What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 138 added, 105 removed, 435 unchanged (36% of the section changed)

3 unchanged sentences

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

September 30,

2024 December 31,

21 unchanged sentences

Operating lease liability, net of current portion

10,239 10,992

Deferred revenue, net of current portion

6 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

no shares issued or outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

43,702,147 and 39,107,048 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized as of September 30, 2024 and December 31, 2023;

no shares issued or outstanding as of September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 200,000,000 shares authorized as of September 30, 2024 and December 31, 2023;

43,721,772 and 39,107,048 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

48 unchanged sentences

Balance at June 30, 2024 43,702,147 4 481,529 ( 377,515 ) 104,018

Issuance of common stock from at the market offering, net of issuance costs of $ 50

8,500 — — — —

Stock-based compensation expense — — 2,011 — 2,011

Stock option exercises 11,125 — 23 — 23

— — — ( 16,673 ) ( 16,673 )

Balance at September 30, 2024 43,721,772 $ 4 $ 483,563 $ ( 394,188 ) $ 89,379

Additional Paid-in Capital

15 unchanged sentences

Balance at June 30, 2023 35,641,784 3 442,381 ( 323,785 ) 118,599

Issuance of common stock from at the market offering, net of issuance costs of $ 29

15,000 — 30 — 30

Stock-based compensation expense — — 2,097 — 2,097

Stock option exercises 1,266 — 2 — 2

— — — ( 8,285 ) ( 8,285 )

Balance at September 30, 2023 35,658,050 $ 3 $ 444,510 $ ( 332,070 ) $ 112,443

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

Werewolf Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited) (amounts in thousands)

Six Months Ended

Condensed Consolidated Statements of Cash Flows (unaudited)

(amounts in thousands)

Nine Months Ended

September 30,

Operating activities:

12 unchanged sentences

Other receivables 886 1,017

Other non-current assets

Accounts payable, accrued expenses and other liabilities

864 ( 5,288 )

Deferred revenue ( 1,340 ) ( 5,258 )

33 unchanged sentences

Purchases of property and equipment in accounts payable and accrued expenses $ 124 $ 198

Issuance costs in accounts payable and accrued expenses

Issuance costs in accounts payable, accrued expenses and other current assets, net

Fair value of derivative liability issued with term loan

20 unchanged sentences

Even if our product development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

We had cash and cash equivalents of $ 135.3 million at June 30, 2024.

We had cash and cash equivalents of $ 122.8 million at September 30, 2024.

We expect that our cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of the condensed consolidated financial statements in this Form 10-Q.

3 unchanged sentences

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements as of June 30, 2024 and December 31, 2023, and for the three and six months ended June 30, 2024 and 2023, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information.

The accompanying condensed consolidated financial statements as of September 30, 2024 and December 31, 2023, and for the three and nine months ended September 30, 2024 and 2023, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

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These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 7, 2024 (the “2023 Annual Report”).

The information presented in the condensed consolidated financial statements and related notes as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023, is unaudited.

The information presented in the condensed consolidated financial statements and related notes as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023, is unaudited.

The December 31, 2023 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Interim results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, or any future period.

Interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, or any future period.

The accompanying condensed consolidated financial statements include the accounts of Werewolf Therapeutics, Inc.

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The significant accounting policies and estimates used in the preparation of the condensed consolidated financial statements are described in our audited financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the 2023 Annual Report.

Other than as set forth below there have been no material changes in our significant accounting policies during the six months ended June 30, 2024.

Other than as set forth below there have been no material changes in our significant accounting policies during the nine months ended September 30, 2024.

Use of Estimates

24 unchanged sentences

Detailed description of the contractual terms and our accounting for the agreement described below is included in our audited financial statements and notes in the 2023 Annual Report.

During the six months ended June 30, 2024, we continued to perform under our exclusive global collaboration and license agreement (the “Collaboration Agreement”) with Jazz Pharmaceuticals Ireland Limited ("Jazz"), pursuant to which we recognized revenue utilizing the cost-to-cost input method, which best depicts the research and development services performed for the customer.

During the nine months ended September 30, 2024, we continued to perform under our exclusive global collaboration and license agreement (the “Collaboration Agreement”) with Jazz Pharmaceuticals Ireland Limited ("Jazz"), pursuant to which we recognized revenue utilizing the cost-to-cost input method, which best depicts the research and development services performed for the customer.

Revenue from the transaction price was recognized over time as research and development services were performed.

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As of the execution of the Transfer Agreement, we no longer have any material performance obligations under the Collaboration Agreement.

As a result, during the three months ended June 30, 2024, all remaining deferred revenue related to the Collaboration Agreement has been recognized.

As a result, all deferred revenue related to the Collaboration Agreement has been recognized as of September 30, 2024.

The following table summarizes research and development costs incurred and revenue recognized in connection with our performance under the Collaboration Agreement:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

(in thousands)

Revenue recognized

2 unchanged sentences

— 911 545 8,184

The following table presents changes in our contract liabilities during the six months ended June 30, 2024:

Balance as of December 31, 2023 Additions Reductions Balance as of June 30, 2024

The following table presents changes in our contract liabilities during the nine months ended September 30, 2024:

Balance as of December 31, 2023 Additions Reductions Balance as of September 30, 2024

(in thousands)

3 unchanged sentences

$ 1,340 $ — $ ( 1,340 ) $ —

All deferred revenue related to the Collaboration Agreement has been recognized as of June 30, 2024

Unbilled receivables related to the Collaboration Agreement of $ 0.2 million and $ 0.4 million are included within other receivables in the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Receivables related to the Collaboration Agreement of $ 0.3 million and $ 0.9 million are included within other receivables in the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Revenue recognized during the six months ended June 30, 2024 and 2023, includes $ 1.3 million and $ 5.3 million of revenue that was included in deferred revenue as of December 31, 2023 and 2022, respectively.

All deferred revenue related to the Collaboration Agreement has been recognized as of September 30, 2024

Unbilled receivables related to the Collaboration Agreement of $ 0.4 million are included within other receivables in the accompanying condensed consolidated balance sheet as of December 31, 2023.

We had no unbilled receivables as of September 30, 2024.

Receivables related to the Collaboration Agreement of $ 0.5 million and $ 0.9 million are included within other receivables in the accompanying condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

Revenue recognized during the nine months ended September 30, 2024 and 2023, includes $ 1.3 million and $ 5.9 million of revenue that was included in deferred revenue as of December 31, 2023 and 2022, respectively.

At the end of each reporting period, we re-evaluate our estimate of the transaction price associated with the Collaboration Agreement and determine if variable consideration previously excluded from the transaction should be included in the transaction price based on changes in circumstances, if any.

During the six months ended June 30, 2024 and 2023, we did not recognize any adjustment to the transaction price associated with variable consideration previously excluded from the transaction price.

As of June 30, 2024, we have not received any royalty payments under the Collaboration Agreement.

During the nine months ended September 30, 2024, we did not recognize any adjustment to the transaction price associated with variable consideration previously excluded from the transaction price.

During the nine months ended September 30, 2023 the overall transaction price was adjusted to include $ 5.0 million in variable consideration that was previously excluded based on our evaluation of the variable constraint associated with the variable payment.

The total revenue recognized during the three and nine months ended September 30, 2023 included a cumulative catch-up of revenue of $ 4.2 million related to the adjustment to the overall transaction price.

As of September 30, 2024, we have not received any royalty payments under the Collaboration Agreement.

Financial Instruments and Fair Value Measurements

Our assets that are required to be measured at fair value on a recurring basis consist of money market funds, classified as cash, cash equivalents and restricted cash and cash equivalents on our condensed consolidated balance sheets as June 30, 2024 and December 31, 2023.

Our liabilities that are required to be measured at fair value on a recurring basis consist of a derivative liability pursuant to a loan and security agreement (the “K2HV Loan Agreement”) with K2 HealthVentures LLC (“K2HV”) (see Note 6, Term Loan) on our condensed consolidated balance sheets as June 30, 2024.

Our liabilities that are required to be measured at fair value on a recurring basis consist of a derivative liability pursuant to a loan and security agreement (the “K2HV Loan Agreement”) with K2 HealthVentures LLC (“K2HV”) (see Note 6, Term Loan ) on our condensed consolidated balance sheet as September 30, 2024.

We did not have any liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2023.

The carrying amounts reflected in the condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 were as follows:

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 were as follows:

Level 1 Level 2

12 unchanged sentences

$ 149,294 $ — $ — $ 149,294

There were no changes in valuation techniques during the three or six months ended June 30, 2024.

Derivative liabilities

There were no changes in valuation techniques used during the three or nine months ended September 30, 2024.

Derivative Liability

In May 2024, we entered into the K2HV Loan Agreement, as further described in Note 6, which provides up to $ 60.0 million principal in term loans.

Pursuant to the terms of the K2HV Loan Agreement, the lenders thereto may elect, prior to the full repayment of the term loans, to convert up to $ 5.0 million of the outstanding principal of the term loans into shares of our common stock at a conversion price of the lesser of $ 6.3182 per share (the “Fixed Price Conversion”) and the lowest effective price per share of our first equity financing following the closing of the K2HV Loan Agreement (the “Variable Price Conversion”), subject to customary adjustments and 9.99 % and 19.99 % beneficial ownership limitations.

The Fixed Price Conversion and Variable Price Conversion within the K2HV Loan Agreement are required to be bifurcated as a single compound embedded derivative at fair value, with subsequent changes in fair value recognized in the statements of operations.

The following table reconciles the change in fair value of the conversion option derivative liability during the six months ended June 30, 2024 based on Level 3 inputs (in thousands):

Six Months Ended

June 30, 2024

The Fixed Price Conversion and Variable Price Conversion within the K2HV Loan Agreement are required to be bifurcated as a single compound embedded derivative carried at fair value, with subsequent changes in fair value recognized in the condensed consolidated statements of operations.

The following table reconciles the change in fair value of the conversion option derivative liability during the nine months ended September 30, 2024 based on Level 3 inputs:

Derivative Liability

(in thousands)

Balance at December 31, 2023 $ —

1 unchanged sentence

Change in fair value ( 1,715 )

Balance at June 30, 2024

For the period ended June 30, 2024, the fair value of the conversion option derivative liability in the term loan has been estimated using the Monte Carlo model.

A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in measuring the conversion option derivative liability in the term loan as of June 30, 2024 and May 2, 2024 (inception) is as follows:

June 30, 2024 May 2, 2024

Balance at September 30, 2024 $ 2,735

The change in fair value of the derivative liability is included in other income (expense), net in the accompanying condensed consolidated statements of operations.

We recognized a gain on the change in fair value of the derivative liability of $ 0.1 million and $ 1.7 million during the three and nine months ended September 30, 2024, respectively.

The fair value of the conversion option derivative liability in the term loan was estimated using the Monte Carlo model.

A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in measuring the conversion option derivative liability in the term loan as of September 30, 2024 and May 2, 2024 (inception) is as follows:

September 30, 2024 May 2, 2024

$ 2.12 $ 6.08

2 unchanged sentences

Expected term (in years)

0.75 yrs 0.91 yrs

Dividend yield (continuous)

6 unchanged sentences

We remeasured the success payment liability at each reporting date and immediately prior to the Success Fee Event.

During the six months ended June 30, 2023, we recognized expense of $ 1.0 million associated with the change in the fair value of the success payment liability which is included in change in fair value of derivative liability in the accompanying condensed consolidated statements of operations.

We had no outstanding obligation associated with the Success Fee as of June 30, 2024 or December 31, 2023.

During the nine months ended September 30, 2023, we recognized expense of $ 1.0 million associated with the change in the fair value of the success payment liability which is included in other income (expense), net in the accompanying condensed consolidated statements of operations.

We had no outstanding obligation associated with the Success Fee as of September 30, 2024 or December 31, 2023.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised as follows:

September 30,

2024 December 31,

(in thousands)

Employee compensation and benefits $ 2,800 $ 3,627

Contract research 2,709 1,049

Manufacturing 2,681 2,772

Employee compensation and benefits 2,274 3,627

Professional fees 1,005 655

Accrued interest 258 310

Other 451 447

Total accrued expenses and other current liabilities

4 unchanged sentences

(i) 0.5 % above the prime rate then in effect or (ii) 4.5 %.

If the prime rate changed throughout the term, the interest rate would be adjusted effective on the date of the prime rate change.

If the prime rate changed throughout the term, the interest rate would have been adjusted effective on the date of the prime rate change.

All interest chargeable under the PWB Loan Agreement was computed on a 360-day year for the actual number of days elapsed, with interest payable monthly.

We recognized interest expense related to the PWB Loan Agreement of $ 0.3 million and $ 0.9 million during the three months ended June 30, 2024 and 2023, respectively.

In May 2024, we repaid all amounts outstanding under the PWB Loan Agreement, using $ 29.5 million in net loan proceeds received under the K2HV Loan Agreement, as described below at Note 6, together with $ 10.5 million in existing cash.

We recognized a total loss on extinguishment of debt in the amount of $ 0.6 million in the six months ended June 30, 2024 primarily due to the write off of unamortized debt issuance costs.

We recognized interest expense related to the PWB Loan Agreement of $ 1.3 million during the nine months ended September 30, 2024.

We recognized interest expense related to the PWB Loan Agreement of $ 0.9 million and $ 1.9 million during the three and nine months ended September 30, 2023, respectively.

We did no t recognize interest expense related to the PWB Loan Agreement during the three months ended September 30, 2024.

In May 2024, we repaid all amounts outstanding under the PWB Loan Agreement, using $ 29.5 million in net loan proceeds received under the K2HV Loan Agreement, as described below, together with $ 10.5 million in existing cash.

We recognized a total loss on extinguishment of debt in the amount of $ 0.6 million during the second quarter of 2024 primarily due to the write off of unamortized debt issuance costs.

K2HV Loan Agreement

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The K2HV Loan Agreement provides up to $ 60.0 million principal in term loans.

We received $ 30.0 million in gross loan proceeds at closing, $ 25.0 million from the first tranche commitment upon closing and $ 5.0 million from the second tranche commitment.

We received $ 30.0 million in gross loan proceeds at closing;

$ 25.0 million from the first tranche commitment and $ 5.0 million from the second tranche commitment.

A third tranche commitment of up to $ 10.0 million is available to be drawn at our option between January 1, 2025 and June 30, 2025, subject to the achievement, as determined by the administrative agent in its discretion, of certain time-based, clinical and regulatory milestones and receipt of not less than $ 60.0 million in net cash proceeds from certain financing activities, with at least $ 50.0 million from a single offering of common stock.

A fourth tranche commitment of up to $ 20.0 million is available to be drawn down at our option through May 1, 2026 or if the third tranche is funded, May 1, 2027, subject to Lender’s review of our clinical, financial and operating plan and subject to the Lender’s consent in its sole and absolute discretion.

The term loan matures on May 1, 2028, and we are obligated to make interest only payments for the first 24 months, or 36 months if the third tranche is funded, and then interest and equal principal payments each month thereafter through the maturity date.

The term loan bears a variable interest rate equal to the greater of (i) 10.3 %, and (ii) the sum of (A) the prime rate last quoted in The Wall Street Journal (or a comparable replacement rate if The Wall Street Journal ceases to quote such rate) and (B) 1.8 %.

The term loan matures on May 1, 2028, and we are obligated to make interest only payments for the first 24 months, or 36 months if the third tranche is funded, followed by interest and equal principal payments each month thereafter through the maturity date.

and (B) 1.8 %.

We may prepay, at our option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the term loans, subject to a prepayment premium to which the Lenders are entitled and certain notice requirements.

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There will be no prepayment penalty for any principal amount converted into common stock.

We determined that the Fixed Price Conversion and the Variable Price

Conversion within the K2HV Loan Agreement are required to be bifurcated as an embedded derivative under ASC 815 at fair value, and recorded as a discount on the debt on the date of issuance, with subsequent changes in fair value recognized in the accompanying consolidated statements of operations.

We determined that the Fixed Price Conversion and the Variable Price Conversion within the K2HV Loan Agreement are required to be bifurcated as an embedded derivative under ASC 815, Derivatives and Hedging (“ASC 815”), at fair value, and recorded as a discount on the debt on the date of issuance, with subsequent changes in fair value recognized in the accompanying condensed consolidated statements of operations.

See Note 4 for further discussion on this derivative instrument.

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Upon the occurrence of an event of default, a default interest rate of an additional 5.0 % per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of their rights and remedies as set forth in the K2HV Loan Agreement and under applicable law.

As of June 30, 2024, we are in compliance with all covenants.

As of September 30, 2024, we are in compliance with all covenants.

Subject to certain conditions, we granted the Lenders the right, prior to repayment of the term loans, to invest up to $ 5.0 million in the aggregate in future offerings of capital stock, at market terms, subject to certain exceptions and conditions.

We incurred debt issuance costs of $ 0.7 million in connection with the term loans, composed of the facility fee of $ 0.4 million and other expenses paid to the Lenders of $ 0.2 million and external legal fees of $ 0.1 million.

These debt issuance costs, together with fair value of the embedded derivative of $ 4.5 million , resulted in a debt discount of $ 5.1 million which is being amortized to interest expense over the term of the K2HV Loan Agreement using the effective interest method.

These debt issuance costs, together with the fair value of the embedded derivative of $ 4.5 million at inception of the K2HV Loan Agreement, resulted in a debt discount of $ 5.1 million which is being amortized to interest expense over the term of the K2HV Loan Agreement using the effective interest method.

As of September 30, 2024, the fair value of the term loan was estimated to be $ 28.5 million.

The fair value was measured using a discounted cash flow analysis, specifically the yield method, which requires the use of Level 3 inputs in the fair value hierarchy.

The outstanding term loans payable consists of the following:

June 30, 2024

September 30, 2024

(in thousands)

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The following table provides the components of interest expense related to the K2HV Loan Agreement:

Three Months Ended June 30, 2024

Six Months Ended June 30, 2024

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

(in thousands)

Interest expense based on coupon interest rate ( 10.3 %) of outstanding term loans

$ 790 $ 1,305

Accretion of debt discount and Final Fee ( 8.94 %)

Total interest expense on effective rate ( 19.24 %)

The following table presents the total principal payments and Final Fee schedules to become due during each of the years ended December 31:

$ 1,244 $ 2,045

The following table presents the total principal payments and Final Fee scheduled to become due during each of the years ended December 31:

Principal Payments and Final Fee

(in thousands)

2024 (remaining as of June 30, 2024) $ —

2024 (remaining as of September 30, 2024)

Total principal payments and Final Fee $ 32,085

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Common stockholders are entitled to dividends if and when declared by our board of directors.

As of June 30, 2024, no dividends on common stock had been declared by us.

As of September 30, 2024, no dividends on common stock had been declared by us.

On May 10, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Leerink Partners LLC (“Leerink Partners”), formerly known as SVB Securities LLC, pursuant to which we may offer and sell shares of our common stock (the “ATM Offering”).

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Following our filing of the Prospectus Supplement, we are now entitled to offer and sell shares of our common stock with an aggregate offering price of up to $ 75.0 million pursuant to the Sales Agreement.

During the six months ended June 30, 2024, we sold 4,342,320 shares of our common stock at an average price of $ 5.11 per share for net proceeds of $ 21.1 million after deducting sales commissions and offering expenses.

During the six months ended June 30, 2023, we sold 4,096,281 shares of our common stock at an average price of $ 2.36 per share for net proceeds of $ 9.3 million after deducting sales commissions and offering expenses.

During the nine months ended September 30, 2024, we sold 4,350,820 shares of our common stock at an average price of $ 5.10 per share for net proceeds of $ 21.1 million after deducting sales commissions and offering expenses.

During the nine months ended September 30, 2023, we sold 4,111,281 shares of our common stock at an average price of $ 2.37 per share for net proceeds of $ 9.3 million after deducting sales commissions and offering expenses.

We have reserved shares of common stock for issuance as follows:

As of June 30, As of December 31,

As of September 30, 2024 As of December 31, 2023

Shares reserved for exercises of outstanding stock options

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Shares reserved for future issuance under the 2021 Stock Incentive Plan 2,057,187 1,911,660

Shares reserved for future issuance as part of K2HV conversion feature

Shares reserved for future issuance as part of the K2HV Loan Agreement conversion feature

Total shares reserved for future issuance

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We are authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series.

As of June 30, 2024, no shares of preferred stock were issued or outstanding.

As of September 30, 2024, no shares of preferred stock were issued or outstanding.

Stock-based Compensation

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The terms of awards, including vesting requirements, are determined by our board of directors, subject to the provisions of the 2021 Plan.

We initially registered 3,352,725 shares of common stock under the 2021 Plan, pursuant to a Registration Statement on Form S-8 filed with the SEC on April 30, 2021, which was comprised of (i) 2,843,116 shares of common stock reserved for issuance under the 2021 Plan, (ii) 31,884 shares of common stock originally reserved for issuance under the 2017 Plan that became available for issuance under the 2021 Plan upon the completion of the IPO, and (iii) 477,725 shares of unvested restricted stock

subject to repurchase by us that may become issuable under the 2021 Plan following such repurchase.

The 2021 Plan also provides that an additional number of shares will be added annually to the shares authorized for issuance under the 2021 Plan on the first day of each fiscal year, beginning with the fiscal year ended December 31, 2022 and continuing until, and including, the fiscal year ending December 31, 2031.

The number of shares added each year will be equal to the lesser of (i) 5 % of the number of outstanding common stock on such date and (ii) such amount as determined by our board of directors.

As of June 30, 2024, a total of 4,911,502 additional shares have been added to the total shares authorized for issuance under the 2021 Plan in accordance with these terms.

As of September 30, 2024, a total of 4,911,502 additional shares have been added to the total shares authorized for issuance under the 2021 Plan in accordance with these terms.

2021 Employee Stock Purchase Plan

The 2021 ESPP permits eligible employees to purchase shares of our common stock at a discount and consists of consecutive six-month offering periods, each containing a single six-month purchase period.

The 2021 Employee Stock Purchase Plan (“2021 ESPP”) permits eligible employees to purchase shares of our common stock at a discount and consists of consecutive six-month offering periods, each containing a single six-month purchase period.

On the first day of each offering period, each employee who is enrolled in the 2021 ESPP will automatically receive an option to purchase up to a whole number of shares of our common stock.

The purchase price of each of the shares purchased, in a given purchase period, will be equal to 85 % of the lesser of the closing price of a share of our common stock on (i) the first day of the offering period, or (ii) the last day of the offering period.

During the six months ended June 30, 2024 and 2023, 35,180 shares and 28,739 shares, respectively, of our common stock were purchased by participants of the 2021 ESPP.

During the nine months ended September 30, 2024, 35,180 shares of our common stock were purchased by participants of the 2021 ESPP for total proceeds of $ 0.1 million.

During the nine months ended September 30, 2023, 28,739 shares of our common stock were purchased by participants of the 2021 ESPP for no minal proceeds.

Stock-Based Compensation Expense

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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As of December 31, 2023, all RSAs granted to employees or non-employees had become fully vested or had been previously forfeited.

No RSAs were granted during the six months ended June 30, 2024.

Accordingly, we had no unrecognized stock-based compensation expense related to unvested RSAs as of June 30, 2024.

The aggregate fair value of RSAs that vested during the three and six months ended June 30, 2023, based upon the fair values of the stock underlying the RSAs on the date of vesting, was $ 0.1 million and $ 0.2 million, respectively.

No RSAs were granted during the nine months ended September 30, 2024.

Accordingly, we had no unrecognized stock-based compensation expense related to unvested RSAs as of September 30, 2024.

No RSAs vested during the three months ended September 30, 2023.

The aggregate fair value of RSAs that vested during the nine months ended September 30, 2023, based upon the fair values of the stock underlying the RSAs on the date of vesting, was $ 0.2 million.

We have granted RSUs to our employees under the 2021 Plan.

The following table summarizes RSU activity during the six months ended June 30, 2024:

The following table summarizes RSU activity during the nine months ended September 30, 2024:

Shares/Units Weighted-Average

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Value Per Share

(in thousands)

Unvested at December 31, 2023 361,500 $ 3.92

( 211,500 ) $ 4.97

Unvested at June 30, 2024 150,000 $ 2.45

As of June 30, 2024, we had unrecognized stock-based compensation expense related to unvested RSUs of $ 0.2 million, which we expect to recognize over a weighted-average period of approximately 0.4 years.

The aggregate fair value of RSUs that vested during the three and six months ended June 30, 2024 , was $ 0.7 million based upon the fair value of the stock underlying the RSUs on the day of vesting.

No RSUs vested during the three and six months ended June 30, 2023.

( 5,000 ) $ 2.45

Unvested at September 30, 2024 145,000 $ 2.45

As of September 30, 2024, we had unrecognized stock-based compensation expense related to unvested RSUs of $ 0.1 million, which we expect to recognize over a weighted-average period of approximately 0.2 years.

The aggregate fair value of RSUs that vested during the nine months ended September 30, 2024, was $ 0.7 million based upon the fair value of the stock underlying the RSUs on the day of vesting.

No RSUs vested during the three months ended September 30, 2024 or during the three or nine months ended September 30, 2023.

Stock Option Activity

1 unchanged sentence

These stock options would have vested only upon achievement of specified performance targets related to certain business objectives on or before December 31, 2023.

As of June 30, 2023, none of these options were vested because none of the specified performance targets had been achieved.

Because achievement of the specified performance targets was not deemed probable as of June 30, 2023, we did no t record any expense for these stock options during the three or six months ended June 30, 2023.

As of September 30, 2023, none of these options were vested because none of the specified performance targets had been achieved.

Because achievement of the specified performance targets was not deemed probable as of September 30, 2023, we did no t record any expense for these stock options during the three or nine months ended September 30, 2023.

As of December 31, 2023, the specified performance targets had not been achieved, and accordingly, all outstanding performance-based stock options expired without vesting.

No additional performance-based stock options have been granted during the three or six months ended June 30, 2024.

The fair value of stock options granted during the three and six months ended June 30, 2024 and 2023 was calculated on the date of grant using the following weighted-average assumptions:

No additional performance-based stock options have been granted during the three or nine months ended September 30, 2024.

The fair value of stock options granted during the three and nine months ended September 30, 2024 and 2023 was calculated on the date of grant using the following weighted-average assumptions:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

7 unchanged sentences

91.9 % 84.8 % 92.6 % 82.7 %

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended June 30, 2024 and 2023 was $ 3.68 and $ 2.24 per share, respectively.

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the six months ended June 30, 2024 and 2023 was $ 3.60 and $ 1.55 per share, respectively.

The following table summarizes stock option activity during the six months ended June 30, 2024:

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended September 30, 2024 and 2023 was $ 1.76 and $ 1.91 per share, respectively.

Using the Black-Scholes option

pricing model, the weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2024 and 2023 was $ 3.57 and $ 1.56 per share, respectively.

The following table summarizes stock option activity during the nine months ended September 30, 2024:

Options Outstanding

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( 426,287 ) $ 4.99

Outstanding at June 30, 2024 7,510,033 $ 6.33 7.85 $ 0.8

Exercisable at June 30, 2024 4,100,266 $ 7.25 7.09 $ 0.5

The aggregate intrinsic fair value of stock options exercised during the three and six months ended June 30, 2024 and 2023 was nominal for each period.

As of June 30, 2024, we had unrecognized stock-based compensation expense related to unvested stock options of $ 12.4 million, which we expect to recognize over a weighted-average period of approximately 2.5 years.

Outstanding at September 30, 2024 7,497,671 $ 6.33 7.64 $ 0.3

Exercisable at September 30, 2024 4,471,589 $ 7.19 6.97 $ 0.2

The aggregate intrinsic fair value of stock options exercised during the three and nine months ended September 30, 2024 and 2023 was nominal for each period.

As of September 30, 2024, we had unrecognized stock-based compensation expense related to unvested stock options of $ 10.6 million, which we expect to recognize over a weighted-average period of approximately 2.3 years.

Related Parties

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Briggs Morrison, who serves on our board of directors, serves as Executive Partner of MPM Capital and Chief Executive Officer of Crossbow.

The term of the sublease agreement commenced in June

2022 and ended in March 2024, with no option to extend.

We received cash payments under the sublease of approximately $ 0.4 million during the six months ended June 30, 2024.

The term of the sublease agreement commenced in June 2022 and ended in March 2024, with no option to extend.

We received cash payments under the sublease of approximately $ 0.4 million during the nine months ended September 30, 2024.

In addition, we received $ 0.2 million from Crossbow in June 2022 as a security deposit, which was remitted to Crossbow following the termination of the sublease.

Net Loss Attributable to Common Stockholders per Share

For purposes of the diluted net loss attributable to common stockholders per share calculation, outstanding stock options, unvested RSAs, unvested RSUs, conversion option derivative under the K2HV Loan Agreement, and warrants to purchase common stock are considered to be potentially dilutive securities, however the following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive:

For purposes of the diluted net loss attributable to common stockholders per share calculation, outstanding stock options, unvested RSAs, unvested RSUs, the conversion option derivative under the K2HV Loan Agreement, and warrants to purchase common stock are considered to be potentially dilutive securities, however the following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive:

September 30,

Outstanding stock options

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7,747,805 6,882,540

7,755,704 7,139,704

As described below, the conversion option derivative under the K2HV Loan Agreement was determined to be dilutive for the nine months ended September 30, 2024.

However, the effect of the conversion option derivative would have been anti-dilutive for the three months ended September 30, 2024.

Accordingly, we have excluded 791,364 shares of common stock equivalents that are available to be issued in conjunction with the conversion option derivative from the calculation of diluted net loss attributable to common stockholders per share for the three months ended September 30, 2024.

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

In computing diluted net loss per share, only potential shares of common stock that are dilutive are included.

We considered each issue or series of issues of potential shares of common stock separately when determining whether potential shares of common stock are dilutive or antidilutive.

We made such determination in sequence from the most dilutive to the least dilutive and concluded that the conversion option derivative under the K2HV Loan Agreement is dilutive to net loss per share for the three and six months ended June 30, 2024.

In computing diluted net loss per share, only potential shares of common stock equivalents that are dilutive are included.

We considered each issue or series of issues of potential shares of common stock separately when determining whether potential shares of common stock equivalents are dilutive or anti-dilutive.

Pursuant to FASB ASC Topic 260, Earnings Per Share , we applied the if-converted method to determine the effect of the conversion option derivative under the K2HV Loan Agreement on the diluted earnings per share calculations.

Pursuant to such method, we adjusted the numerator for the gain recognized during the period in net loss from the conversion option derivative under the K2HV Loan Agreement and the increased the denominator to include the number of additional shares of common stock that would have been outstanding if the conversion option derivative under the K2HV Loan Agreement were converted as of the beginning the period.

Three Months Ended June 30, Six Months Ended June 30,

Pursuant to such method, we adjusted the numerator for the gain recognized during the period in net loss due to the change in the fair value of the conversion option derivative liability under the K2HV Loan Agreement and the interest expense recognized during the period that is attributable to the portion of the term loan that is subject to the conversion option.

We also increased the denominator to include the weighted-average number of additional shares of common stock that would have been outstanding if the conversion option derivative under the K2HV Loan Agreement were converted at the inception of the K2HV Loan Agreement.

The following table summarizes the computations of basic and diluted net loss per share as presented in our condensed consolidated statements of operations:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

(in thousands, except share and per share amounts)

Net loss $ ( 16,673 ) $ ( 8,285 ) $ ( 50,115 ) $ ( 25,365 )

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Dilutive effect of common stock issuable from assumed conversion of convertible term loan — — 439,005 —

521,778 — 260,889 —

Weighted-average common stock outstanding, diluted 43,704,836 35,653,924 43,386,287 35,335,286

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements