What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 104 added, 118 removed, 432 unchanged (34% of the section changed)

5 unchanged sentences

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

STATEMENTS OF AND STOCKHOLDERS’ EQUITY

STATEMENTS OF CASH FLOWS

5 unchanged sentences

We have audited the accompanying balance sheets of Edgewise Therapeutics, Inc.

(the Company) as of December 31, 2022 and 2021, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the financial statements).

(the Company) as of December 31, 2023 and 2022, the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

36 unchanged sentences

Operating lease liability, net of current portion

Other long term liabilities

Total liabilities

7 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

13 unchanged sentences

Total other income

Other comprehensive loss:

Unrealized loss on available-for-sale securities

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities

Total comprehensive loss

3 unchanged sentences

EDGEWISE THERAPEUTICS, INC.

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Preferred Stock

Comprehensive

Paid-In Capital

Income (Loss)

Balance as of December 31, 2021

Convertible preferred stock converted into shares of common stock

( 8,187,100 )

( 7,888,392 )

( 6,527,654 )

( 12,954,423 )

Initial public offering of common stock, net of offering costs

Issuance of common stock, net of offering costs

Exercise of stock options

4 unchanged sentences

Issuance of common stock, net of offering costs

Exercise of stock options

Exercise of stock options and vesting of restricted stock units

Purchase of common stock under employee stock purchase plan

Stock-based compensation

Other comprehensive loss

Other comprehensive income

Balance as of December 31, 2023

21 unchanged sentences

Purchases of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from issuance of common stock, net of underwriting discounts and commissions and offering costs

Proceeds from initial public offering of common stock, net of underwriting discounts and commissions and offering costs

Payment of preferred stock issuance costs

Exercise of stock options

6 unchanged sentences

Supplemental disclosures of non-cash investing and financing activities:

Right-of-use asset obtained in exchange for new operating lease liability, net of reimbursed tenant improvements

Right-of-use asset obtained in exchange for new operating lease liability, net of tenant improvement receivable

Property and equipment purchases included in accounts payable and accrued other expenses

Conversion of convertible preferred stock upon closing of initial public offering

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

6 unchanged sentences

(the Company) was incorporated as a Delaware corporation in May 2017, and it is headquartered in Boulder, Colorado.

The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need.

The Company’s lead product candidate, EDG-5506, is an orally administered small molecule designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD).

The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe muscle diseases for which there is significant unmet medical need.

The Company is currently studying EDG-5506 in Phase 2 trials, which are being held in the U.S.

and certain countries in Europe.

In addition, the Company has identified EDG-7500, for the potential treatment of hypertrophic cardiomyopathy (HCM) and is conducting nonclinical studies to support advancing the compound into a Phase 1 clinical trial in late 2023.

In addition, the Company has initiated the Phase 1 study of EDG-7500, for the potential treatment of hypertrophic cardiomyopathy (HCM).

The Company is using its proprietary drug discovery platform to develop a pipeline of precision medicine product candidates that target key muscle proteins and modulators to address a broad array of genetically defined muscle disorders.

Initial Public Offering

On March 30, 2021, the Company completed its initial public offering (IPO) in which it issued and sold 12,650,000 shares of common stock at a price of $ 16.00 per share, including 1,650,000 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares.

The aggregate net proceeds received by the Company from the IPO was $ 186.1 million after deducting underwriting discounts and commissions of $ 14.2 million and offering expenses of approximately $ 2.1 million.

In addition, in connection with the IPO, all shares of convertible preferred stock outstanding at the time of the IPO converted into 35,557,569 shares of common stock.

Risks and Uncertainties

The Board of Directors of the Company discusses with management macroeconomic and geopolitical developments, including COVID-19, the Russia-Ukraine conflict and inflation and the impact on the Company’s personnel, cybersecurity and sanctions so that the Company can be prepared to react to new developments as they arise.

The board of directors of the Company discusses with management macroeconomic and geopolitical developments, including inflation, instability in the banking and financial services sector, tightening of the credit markets, international conflicts, COVID-19, cybersecurity and sanctions so that the Company can be prepared to react to new developments as they arise.

The board of directors and the management of the Company are carefully monitoring these developments and the resulting economic impact on its financial condition and results of operations.

Disruptions caused by the COVID-19 pandemic impacted our productivity, resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial.

Recently, President Biden announced that the administration intends to end the COVID-19 national and public health emergencies on May 11, 2023.

The full impact of the termination of the public health emergencies on FDA and other regulatory policies and operations are unclear .

Liquidity and Capital Resources

1 unchanged sentence

The Company’s ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles.

The Company filed:

(i) on April 1, 2022, a shelf registration statement on Form S-3 with the U.S.

The Company filed on April 1, 2022, a shelf registration statement on Form S-3 with the U.S.

Securities and Exchange Commission (SEC) that became effective on May 5, 2022 and allows us to undertake various equity and debt offerings up to $ 400,000,000 .

and (ii) on May 5, 2022 a prospectus supplement to the shelf registration statement that covers the offering, issuance and sale of up to $ 125 million of our common stock from time to time through an “at-the-market” program under the Securities Act of 1933, as amended (Securities Act).

As of December 31, 2022, the Company has not sold any shares under the “at the market” program.

On September 16, 2022, the Company closed an underwritten public offering of 13,372,093 shares of common stock at a public offering price of $ 10.32 per share (collectively with the underwriters’ option, the “September 2022

The underwriters exercised in full their option to purchase 1,744,186 additional shares of common stock.

The aggregate gross proceeds from the September 2022 Offering were $ 138.0 million, and the net proceeds were $ 129.2 million after deducting underwriting discounts and commissions of $ 8.3 million and offering expenses of $ 0.5 million.

On June 16, 2023, the Company entered into a Sales Agreement (Sales Agreement) with BofA Securities, Inc.

(BofA Securities) under which the Company may offer and sell shares of common stock, having aggregate sales proceeds of up to $ 125,000,000 from time to time, through an “at the market offering” program (ATM Program) under which BofA Securities will act as sales agent.

On April 1, 2022, the Company entered into a Sales Agreement (Prior Sales Agreement) with Cowen and Company, LLC (Cowen), as agent, pursuant to which the Company was permitted to issue and sell shares of its common stock, having an aggregate offering price of up to $ 125,000,000 (Placement Shares), from time to time through Cowen.

Prior to termination, the Company had not sold any Placement Shares under the Prior Sales Agreement.

During the year ended December 31, 2023, the Company sold 6,928,044 shares of common stock under the ATM Program at a weighted average price of $ 7.63 per share.

The gross proceeds were $ 52.9 million, and the net proceeds were $ 52.6 million after deducting underwriting discounts and commissions of $ 0.1 million and offering expenses of $ 0.2 million.

The Company’s ability to secure capital is dependent upon success in developing its technology and product candidates.

The Company cannot provide assurance that additional capital will be available on acceptable terms, if at all.

The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s stockholders.

The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s

stockholders.

Should additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may be unable to realize value from the Company’s assets or discharge liabilities in the normal course of business, which may, among other alternatives, cause the Company to delay, substantially reduce, or discontinue operational activities to conserve cash balances, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

26 unchanged sentences

Should the equity issuance be abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations.

Deferred offering costs as of December 31, 2022 and December 31, 2021 were $ 0.3 and $ 0 million, respectively.

Deferred offering costs as of December 31, 2023 and December 31, 2022 were $ 0.3 million.

Such costs are classified in other non-current assets in the accompanying balance sheets.

1 unchanged sentence

Property and equipment is stated at cost less accumulated depreciation and amortization.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the related asset, which is generally three to five years , and in the case of leasehold improvements, the shorter of the estimated useful lives of the assets or the term of the lease.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the related asset, which is generally three to seven years , and in the case of leasehold improvements, the shorter of the estimated useful lives of the assets or the term of the lease.

The Company accounts for its leases under Accounting Standards Codification (ASC) Topic 842, Leases (ASC 842).

21 unchanged sentences

Deferred tax assets are reduced by a valuation allowance if such deferred tax assets are deemed more likely than not that some or all of the deferred tax assets will not be realized.

Historically, the Company has not recognized these potential benefits in its financial statements and has fully reserved for such net deferred tax assets, as it believes it is more likely than not that the full benefit of these net deferred tax assets will not be

Deferred tax liabilities are recognized for temporary differences that will be taxable in future years.

4 unchanged sentences

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs are those that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.

Unobservable inputs are those that reflect the

Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.

The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality.

6 unchanged sentences

The Company considers its available-for-sale portfolio as available for use in current operations.

Accordingly, the Company may classify its investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date.

Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive loss and reported as a separate component of stockholders’ equity until realized.

Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net.

Accordingly, the Company classifies its investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date.

Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity until realized.

Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income.

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

30 unchanged sentences

During the years ended December 31, 2023 and 2022, there were no transfers of financial assets between Level 1 and Level 2.

As of December 31, 2022, the remaining contractual maturities of $ 315.0 million of marketable securities were less than one year and $ 16.3 million were one to two years .

As of December 31, 2023, the remaining contractual maturities of $ 232.2 million of marketable securities were less than one year .

The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns.

1 unchanged sentence

Unrealized losses on marketable securities at December 31, 2023 were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources.

The Company’s only element of other comprehensive loss was net unrealized loss on marketable securities.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources.

The Company’s only element of other comprehensive income (loss) was net unrealized gain (loss) on marketable securities.

Stock-Based Compensation

4 unchanged sentences

The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to the Company’s common stock valuation (see Note 4).

Due to the absence of an active market for the Company’s common stock prior to the closing of the Company’s IPO, the Company utilized methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series:

Valuation of Privately Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock.

In determining the exercise prices for options granted, the Company considered the fair value of the common stock as of the grant date.

The fair value of the common stock had previously been determined based upon a variety of factors, including the Company’s financial position, historical performance and operating results, the Company’s stage of development, the progress of the Company’s research and development programs, the prices at which the Company sold its convertible preferred stock, the superior rights, preferences and privileges of the Company’s convertible preferred stock relative to its common stock, external market conditions affecting the biotechnology industry, the lack of marketability of the Company’s common stock and the prospects of a liquidity event and the analysis of IPO and market performance of similar companies as well as recently completed mergers and acquisitions of peer companies.

Following the completion of the Company’s IPO, the fair value of its common stock is determined based on the closing price of its common stock on the date of grant.

Research and Development Expenses and Accrued Research and Development Expenses

2 unchanged sentences

Internal costs consist primarily of employee-related costs, facilities, depreciation and costs related to compliance with regulatory requirements.

Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as an expense in the period that the Company receives the goods or when services are performed.

The Company records expenses related to external research and development services based on its estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and CDMOs that supply, conduct and manage preclinical studies and clinical trials on its behalf.

5 unchanged sentences

Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.

earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

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

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02), which requires the lessee to recognize a ROU asset and a lease liability for operating leases, initially measured at the present value of lease payments, in its consolidated balance sheet.

The Company adopted ASU 2016-02 effective January 1, 2022, using the alternative modified transition method, which applies ASU 2016-02 as of the adoption date and therefore, the Company has not applied the standard to the comparative periods presented in the Company's financial statements.

The Company elected the “package of practical expedients,” which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs.

The Company also elected the hindsight practical expedient to determine the lease term, the practical expedient to not separate lease and non-lease components and the policy election to not recognize ROU assets or lease liabilities for short-term leases.

The adoption of ASC 842 did not have a material effect on the Company’s balance sheet as of January 1, 2022 due to the terms related to the Company’s existing leases.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses :

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Statements (Topic 326) (ASU 2016-13), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities.

Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASU’s to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance.

The Company estimates that there will be no material effect on the financial statements upon adoption.

Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance.

ASU 2016-13 was adopted on January 1, 2023 and the adoption of the new standard did not have a material impact on the Company's financial statements.

The Company monitors credit losses at each reporting period.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update is effective beginning with the Company’s 2024 fiscal year annual reporting period, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU is expected to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities on an annual basis to disclose specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid.

This ASU is effective beginning with the Company’s 2025 fiscal year annual reporting period, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its financial statements.

NOTE 3 PREFERRED STOCK AND COMMON STOCK

6 unchanged sentences

The holder of each share of common stock is entitled to one vote.

The Company had no convertible preferred stock outstanding as of December 31, 2022 and 2021.

Immediately prior to the completion of the IPO in March 2021, all outstanding shares of the Company’s convertible preferred stock were automatically converted into 35,557,569 shares of common stock.

NOTE 4 STOCK-BASED COMPENSATION AWARDS

Equity Incentive Plans

In March 2021, the Company’s Board of Directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (2021 Plan), which became effective in March 2021 in connection with the IPO.

In March 2021, the Company’s board of directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (the 2021 Plan), which became effective in March 2021 in connection with the IPO.

Upon adoption of the 2021 Plan, the Company restricted the grant of future equity awards under its 2017 Equity Incentive Plan, as amended and restated (the 2017 Plan).

The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to its employees, directors, and consultants and its subsidiary corporations’ employees and consultants.

The vesting of stock options is stated in each individual grant agreement, which is generally four years .

Options granted expire 10 years after the date of grant.

A total of 5,040,000 shares of the Company’s common stock were initially reserved for issuance pursuant to the 2021 Plan.

The 2021 Plan share reserve will be increased by the number of shares under the 2017 Plan that are repurchased, forfeited, expired or cancelled after the effective date of the 2021 Plan up to the limit under the 2021 Plan.

The 2021 Plan share reserve increases by the number of shares under the 2017 Plan that are repurchased, forfeited, expired or cancelled after the effective date of the 2021 Plan up to the limit under the 2021 Plan.

The number of shares available for issuance under the 2021 Plan increases annually on the first day of each fiscal year beginning with the Company’s 2022 fiscal year, equal to the least of (1) 5,040,000 shares, (2) five percent ( 5 %) of the outstanding shares of its common stock as of the last day of the immediately preceding fiscal year;

6 unchanged sentences

Exercise Price

Value (000's)

Outstanding as of December 31, 2022

36 unchanged sentences

A restricted stock unit (RSU) represents the right to receive one share of common stock upon vesting of the RSU.

During the year ended December 31, 2022, the Company issued RSUs with service conditions that vest over three years .

The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant.

The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant and vest over 3 years .

RSU activity for the year ended December 31, 2023 is as follows:

Weighted Average Grant

Date Fair Value

Weighted Average

Issued and unvested as of December 31, 2022

13 unchanged sentences

License Agreements

On November 20, 2020 the Company exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement.

Under the license agreement, the Company is obligated to make payments to OSIF aggregating up to $ 1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $ 2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones.

The Company is also obligated to pay low single-digit royalties to OSIF based on net sales by the Company and its affiliates and sublicensees of each product covered by the OSIF licensed patent rights.

In addition, in the event the Company sublicenses the OSIF licensed patent rights, the Company is obligated to pay OSIF a specified portion of income received from sublicensing.

Total costs incurred for license fees and milestones achieved under the OSIF license agreement was $ 0.2 million and $ 0 for the years ended December 31, 2022 and 2021, respectively.

The Company exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) in a license agreement which was made effective November 20, 2020.

Under the licensing agreement, the Company was obligated to make payments to OSIF aggregating up to $ 1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $ 2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones.

The Company was also obligated to pay low single-digit royalties to OSIF based on net sales by the Company and its affiliates and sublicensees of each product covered by the OSIF licensed patent rights.

In addition, in the event the Company sublicensed the OSIF licensed patent rights, the Company was obligated to pay OSIF a specified portion of income received from sublicensing.

On July 27, 2023, the Company provided notice to OSIF to terminate the license agreement because the licensed technology is no longer relevant to the Company’s business.

The license agreement was terminated effective, October 25, 2023 and as a result, the Company no longer has any payment obligations to OSIF.

As of December 31, 2023, the Company has paid $ 0.7 million for license fees and milestones achieved in connection with the license agreement.

Lease Agreements

In January 2022, we entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado (the New Boulder Lease) with aggregate base rent payments of approximately $ 3.3 million over the initial 8.2 -year term of the lease.

The Company has the option to extend the New Boulder Lease for two additional terms of five years each.

In January 2022, the Company entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado (the New Boulder Lease) with aggregate base rent payments of approximately $ 3.3 million over the initial 8.2 -year term of the lease.

Further, the Company provided a standby letter of credit (LOC) of $ 0.8 million during the term of the lease as collateral for the Company’s obligations under the lease.

1 unchanged sentence

The New Boulder Lease includes two tenant improvement allowances, which includes one for $ 1.0 million in construction costs to be fully reimbursed by the lessor (the First Allowance) and one for $ 2.0 million in construction costs to be repaid to the lessor as additional rent payments over the initial term of the lease (the Second Allowance).

During the year ended December 31, 2022, $ 1.0 million and $ 1.8 million was received by the lessor under the First Allowance and Second Allowance, respectively.

Both the First Allowance and Second Allowance have been received in full.

The receipt of $ 2.0 million under the Second Allowance resulted in an increase to operating lease liabilities and an increase to aggregate base rent payments totaling $ 2.5 million.

In February 2023, the New Boulder Lease was modified to occupy an additional 9,624 square feet of office space (the Expansion Space) with aggregate payments of approximately $ 1.5 million over the initial 7.3 year term of the lease.

The Expansion space includes an improvement allowance in the amount of $ 0.5 million to be fully reimbursed by the lessor.

As of December 31, 2023, $ 0 was received by the lessor under the allowance associated with the expansion space.

Under the New Boulder Lease and the Expansion Space (collectively, the Lease), the Company has the option to extend the Lease for two additional terms of five years each.

The Company is obligated to pay the lessor an amount not to exceed 5 % of the net rents from the property for operating costs.

Such amounts are not included in the measurement of the lease liability and are recognized as variable lease expense when they are incurred.

Variable lease expense under the New Boulder Lease was $ 0.1 million and $ 0 for the years ended December 31, 2022 and 2021, respectively.

The New Boulder Lease is classified as an operating lease.

The Company recorded a lease liability and ROU lease asset for the New Boulder Lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate.

The option to extend the New Boulder Lease was not recognized as part of the Company’s lease liability and ROU lease asset, as such extensions are not reasonably certain to occur.

As of December 31, 2022, the weighted-average remaining lease term and the weighted-average discount rate for the New Boulder Lease was 7.3 years and 6 %, respectively.

Rent expense under the New Boulder Lease was $ 0.3 million and $ 0 for the years ended December 31, 2022 and 2021, respectively.

Future minimum lease payments under the New Boulder Lease as of December 31, 2022 are as follows (in thousands):

Such amounts are not included in the measurement of the lease liabilities and are recognized as variable lease expense when they are incurred.

Variable lease expense was $ 0.3 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

The Lease is classified as an operating lease.

The Company recorded lease liabilities and ROU lease assets for the Lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate.

The option to extend the Lease was not recognized as part of the Company’s lease liabilities and ROU lease assets, as such extensions are not reasonably certain to occur.

As of December 31, 2023, the weighted-average remaining lease term and the weighted-average discount rate for the Lease was 6.3 years and 6.4 %, respectively.

Rent expense under the Lease was $ 0.5 million and $ 0.3 million for the years ended December 31, 2023 and 2022, respectively.

Future minimum lease payments under the Lease as of December 31, 2023 are as follows (in thousands):

Year Ending December 31,

Total undiscounted future minimum lease payments

tenant improvement receivable

Total lease liability

The Company additionally leases office and lab space under lease agreements which expire in August 2023.

These leases were excluded from our lease liability and ROU asset calculations due to their short-term nature.

Future minimum lease payments under these short-term leases as of December 31, 2022 total $ 38,000 , all of which will be paid through the end of fiscal year 2023.

Total rent expense under these short term leases were $ 0.2 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2021, future minimum lease payments totaled $ 141,000 , all of which were paid in 2022.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

12 unchanged sentences

Federal tax at statutory rate

State taxes, net of federal deduction

Research and development credits

State taxes, net of federal deduction

Disallowed compensation

4 unchanged sentences

Deferred tax assets (liabilities):

Federal net operating loss carryforward

Capitalized research expenses

Federal net operating loss carryforward

Federal and state R&D credits

State net operating loss carryforward

Federal R&D credit

Stock-based compensation

1 unchanged sentence

Lease liability

Orphan Drug Credit

Property and equipment

2 unchanged sentences

Net deferred tax asset (liability)

For the period ended December 31, 2022, the Company has federal and state net operating loss carryforwards of $ 83.8 million and $ 86.4 million, respectively.

Approximately $ 1.2 million and $ 53.3 million of the Company's federal and state net operating loss carryforwards, respectively will begin to expire in 2037.

The remainder of the Company's federal and state net operating losses will carry forward indefinitely.

The Company also has $ 3.4 million of federal research and development tax credits carryforwards, which will begin to expire in 2039.

In accordance with Section 382 and Section 383, utilization of the NOL and tax credit carryforwards may subject to limitations based on prior or future ownership changes.

Also, after weighing all available and positive and negative evidence the Company determined a full valuation allowance was necessary, consistent with prior year.

For the period ended December 31, 2023, the Company has federal gross net operating loss (NOL) carryforwards of $ 109.4 million.

Of this amount, $ 1.2 million have a limited carryforward period and will begin to expire in 2037;

the remaining $ 108.2 million have an indefinite carryforward period.

The Company also has post-apportioned gross state NOL carryforwards of $ 114.3 million.

Of this amount, $ 81.5 million have a limited carryforward period and will begin to expire in 2033;

the remaining $ 32.8 million have an indefinite carryforward period.

The Company also has $ 8.7 million of federal research and development tax credits carryforwards, which will begin to expire in 2039 and $ 0.7

million of federal orphan drug tax credit carryforward, which will begin to expire in 2043.

After weighing all available and positive and negative evidence, the Company determined a full valuation allowance was necessary, consistent with the prior year.

The Company is subject to income tax in multiple jurisdictions, including federal and several states.

11 unchanged sentences

The Company’s contribution to the plan, as determined by the Company’s Board of Directors, was discretionary until September 2021 when the Company initiated a match with a maximum amount of 4 % of the participant’s compensation.

During the years ended December 31, 2022 and 2021, the Company made matching contributions of $ 0.4 million and $ 47,000 respectively.

During the years ended December 31, 2023 and 2022, the Company made matching contributions of $ 0.6 million and $ 0.4 million, respectively.

NOTE 8 NET LOSS PER SHARE

1 unchanged sentence

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

For purposes of the diluted net loss per share calculation, the convertible preferred stock and common stock options are considered to be potentially dilutive securities.

Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security.

For purposes of the diluted net loss per share calculation, common stock options and unvested restricted stock units are considered to be potentially dilutive securities.

The Company’s participating securities do not have a contractual obligation to share in the Company’s losses.

9 unchanged sentences

Unvested restricted stock units

Convertible preferred stock

NOTE 9 PROPERTY AND EQUIPMENT

2 unchanged sentences

As of December 31,

Leasehold improvements

Laboratory equipment

Computers and software

Furniture and fixtures

Construction in process

11 unchanged sentences

NOTE 11 SUBSEQUENT EVENTS

In February 2023, we signed an amendment to the lease agreement for the New Boulder Lease to occupy an additional 9,624 square feet of office and laboratory space (the Expansion Space).

The Expansion Space includes an improvement allowance in the amount of $ 0.5 million.

Rent payments will begin in December 2023.

Future minimum lease payments under the Expansion Space are as follows (in thousands):

Year Ending December 31,

Total future minimum principal payments

Effective January 19, 2024, the Company suspended and terminated the prospectus related to the Company’s common stock (the ATM Prospectus) issuable pursuant to the terms of the Sales Agreement.

As a result, the Company will not make any sales of the Company’s securities pursuant to the Sales Agreement unless and until a new prospectus, prospectus supplement or a new registration statement is filed.

As of the date of the suspension of the ATM Prospectus, the Company had sold 7,560,068 shares of our common stock at an average price of $ 7.93 per share totaling aggregate gross proceeds of $ 59.9 million.

On January 23, 2024, the Company closed an underwritten registered direct offering of 21,818,182 shares of common stock at a public offering price of $ 11.00 per share (the January 2024 Offering).

The aggregate gross proceeds from the January 2024 Offering were $ 240.0 million.

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