Direct and incremental costs of the asset acquisition

In addition, subject to and upon the terms and conditions set forth in the Merger Agreement, the Company may also (i) pay Contingent Merger Consideration (as defined in the Merger Agreement) that may become payable if, and only if, certain assets of Flame related to Flame’s FL-101 program and/or FL-103 program are sold after the consummation of the Merger pursuant to the FL-101/103 Disposition Agreement (as defined in the Merger Agreement), which Contingent Merger Consideration shall be 80 % of the after-tax net proceeds of such sale, if any, and the payment thereof is subject to the terms and conditions set forth in the Merger Agreement and (ii) issue pursuant to the Merger additional shares of Series X Preferred Stock or common stock as a result of any applicable post-closing purchase price adjustment in the event that Flame’s actual Company Net Cash (as defined in the Merger Agreement) as of the Effective Date is determined to be greater than Flame’s estimated Company Net Cash as of the closing.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Acquisition of Flame Biosciences (continued)

Sale of FL-101/FL-103 to AlmataBio, Inc.

On December 6, 2023 the Company sold certain IPR&D assets previously acquired from Flame related to Flame’s FL-101/FL-103 program which included permits, clinical trial material, clinical data, and related identified contracts, such as licensing, research, clinical trials, and various other agreements.

The Company received total consideration in the form of a non-refundable closing date cash payment of $ 500 .

Pursuant to the terms of the asset purchase agreement, the Company is entitled to receive milestone payments of up to $ 70,000 upon achievement of certain regulatory approval and sales milestones specified in the asset purchase agreement.

The IPR&D assets sold related to Flame’s FL-101/FL-103 program did not meet the definition of a business and had a carrying value of $ 0 at the time of the sale.

In addition, the Company estimated the likelihood of receiving any milestone payments to be remote.

As such, management elected the most likely amount method to determine the transaction price of the sale, which included the non-refundable closing date cash payment of $ 500 and future milestone payments of $ 0 .

Therefore, the Company recognized a non-operating gain in other income for the difference between the amount of non-refundable consideration received of $ 500 and the carrying value of $ 0 during the year ended December 31, 2023.

In the event of a change in circumstances, such that it becomes likely that the Company will receive milestone payments, the Company will recognize income for the change in transaction price in the period in which the transaction price changes.

In addition, during the year ended December 31, 2023, the Company incurred various qualified expenses, such as legal fees, consulting and general and administrative expenses in connection with the sale of Flame’s FL-101 program.

Such expenses exceeded the non-refundable consideration received of $ 500 , and therefore, the Company was not obligated to pay Contingent Merger Consideration to the Flame Stockholders.

Series X Preferred Stock

Pursuant to the Merger, the Company agreed to issue 136,248 shares of Series X Preferred Stock to Flame Stockholders and January 2023 Series X Preferred Stock Warrants for 443 shares of Series X Preferred Stock to Flame Warrant Holders.

The Company obtained Stockholder Approval during the year ended December 31, 2023 to convert each issued share of Series X Preferred Stock and each share of Series X Preferred Stock issuable pursuant to the January 2023 Series X Preferred Stock Warrants into 100 shares of its common stock.

The Series X Preferred Stock was converted to common stock on June 21, 2023, and the carrying value of the Series X Preferred Stock was reclassified from mezzanine equity to permanent equity.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Acquisition of Flame Biosciences (continued)

January 2023 Common Stock Warrants and January 2023 Series X Preferred Stock Warrants

In January 2023, pursuant to the Merger, the warrants held by the Flame Warrant Holders became exercisable for 6,530 shares of Leap’s common stock (the “January 2023 Common Stock Warrants”).

The January 2023 Common Stock Warrants have an exercise price of $ 6.78 per share and expire in February 2025.

The January 2023 Common Stock Warrants qualify for equity classification.

Also in January 2023, pursuant to the Merger, the warrants held by the Flame Warrant Holders became exercisable for 443 shares of Series X Preferred Stock (the “January 2023 Series X Preferred Stock Warrants”).

Upon obtaining Stockholder Approval for the conversion of the Series X Preferred Stock and the one -for-ten reverse stock split, each share of Series X Preferred Stock converted into 100 shares of Common Stock.

The January 2023 Series X Preferred Stock Warrants have an exercise price of $ 6.78 per share and expire in February 2025.

The Company initially recorded the January 2023 Series X Preferred Stock Warrants as a liability on the Effective Date and the warrant liability was subsequently remeasured to fair value at each reporting date and on the date on which Stockholder Approval to convert shares of Series X Preferred Stock into shares of common stock was obtained.

On June 21, 2023, after obtaining stockholder approval for the conversion of the Series X Preferred Stock into common stock, the January 2023 Series X Preferred Stock Warrants were reclassified from liability to equity.

Changes in the fair value of the warrant liability are recognized as gains (losses) in the Company’s consolidated statement of operations.

During the year ended December 31, 2023, the Company recorded a gain of $ 12 in its consolidated statement of operations.

Property and equipment, net

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Accrued expenses

The Company has operating leases for real estate in the United States and does not have any finance leases.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

The Company has an operating lease for real estate in the United States and does not have any finance leases.

The Company’s leases may contain options to renew and extend lease terms and options to terminate leases early.

Reflected in the right-of-use asset and lease liability on the Company’s consolidated balance sheets are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain to not exercise.

The Company has existing leases that include variable lease and non-lease components that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred.

The Company’s existing 47 Thorndike Street Lease was set to expire in July 2024.

In January 2024 the Company entered into a fourth amendment with its 47 Thorndike Street Lease (“Fourth Amendment”), extending the lease through July 2025 (see Note 15).

The 47 Thorndike Street Lease includes variable lease and non-lease components that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred.

Such payments primarily include common area maintenance charges and increases in rent payments that are driven by factors such as future changes in an index (e.g., the Consumer Price Index).

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This will potentially result in the initial and subsequent measurement of the balances of the right-of-use asset and lease liability for leases being greater than if the policy election was not applied.

The Company has existing net leases in which the non-lease components (e.g.

The Company has an existing net lease in which the non-lease components (e.g.

common area maintenance, maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred.

During the year ended December 31, 2022, the Company extended the term of its operating lease and recorded an additional right-of-use asset and lease liability of $ 609 .

As of December 31, 2022, a right-of-use asset of $ 669 and lease liability of $ 678 are reflected on the consolidated balance sheets.

The Company recorded rent expense of $ 451 and $ 423 , respectively, during the years ended December 31, 2022 and 2021

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Leases (continued)

As of December 31, 2023, a right-of-use asset of $ 257 and lease liability of $ 262 are reflected on the consolidated balance sheet.

The Company recorded operating lease costs of $ 449 and $ 443 , respectively, during the years ended December 31, 2023 and 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 452 and $ 445 , respectively, during the years ended December 31, 2023 and 2022.

Future lease payments under non-cancelable operating leases as of December 31, 2023 are detailed as follows:

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Total operating lease liabilities

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

As of December 31, 2023, outstanding warrants to purchase common stock, all of which are classified as equity warrants, consisted of the following:

December 31, 2023

Number of Shares

Number of Common Shares

Exercise Price

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February 2026

March 2020 Pre-funded Warrants

March 2020 Coverage Warrants

Jan - March 2027

September 2021

2017 Warrants

The 2017 Warrants contain full ratchet anti-dilution protection provisions.

The Company will recognize on a prospective basis the value of the effect of the down round feature in the warrant when it is triggered (i.e., when the exercise price is adjusted downward).

The value of the effect of the down round feature will be treated as a dividend and a reduction to income available to common shareholders in the basic EPS calculation.

During the year ended December 31, 2021, 47,458 of the 2017 Warrants were exercised for cash resulting in gross proceeds to the Company of $ 50 .

September 2021 Pre-funded Warrants

January 2023 Common Stock Warrants

February 2025

2019 Warrants

On February 5, 2019, in connection with the 2019 Public Offering, the Company issued immediately exercisable warrants (the “2019 Warrants”) to purchase 7,557,142 shares of common stock to investors.

The 2019 Warrants have an exercise price of $ 1.95 per share and expire on February 5, 2026.

The 2019 Warrants qualify for equity classification.

During the year ended December 31, 2021, 483,185 of the 2019 Warrants were exercised for cash resulting in gross proceeds to the Company of $ 943 .

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Warrants (continued)

March 2020 Warrants

On January 3, 2020, the Company entered into a Securities Purchase Agreement with investors, pursuant to which the Company issued and sold 1,421,801 shares of its Series A Preferred Stock, at a purchase price of $ 10.54 per share, 1,137,442 shares of its Series B Preferred Stock at a purchase price of $ 10.55 per share, and one (1) share of the Company’s Special Voting Stock entitling the purchaser of Series A Preferred Stock to elect one member of the Company’s board of directors.

On March 5, 2020, the Company’s stockholders approved the conversion of the Series A Preferred Stock into a pre-funded warrant to purchase 14,413,902 shares of common stock at an exercise price of $ 0.001 (the “March 2020 Pre-funded Warrants”) and the conversion of the Series B Preferred Stock into 11,531,133 shares of common stock.

Each investor also received a warrant to purchase an equal number of shares of common stock at an exercise price of $ 2.11 per share (the “Coverage Warrants”).

The March 2020 Pre-funded Warrants and the Coverage Warrants qualify for equity classification.

During the year ended December 31, 2022, there were cashless exercises of 6,166,732 of the March 2020 Pre-funded Warrants, at an exercise price of $ 0.001 per share, resulting in the issuance of 6,161,000 shares of the Company’s common stock.

June 2020 Warrants

On June 22, 2020, the Company completed a Public Offering (“the 2020 Public Offering”) whereby the Company issued 20,250,000 shares of its common stock, at $ 2.00 per share and, in lieu of common stock, offered pre-funded warrants (the “June 2020 Pre-funded Warrants”) to purchase up to 2,250,000 shares of its common stock to certain investors.

The June 2020 Pre-funded Warrants have an exercise price of $ 0.001 per share and qualify for equity classification.

During the year ended December 31, 2021, 559,863 of the June 2020 Pre-Funded Warrants were exercised on cashless basis resulting in the issuance of 559,705 shares of common stock.

During the year ended December 31, 2022, there were cashless exercises of 1,690,137 of the June 2020 Pre-funded Warrants, at an exercise price of $ 0.001 per share, resulting in the issuance of 1,688,571 shares of the Company’s common stock.

As of December 31, 2022, there were no June 2020 Warrants outstanding.

September 2021 Warrants

On September 24, 2021, the Company completed a public offering (the “2021 Public Offering”) whereby the Company issued 27,568,072 shares of its common stock, at $ 2.85 per share and, in lieu of common stock, offered pre-funded warrants (the “September 2021 Pre-funded Warrants”) to purchase up to 8,771,928 shares of its common stock to certain investors.

The September 2021 Pre-funded Warrants have an exercise price of $ 0.001 per share and qualify for equity classification.

During the year ended December 31, 2022, there were cashless exercises of 2,855,898 of the September 2021 Pre-funded Warrants, at an exercise price of $ 0.001 per share, resulting in the issuance of 2,853,351 shares of the Company’s common stock.

During the year ended December 31, 2023, the Company redeemed 10,000 of the 2019 Warrants at a purchase price of $ 2.90 per share.

January 2023 Common Stock Warrants

In January 2023, pursuant to the Merger, the warrants held by the Flame Warrant Holders became exercisable for 6,530 shares of Leap’s common stock (the “January 2023 Common Stock Warrants”).

The January 2023 Common Stock Warrants have an exercise price of $ 6.78 per share and expire in February 2025.

The January 2023 Common Stock Warrants qualify for equity classification.

January 2023 Series X Preferred Stock Warrants

In January 2023, pursuant to the Merger, the warrants held by the Flame Warrant Holders also became exercisable for 443 shares of Series X Preferred Stock (the “January 2023 Series X Preferred Stock Warrants”).

Each share of Series X Preferred Stock converted into 100 shares of common stock, following Stockholder Approval during the year ended December 31, 2023.

The January 2023 Series X Preferred Stock Warrants have an exercise price of $ 6.78 per share and expire in February 2025.

The Company initially recorded the January 2023 Series X Preferred Stock Warrants as a liability on its consolidated balance sheet as of the Effective Date and subsequently remeasured the warrant liability to fair value at each reporting date and on the date Stockholder Approval was obtained to convert shares of Series X Preferred Stock into shares of common stock.

Changes in the fair value of the warrant liability were recognized as gains (losses) in the Company’s consolidated statement of operations.

During the year ended December 31, 2023, the Company recorded a gain of $ 12 in its consolidated statement of operations.

During the year ended December 31, 2023, upon obtaining Stockholder Approval, the January 2023 Series X Preferred Stock Warrants were converted into common stock warrants and reclassified from liability to equity.

LEAP THERAPEUTICS, INC.

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Through December 31, 2023, no dividends have been declared for shares of common stock.

Public Offering of Common Stock - September 2021

On September 24, 2021, the Company completed the 2021 Public Offering, whereby the Company issued 22,828,072 shares of its common stock at $ 2.85 per share and, in lieu of common stock, issued certain investors 8,771,928 of its September 2021 Pre-funded Warrants.

The September 2021 Pre-funded Warrants have an exercise price of $ 0.001 per share and qualify for equity classification.

The underwriters exercised their right to purchase 4,740,000 additional shares of the Company’s common stock at the public offering price per share of common stock, less underwriting discounts and commissions.

The aggregate net proceeds received by the Company from the 2021 Public Offering were approximately $ 96,828 net of underwriting discounts and commissions and offering expenses payable by the Company.

Acquisition of Flame – January 2023

On January 17, Leap acquired 100 % of the outstanding equity of Flame.

Pursuant to the Merger, Leap issued to Flame Stockholders 1,972,901 shares of common stock.

The Company also issued Series X Preferred Stock to Flame Stockholders pursuant to the Merger (see Note 3).

Stock-Based Compensation

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Beginning on January 1, 2018, the number of shares of common stock authorized for issuance pursuant to the 2016 Plan was increased each January 1 by an amount equal to four percent ( 4 %) of the Company’s outstanding common stock as of the end of the immediately preceding calendar year or such other amount as determined by the compensation committee of the Company’s board of directors.

During the year ended December 31, 2019, the compensation committee of the board of directors authorized an additional 3,000,000 shares of common stock to be added to the shares authorized for issuance under the 2016 Plan.

On June 16, 2022, the Company’s stockholders approved the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for a total of 750,000 new shares of the Company’s common stock to be granted.

In addition, on June 16, 2023, stockholders approved 2,250,000 new shares of the Company’s common stock to be added to the 2022 Plan for future issuance.

As of December 31, 2023, there were 1,016,023 shares available for grant under the Company’s Equity Incentive Plans, which excludes the 2012 Plan which expired during the year ended December 31, 2022.

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The expected life was estimated using the “simplified” method as defined by the SEC’s Staff Accounting Bulletin 107, Share-Based Payment.

The expected volatility was based on the historical volatility of comparable public companies from a representative peer group selected based on industry and market capitalization data.

The expected volatility was based on the historical volatility of the Company.

The risk-free interest rate was based on the continuous rates provided by the U.S.

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Restricted Stock Units

During the years ended December 31, 2022 and 2021, the Company granted 2,650,000 and 275,000 , respectively, RSUs to executive officers that will cliff vest and will be settled after three years of continuous service, or upon a change of control of the Company, whichever is earlier, pursuant to the 2016 Plan.

During the year ended December 31, 2022 the Company granted 265,000 restricted stock units (“RSUs”) to employees that will cliff vest and will be settled after three years of continuous service, or upon a change of control of the Company, whichever is earlier, pursuant to the 2016 Plan.

The Company did not grant any RSUs during the year ended December 31, 2023.

During the years ended December 31, 2023 and 2022, the Company recognized $ 1,632 and $ 2,086 , respectively, of stock based compensation expense related to these equity classified RSUs.

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Outstanding at December 31, 2021

Settled in cash

Outstanding at December 31, 2022

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General and administrative

As of December 31, 2022, the Company had federal, state and foreign net operating loss carryforwards of approximately $ 210,487 , $ 191,524 and $ 393 , respectively, which begin to expire in 2030 for federal and state purposes, while the foreign net operating losses carryforward indefinitely.

The Company’s federal net operating losses include $ 129,179 which can be also carried forward indefinitely.

The Company may be able to utilize its net operating loss carryforwards to reduce future federal and State income tax liabilities.

However, these net operating losses are subject to various limitations under Internal Revenue Code (“IRC”) section 382, which limit the use of net operating loss carryforwards to the extent there has been an ownership change of more than 50 percentage points.

In addition, the net operating loss carryforwards are subject to examination by taxing authorities and could be adjusted or disallowed due

LEAP THERAPEUTICS, INC.

2 unchanged sentences

(Amounts in thousands, except share and per share amounts)

to such exams.

Although the Company has not undergone an IRC section 382 analysis, it is possible that the utilization of the Company’s net operating loss carryforwards may be limited.

Income Taxes (continued)

In addition, the Company has federal and state research and development tax credits of approximately $ 7,903 and $ 1,841 , respectively, that begin to expire in 2030 for federal and state tax purposes.

There is no provision for income taxes in the United States because the Company has historically incurred operating losses and maintains a full valuation allowance against its deferred tax assets in these jurisdictions.

Income (loss) before income taxes consisted of the following:

Loss before income taxes consisted of the following:

Loss before income taxes

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Deferred expense (benefit):

Total deferred expense (benefit):

Total income tax expense (benefit):

Total deferred expense

Total income tax expense

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

1 unchanged sentence

State taxes, net of federal benefit

Flame IPR&D write off

Permanent differences

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Change in valuation allowance

Section 382 limitations

LEAP THERAPEUTICS, INC.

9 unchanged sentences

Capitalized R&D expenses

Start-up costs

Stock based compensation

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Net deferred tax assets

As of December 31, 2022, the Company has provided a full valuation allowance against its overall net deferred tax assets, as realization of any associated tax benefit in the future is not more likely than not.

As of December 31, 2021, the Company had provided a full valuation allowance against its net US deferred tax assets, but had recorded a deferred tax asset with no offsetting valuation allowance for its foreign subsidiary.

Under applicable accounting requirements, as of December 31, 2022, the Company has established a full valuation allowance against its Australia deferred tax assets based on negative evidence associated with a three-year cumulative loss position.

The valuation allowance, inclusive of the adjustment for the Australia deferred tax asset, increased during the years ended December 31, 2022 and 2021 by $ 14,886 and $ 12,413 , respectively.

The Tax Cuts and Jobs Act (“TCJA”) resulted in significant changes to the treatment of research and developmental expenditures under Section 174.

For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all research and development expenditures that are paid or incurred in connection with their trade or business.

Specifically, costs for U.S.-based research and development activities must be amortized over five years and costs for foreign research and development activities must be amortized over 15 years, both using a midyear convention.

During the year ended December 31, 2022, the Company capitalized $ 37,873 million of research and development expenses.

As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $ 17,487 , and $ 18,532 , respectively.

The Company’s federal NOL’s can be carried forward indefinitely and the state NOL’s begin to expire in 2038.

Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

The Company has completed a study to assess whether an ownership change occurred or whether there had been multiple ownership changes since the Company became a “loss corporation” as defined in Section 382.

The Company experienced multiple ownership changes occurring in 2019, 2020, and 2023.

The ownership changes have and will continue to subject the Company’s pre-ownership change NOL carryforwards to an annual limitation, which will significantly restrict its ability to use them to offset taxable income in periods following the ownership changes.

In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.

As a result of the ownership changes, the Company is limited to a $ 0 annual limitation on its ability to utilize its NOL’s and research and development (“R&D”) credits recognized prior to the Flame merger.

Due to this limitation, approximately $ 210,844 of the federal NOL’s and $ 7,889 of federal R&D credits that had been available to offset future taxable income prior to the date of the ownership change, will expire unutilized.

Additionally, approximately $ 192,689 and $ 1,771 of state NOL’s and R&D tax credits that had been available to offset future taxable income prior to the date of the ownership change, will expire unutilized.

As a result, during the year ended December 31, 2023, the Company has reduced its deferred tax assets related to the federal and state NOL and R&D credits which is offset by the corresponding decrease in a valuation allowance.

In addition, As of December 31, 2023, the Company has federal and state R&D tax credits of approximately $ 1,466 and $ 231 , respectively, that begin to expire in 2043 and 2038, respectively, for federal and state tax purposes.

As of December 31, 2023 and 2022, the Company has provided a full valuation allowance against its net deferred tax assets, as realization of any associated tax benefit in the future is not more likely than not.

The valuation allowance decreased by $ 42,726 and increased by $ 14,886 during the years ended December 31, 2023 and 2022, respectively.

The decrease in valuation allowance during the year ended December 31, 2023 is due primarily to Section 382 limitations on NOL’s and R&D tax credits.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Income Taxes (continued)

The Tax Cuts and Jobs Act (“TCJA”) resulted in significant changes to the treatment of R&D expenditures under Section 174.

For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business.

Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years, both using a midyear convention.

During the year ended December 31, 2023, the Company capitalized $ 41,838 of R&D expenses.

The Company follows the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position.

7 unchanged sentences

There were no interest and penalties pertaining to uncertain tax positions for the years ended December 31, 2023 or 2022.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Net Loss Per Share

4 unchanged sentences

Net loss per share attributable to common stockholders - basic and diluted

Included within weighted average common shares outstanding for the years ended December 31, 2022 and 2021, are 14,217,716 and 24,930,483 , respectively, common shares issuable upon the exercise of the pre-funded warrants and penny warrants, as the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

Included within weighted average common shares outstanding for the years ended December 31, 2023 and 2022, are 1,421,768 common shares issuable upon the exercise of the pre-funded warrants and penny warrants, as the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

LEAP THERAPEUTICS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands, except share and per share amounts)

Net Loss Per Share (continued)

The Company’s potentially dilutive securities include RSUs, stock options and warrants.

11 unchanged sentences

However, there can be no assurance that clinical or commercialization success of developed products will occur, and no royalties have been paid or accrued through December 31, 2023.

License Agreement— On May 28, 2015, the Company entered into a license agreement with Lonza Sales AG (“Lonza”), pursuant to which Lonza granted the Company a world-wide, non-exclusive license for certain intellectual property relating to a gene expression system for manufacturing DKN-01.

As defined in the license agreement, the Company would be required to pay royalties to Lonza based on a percentage in the low single digits of net sales of DKN-01, if and when achieved.

However, there can be no assurance that clinical or commercialization success will occur, and no royalties have been paid or accrued through December 31, 2023.

Collaboration Agreement --On August 10, 2020, the Company entered into a collaboration agreement with Adimab, LLC (the “Adimab Agreement”), pursuant to which Adimab will conduct research programs to develop monoclonal antibodies to certain targets identified by the Company and provide it with an option to acquire exclusive rights to such antibodies.

Upon payment of an option fee, on a product-by-product basis, Adimab will grant the Company a world-wide, exclusive license for, or assign ownership to the Company of, certain intellectualproperty rights and grant the Company a non-exclusive license with respect to the Adimab platform technology.

As defined in the Adimab Agreement, after exercising an option and making the option payment, the Company would be required to pay Adimab milestones upon the completion of clinical development and regulatory milestones, along with a royalty in the low-single digits of net sales of each product, if and when achieved.

However, there can be no assurance that clinical, or commercialization success will occur, and no royalties have been paid or accrued through December 31, 2023.

LEAP THERAPEUTICS, INC.

3 unchanged sentences

Commitments and Contingencies (continued)

As defined in the license agreement, the Company would be required to pay royalties to Lonza based on a percentage in the low single digits of net sales of DKN-01, if and when achieved.

License Agreement --On August 13, 2021, the Company entered into a strategic partnership and license agreement with NovaRock Biopharmaceuticals, Inc.

(the “NovaRock Agreement”), pursuant to which NovaRock granted the Company a world-wide, excluding the People’s Republic of China, Hong Kong, Macau, and Taiwan, exclusive license for certain intellectual property rights relating to FL-301 and FL-302.

As defined in the license agreement, the Company would be required to pay NovaRock milestones upon the completion of development, regulatory and sales milestones for up to three different products (FL-301, FL-302 and potentially one additional target), along with a royalty in the mid-single digits of net sales of each product in the territory, if and when achieved.

However, there can be no assurance that clinical, or commercialization success will occur, and no royalties have been paid or accrued through December 31, 2023.

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The Company made matching contributions of $ 443 and $ 333 for the years ended December 31, 2023 and 2022, respectively.

Related Party Transactions

The Company has a license agreement with a stockholder (See Note 12).

LEAP THERAPEUTICS, INC.

2 unchanged sentences

(Amounts in thousands, except share and per share amounts)

Related Party Transactions

The Company has a license agreement with a stockholder (See Note 12).

Subsequent Events

Acquisition of Flame

On January 17, 2023, the Company acquired 100 percent of the outstanding equity of Flame Biosciences, Inc.

Pursuant to the terms of the agreement and plan of merger, the Company issued an aggregate of 19,794,373 shares of its common stock, par value $ 0.001 per share, and 136,833 shares of Series X non-voting convertible preferred stock, par value $ 0.001 per share (the “Series X Preferred Stock”).

Subject to and upon the requisite approval of the stockholders of Leap, each share of Series X Preferred Stock shall convert into 1,000 shares of common stock.

Under the terms of the merger agreement, the Company held back approximately 15,662 shares out of the aggregate number of shares of Series X Preferred Stock that the common stockholders of Flame otherwise would be entitled to receive pursuant to the Merger so that the Company can have recourse to these shares for purposes of satisfying certain claims for indemnification that the Company may have against the sellers in connection with the merger.

The Company will account for the transaction as an asset acquisition.

Expiration of BeiGene Option

In March 2023, BeiGene notified the Company that it would not exercise its option under the BeiGene Agreement.

On January 3, 2024, the Company entered into a Fourth Amendment.

Under the Fourth Amendment, the Company extended the term of the 47 Thorndike Street Lease through July 31, 2025.

Under the Fourth Amendment, the Company will continue to pay the current monthly base rent amount of $ 38,335 contemplated by the 47 Thorndike Street Lease through July 31, 2024, with an increase commencing on August 1, 2024 adjusting the monthly base rent amount to approximately $ 38,974 through July 31, 2025.

In January 2024, the Company released the Holdback Shares to the Flame Shareholders (see Note 3).

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