What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-03 compared with 2021-02-26 · 187 added, 244 removed, 798 unchanged (35% of the section changed)

18 unchanged sentences

Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021.

Pursuant to Section 404(c) of the Sarbanes-Oxley Act, our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting for the year ended December 31, 2020, which is included below.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Gossamer Bio, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Gossamer Bio, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, (the COSO criteria).

In our opinion, Gossamer Bio, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Diego, California

February 26, 2021

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

4 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Gossamer Bio, Inc.

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

Opinion on the Financial Statements

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

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Research and Development Expenses

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How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the accounting for accrued research and development expenses.

This included controls over management's assessment of the assumptions and accuracy of data underlying the accrued research and development expenses estimate.

To test the completeness of the Company’s accrued research and development expenses, among other procedures, we obtained supporting evidence of the research and development activities performed for significant clinical trials.

2 unchanged sentences

We also examined a sample of subsequent payments to evaluate the completeness of the accrued research and development expenses.

Convertible Senior Notes

Description of the Matter

On May 21, 2020, the Company issued $200.0 million aggregate principal amount of 5.00% convertible senior notes due in 2027 in a public offering.

As described in Note 2 of the consolidated financial statements, the Convertible Notes include conversion terms that require the Company to account for the debt and equity components of the Convertible Notes separately including allocating value to the debt component with the remaining value allocated to the equity component reflected as a debt discount to be amortized to interest expense over the terms of the notes.

Auditing management’s conclusions related to the value allocated to the debt portion of the Convertible Note is complex and involves estimation to determine the effective yield that the Company would have received on the debt issuance had it not included the conversion feature.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the Company’s process to determine the allocation between debt and equity components, including the valuation model and assumptions.

To test the value assigned to each component, we performed audit procedures that included, among others, evaluating the Company’s valuation methodology.

We tested the completeness and accuracy of the calculation used to estimate the fair value of the debt component.

In addition, we involved our valuation specialists to assist in testing the concluded effective yield used to determine the value allocated to the debt component by performing an independent credit analysis including comparison to market rates for similarly rated instruments.

/s/ Ernst & Young LLP

1 unchanged sentence

San Diego, California

February 26, 2021

March 3, 2022

GOSSAMER BIO, INC.

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Loss from operations ( 216,124 ) ( 233,962 ) ( 186,139 )

Other income (expense)

Other (expense) income

Interest income 761 3,442 5,563

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Other income (expense) 799 ( 174 ) 2,207

Total other income (expense), net ( 9,398 ) 5,832 2,024

Total other (expense) income, net ( 17,880 ) ( 9,398 ) 5,832

Net loss $ ( 234,004 ) $ ( 243,360 ) $ ( 180,307 )

Other comprehensive income:

Other comprehensive (loss) income:

Foreign currency translation, net of tax ( 329 ) 441 ( 12 )

Unrealized gain (loss) on marketable securities, net of tax ( 100 ) 331 ( 61 )

Other comprehensive income (loss) 341 319 ( 61 )

Unrealized (loss) gain on marketable securities, net of tax ( 225 ) ( 100 ) 331

Other comprehensive (loss) income ( 554 ) 341 319

Comprehensive loss ( 234,558 ) ( 243,019 ) ( 179,988 )

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Balance as of December 31, 2018 20,000,000 $ 29,200 45,714,286 $ 79,615 71,506,513 $ 229,552 8,051,418 $ 2 $ 33,853 $ ( 153,863 ) $ ( 61 ) $ ( 120,069 )

Issuance of Series A preferred stock for cash, net of $ 0.4 million in offering costs

— — 42,215,077 73,491 — — — — — — — —

Issuance of stock for acquisition 20,000,000 29,200 — — — — 1,101,278 1 2,874 — — 2,875

Issuance of Series A preferred stock to convert debt and accrued interest — — 3,499,209 6,124 — — — — — — — —

Issuance of Series B preferred stock for cash, net of $ 0.5 million in offering costs

— — — — 71,506,513 229,552 — — — — — —

Vesting of restricted stock — — — — — — 2,369,696 1 — — — 1

Incremental vesting conditions placed on previously issued common shares — — — — — — ( 4,580,444 ) — — — — —

Stock-based compensation — — — — — — — — 30,947 — — 30,947

Net loss — — — — — — — — — ( 146,969 ) — ( 146,969 )

Other comprehensive income (loss) — — — — — — — — — — ( 61 ) ( 61 )

Balance as of December 31, 2018 20,000,000 $ 29,200 45,714,286 $ 79,615 71,506,513 $ 229,552 8,051,418 $ 2 $ 33,853 $ ( 153,863 ) $ ( 61 ) $ ( 120,069 )

Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs — — — — — — 19,837,500 2 291,309 — — 291,311

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Net loss — — — — — — — — — ( 180,307 ) — ( 180,307 )

Other comprehensive income (loss) — — — — — — — — — — 319 319

Other comprehensive income — — — — — — — — — — 319 319

Balance as of December 31, 2019 — $ — — $ — — $ — 61,635,477 $ 7 $ 686,390 $ ( 334,170 ) $ 258 $ 352,485

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Net loss — — — — — — — — — ( 243,360 ) — ( 243,360 )

Other comprehensive income (loss) — — — — — — — — — — 341 341

Other comprehensive income — — — — — — — — — — 341 341

Balance as of December 31, 2020 — $ — — $ — — $ — 73,874,904 $ 8 $ 897,607 $ ( 577,530 ) $ 599 $ 320,684

Vesting of restricted stock — — — — — — 906,037 — — — — —

Exercise of stock options — — — — — — 325,494 — 2,014 — — 2,014

Stock-based compensation — — — — — — — — 32,008 — — 32,008

Issuance of common stock pursuant to Employee Stock Purchase Plan — — — — — — 160,790 — 1,315 — — 1,315

Issuance of common stock for restricted stock units vested — — — — — — 485,439 — — — — —

Net loss — — — — — — — — — ( 234,004 ) — ( 234,004 )

Other comprehensive loss — — — — — — — — — — ( 554 ) ( 554 )

Balance as of December 31, 2021 — $ — — $ — — $ — 75,752,664 $ 8 $ 932,944 $ ( 811,534 ) $ 45 $ 121,463

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

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Amortization of premium on investments, net of accretion of discounts 339 98 ( 2,364 )

Net realized gain on investments ( 256 ) ( 28 ) —

Net realized loss (gain) on investments — ( 256 ) ( 28 )

Loss on disposal of property and equipment 20 — —

Changes in operating assets and liabilities:

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Proceeds from the exercise of stock options 2,014 534 2,045

Proceeds from issuance of Series A convertible preferred stock, net — — 73,491

Proceeds from issuance of Series B convertible preferred stock, net — — 229,552

Repayment of notes payable to related parties — — ( 40 )

Payment of deferred offering costs — — ( 2,144 )

Net cash provided by financing activities 3,329 312,540 321,578

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 165 ) 9 70

Net increase in cash, cash equivalents and restricted cash 351,531 29,670 105,104

Net (decrease) increase in cash, cash equivalents and restricted cash ( 303,153 ) 351,531 29,670

Cash, cash equivalents and restricted cash, at the beginning of the period 486,620 135,089 105,419

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Supplemental disclosure of noncash investing and financing activities:

Acquisition of in-process research and development through issuance of stock $ — $ — $ 19,284

Issuance of Series A convertible preferred stock to convert debt and accrued interest $ — $ — $ 6,124

Unpaid deferred offering costs - net $ — $ — $ 1,545

Right-of-use assets obtained in exchange for lease liabilities $ — $ 3,106 $ 12,458

Derecognition ROU lease assets obtained in exchange for operating lease liabilities 1,650 $ — $ —

Conversion of convertible preferred stock to common stock $ — $ — $ 338,367

Change in unrealized gain (loss) on marketable securities, net of tax $ ( 225 ) $ ( 100 ) $ 331

Unpaid property and equipment $ 15 $ 183 $ —

Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities $ — $ 15 $ 183

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

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Gossamer Bio, Inc.

(including its subsidiaries, the “Company”) is a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology.

(including its subsidiaries, referred to as the “Company”) is a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology.

The Company was incorporated in the state of Delaware on October 25, 2015 (originally as FSG Bio, Inc.) and is based in San Diego, California.

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All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation.

Initial Public Offering in February 2019

On February 12, 2019, the Company completed its initial public offering (“IPO”) with the sale of 19,837,500 shares of common stock, including shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $ 16.00 per share, resulting in net proceeds of $ 291.3 million after deducting underwriting discounts, commissions, and offering expenses.

Liquidity and Capital Resources

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From the Company’s inception through the year ended December 31, 2021, the Company has funded its operations primarily through equity financings and debt issuance.

The Company raised $ 942.0 million from October 2017 through December 31, 2020 through Series A and Series B convertible preferred stock financings, a convertible note financing, its IPO, its Credit Facility (as defined in Note 5 below), and concurrent underwritten public offerings of its 5.00 % convertible senior notes due 2027 (the "2027 Notes") and common stock in May 2020.

The Company raised $ 942.0 million from October 2017 through December 31, 2021 through Series A and Series B convertible preferred stock financings, a convertible note financing, its IPO, its Credit Facility (as defined in Note 5 below), and concurrent underwritten public offerings of its 5.00 % convertible senior notes, its 2027 Notes and common stock in May 2020.

See Note 5 for additional information regarding the Credit Facility and the 2027 Notes.

In addition, the Company received $ 12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc.

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable.

As a result, the Company will need to raise capital through equity offerings, debt financings and other capital sources, including potential collaborations, licenses and other similar arrangements.

Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these consolidated financial statements were available to be issued.

Management believes that it has sufficient working capital on hand to fund operations through at least the next 12 months from the date these consolidated financial statements were available to be issued.

There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

The COVID-19 pandemic has caused significant business disruption around the globe.

The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the pandemic and the impact on the Company’s clinical trials, employees and vendors.

At this point, the degree to which COVID-19 has impacted and may continue to impact the Company’s financial condition or results of operations is uncertain.

The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the pandemic worldwide and the impact on the Company’s clinical trials, employees and vendors.

At this point, the degree to which COVID-19 may continue to impact the Company’s financial condition or results of operations remains uncertain.

A prolonged pandemic could have a material and adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital.

For example, the Company temporarily paused enrollment in its Phase 1b clinical trial in pulmonary arterial hypertension ("PAH") in 2020 as a result of the ongoing COVID-19 pandemic.

In addition, due to the challenges of enrolling patients posed by the COVID-19 pandemic, the Company may experience delays in enrollment of patients in its Phase 2 clinical trials of GB004 in ulcerative colitis and of seralutinib, also known as GB002, in PAH, as well as delays in reporting data results from its ongoing trials.

For example, certain sites temporarily closed enrollment in the Company's Phase 2 clinical trial in pulmonary arterial hypertension ("PAH") in 2020 as a result of the COVID-19 pandemic and related staffing shortages at sites and key vendors.

In addition, due to the challenges of enrolling patients worldwide posed by the COVID-19 pandemic and related staffing shortages at sites and key vendors, the Company has experienced and may continue to experience delays in enrollment of patients in its Phase 2 clinical trial of seralutinib, also known as GB002, in PAH, as well as delays in reporting data results from its ongoing trials.

Note 2— Summary of Significant Accounting Policies

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.

The most significant estimates in the Company’s consolidated financial statements relate to the allocation of the 2027 Notes into liability and equity components and accrued research and development expenses.

The most significant estimates in the Company’s consolidated financial statements relate to the allocation of the 2027 Notes

into liability and equity components and accrued research and development expenses.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

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The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as current assets on the accompanying condensed consolidated balance sheets.

The Company’s marketable securities consist of U.S.

Treasury and agency securities, commercial paper, and corporate debt securities.

Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as current assets on the accompanying consolidated balance sheets.

The Company’s marketable securities consist of commercial paper and corporate debt securities.

Marketable securities are recorded at fair value and unrealized gains and losses are recorded within accumulated other comprehensive loss.

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Restricted cash as of December 31, 2021, and 2020 represents cash held as collateral for the Company's facility leases.

Restricted cash as of December 31, 2018 served as collateral for the Company’s corporate credit card program.

Concentrations of Credit Risk and Off-Balance Sheet Risk

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Property and equipment, net, which consists mainly of office equipment and leasehold improvements, are carried at cost less accumulated depreciation.

Depreciation is computed over the estimated useful lives of the respective assets, generally three to seven years, using the straight-line method.

Depreciation is computed over the estimated useful lives of the respective assets, generally two to seven years , using the straight-line method.

Convertible Senior Notes

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have associated convertible features.

The carrying amount of the liability component was calculated by measuring the fair value of similar debt

instruments that do not have associated convertible features.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2027 Notes.

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All research and development costs are expensed as incurred.

Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services) and in process research and development expenses.

Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others.

Some of these contractor’s bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones.

Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones.

For the latter, the Company accrues the expenses as goods or services are used or rendered.

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Upfront costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once incurred as research and development expenses.

In process research and development

In process research and development costs relate to upfront payment to Aadi in connection with the amendment to the in-license agreement of GB004 and a milestone payment to Pulmokine for the initiation of the Phase 2 clinical trial for seralutinib.

Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain.

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When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority.

The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

The determination as to whether the tax benefit will

more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Deferred tax assets and liabilities reflect the future tax consequences of the differences between the financial reporting and tax bases of assets and liabilities using current enacted tax rates.

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Income and expense accounts are translated at average exchange rates during the year which approximate the rates in effect at the transaction dates.

The resulting translation adjustments are recorded in accumulated other comprehensive income (loss).

The resulting translation adjustments are recorded in accumulated other comprehensive income in the Company's consolidated balance sheets.

Foreign exchange transaction gains and losses are included in other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

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This guidance is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2020.

The Company is currently assessing the impact this standard will have on its consolidated financial statements or related financial statement disclosures.

Recently Adopted Accounting Pronouncements

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

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments.

For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities.

This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018.

The Company adopted ASU 2016-13 as of January 1, 2020.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related financial statement disclosures.

The Company plans to adopt ASU 2020-06 on January 1, 2022 using the modified retrospective approach, and accordingly the Company will record an adjustment that reflects the 2027 Notes as if the embedded conversion feature had not been separated.

The impact upon adoption on the Consolidated Balance Sheets is anticipated to be an increase of approximately $ 44.8 million in convertible senior notes, net, a write-off of approximately $ 9.4 million in deferred income tax liabilities and a decrease of approximately $ 53.5 million in additional paid-in capital.

In addition, upon adoption, there is an adjustment to increase the beginning balance of retained earnings on the Consolidated Balance Sheets for previously recognized interest expense, of approximately $ 8.7 million for amortization of debt discount related to the carrying value of the embedded conversion feature upon issuance.

There will be no impact to the Company’s net loss per share calculation.

Debt for further information regarding the 2027 Notes.

Net Loss Per Share

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The Company uses the if-converted method for assumed conversion of the 2027 Notes to compute the weighted average shares of common stock outstanding for diluted net loss per share.

Diluted net loss per share excludes the potential impact of the Company's Series Seed convertible preferred stock, Series A convertible preferred stock, and Series B convertible preferred stock, common stock options and unvested shares of restricted stock and the potential shares issuable upon conversion of the 2027 Notes because their effect would be anti-dilutive due to the Company’s net loss.

Diluted net loss per share excludes the potential impact of the Company’s common stock options and unvested shares of restricted stock and the potential shares issuable upon conversion of the 2027 Notes

because their effect would be anti-dilutive due to the Company’s net loss.

Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

1 unchanged sentence

2021 2020 2019

Shares issuable upon conversion of Series Seed convertible preferred stock — — 4,444,444

Shares issuable upon conversion of Series A convertible preferred stock — — 10,158,710

Shares issuable upon conversion of Series B convertible preferred stock — — 15,890,306

2027 Notes 12,321,900 12,321,900 —

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Accrued compensation $ 11,916 $ 12,194

Operating lease liabilities, current 3,633 2,354

Operating lease liabilities 2,902 3,633

Accrued consulting fees 956 1,919

Accrued interest, current 1,094 —

Accrued other 742 1,126

Accrued interest 1,066 1,094

Accrued legal fees 202 619

Accrued litigation liability 2,375 —

Accrued accounting fees 154 285

Accrued in process research and development — 225

Accrued other 839 742

Total accrued expenses $ 20,410 $ 20,711

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the hierarchy for assets measured at fair value on a recurring basis as of December 31, 2020 and December 31, 2019 (in thousands):

The following table presents the hierarchy for assets measured at fair value on a recurring basis as of December 31, 2021 and 2020 (in thousands):

Fair Value Measurements at End of Period Using:

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Money market funds $ 139,794 $ 139,794 $ — $ —

Treasury and agency securities 18,280 18,280 — —

Commercial paper 113,939 — 113,939 —

Corporate debt securities 37,873 — 37,873 —

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Treasury and agency securities 18,280 18,280 — —

Commercial paper 37,411 — 37,411 —

Corporate debt securities 26,573 — 26,573 —

1 unchanged sentence

Fair Value of Other Financial Instruments

As of December 31, 2020 and December 31, 2019, the carrying amounts of the Company’s financial instruments, which include cash, interest receivable, accounts payable and accrued expenses, approximate fair values because of their short maturities.

Interest receivable as of December 31, 2020 and December 31, 2019 was $ 0.2 million and $ 1.5 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the condensed consolidated balance sheets.

As of December 31, 2021 and 2020, the carrying amounts of the Company’s financial instruments, which include cash, restricted cash, prepaid and other current assets, interest receivable, accrued research and development expenses, accounts payable and accrued expenses and other current liabilities, approximate fair values because of their short maturities.

Interest receivable as of December 31, 2021 and 2020 was $ 0.2 million and $ 0.2 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the consolidated balance sheets.

The Company believes that its Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and, accordingly, the carrying value of the Credit Facility approximates fair value.

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Based on the assumptions used to value these liabilities at fair value, the debt instrument is categorized as Level 2 in the fair value hierarchy.

As of December 31, 2020 the fair value of the Company's 2027 Notes was $ 198.5 million.

As of December 31, 2021 and 2020 the fair value of the Company's 2027 Notes was $ 190.5 million and $ 198.5 million, respectively.

The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (see Note 5).

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The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors.

Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense.

The Company does not generally intend to sell the

investments and it is not more likely than not that it will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in marketable securities and long-term investments as of December 31, 2020 are as follows (in thousands):

Marketable securities

Realized gains and losses are calculated using the specific identification method and recorded in other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

The Company does not generally intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

As of December 31, 2021

Corporate debt securities $ 37,921 $ — $ ( 48 ) $ 37,873

Commercial paper $ 103,942 $ — $ — $ 103,942

Total marketable securities $ 141,863 $ — $ ( 48 ) $ 141,815

As of December 31, 2020

Corporate debt securities $ 26,396 $ 177 $ — $ 26,573

Total marketable securities $ 26,396 $ 177 $ — $ 26,573

As of December 31, 2021 and 2020, the Company classified $ 10.0 million and $ 18.3 million, respectively, of assets with original maturities of 90 days or less as cash equivalents.

3 unchanged sentences

The Company intends and has the ability to hold its investments in unrealized loss positions until their amortized cost basis has been recovered.

As of December 31, 2020, there were no material declines in the market value of the Company's available-for-sale investments due to credit-related factors.

As of December 31, 2021 and 2020, there were no material declines in the market value of the Company's available-for-sale investments due to credit-related factors.

Contractual maturities of available-for-sale debt securities, as of December 31, 2021, were as follows (in thousands):

Due within one year $ 26,573

One to two years —

Less than one year $ 141,815

Greater than one year —

Total $ 141,815

The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

Note 5— Indebtedness

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The remaining two tranches are available no earlier than the satisfaction of the applicable funding conditions, including the applicable clinical development milestones, and no later than December 31, 2022.

As of December 31, 2020, no other tranches under the Credit Facility have been available.

As of December 31, 2021, no other tranches under the Credit Facility were available to be drawn.

The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property.

Each term loan under the Credit Facility bears interest at an annual rate equal to the sum of (i) one-month LIBOR (customarily defined, with a change to prime rate if LIBOR funding becomes unlawful or impractical) plus (ii) 7.00 %, subject to a LIBOR floor of 2.00 %.

The Company is required to make interest-only payments on the term loan for all payment dates prior to July 1, 2022.

The term loans under the Credit Facility will begin amortizing on July 1, 2022, with equal monthly payments of principal plus interest being made by the Company to the Lenders in consecutive monthly installments following

such interest-only period until the Credit Facility matures on January 1, 2025.

Upon final repayment of the term loans, the Company must pay an exit fee of 1.75 % of the amount borrowed under the Credit Facility, less any partial exit fees previously paid.

Upon partial prepayment of a portion of the term loans, the Company must pay a partial exit fee of 1.75 % of the principal being prepaid.

At the Company’s option, the Company may prepay the outstanding principal balance of the term loan in whole or in part, subject to a prepayment fee of 3.00 % of any amount prepaid if the prepayment occurs through and including the first anniversary of the second amendment effective date, 2.00 % of the amount prepaid if the prepayment occurs after the first anniversary of the second amendment effective date through and including the second anniversary of the second amendment effective date, and 1.00 % of any amount prepaid after the second anniversary of the second amendment effective date and prior to January 1, 2025.

The borrower is required to make interest-only payments on the term loan for all payment dates prior to July 1, 2022.

Upon final repayment of the term loans, the borrower must pay an exit fee of 1.75 % of the amount borrowed under the Credit Facility, less any partial exit fees previously paid.

Upon partial prepayment of a portion of the term loans, the borrower must pay a partial exit fee of 1.75 % of the principal being prepaid.

At the borrower’s option, the borrower may prepay the outstanding principal balance of the term loan in whole or in part, subject to a prepayment fee of 3.00 % of any amount prepaid if the prepayment occurs through and including the first anniversary of the second amendment effective date, 2.00 % of the amount prepaid if the prepayment occurs after the first anniversary of the second amendment effective date through and including the second anniversary of the second amendment effective date, and 1.00 % of any amount prepaid after the second anniversary of the second amendment effective date and prior to January 1, 2025.

The Credit Facility includes affirmative and negative covenants applicable to the Company and certain of its subsidiaries.

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5.00% Convertible Senior Notes due 2027

On May 21, 2020, the Company issued $ 200.0 million aggregate principal amount of 5.00 % convertible senior notes due 2027 in a public offering.

On May 21, 2020, the Company issued $ 200.0 million aggregate principal amount of 5.00 % convertible senior notes due 2027 in a public offering (the "2027 Notes").

The 2027 Notes were registered pursuant to the Company’s Shelf Registration Statement (as defined in Note 8 below).

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In the case of certain events of bankruptcy, insolvency or reorganization, the principal amount of the 2027 Notes together with accrued and unpaid interest, if any, thereon will automatically become and be immediately due and payable.

As of December 31, 2020, there were no events or market conditions that would allow holders to convert the 2027 Notes.

At the time the 2027 Notes become convertible within 12 months of the balance sheet date, the carrying value of the 2027 Notes will be reclassified to short-term.

As of December 31, 2021 and 2020, there were no events or market conditions that would allow holders to convert the 2027 Notes.

When the 2027 Notes become convertible within 12 months of the balance sheet date, the carrying value of the 2027 Notes will be reclassified to short-term.

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components.

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Because the assets had not yet received regulatory approval, the fair value attributable to these assets was recorded as in process research and development (“IPR&D”) expenses in the Company’s consolidated statement of operations for the years ended December 31, 2021, 2020, and 2019.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is resolved.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is met.

License from Pulmokine, Inc.

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The development activities cannot be performed without significant cost and effort by the Company.

The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country basis, the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim covering such

licensed product or specified regulatory exclusivity for the licensed product in such country.

The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country

basis, the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product or specified regulatory exclusivity for the licensed product in such country.

The Company is obligated to make future development and regulatory milestone payments of up to $ 58.0 million, commercial milestone payments of up to $ 45.0 million, and sales milestone payments of up to $ 190.0 million.

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The Company made an upfront payment of $ 5.5 million in October 2017.

In December 2020, the Company accrued a milestone payment of $ 5.0 million in connection with the initiation of the first Phase 2 clinical trial of seralutinib.

AA Biopharma Inc.

Acquisition (GB001)

On January 4, 2018, the Company acquired AA Biopharma Inc.

pursuant to a merger agreement, and with the acquisition acquired the rights to GB001 and certain backup compounds.

In connection with the merger agreement, the Company issued an aggregate of 20,000,000 shares of Series Seed convertible preferred stock and 1,101,278 shares of common stock to the AA Biopharma shareholders.

The Company recorded IPR&D of $ 19.3 million in connection with the acquisition of AA Biopharma.

License from Aerpio Pharmaceuticals, Inc.

On June 24, 2018, the Company entered into a license agreement with Aerpio Pharmaceuticals, Inc.

(“Aerpio”) under which the Company was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Aerpio to develop and commercialize GB004, and certain other related compounds for all applications.

As of December 31, 2020, the Company accrued a milestone payment of $ 5.0 million in connection with the initiation of the first Phase 2 clinical trial of seralutinib, which was paid in January 2021.

As of December 31, 2021, no other milestones had been accrued as the underlying contingencies had not yet been met.

License from Aadi Biosciences, Inc.

On June 24, 2018, the Company entered into a license agreement with Aerpio Pharmaceuticals, Inc., now known as Aadi Biosciences, Inc.

("Aadi"), under which the Company was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Aadi to develop and commercialize GB004, and certain other related compounds for all applications.

The Company made an upfront payment of $ 20.0 million in June 2018, which represented the purchase consideration for an asset acquisition.

On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $ 15.0 million to Aerpio for a reduction in future milestone payments and royalties.

On May 11, 2020, the Company entered into an amendment to the license agreement with Aadi pursuant to which the Company made an upfront payment of $ 15.0 million to Aadi for a reduction in future milestone payments and royalties.

Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $ 40.0 million and a sales milestone payment of $ 50.0 million.

1 unchanged sentence

The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from low- to mid-single digits, subject to certain customary reductions.

Aerpio retains its twenty percent ( 20.00 %) participation right on a disposition of GB004.

As of December 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been resolved.

Aadi retains its twenty percent ( 20.00 %) participation right on a disposition of GB004.

As of December 31, 2021and 2020, no milestones had been accrued as the underlying contingencies had not yet been met.

Adhaere Pharmaceuticals, Inc.

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On September 21, 2018, the Company acquired Adhaere Pharmaceuticals, Inc.

pursuant to a merger agreement for an upfront payment of $ 7.5 million in cash, and with the acquisition acquired the rights to GB1275 and certain backup compounds.

("Adhaere") pursuant to a merger agreement for an upfront payment of $ 7.5 million in cash, and with the acquisition acquired the rights to GB1275 and certain backup compounds.

The Company is obligated to make future regulatory, development and sales milestone payments of up to $ 62.0 million and pay tiered royalties on worldwide net sales, at percentages ranging from low to mid-single digits, subject to customary reductions.

1 unchanged sentence

In May 2019, the Company made a milestone payment of $ 1.0 million in connection with the filing of the Investigational New Drug application for the GB1275 program.

As of December 31, 2020, no other milestones had been accrued as the underlying contingencies had not yet been resolved.

As of December 31, 2021 and 2020, no other milestones had been accrued as the underlying contingencies had not yet been met.

The Company recorded the following IPR&D expense on the consolidated statements of operations (in thousands):

4 unchanged sentences

GB1275 — — 1,000

GB001 — — 19,148

Other preclinical programs 75 3,380 2,600

1 unchanged sentence

Note 7— Income Taxes

The amount of net loss before taxes for the years ended December 31, 2020, 2019, and 2018 is as follows:

The amount of net loss before taxes for the years ended December 31, 2021, 2020, and 2019 is as follows (in thousands):

2021 2020 2019

24 unchanged sentences

Property, plant and equipment ( 790 ) ( 776 ) ( 57 )

Stock-based compensation — — ( 1,057 )

Total gross deferred tax liabilities ( 11,335 ) ( 13,583 ) ( 2,221 )

1 unchanged sentence

Net deferred tax asset $ — $ — $ —

At December 31, 2020, the Company has federal and California NOL carryforwards of approximately $ 310.7 million and $ 1.1 million, respectively.

The federal NOL carryforwards generated prior to January 1, 2018 begin to expire in 2034.

The federal NOL generated after 2017 of $ 307.7 million can be carried forward indefinitely but may only be used to offset up to 80 % of the Company's taxable income in taxable years beginning after December 31, 2020.

As of December 31, 2021, the Company had federal and state NOL carryforwards of approximately $ 460.4 million and $ 1.1 million, respectively.

The federal and state NOL carryforwards that are subject to expiration will begin to expire in 2034, unless previously utilized.

The federal NOL generated after 2017 of $ 457.5 million can be carried forward indefinitely but may only be used to offset up to 80 % of future taxable income each year.

The California NOL carryforwards begin to expire in 2036.

At December 31, 2020, the Company has foreign NOL carryforwards of approximately $ 101.1 million that can be carried forward indefinitely.

At December 31, 2020, the Company also has orphan drug credit and federal research tax credit carryforwards of approximately $ 17.9 million and California research tax credits of $ 5.4 million.

As of December 31, 2021, the Company also has foreign NOL carryforwards of approximately $ 157.2 million.

The foreign NOL can be carried forward indefinitely.

As of December 31, 2021, the Company also had orphan drug credit and federal research tax credit carryforwards of approximately $ 25.7 million and California research tax credits of $ 8.0 million.

The federal research tax credit carryforwards begin to expire in 2038 and the California research tax credit carryforward does not expire and can be carried forward indefinitely until utilized.

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Stock-based compensation ( 1.56 %) ( 1.81 %) — %

In process research and development — % — % ( 3.92 %)

Nondeductible interest ( 0.96 %) — % — %

Other 0.57 % ( 0.80 %) ( 0.85 %)

Provision for income taxes — % — % — %

The NOL carryforward may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax respectively.

In general, an ownership change as defined by Section 382 and 383, results from the transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

The NOL and credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Under Section 382 and 383 of the Code, the NOL and credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders (or groups of stockholders) in excess of 50 percentage points over a rolling three-year period.

Similar rules may apply under state and foreign tax laws.

In connection with the Company’s IPO in February 2019, the Company experienced an ownership change for the purposes of Section 382 and 383 of the Code.

The ownership change did not result in the forfeiture of any NOLs or credits generated prior to this date.

Consequently, the Company’s federal and state NOLs and tax credits generated through February 2019 will be subject to annual limitations.

If a change in ownership occurs in the future, the NOL and tax credits carryforwards could be eliminated or restricted.

If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.

Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

However, the Company’s NOLs and tax credits are not expected to expire unused as a result of such annual limitations, assuming we otherwise have taxable income or income tax liabilities in future periods.

If a change in ownership occurs in the future as a result of changes in the Company’s stock ownership, many of which are outside the Company’s control, the NOL and credit carryforwards could be subject to further annual limitations.

If the Company earns taxable income, such annual limitations could result in increased future tax liability to the Company and its future cash flows could be adversely affected.

The Company has recorded a full valuation allowance related to its NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

The Company files income tax returns in the United States, California, Ireland, and Luxembourg.

Due to the Company’s unutilized NOLs and credits, the Company is subject to the income tax examination by authorities since inception.

Due to the Company’s losses incurred, the Company is subject to the income tax examination by authorities since inception.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense.

As of December 31, 2020, 2019, or 2018, there were no significant accruals for interest related to unrecognized tax benefits or tax penalties.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was signed into law making significant changes to the Internal Revenue Code, including, but are not limited to (a) reducing the federal corporate income tax rate from 35% to 21%, effective January 1, 2018;

(b) eliminating the federal corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized;

and (c) eliminating several business deductions and credits, including deductions for certain executive compensation in excess of $1 million.

As a result of the rate reduction, the Company reduced the deferred tax asset balance as of December 31, 2018 by $ 0.8 million.

Due to the Company's full valuation allowance position, there was no net impact on the Company’s income tax provision at December 31, 2018 as the reduction in the deferred tax asset balance was fully offset by a corresponding decrease in the valuation allowance.

As of December 31, 2021, 2020, or 2019, there were no accruals for interest related to unrecognized tax benefits or tax penalties.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2021, 2020, and 2019, excluding interest and penalties, is as follows:

4 unchanged sentences

Balance at the end of the year $ 7,551 $ 5,060 $ 2,754

Included in the balance of unrecognized tax benefits at December 31, 2020 is $ 5.1 million that, if recognized, would not impact the Company’s income tax benefit or effective tax rate as long as our deferred tax asset remains subject to a

full valuation allowance.

The Company does not expect any significant increases or decreases to our unrecognized tax benefits within the next 12 months.

Included in the balance of unrecognized tax benefits at December 31, 2021 is $ 7.6 million that, if recognized, would not impact the Company’s income tax benefit or effective tax rate as long as the Company's deferred tax asset remains subject to a full valuation allowance.

The Company does not expect any significant increases or decreases to the Company's unrecognized tax benefits within the next 12 months.

Note 8— Stockholders’ Equity

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These shares are subject to repurchase by the Company upon a founder's termination of employment or service to the Company.

Pursuant to the employment agreements with the Company’s founders executed January 4, 2018, the Company provided for certain potential additional issuances of common stock (the “anti-dilution shares”) to each of the founders to ensure the total number of shares of common stock held by them and their affiliates (inclusive of any shares subject to equity awards granted by the Company and the Founders’ Equity) would represent 15 % of the Company’s fully-diluted capitalization until such time as the Company raised $ 300.0 million in equity capital, including the capital raised in the Series A financing.

Pursuant to the employment agreements with the Company’s founders executed January 4, 2018, the Company provided for certain potential additional issuances of common stock (the “anti-dilution shares”) to each of the founders to ensure the total number of shares of common stock held by them and their affiliates (inclusive of any shares subject to equity awards granted by the Company) would represent 15 % of the Company’s fully-diluted capitalization until such time as the Company raised $ 300.0 million in equity capital, including the capital raised in the Series A financing.

In furtherance of this obligation, on May 21, 2018, the Company issued 251,547 shares of common stock to the founders for services rendered to the Company, valued at $ 2.61 per share with an additional 251,547 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares.

In addition, on September 6, 2018, the Company issued 1,795,023 shares of common stock to the founders for services rendered to the Company, valued at $ 9.63 per share, with an additional 1,795,023 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares.

In November 2017, in connection with the issuance of the Series A convertible preferred stock, certain employees entered into stock restriction agreements, whereby 1,305,421 shares are subject to repurchase by the Company upon the stockholder’s termination of employment or service to the Company.

For the year ended December 31, 2021, 25,383 shares were forfeited due to termination of employment.

6 unchanged sentences

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”).

The 2019 Plan became effective on February 6, 2019, the day prior to the

effectiveness of the registration statement filed in connection with the IPO.

The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO.

Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries.

14 unchanged sentences

Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan.

As of December 31, 2020, 3,941,562 shares of common stock were subject to outstanding options under the 2017 Plan, and 268,719 shares of restricted stock awards granted under the 2017 plan were unvested.

As of December 31, 2021, 2,875,330 shares of common stock were subject to outstanding options under the 2017 Plan, and no shares of restricted stock awards granted under the 2017 plan were unvested.

Fair Value of Stock Option Awards

22 unchanged sentences

0.12 % - 0.95 %

1.46 % - 1.87 %

Volatility 61.29 % - 87.13 %

85.50 % - 99.13 %

Dividend yield — — N/A

72.08 % - 78.70 %

Dividend yield — — —

Stock Options

19 unchanged sentences

Outstanding as of December 31, 2021 9,434,660 $ 12.24 7.4 $ 15,822

Options vested and exercisable as of December 31, 2020 3,749,170 $ 12.66 7.5 $ 6,293

Options vested and expected to vest as of December 31, 2021

9,434,660 $ 12.24 7.4 15,822

Options exercisable as of December 31, 2021

4,780,459 $ 12.63 6.5 10,221

The weighted-average grant date fair value per share for the stock options granted during the year ended December 31, 2021, 2020 and 2019 was $ 6.93 , $ 9.82 and $ 13.17 , respectively.

1 unchanged sentence

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

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2020 and 2019 was $ 1.1 million and $ 6.9 million, respectively.

There were no stock options exercised during the year ended December 31, 2018.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021, 2020 and 2019 was $ 1.6 million, $ 1.1 million and $ 6.9 million, respectively.

At December 31, 2021, the total unrecognized compensation related to unvested stock option awards granted was $ 34.1 million, which the Company expects to recognize over a weighted-average period of approximately 2.3 years.

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Nonvested at December 31, 2018 7,482,032 $ 4.01

Granted 8,673,584 5.53

Vested ( 2,833,506 ) 4.05

Forfeited ( 127,277 ) 0.09

Forfeited / cancelled — —

Nonvested at December 31, 2019 4,648,526 $ 3.98

Granted 2,003,900 10.96

Vested ( 2,557,377 ) 4.00

Forfeited — —

Forfeited / cancelled ( 764,228 ) 8.30

Nonvested at December 31, 2020 3,330,821 $ 7.16

1 unchanged sentence

Vested ( 1,391,476 ) 5.86

Forfeited ( 764,228 ) 8.30

Forfeited / cancelled ( 728,011 ) 10.03

Nonvested at December 31, 2021 2,561,219 $ 8.67

8 unchanged sentences

In connection with the departure of the Company's former President and Chief Executive Officer in November 2020, the Company recognized $ 5.5 million of incremental stock-based compensation expense during the year ended December 31, 2020, due to a modification of the executive's existing restricted stock award, which included 18 months of accelerated vesting of the executive's outstanding restricted stock in accordance with the terms of the executive's transition agreement.

As of December 31, 2020, total unrecognized compensation expense related to the ESPP was $ 1.4 million, which the Company expects to recognize over a weighted-average period of approximately 1 year.

As of December 31, 2021, total unrecognized compensation expense related to the ESPP was $ 1.0 million, which the Company expects to recognize over a weighted-average period of approximately 0.9 years.

Note 10— Property and Equipment, Net

12 unchanged sentences

Property and equipment, net $ 5,320 $ 5,534

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was approximately $ 1.4 million, $ 0.9 million and $ 0.3 million, respectively, and was recorded in general and administrative expense in the consolidated statements of operations.

Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was approximately $ 1.7 million, $ 1.4 million and $ 0.9 million, respectively, and was recorded in general and administrative expense and research and development expense, respectively, on the consolidated statements of operations.

Note 11— Commitments and Contingencies

The Company subleases certain office and laboratory space under a non-cancelable operating lease expiring in January 2025 for the initial leased space and December 2022 for expansion space leased pursuant to an amendment to the lease agreement entered into in August 2018.

The Company subleases certain office and laboratory space under a non-cancelable operating lease expiring in January 2025 for the initial leased space and for the expansion space leased pursuant to an amendment to the lease agreement entered into in August 2018.

The sublease agreement included options to extend for the entire premises through October 2028.

1 unchanged sentence

The period covered by the options was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The lease agreement also includes a one-time termination option for the expansion space only whereby the Company can terminate the lease with advance written notice.

The termination option was not determined to be reasonably certain to be executed.

In February 2022, the Company exercised its renewal option to extend the term of the expansion space until January 2025.

The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3 % increase each subsequent year.

Costs determined to be variable and not based on an index or rate were not included in the measurement of the operating lease liabilities.

In November 2019, the Company entered into an additional non-cancelable lease agreement for certain office and laboratory space (the “permanent space”) in San Diego, California, commencing on May 1, 2020 and expiring on December 31, 2021.

The lease agreement includes a lease for temporary space commencing on January 1, 2020 and expiring on the commencement date of the lease of the permanent space.

The monthly base rent for the permanent and temporary space is $ 63,425 and $ 28,745 , respectively.

The lease agreement included an option to extend the term of the permanent space for twelve months .

The option to extend must be exercised nine months prior to the termination of the original lease agreement.

The period covered by the option was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3 % increase each subsequent year.

In November 2019, the Company entered into an additional non-cancelable lease agreement for certain office and laboratory space (the “Permanent Space”) in San Diego, California, commencing on May 1, 2020 and expired on December 31, 2021.

The lease agreement included a lease for temporary space commencing on January 1, 2020 and expired on the commencement date of the lease of the Permanent Space.

The monthly base rent for the permanent and temporary space was $ 63,425 and $ 28,745 , respectively.

The lease was subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3 % increase each subsequent year.

In June 2020, the Company entered into a sublease agreement for the Permanent Space with a third party.

The sublease commenced on July 1, 2020 and expires on December 31, 2021.

The sublessee pays the monthly base rent of $ 63,425 , subject to an annual 3 % increase, and is obligated to pay for common area maintenance and other costs.

The sublease commenced on July 1, 2020 and expired on December 31, 2021.

The sublessee paid the monthly base rent of $ 63,425 , subject to an annual 3 % increase, and was obligated to pay for common area maintenance and other costs.

The sublessee received a 6 months base rent abatement.

The Company determined that there was no impairment on the original right-of-use asset and will continue to account for the permanent space as it did before the commencement of the sublease.

The Company recognized $ 0.2 million in sublease income for the year ended December 31, 2020.

The Company determined that there was no impairment on the original right-of-use asset and continued to account for the Permanent Space as it did before the commencement of the sublease.

The Company recognized $ 1.1 million and $ 0.2 million in sublease income for the years ended December 31, 2021 and 2020, respectively.

On July 29, 2020, the Company entered into a lease assignment agreement, whereby it became the assignee to a lease for certain office and laboratory space in Ann Arbor, Michigan.

The lease term expires on December 31, 2026 and the Company has the option to extend the term of the lease by up to five years .

The period covered by the option was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The monthly base rent for the space is $ 28,495 .

The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 2.5 % increase on January 1 of each year.

On August 4, 2021, the Company entered into a lease assignment agreement, whereby it assigned the lease to another assignee.

The Company derecognized the related operating lease obligation and right-of-use asset of $ 1.7 million.

Monthly rent expense is recognized on a straight-line basis over the term of the leases.

3 unchanged sentences

Year Ended December 31,

2021 2020 2019

Operating lease cost $ 4,029 $ 3,615 $ 3,011

7 unchanged sentences

Present value discount ( 539 )

Present value $ 11,346

Present value of lease payments $ 6,120

Current portion of operating lease liabilities (included as a component of accrued expenses and other current liabilities) 2,902

5 unchanged sentences

3:20-cv-00649-DMS-DEB).

The first amended complaint was filed on August 31, 2020, and the second amended complaint was filed on November 20, 2020.

The second amended complaint was filed on behalf of all investors who purchased the Company's securities pursuant to or traceable to the Company's February 8, 2019 IPO.

The second amended complaint alleges that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11 and 15 of the Securities Act of 1933, as amended.

The plaintiff seeks damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.

The Company moved to dismiss the second amended complaint on January 19, 2021, and Plaintiff filed an opposition to the motion on February 18, 2021.

The Company’s deadline to file a reply in support of the motion to dismiss is March 22, 2021.

The Company intends to vigorously defend this matter.

Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from this action.

The second amended complaint was filed on November 20, 2020.

The complaint was filed on behalf of all investors who purchased the Company's securities pursuant to or traceable to the Company's February 8, 2019 IPO.

The complaint alleged that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11 and 15 of the Securities Act of 1933, as amended.

The plaintiff sought damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.

The Company moved to dismiss the complaint on January 19, 2021.

On April 19, 2021, the Court granted the Company's motion to dismiss in substantial part without leave to amend, and denied the motion to dismiss as to single claim.

On October 29, 2021, the parties informed the Court that they had reached a settlement in principle, and the Court vacated all deadlines.

The parties entered a settlement agreement on February 1, 2022.

Pursuant to the agreement, the Company has agreed to pay approximately $ 2.4 million, in exchange for customary releases and settlement terms.

The lead plaintiff filed a motion for preliminary approval of the settlement and authorization of dissemination of notice to the class on February 2, 2022, which remains pending.

In accordance with the authoritative guidance on the evaluation of loss contingencies, the Company recorded a $ 2.4 million litigation charge related to this matter in the third quarter of 2021, which is included as a component of General and Administrative expense in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

EXHIBIT INDEX

10 unchanged sentences

4.3 Description of Securities Registered under Section 12 of the Exchange Act.

10-K 2/26/2021 4.3

4.4 Indenture, dated as of May 21, 2020, by and between the Registrant and Wilmington Trust, National Association.

23 unchanged sentences

Non-Employee Director Compensation Program.

S-1/A 1/23/2019 10.7

10.8# Gossamer Bio, Inc.

1 unchanged sentence

10-Q 5/12/2020 10.1

10.9# Employment Letter, dated January 4, 2018, by and between Sheila Gujrathi, M.D.

and the Registrant.

S-1 12/21/2018 10.8

10.10# Transition Agreement, dated November 17, 2020, by and between Sheila Gujrathi, M.D.

and the Registrant.

10.9# Letter Agreement, dated November 16, 2020, by and between Faheem Hasnain and the Registrant.

10-K 2/26/2021 10.11

10.10# Employment Letter, dated December 4, 2018, by and between Bryan Giraudo and the Registrant.

2 unchanged sentences

S-1 12/21/2018 10.11

10.14# Employment Letter, dated December 4, 2018, by and between Luisa Salter-Cid, Ph.D.

and the Registrant.

S-1 12/21/2018 10.13

10.12# Employment Letter, dated April 16, 2021, by and between Caryn Peterson and the Registrant.

10-Q 8/9/2021 10.1

10.13# Employment Letter, dated May 1, 2021, by and between Laura Carter and the Registrant.

10-Q 8/9/2021 10.2

10.14# Employment Letter, dated June 21, 2021, by and between Richard Aranda and the Registrant.

10-Q 8/9/2021 10.3

10.15# Form of Indemnification Agreement.

6 unchanged sentences

S-1 12/21/2018 10.17

10.19† License Agreement, dated June 24, 2018, by and between Aerpio Pharmaceuticals, Inc.

10.19† License Agreement, dated June 24, 2018, by and between Aadi Bioscience, Inc.

and GB004, Inc.

2 unchanged sentences

1 to License Agreement, dated May 11, 2020, by and between GB004, Inc.

and Aerpio Pharmaceuticals, Inc.

and Aadi Bioscience, Inc.

10-Q 8/11/2020 10.2

9 unchanged sentences

21.1 List of Subsidiaries of the Registrant.

10-K 3/24/2020 21.1

23.1 Consent of Ernst & Young LLP, independent registered public accounting firm.

18 unchanged sentences

President and Chief Executive Officer

Date February 26, 2021

Date March 3, 2022

SIGNATURES AND POWER OF ATTORNEY

2 unchanged sentences

/s/ Faheem Hasnain President, Chief Executive Officer and Chairman of the Board of Directors

(principal executive officer) February 26, 2021

(principal executive officer) March 3, 2022

Faheem Hasnain

/s/ Bryan Giraudo Chief Financial Officer

/s/ Bryan Giraudo Chief Operating Officer and Chief Financial Officer

(principal financial and

accounting officer) February 26, 2021

accounting officer) March 3, 2022

Bryan Giraudo

/s/ Joshua H.

Bilenker Director February 26, 2021

Bilenker Director March 3, 2022

Bilenker, M.D.

/s/ Kristina Burow Director February 26, 2021

/s/ Kristina Burow Director March 3, 2022

Kristina Burow

/s/ Russell Cox Director February 26, 2021

/s/ Russell Cox Director March 3, 2022

/s/ Thomas Daniel, M.D.

Director February 26, 2021

Director March 3, 2022

Thomas Daniel, M.D.

/s/ Renée Galá Director February 26, 2021

/s/ Renée Galá Director March 3, 2022

/s/ Sandra Milligan, M.D., J.D.

Director March 3, 2022

Sandra Milligan

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