Werewolf Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without 103 Table of Contents limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial officer, or persons performing similar functions, and effected by a company’s board of directors, management, and other personnel, 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 and includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’s assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a 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. 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. Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment as of December 31, 2024, management concluded that our internal control over financial reporting was effective at the reasonable assurance level. This Annual Report does not include an attestation report of our independent registered public accounting firm, as it is not required for as long as we remain an emerging growth company or a smaller reporting company with less than $100.0 million in annual revenue. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of the year ended December 31, 2024 t hat has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter of 2024. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 will be included in the sections captioned “Corporate Governance” and “Proposal No. 1” in our definitive proxy statement to be filed with the Securities and Exchange Commission, or the SEC, with respect to our 2025 Annual Meeting of Stockholders within 120 days of December 31, 2024, which information is incorporated herein by reference. 104 Table of Contents Code of Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is posted on the Corporate Governance section of our website, which is located at www.werewolftx.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K. We will provide any person, without charge, a copy of such Code of Business Conduct and Ethics upon written request, which may be mailed to 200 Talcott Ave, 2nd Floor, Watertown, MA 02472, Attn: Corporate Secretary. Item 11. Executive Compensation The information required by this Item 11 will be included in the section captioned “Executive Compensation” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024, which information, other than the information required by Item 402(v) of Regulation S-K, is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Except to the extent provided below, the information required by this Item 12 will be included in the section captioned “Principal Stockholders” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024, which information is incorporated herein by reference. Equity Compensation Plan Information The following table contains information about our 2017 Stock Incentive Plan, or the 2017 Plan, our 2021 Stock Incentive Plan, or the 2021 Plan, and our 2021 Employee Stock Purchase Plan, or 2021 ESPP, as of December 31, 2024: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders (1) 7,693,841 $ 6.19 2,353,185 Equity compensation plans not approved by security holders — — — Total 7,693,841 $ 6.19 2,353,185 (1) Includes the 2017 Plan, the 2021 Plan and the 2021 ESPP. As of December 31, 2024, 1,919,921 shares of our common stock were available for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan will be increased on each January 1 through January 1, 2031 by the lesser of (i) 5% of the number of shares of our common stock outstanding on the first day of such year and (ii) an amount determined by our board of directors. The shares of common stock underlying any awards that are expired, forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by us under the 2021 Plan or the 2017 Plan are added back to the shares of common stock available for issuance under the 2021 Plan. On January 1, 2025, the shares under the 2021 Plan were increased by 2,241,357 shares pursuant to the annual increase described above. As of December 31, 2024, 433,264 shares of our common stock were reserved for issuance under the 2021 ESPP. The number of shares reserved for issuance under the 2021 ESPP will be increased on each January 1 through January 1, 2032 by the least of (i) 488,000 shares, (ii) 1% of the number of shares of our common stock outstanding on the first day of such year and (iii) an amount determined by our board of directors. On January 1, 2025, the shares under the 2021 ESPP were increased by 224,135, representing a 0.5% increase in the number of shares of our common stock available for issuance pursuant to the 2021 ESPP as determined by our board of directors. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 will be included in the sections captioned “Corporate Governance” and “Transactions with Related Persons” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024, which information is incorporated herein by reference. 105 Table of Contents Item 14. Principal Accountant Fees and Services The information required by this Item 14 will be included in the section captioned “Ratification of the Appointment of Ernst & Young, LLP As Our Independent Registered Public Accounting Firm For The Fiscal Year Ending December 31, 2025” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024, which information is incorporated herein by reference. 106 Table of Contents PART IV Item 15. Exhibit and Financial Statement Schedules (1) Financial Statements The following documents are attached hereto and are filed as part of this Annual Report. Report of the Independent Registered Public Accounting Firm (PCAOB ID No. 42 ) 108 Consolidated Balance Sheets 109 Consolidated Statements of Operations 110 Consolidated Statements of Stockholders’ Equity 111 Consolidated Statements of Cash Flows 112 Notes to Consolidated Financial Statements 113 (2) Financial Statement Schedules Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein. (3) Exhibits The exhibits filed or furnished as part of this Annual Report are listed in the Exhibit Index immediately preceding the signatures, which Exhibit Index is incorporated herein by reference. Item 16. Form 10-K Summary None. 107 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Werewolf Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Werewolf Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations , stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits in accordance with the standards of the PCAOB. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2022. Boston, Massachusetts March 11, 2025 108 Table of Contents Werewolf Therapeutics, Inc. Consolidated Balance Sheets (amounts in thousands, except share and per share amounts) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 110,995 $ 134,343 Prepaid expenses and other current assets 2,071 2,677 Other receivables — 1,350 Total current assets 113,066 138,370 Property and equipment, net 6,322 7,958 Restricted cash and cash equivalents, net of current portion 1,220 21,023 Operating lease right of use asset 6,001 6,888 Other assets 320 594 Total assets $ 126,929 $ 174,833 Liabilities and stockholders’ equity: Current liabilities: Accounts payable $ 3,035 $ 1,336 Accrued expenses and other current liabilities 10,588 8,860 Operating lease liability, current 1,557 1,608 Deferred revenue, current — 907 Note payable, current — 6,667 Total current liabilities 15,180 19,378 Operating lease liability, net of current portion 9,435 10,992 Deferred revenue, net of current portion — 433 Note payable, net of discount, issuance costs, and current portion 26,095 32,656 Derivative liability 2,829 — Total liabilities 53,539 63,459 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized as of December 31, 2024 and 2023; no shares issued or outstanding as of December 31, 2024 and 2023 — — Common stock, $ 0.0001 par value, 200,000,000 shares authorized as of December 31, 2024 and 2023; 44,827,159 and 39,107,048 shares issued as of December 31, 2024 and 2023, respectively; 44,827,159 and 39,107,048 shares outstanding as of December 31, 2024 and 2023, respectively 5 4 Additional paid-in capital 487,973 455,443 Accumulated deficit ( 414,588 ) ( 344,073 ) Total stockholders’ equity 73,390 111,374 Total liabilities and stockholders’ equity $ 126,929 $ 174,833 The accompanying notes are an integral part of these consolidated financial statements. 109 Table of Contents 1z Werewolf Therapeutics, Inc. Consolidated Statements of Operations (amounts in thousands, except share and per share amounts) Year Ended December 31, 2024 2023 Revenue: Collaboration revenue $ 1,885 $ 19,943 Operating expenses: Research and development 56,434 41,776 General and administrative 19,045 18,670 Total operating expenses 75,479 60,446 Operating loss ( 73,594 ) ( 40,503 ) Other income: Interest income 6,673 7,416 Interest expense ( 4,656 ) ( 3,139 ) Loss on extinguishment of debt ( 553 ) — — Other income (expense), net 1,615 ( 1,142 ) Total other income 3,079 3,135 Net loss $ ( 70,515 ) $ ( 37,368 ) Net loss per share, basic $ ( 1.63 ) $ ( 1.05 ) Net loss per share, diluted $ ( 1.63 ) $ ( 1.05 ) Weighted-average common shares outstanding, basic 43,332,088 35,646,572 Weighted-average common shares outstanding, diluted 43,859,664 35,646,572 The accompanying notes are an integral part of these consolidated financial statements. 110 Table of Contents Werewolf Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (amounts in thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 31,515,074 $ 3 $ 429,039 $ ( 306,705 ) $ 122,337 Issuance of common stock from at the market offering, net of issuance costs of $ 762 7,431,981 1 18,296 — 18,297 Issuance of common stock, net 157,037 — 93 — 93 Stock-based compensation expense — — 8,008 — 8,008 Stock option exercises 2,956 — 7 — 7 Net loss — — — ( 37,368 ) ( 37,368 ) Balance at December 31, 2023 39,107,048 4 455,443 ( 344,073 ) 111,374 Issuance of common stock from at the market offering, net of issuance costs of $ 1,283 5,272,538 1 23,527 — 23,528 Issuance of common stock, net 430,349 — 142 — 142 Stock-based compensation expense — — 8,826 — 8,826 Stock option exercises 17,224 — 35 — 35 Net loss — — — ( 70,515 ) ( 70,515 ) Balance at December 31, 2024 44,827,159 $ 5 $ 487,973 $ ( 414,588 ) $ 73,390 The accompanying notes are an integral part of these consolidated financial statements. 111 Table of Contents Werewolf Therapeutics, Inc. Consolidated Statements of Cash Flows (amounts in thousands) Year Ended December 31, 2024 2023 Operating activities: Net loss $ ( 70,515 ) $ ( 37,368 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 8,826 8,008 Depreciation expense 1,814 1,764 Non-cash interest expense 1,342 273 Non-cash lease expense 887 1,575 Loss on extinguishment of debt 553 — Change in fair value of derivative liability ( 1,621 ) — Change in fair value of success payment liability — ( 1,030 ) Amortization of debt issuance costs — 60 Changes in operating assets and liabilities: Prepaid expenses and other assets 669 1,267 Other receivables 1,350 5,578 Accounts payable, accrued expenses and other liabilities 3,455 ( 4,335 ) Deferred revenue ( 1,340 ) ( 6,320 ) Operating lease liability ( 1,608 ) ( 2,084 ) Net cash used in operating activities ( 56,188 ) ( 32,612 ) Investing activities: Purchases of property and equipment ( 254 ) ( 769 ) Net cash used in investing activities ( 254 ) ( 769 ) Financing activities: Proceeds from at the market offering of common stock, net of issuance costs 23,576 18,329 Proceeds from drawdown of term loans 30,000 40,000 Payment of debt issuance costs ( 673 ) — Repayment of term loan ( 40,000 ) — Proceeds from issuances under Employee Stock Purchase Plan 142 93 Proceeds from stock option exercises 35 7 Net cash provided by financing activities 13,080 58,429 Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents ( 43,362 ) 25,048 Cash, cash equivalents and restricted cash and cash equivalents—beginning of period 155,577 130,529 Cash, cash equivalents and restricted cash and cash equivalents—end of period $ 112,215 $ 155,577 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,358 $ 2,556 Supplemental disclosure of non-cash investing and financing activities: Purchases of property and equipment in accounts payable and accrued expenses $ — $ 76 Issuance costs in accounts payable and accrued expenses $ 84 $ 36 Fair value of derivative liability issued with term loan $ 4,450 $ — The accompanying notes are an integral part of these consolidated financial statements. 112 Table of Contents Werewolf Therapeutics, Inc. Notes to Consolidated Financial Statements 1. Nature of Business Werewolf Therapeutics, Inc. was incorporated in the state of Delaware in October 2017. As used throughout these consolidated financial statements, the terms “Werewolf,” “we,” “us,” and “our” refer to the business of Werewolf Therapeutics, Inc., and its wholly owned subsidiary. We are an innovative biopharmaceutical company pioneering the development of therapeutics engineered to stimulate the body’s immune system for the treatment of cancer. Our headquarters are located in Watertown, Massachusetts. Since inception, we have devoted substantially all of our efforts and financial resources to organizing and staffing the company; business planning; raising capital; developing and optimizing our platform technology; identifying potential product candidates; enhancing our intellectual property portfolio; undertaking research, preclinical studies, and clinical trials; and enabling manufacturing for our development programs. We are subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. 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 $ 111.0 million at December 31, 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 consolidated financial statements included in this Annual Report on Form 10-K. However, additional funding will be necessary beyond this point to fund future preclinical and clinical activities. We expect to finance our future cash needs through a combination of equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements. There is no guarantee that additional financing will be available to us on acceptable terms, or at all. If we fail to raise capital as and when needed, we may be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, or seek to merge with or be acquired by another company. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying consolidated financial statements 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”). The accompanying consolidated financial statements include the accounts of Werewolf Therapeutics, Inc. and its wholly owned subsidiary, Werewolf Therapeutics Mass Securities, Inc. All intercompany transactions and balances have been eliminated in consolidation. Segment Information We operate in one business segment, which focuses on the discovery and development of cancer therapeutics. Our chief operating decision maker (“CODM”), our Chief Executive Officer, makes operating decisions based upon the performance of the enterprise as a whole and utilizes our consolidated financial statements for decision making. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued expenses, assumptions used in the valuation of stock-based compensation expense and the fair value of the derivative liability, and income taxes. Actual results could differ from those estimates. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent from us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. 113 Table of Contents ASC 820 defines fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered fair value hierarchy that distinguishes between the following: • Level 1 - Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 - Unobservable inputs for which little or no market data exists and that are significant to the fair value measurement, such as our own assumptions used to measure assets and liabilities at fair value. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3. The classification of a financial asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents Our cash and cash equivalents consist of cash maintained within standard checking accounts. We also maintain cash sweep accounts in which cash from our main operating cash accounts are invested overnight in highly liquid, short-term investments. We consider all highly liquid investments with a maturity date of 90 days or less at the date of purchase to be cash equivalents. We maintained restricted cash and cash equivalents of $ 1.2 million and $ 21.2 million at December 31, 2024 and December 31, 2023, respectively. The restricted cash and cash equivalents balance as of December 31, 2024 are comprised solely of a letter of credit required pursuant to our leased office spaces (see Note 10, Commitments and Contingencies ). At December 31, 2023, $ 20.0 million of the restricted cash and cash equivalents balance represents an obligation under the term loan facility to maintain a minimum cash balance in our accounts with Pacific Western Bank (“PWB”). This obligation became effective upon imminent achievement of the funding goal as required by the terms of an amended and restated loan and security agreement (the “PWB Loan Agreement”) with PWB (see Note 7, Term Loan ). The remaining restricted cash and cash equivalents balance as of December 31, 2023 are comprised solely of letters of credit required pursuant to our leased office spaces (see Note 10, Commitments and Contingencies ). Restricted cash and cash equivalents are presented as current or non-current assets based on when the restrictions are expected to expire. The current portion of restricted cash and cash equivalents is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows: December 31, 2024 2023 (in thousands) Cash and cash equivalents $ 110,995 $ 134,343 Prepaid expenses and other current assets — 211 Restricted cash and cash equivalents, net of current portion 1,220 21,023 Total cash, cash equivalents and restricted cash and cash equivalents $ 112,215 $ 155,577 Property and Equipment Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the applicable assets. Upon the sale or retirement of an asset, the cost and related accumulated depreciation are eliminated from the respective account, and the resulting gain or loss, if any, is included in current operations. Amortization of leasehold improvements is recorded as depreciation expense using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related asset. We capitalize property and equipment that are acquired for research and development activities and that have an alternate future use. Expenditures for maintenance and repairs are recorded to 114 Table of Contents expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Property and equipment are depreciated over the following periods: Laboratory equipment 5 years Furniture and office equipment 5 years Computer equipment 3 years Leasehold improvements Shorter of lease term or useful life of asset Costs for property and equipment not yet placed into service are classified as construction in progress and depreciated in accordance with the above guidelines once placed into service. Impairment of Long-lived Assets Long-lived assets consist of property and equipment. We review our property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable. If such events or changes in circumstances arise, we compare the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the fair value of the assets, is recorded. The fair value of long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived assets. We have not recorded any material impairment charges during the years ended December 31, 2024 or 2023. Leases At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than twelve months are recognized on the balance sheet as right-of-use assets and current or non-current lease liabilities, as applicable. We do not recognize leases with terms of twelve months or less on the balance sheet. The lease term is determined at lease commencement, and includes the noncancellable period during which we have the right to use the underlying asset. Any period covered by an option to extend or terminate a lease is included in the lease term if we are reasonably certain that the option to extend will be exercised or the option to terminate will not be exercised. We monitor our plans to renew material leases on a quarterly basis. We combine lease and non-lease components for our leases. Lease payments included in determining the right-of-use asset and lease liability recognized include fixed payments to be paid over the term of the lease, less any lease incentives to be paid or payable to us by the lessor. Variable lease payments are included if they are based on an index or rate. Variable lease payments that are not based on an index or rate are recognized as expense in the period incurred. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rate (“IBR”), which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, and in a similar economic environment. The lease liability is measured as the value of the remaining lease payments, discounted to present value using the IBR for the lease. All of our leases are classified as operating leases. Operating lease expense is recognized over the lease term using the straight-line method. Revenue Recognition We analyze our collaborations to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, either by analogy to authoritative accounting literature or by applying a reasonable and rational policy election. For those elements of the arrangement that are accounted for pursuant to ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In applying ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. We only apply the five-step model to contracts when it is probable that we will collect the 115 Table of Contents consideration to which we are entitled in exchange for the goods or services we provide to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the assessment, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We use key assumptions to determine the standalone selling price, which may include reimbursement rates for personnel costs, development timelines and probabilities of regulatory success. We do not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of promised goods or services to the customer will be one year or less. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until obligations under these arrangements are fulfilled. Event-based milestone payments represent variable consideration, and we use the “most likely amount” method to estimate this variable consideration. Given the high degree of uncertainty around the occurrence of these events, we consider the milestones and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. Revenue will be recognized from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. Research and Development Expenses Expenditures relating to research and development are expensed as incurred. Research and development expenses include external expenses incurred under arrangements with third parties, academic and non-profit institutions and consultants; salaries and personnel-related costs, including non-cash stock-based compensation expense; license fees to acquire in-process technology and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Intellectual Property Expenses We expense costs associated with intellectual property-related matters as incurred and classify such costs as general and administrative expenses within the consolidated statements of operations. Stock-based Compensation We issue stock-based awards to employees and directors, generally in the form of stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), or as awards under the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period of the award on a straight-line basis. For awards with performance conditions, we estimate the likelihood of satisfaction of the performance condition, which affects the period over which the expense is recognized. When the likelihood of satisfying the performance conditions related to an award is determined to be probable, the expense is recognized over the requisite service period. We have not granted any awards with market conditions. We recognize forfeitures of stock-based awards as they occur. The grant date fair value of stock options, and awards granted under the 2021 ESPP are measured using the Black-Scholes valuation model, which requires us to make assumptions about the fair value of the underlying common stock on the date of grant. The grant date fair value of RSUs and RSAs is estimated to be equal to the closing price of our common stock on the date of grant. In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of our common stock, we may consider whether an adjustment to the observable market price is required when estimating the grant date fair value. Debt Issuance Costs Certain costs associated with the issuance of debt instruments are capitalized and amortized over the term of the respective debt instrument using the effective interest method through the maturity date of the related debt instrument and are recognized as a non-cash component of interest expense. The carrying value of our debt instruments is presented net of debt issuance costs. Equity Issuance Costs Equity issuance costs represent costs paid to third parties to secure equity financing and generally consist of sales agent commissions, incremental legal fees and other professional fees. Equity issuance costs are capitalized as other assets until the associated equity financing is consummated. Upon consummation of an equity financing, these costs are recorded as a 116 Table of Contents reduction of additional paid-in capital. In the event that a planned equity financing is abandoned, any capitalized equity issuance costs are immediately expensed to operating expenses in the consolidated statement of operations. Income Taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”) which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. We recognize any material interest and penalties related to unrecognized tax benefits in income tax expense. Comprehensive Loss We do not have items of other comprehensive loss for the years ended December 31, 2024 and 2023, and therefore do not present a consolidated statement of comprehensive loss. Our comprehensive loss equals our net loss. Basic and Diluted Net Loss per Common Share Basic net loss per share is calculated based upon the weighted-average number of common shares outstanding during the period, excluding outstanding stock options and RSUs that have been issued but are not yet vested. Diluted net loss per share is calculated based upon the weighted-average number of common shares outstanding during the period plus the dilutive impact of weighted-average common equivalent shares outstanding during the period. The potentially dilutive shares of common stock resulting from the assumed exercise of outstanding stock options and the assumed vesting of RSUs are determined under the treasury stock method. The potentially dilutive shares of common stock resulting from the assumed conversion of the currently outstanding convertible term loan is determined using the if-converted method. Concentration of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and cash equivalents. Cash and cash equivalents are primarily held with two reputable financial institutions in the United States. At times, such deposits may be in excess of insured limits. We have not experienced any losses on our deposits of cash and cash equivalents. We have no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU No. 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity. ASU No. 2020-06 also simplifies the diluted earnings per share calculation in certain areas. We adopted ASU No. 2020-06 on January 1, 2024. The adoption did not have a material impact on our consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures (“ASU No. 2023-07”), which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment. We adopted ASU No. 2023-07 on January 1, 2024. The adoption had no impact on the reportable segment we have identified, and additional required disclosures have been included in Note 15. Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures primarily related to rate reconciliation and income taxes paid. The provisions of ASU No. 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and are required to be applied on a prospective basis. We are currently evaluating the impact that this standard will have on our consolidated financial statements. 117 Table of Contents In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-04) (“ASU No. 2024-03”), which requires the disclosure of additional information about specific expense categories in the notes to the consolidated financial statements at interim and annual reporting periods. The provisions of ASU No. 2024-03 are effective for annual reporting periods beginning after December 31, 2026, with early adoption permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption. Subsequent Events We have evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these financial statements, we did not identify any subsequent events that would have required adjustment to or disclosure in the financial statements. 3. Jazz Collaboration and License Agreement In April 2022, we entered into an exclusive global collaboration and license agreement (the “Collaboration Agreement”) with Jazz Pharmaceuticals Ireland Limited (“Jazz”) pursuant to which we granted Jazz certain licenses to develop and commercialize products containing our Interferon alpha (“IFNα”) INDUKINE™ molecule, JZP898 (formerly WTX-613), as well as products containing certain isolated recombinant polypeptides comprising IFNα that meet specified criteria (each such product, a “Licensed Product”). Under the Collaboration Agreement, we were responsible for certain preclinical development activities with respect to JZP898 and other development activities specified in mutually agreed upon development plans. Jazz had generally reimbursed us for the cost of such activities. Jazz is responsible for all other development and commercialization activities conducted to exploit the Licensed Products, including submission of an investigational new drug application (“IND”) to the U.S. Food and Drug Administration (the “FDA”). Jazz received IND application clearance for JZP898 in July 2023 and initiated a Phase 1 clinical trial of JZP898 in the fourth quarter of 2023. In June 2024, we executed a transfer agreement (the “Transfer Agreement”) to assign our rights in a development agreement with a contract manufacturer of JZP898 to Jazz. The execution of this Transfer Agreement was the last material performance obligation required of us under the Collaboration Agreement. Under the terms of the Collaboration Agreement, we received a non-refundable upfront cash payment of $ 15.0 million in April 2022 and a variable consideration payment of $ 5.0 million in July 2023, which is included in the overall transaction price as described below. Milestones and Royalties As of December 31, 2024, we are eligible to receive up to $ 515.0 million in development and regulatory milestones, and up to $ 740.0 million in sales-based milestones for all Licensed Products. In addition, we are eligible to receive tiered mid-single digit royalties based on Jazz’s, and any of its affiliates’ and sublicensees’ annual net sales of Licensed Products, subject to reduction in specified circumstances. As of December 31, 2024, we have not recognized any revenue related to sales-based milestones. Accounting Analysis under ASC 606 Identification of the Contract(s) We assessed the Collaboration Agreement and concluded that it represents a contract with a customer within the scope of ASC 606. Identification of Promises and Performance Obligations We have concluded that the exclusive license to our intellectual property, JZP898, and the non-exclusive corresponding “know-how” are not capable of being distinct from the other promises within the contract, and as such, we have determined that the license and “know-how” combined with the other research and development services and supply represent a single combined performance obligation. Determination of Transaction Price The overall transaction price as of the inception of the contract was determined to be $ 32.3 million, which was comprised of the nonrefundable upfront payment of $ 15.0 million and the estimated costs for research services of $ 17.3 million. Outside of the estimated costs for research services, there was no other variable consideration included in the transaction price at inception. We used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development and regulatory milestone payment under this agreement was zero at inception of the contract, as achievement of those milestones was uncertain and highly susceptible to factors outside of our control. Accordingly, all such 118 Table of Contents milestone payments were excluded from the transaction price at inception. We re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and adjust the transaction price as necessary. During the year ended December 31, 2024, we did not recognize any adjustment to the transaction price associated with variable consideration previously excluded from the transaction price. During the year ended December 31, 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. Sales based royalties, including milestones based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. We will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The upfront payment of $ 15.0 million was recorded as deferred revenue and, along with payments related to our conduct of research services under the Collaboration Agreement or any development and regulatory milestones, has been recognized as revenue using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. We believe this input-based method to recognize revenue best reflects the transfer of value to Jazz. As of the execution of the Transfer Agreement, we no longer have any material performance obligations under the Collaboration Agreement. As a result, all deferred revenue related to the Collaboration Agreement has been recognized as of December 31, 2024. Recognition of Revenue We use the cost-to-cost input method, which best depicts the research services performed for the customer, to measure the revenue recognized under the Collaboration Agreement. Significant judgements used in the cost-to-cost method include estimated costs for research services and assumptions about the timing of when those costs are expected to be incurred. Differences in these estimates and assumptions can have a significant impact on the measurement and timing of when revenue under the Collaboration Agreement is recognized. For the years ended December 31, 2024 and 2023, we recognized $ 1.9 million and $ 19.9 million of revenue related to the Collaboration Agreement, respectively. The measurement of revenue recognized based on the cost-to-cost input method and the timing of payments received under the Collaboration Agreement directly impact the amounts reported as contract liabilities in our consolidated balance sheets as of December 31, 2024 and 2023. During the year ended December 31, 2023, the total revenue recognized included a cumulative catch-up of revenue of $ 4.2 million related to a variable payment that was previously excluded from the overall transaction price based on our evaluation of the variable constraint associated with the variable payment. The cumulative catch-up of revenue was recognized based on the cost-to-cost input method discussed above. Revenue from the reimbursement of costs for research activities was recognized during each of the respective periods in amounts equal to the costs incurred. The following table presents the activity in our contract liabilities during the year ended December 31, 2024: Beginning of Period Balance Additions Reductions End of Period Balance (in thousands) Contract liabilities: Deferred revenue $ 1,340 $ — $ ( 1,340 ) $ — Total contract liabilities $ 1,340 $ — $ ( 1,340 ) $ — The following table presents the activity in our contract liabilities during the year ended December 31, 2023: Beginning of Period Balance Additions Reductions End of Period Balance (in thousands) Contract liabilities: Deferred revenue $ 7,660 $ 5,000 $ ( 11,320 ) $ 1,340 Total contract liabilities $ 7,660 $ 5,000 $ ( 11,320 ) $ 1,340 There are no unbilled receivables or receivables related to the Collaboration Agreement as of December 31, 2024. Unbilled receivables and receivables related to the Collaboration Agreement of $ 0.4 million and $ 0.9 million, respectively, were included in other receivables in the accompanying consolidated balance sheets as of December 31, 2023. Revenue recognized during the year ended December 31, 2024 includes $ 1.3 million of revenue that was included in deferred revenue as of 119 Table of Contents December 31, 2023. Revenue recognized during the year ended December 31, 2023 includes $ 6.7 million of revenue that was included in deferred revenue as of December 31, 2022. As of December 31, 2024, we have not received any royalty payments under the Collaboration Agreement. 4. 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 consolidated balance sheets as of December 31, 2024 and 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 7, Term Loan ) as of December 31, 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 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 December 31, 2024 were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Money market funds $ 105,526 $ — $ — $ 105,526 Total assets $ 105,526 $ — $ — $ 105,526 Liabilities: Derivative liability $ — $ — $ 2,829 $ 2,829 Total liabilities $ — $ — $ 2,829 $ 2,829 Assets measured at fair value on a recurring basis as of December 31, 2023 were as follows: Level 1 Level 2 Level 3 Total (in thousands) Assets: Money market funds $ 149,294 $ — $ — $ 149,294 Total assets $ 149,294 $ — $ — $ 149,294 There were no changes in valuation techniques during the year ended December 31, 2024. Derivative Liability In May 2024, we entered into the K2HV Loan Agreement, as further described in Note 7, which provides up to $ 60.0 million principal in term loans. Pursuant to the terms of 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 carried at fair value, with subsequent changes in fair value recognized in the consolidated statement of operations. The following table reconciles the change in fair value of the derivative liability during the year ended December 31, 2024 based on Level 3 inputs (in thousands): Balance at December 31, 2023 $ — Fair value of derivative liability at issuance of term loan 4,450 Change in fair value ( 1,621 ) Balance at December 31, 2024 $ 2,829 120 Table of Contents The change in fair value of the derivative liability is included in other income (expense), net in the accompanying consolidated statements of operations. We recognized a gain on the change in fair value of the derivative liability of $ 1.6 million during the year ended December 31, 2024. 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 December 31, 2024 and May 2, 2024 (inception) is as follows: December 31, 2024 May 2, 2024 Stock Price $ 1.48 $ 6.08 Volatility 103.0 % 101.0 % Risk-free rate (continuous) 4.2 % 4.7 % Expected term (in years) 0.58 0.91 Dividend yield (continuous) — % — % Success Payment Liability In April 2022, we entered into an amended and restated loan and security agreement (the “PWB Loan Agreement”) with PWB, as described below in Note 7. In conjunction with the PWB Loan Agreement, we became obligated to pay to PWB a one-time success payment of up to $ 1.6 million (the “Success Fee”) upon achieving certain conditions defined in the PWB Loan Agreement (the “Success Fee Event”). The Success Fee Event occurred during the second quarter of 2023, resulting in the immediate payment in full of the required Success Fee. Prior to the occurrence of the Success Fee Event, we recognized a success payment liability that was stated at fair value and was considered Level 3 because its fair value measurement was based, in part, on significant inputs not observed in the market. Upon completion of the Success Fee Event, we paid the total $ 1.6 million success payment and removed the corresponding success payment liability. We remeasured the success payment liability at each reporting date and immediately prior to the Success Fee Event. During the year ended December 31, 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 consolidated statement of operations. We had no outstanding obligation associated with the Success Fee as of December 31, 2024 or December 31, 2023. 5. Property and Equipment, Net Property and equipment, net was comprised as follows: December 31, 2024 2023 (in thousands) Leasehold improvements $ 7,971 $ 7,971 Laboratory equipment 2,485 2,339 Computer equipment 539 512 Furniture and fixtures 311 306 Total property and equipment, gross 11,306 11,128 Less: accumulated depreciation ( 4,984 ) ( 3,170 ) Total property and equipment, net $ 6,322 $ 7,958 121 Table of Contents 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities were comprised as follows: December 31, 2024 2023 (in thousands) Manufacturing $ 4,783 $ 2,772 Employee compensation and benefits 3,616 3,627 Contract research 820 1,049 Professional fees 747 655 Accrued interest 266 310 Other 356 447 Total accrued expenses and other current liabilities $ 10,588 $ 8,860 7. Term Loan PWB Loan Agreement In April 2022, we entered into the PWB Loan Agreement with PWB and subsequently drew down an aggregate of $ 40.0 million in term loans. The term loans accrued interest on the outstanding daily balance at a floating annual rate equal to greater of (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 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 $ 1.3 million and $ 2.9 million during the years ended December 31, 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, 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 year ended December 31, 2024 primarily due to the write off of unamortized debt issuance costs. We were obligated to pay PWB a one-time fee in the event of certain corporate transactions equal to either (i) the greater of (a) $ 0.2 million and (b) 2.0 % of the amount drawn under the term loans, for a transaction occurring on or before March 31, 2023, or (ii) for any transaction occurring thereafter, the greater of (a) $ 0.4 million and (b) 4.0 % of the amount drawn under the term loans (the “Success Fee”). We determined that the Success Fee constituted a freestanding financial instrument that was required to be accounted for as a liability in connection with ASC Topic 815, Derivatives and Hedging (“ASC 815”). We determined the fair value of the Success Fee upon the closing date of the PWB Loan Agreement and then marked to market the fair value of the Success Fee as of December 31, 2023. The Success Fee Event (as defined in the PWB Loan Agreement) occurred during the second quarter of 2023, resulting in the immediate payment in full of the $ 1.6 million required Success Fee. K2HV Loan Agreement In May 2024, we, as borrower, entered into the K2HV Loan Agreement with K2HV (together with any other lender from time to time, the “Lenders”); K2HV, as administrative agent for the Lenders; and Ankura Trust Company, LLC, as collateral trustee for the Lenders. 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 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, followed by 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 %. 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 122 Table of Contents the Lenders are entitled and certain notice requirements. We are obligated to pay a final fee equal to 6.95 % of the aggregate amount of the term loans funded, or the Final Fee, to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Final Fee is being accreted to interest expense using the effective interest method over the life of the debt. The Lenders may elect prior to the full repayment of the term loans to convert up to $ 5.0 million of outstanding principal of the term loans into shares of our common stock, pursuant to the Fixed Price Conversion or the Variable Price Conversion, subject to customary adjustments and 9.99 % and 19.99 % beneficial ownership limitations. 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. See Note 4 for further discussion on this derivative instrument. As security for our obligations under the K2HV Loan Agreement, we granted the Lenders a first priority security interest on substantially all of our assets (other than intellectual property), subject to certain exceptions. The K2HV Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, dispose of assets, make changes to our business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, incur additional liens, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. 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 December 31, 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 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 December 31, 2024, the fair value of the term loan was estimated to be approximately $ 28.2 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: December 31, 2024 (in thousands) Term loans $ 30,000 Unamortized debt discount ( 3,905 ) Total debt, long-term $ 26,095 The following table provides the components of interest expense related to the K2HV Loan Agreement: Year Ended December 31, 2024 (in thousands) Interest expense based on coupon interest rate ( 10.3 %) of outstanding term loans $ 2,094 Amortization of debt discount and accretion of Final Fee ( 8.94 %) 1,217 Total interest expense on effective rate ( 19.24 %) $ 3,311 123 Table of Contents The following table presents the total principal payments scheduled to become due during each of the years ended December 31 (in thousands): 2025 $ — 2026 9,600 2027 14,400 2028 8,085 Total principal payments and Final Fee $ 32,085 8. Common and Preferred Stock Common Stock We are authorized to issue 200,000,000 shares of common stock. Common stockholders are entitled to dividends if and when declared by our board of directors. As of December 31, 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”), pursuant to which we are entitled to offer and sell shares of our common stock (the “ATM Offering”). The Sales Agreement provides that Leerink Partners will be entitled to a sales commission equal to 3.0 % of the gross sales price per share of all shares sold under the ATM Offering. We were initially entitled to offer and sell shares of our common stock having an aggregate offering price of up to $ 50.0 million in the ATM Offering. On February 9, 2024, we filed a prospectus supplement (the “Prospectus Supplement”) under our shelf registration statement for the offer and sale of shares of our common stock having an offering price of up to an additional $ 25.0 million in the ATM Offering. 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 year ended December 31, 2024, we sold an aggregate of 5,272,538 shares under the ATM Offering at an average price of $ 4.71 per share for net proceeds of $ 23.5 million after deducting sales commissions and offering expenses. During the year ended December 31, 2023, we sold an aggregate of 7,431,981 shares under the ATM Offering at an average price of $ 2.56 per share for net proceeds of $ 18.3 million after deducting sales commissions and offering expenses. We have reserved shares of common stock for issuance as follows: As of December 31, 2024 2023 Shares reserved for exercises of outstanding stock options 7,634,937 5,700,070 Shares reserved for vesting of restricted stock units — 361,500 Shares reserved for exercises of warrants 58,904 58,904 Shares reserved for issuance under the 2021 Employee Stock Purchase Plan 433,264 507,113 Shares reserved for future issuance under the 2021 Stock Incentive Plan 1,919,921 1,911,660 Shares reserved for future issuance as part of the K2HV Loan Agreement conversion feature 791,364 — Total shares reserved for future issuance 10,838,390 8,539,247 Preferred Stock We are authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As of December 31, 2024, no shares of preferred stock were issued or outstanding. 9. Stock-based Compensation 2017 Stock Incentive Plan In December 2017, we adopted the 2017 Stock Incentive Plan (the “2017 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards to eligible employees, officers, directors and consultants. The terms of stock options and RSAs, including vesting requirements, are determined by our board of directors, subject to the provisions of the 2017 Plan. 2021 Stock Incentive Plan In April 2021, our board of directors adopted and our stockholders approved the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of our initial public offering (the “IPO”). As a result of the adoption of the 2021 Plan, no further awards will be made under the 2017 Plan. 124 Table of Contents The 2021 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2021 Plan. 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 Stock Incentive 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 ending December 31, 2022 and continuing until, and including, the fiscal year ended 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 the board of directors. As of December 31, 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 December 31, 2024, there were 1,919,921 shares available for future issuance under the 2021 Plan. Effective January 1, 2025, 2,241,357 additional shares were added to the shares authorized for future issuance under the 2021 Plan pursuant to the terms of the annual increase described above. 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. 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 year ended December 31, 2024, 73,849 shares of our common stock were purchased by participants of the 2021 ESPP for total proceeds of $ 0.1 million. During the year ended December 31, 2023, 52,037 shares of our common stock were purchased by participants of the 2021 ESPP for total proceeds of $ 0.1 million. Stock-Based Compensation Expense Total stock-based compensation expense recognized in the consolidated statements of operations was as follows: Year Ended December 31, 2024 2023 (in thousands) Research and development $ 4,606 $ 4,003 General and administrative 4,220 4,005 Total stock-based compensation $ 8,826 $ 8,008 RSA Activity We may, at our discretion, repurchase unvested shares of restricted stock issued pursuant to the 2017 Plan at the initial purchase price if the employees or non-employees terminate their service relationship with us. The shares are recorded in stockholders’ deficit as they vest. 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 year ended December 31, 2024. Accordingly, we had no unrecognized stock-based compensation expense related to unvested RSAs as of December 31, 2024. 125 Table of Contents The aggregate fair value of RSAs that vested during the year ended December 31, 2023, based upon the fair value of the stock underlying the RSAs on the day of vesting, was $ 0.2 million. RSU Activity We have granted RSUs to our employees under the 2021 Plan. The following table summarizes RSU activity during the year ended December 31, 2024: Shares/Units Weighted-Average Grant Date Fair Value Per Share Unvested at December 31, 2023 361,500 $ 3.92 Granted — $ — Vested ( 356,500 ) $ 3.95 Forfeited ( 5,000 ) $ 2.45 Unvested at December 31, 2024 — $ — As of December 31, 2024, there were no unvested RSUs. Accordingly, we had no unrecognized stock-based compensation expense related to unvested RSUs as of December 31, 2024. The aggregate fair value of RSUs that vested during the year ended December 31, 2024, based upon the fair value of the stock underlying the RSUs on the day of vesting was $ 1.0 million. The aggregate fair value of RSUs that vested during the year ended December 31, 2023, based upon the fair value of the stock underlying the RSUs on the day of vesting was $ 0.2 million. Stock Option Activity During the year ended December 31, 2022, we granted performance-based stock options to certain executive officers for the purchase of an aggregate of 883,352 shares of common stock with a grant date fair value of $ 3.36 per share. These stock options would have vested only upon achievement of specified performance targets related to certain business objectives prior to December 31, 2023. These performance targets were not achieved, and accordingly these awards expired without vesting on December 31, 2023. No stock-based compensation expense was recognized during the year ended December 31, 2023 based on our assessment about the probability that the performance targets would be achieved prior to expiration. The fair value of stock options granted during the years ended December 31, 2024 and 2023 was calculated on the date of grant using the following weighted-average assumptions: Year Ended December 31, 2024 2023 Risk-free interest rate 4.0 % 3.9 % Expected term (in years) 6.0 6.0 Expected annual dividend yield — % — % Expected volatility 92.7 % 82.7 % The valuation assumptions were determined as follows: • Risk-free interest rate: The yield on zero-coupon U.S. Treasury securities for a period that was commensurate with the expected term of the awards. • Expected term (in years): The expected term of the awards represents the period of time that the awards were expected to be outstanding. We use the simplified method to estimate the expected term due to a lack of sufficient historical exercise data to provide a reasonable basis on which to estimate the expected term. Under this method, the expected term equals the average of the vesting term and the original contractual term of the option. • Expected annual dividend yield: The estimated dividend yield was zero because we have no history of paying dividends, and do not intend to do so in the foreseeable future. • Expected volatility: The expected term of stock options granted by us is generally longer than the trading history of our common stock since the IPO on April 30, 2021. Accordingly, we estimated the expected volatility based on the historical volatility of a group of publicly-traded companies with similar characteristics to us, including stage of product development and therapeutic focus within the life sciences industry. The historical volatility of these companies was calculated over a period of time commensurate with the expected term of the stock option. 126 Table of Contents Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the years ended December 31, 2024 and 2023 was $ 3.43 and $ 1.56 per share, respectively. The following table summarizes stock option activity during the year ended December 31, 2024: Options Outstanding Number of Options Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2023 5,700,070 $ 6.89 Granted 2,381,112 $ 4.44 Exercised ( 17,224 ) $ 2.05 Cancelled ( 429,021 ) $ 4.98 Outstanding, December 31, 2024 7,634,937 $ 6.24 7.44 $ — Exercisable at December 31, 2024 4,866,277 $ 7.13 6.79 $ — The aggregate intrinsic fair value of stock options exercised during the years ended December 31, 2024 and 2023 were nominal for each year. As of December 31, 2024, there was unrecognized stock-based compensation expense related to unvested stock options of $ 8.9 million, which we expect to recognize over a weighted-average period of approximately 2.2 years. 10. Commitments and Contingencies Leases Our leases are as follows: • An April 2019 operating lease for approximately 9,949 square feet of office and laboratory space which commenced in April 2019 and terminated in March 2024. The lease was subject to fixed-rate rent escalations and provided for a term extension option, which was not reasonably certain of exercise. In May 2022, we entered into a sublease agreement with Crossbow Therapeutics, Inc. (“Crossbow”), to sublease the entirety of this space. The total rent due to us for the subleased premises over the term of the sublease was approximately $ 2.1 million, which is greater than the annual rent paid by us to the landlord for the leased premises over the same term. Rent expense associated with the April 2019 operating lease was recognized net of the lease income generated from the sublease agreement. Lease income was allocated to either research and development expense or general and administrative expense in the same manner as the associated rent expense was allocated. Crossbow was obligated to pay all real estate taxes and costs related to the subleased premises, including cost of operations, maintenance, repair, replacement, and property management. The sublease with Crossbow terminated in March 2024 concurrently with the termination of the lease. • A June 2021 operating lease for approximately 25,778 square feet of office and laboratory space, which commenced in May 2022 and terminates in May 2030. The lease is subject to fixed-rate rent escalations and provided for $ 5.7 million in tenant improvements, which we fully utilized, and a term extension option, which was not reasonably certain of exercise. We provided the landlord with a security deposit in the form of a letter of credit in the amount of $ 1.0 million upon signing, which is included in restricted cash and cash equivalents, net of current portion as of December 31, 2024 and 2023. The following table summarizes operating lease costs: Year Ended December 31, 2024 2023 (in thousands) Operating lease costs $ 1,918 $ 2,442 Variable lease costs 1,280 1,210 Sublease income ( 398 ) ( 1,562 ) Total $ 2,800 $ 2,090 127 Table of Contents Cash paid for amounts included in the measurement of lease liabilities were $ 2.5 million and $ 3.0 million for the years ended December 31, 2024 and 2023, respectively. The following table summarizes the lease term and discount rate for operating leases: As of December 31, 2024 2023 Weighted-average remaining lease term (years) 5.4 6.3 Weighted-average discount rate 8.0 % 8.0 % As of December 31, 2024, the future minimum lease payments due under our lease for each of the next five years ended December 31, and thereafter are as follows (in thousands): 2025 $ 2,337 2026 2,403 2027 2,471 2028 2,542 2029 2,614 Thereafter 1,102 Total future minimum lease payments 13,469 Less: imputed interest ( 2,477 ) Total lease liability $ 10,992 License Agreements Harpoon License In March 2018, we entered into a Patent Assignment and License Agreement (the “Harpoon Agreement”) with Harpoon Therapeutics, Inc. (“Harpoon”), a clinical-stage immune-oncology company developing a novel class of T-cell engagers to fight cancer and other diseases. Under the terms of the Harpoon Agreement, Harpoon granted us a license to use its intellectual property, solely to make, have made, use, sell, offer for sale and import covered products in the licensed field and Harpoon sold, assigned and transferred other specific patents to us (the “Harpoon License”). On October 19, 2018, we entered into the First Amended and Restated Assignment and License Agreement with Harpoon, which amended certain terms of the original agreement, but did not change the terms of the license to us, patent assignments between the parties or payments due to Harpoon. Further, on December 20, 2019, the companies entered into the Second Amended and Restated Assignment and License Agreement, which also amended certain terms of the original agreement to expand the licenses and assignments for specific patents granted to us or by us to Harpoon. In exchange for these additional terms, Harpoon agreed to reimburse up to $ 75,000 of our legal costs. Additionally, we agreed to pay to Harpoon royalties on future net sales and pay minimum annual royalties of $ 250,000 upon achievement of our first commercial sale. Under the terms of the Harpoon License, we paid an upfront fee of $ 500,000 in 2018 and are obligated to reimburse Harpoon for certain legal costs incurred by Harpoon. In addition, we are obligated to pay Harpoon royalties based on future net sales and have agreed to pay a minimum annual royalty payment at an amount in the low hundreds of thousands of dollars upon achievement of our first commercial sale. In 2018, we recorded the upfront fee as research and development expense upon payment as the intellectual property was acquired prior to regulatory approval and does not have an alternative future use. The royalty payments are contingent upon sales and, as such, the royalty payments made to Harpoon will be considered probable and estimable and treated as cost of sales when incurred. Accordingly, at the commencement of sales, we will account for the royalty payments as cost of sales equal to the greater of a percentage in the low-single digits of the net sales of the patent-covered products or a minimum annual royalty payment at an amount in the low hundreds of thousands of dollars. Any legal fees incurred in connection with the Harpoon Agreement will be expensed as incurred. The Harpoon License will expire on a country-by-country basis upon the expiration of the last to expire patent or patent application included in the licensed patents within the applicable country. We have the right to terminate the Harpoon License upon 30 days prior written notice to Harpoon, and either party may terminate for a material breach if such breach is not cured within a specified number of days. Adimab 2018 License In March 2018, we entered into a Development and Option Agreement (the “Adimab Agreement”) with Adimab LLC (“Adimab”), a company specializing in antibody discovery, humanization and optimization. Under the terms of the Adimab 128 Table of Contents Agreement, Adimab granted us the rights to initiate certain research initiatives on a specified number of targets. Adimab also granted us a license to certain Adimab core technologies, antibodies and products applicable to certain targets (“Adimab License”). In August 2020, we entered into Amendment One to the Development and Option Agreement with Adimab, which extended the period of time for us to evaluate candidate antibodies in advance of electing to exercise the option to acquire exclusive rights to licensed antibodies (the “Evaluation Term”), but did not otherwise change the terms of the Adimab License. The Evaluation Term was then further extended in December 2020 by entering into Amendment Two to the Development and Option Agreement, through delivery of a non-refundable payment of $ 100,000 by us to Adimab, which was creditable toward the option fee. The non-refundable payment was recorded immediately as research and development expense in the consolidated statements of operations. In July 2021, we entered into the First Amended and Restated Development and Option Agreement with Adimab to extend the target selection time period and to allow for us to add additional antibody discovery programs to be covered under the agreement, but otherwise retaining all other material provisions of the Adimab License. Under the terms of the Adimab License, we must pay both an upfront fee and final fee of $ 200,000 for all research programs. We must also pay Adimab milestone fees with respect to each research program ranging from $ 150,000 to $ 200,000 based on the achievement of technical milestones by Adimab for the applicable research program. In order to exercise any options in the Adimab Agreement, we must pay a $ 500,000 fee for each target option exercised. For each target option exercised, we are also obligated to pay certain milestones ranging from $ 1.0 million to $ 4.0 million for certain clinical and commercialization achievements. Additionally, for licensed products sold during the applicable royalty term, we must pay Adimab royalties at percentages in the low-to-mid single digits. The Adimab Agreement will expire upon the expiration of any options or if an option is exercised, on a country-by-country and licensed product-by-licensed product basis on the expiration of the last royalty term for a licensed product in the particular country. As of December 31, 2024, we have exercised the target option for one target covered under the Adimab Agreement. As of December 31, 2024, we have not made any payments for clinical or sales-based milestones or royalties pursuant to the Adimab Agreement. Adimab 2022 Collaboration In November 2022, we entered into a Collaboration Agreement (the “Adimab Collaboration Agreement”) with Adimab. Under the terms of the Adimab Collaboration Agreement, Adimab has agreed to provide us with services to help discover, generate, optimize and/or engineer specified proteins. In addition, Adimab will provide us with a license to certain Adimab core technologies, patents and products applicable to certain targets (“Adimab Collaboration License”), separate from those provided in the 2018 Adimab Agreement. Under the terms of the Adimab Collaboration Agreement, we must pay Adimab milestone fees with respect to each research program ranging from $ 500,000 to $ 1.5 million based on the achievement of certain clinical milestones by us. The Adimab Collaboration Agreement provides us with an option to obtain any development and commercialization licenses from Adimab used in products. To exercise an option, we must pay a $ 500,000 fee for each product option exercised. For each product sold, we are also obligated to pay certain milestones ranging from $ 1.0 million to $ 2.0 million based on the achievement of the first commercial sale in certain countries. Additionally, for licensed products sold during the applicable royalty term, we must pay Adimab royalties at percentages in the low-to-mid single digits. The Adimab Collaboration Agreement will expire upon the expiration of any options or if an option is exercised, on a country-by-country and licensed product-by-licensed product basis on the expiration of the last royalty term for a licensed product in the particular country. As of December 31, 2024, we have not exercised any options and have not made any payments for clinical or sales-based milestones or royalties pursuant to the Adimab Collaboration Agreement. 11. Income Taxes During the years ended December 31, 2024 and 2023, we recorded no current or deferred income tax expenses or benefits as we have incurred losses since inception and have provided a full valuation allowance against our deferred tax assets. 129 Table of Contents A reconciliation of the expected income tax expense (benefit) computed using the federal statutory income tax rate to our effective income tax rate is as follows: Year Ended December 31, 2024 2023 Income tax computed at federal statutory rate 21.0 % 21.0 % State taxes 6.5 9.4 Change in valuation allowance ( 29.4 ) ( 12.4 ) R&D credit carryovers 3.7 4.5 Stock-based compensation ( 2.4 ) ( 3.0 ) Permanent differences 0.5 ( 0.6 ) Section 382 net operating loss adjustments 0.0 ( 20.2 ) Other 0.1 1.3 Effective income tax rate 0.0 % 0.0 % Our deferred tax assets and liabilities consist of the following: As of December 31, 2024 2023 (in thousands) Deferred tax assets: Net operating losses $ 32,781 $ 23,873 Tax credit carryforwards 6,141 3,168 Lease liability 3,069 3,645 Other capitalized costs—net of amortization 219 95 Reserves and accruals 983 1,295 Stock-based compensation 1,921 2,021 Capitalized research and experimental expenditures—net of amortization 25,214 16,162 Deferred tax assets 70,328 — 50,259 Valuation allowance ( 67,756 ) ( 47,058 ) Deferred tax assets 2,572 — 3,201 Deferred tax liabilities: Right of use asset ( 1,676 ) ( 1,993 ) Fixed assets and depreciation ( 896 ) ( 1,208 ) Deferred tax liabilities ( 2,572 ) ( 3,201 ) Net deferred taxes $ — $ — The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and experimental (“R&E”) expenditures under Section 174 for tax years beginning after December 31, 2021. This rule became effective for us during 2022 and resulted in the capitalization of R&E expenditures of $ 50.2 million and $ 27.9 million during the years ended December 31, 2024 and 2023, respectively. We amortize these costs for tax purposes over 5 years for research and development (“R&D”) performed in the U.S. and over 15 years for R&D performed outside the U.S. We evaluated the positive and negative evidence bearing upon our ability to realize the deferred tax assets as of December 31, 2024 and 2023. We considered our cumulative net losses and concluded as of December 31, 2024 and 2023, that it was more likely than not that we would not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance was established against the net deferred tax assets as of December 31, 2024 and 2023. The valuation allowance increased by $ 20.7 million during the year ended December 31, 2024 primarily due to an increase in deferred tax assets related to capitalized R&E expenditures, and as the result of operating losses generated with no corresponding financial statement benefit. The valuation allowance increased by $ 4.6 million during the year ended December 31, 2023 primarily due to an increase in deferred tax assets related to capitalized R&E expenditures, and as the result of operating losses generated with no corresponding financial statement benefit. These increases were offset by a decrease in deferred tax assets as the result of our Section 382 study that was completed for the period of January 22, 2018, through December 31, 2022, which resulted in limitations being identified on historical net operating losses and research and development tax credits. 130 Table of Contents We have incurred net operating losses since inception. As of December 31, 2024 and 2023, we had federal net operating loss carryforwards of $ 126.8 million and $ 96.6 million, respectively, available to reduce future federal taxable income. The carryforwards generated from losses incurred prior to January 1, 2018 will expire in 2037. The carryforwards generated from losses incurred after December 31, 2017 do not expire. As of December 31, 2024, federal net operating loss carryforwards includes $ 126.7 million of carryforwards that do not expire. The TCJA enacted on December 22, 2017 limits a taxpayer’s ability to utilize a net operating loss deduction in a year to 80% taxable income for federal net operating losses arising in tax years beginning after December 31, 2017. As of December 31, 2024 and 2023, we had state net operating loss carryforwards of $ 76.8 million and $ 44.9 million, respectively, available to reduce future state taxable income, which expire at various dates beginning in 2037. As of December 31, 2024 and 2023, we had federal research and development tax credit carryforwards of $ 4.9 million and $ 2.3 million, respectively, available to reduce future federal tax liabilities, which expire at various dates beginning in 2042. We had state research and development tax credit carryforwards as of December 31, 2024 and 2023 of $ 1.3 million and $ 0.9 million, respectively, available to reduce future state tax liabilities, which expire at various dates beginning in 2037. Utilization of our net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. We completed a Section 382 study for the period of January 22, 2018, through December 31, 2022 and identified three ownership changes that occurred on June 10, 2019, August 2, 2019, and August 31, 2022 for Section 382 purposes. As we experienced these ownership changes, all pre-change net operating loss and research and development tax credit carryforwards are subject to limitation. Due to the unlimited carryover period for net operating losses generated after December 31, 2017, none of our federal net operating losses will expire unused. A portion of our state net operating losses, and federal and state research and development tax credits are expected to expire unused. We have analyzed the impact of these limitations on our attributes and included the impact of these limitations in our deferred tax assets as of December 31, 2024 and 2023. We have not recorded any reserves for uncertain tax positions as of December 31, 2024 and 2023. We have conducted a study of research and development tax credit for tax years 2018 through 2020. The amounts of federal and state research and development tax credit carryforwards presented above have reflected the results from the study. A full valuation allowance has been provided against our research and development credits. We file tax returns as prescribed by the tax laws of the jurisdictions in which we operate. In the normal course of business, we are subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The statute of limitations for assessment by the Internal Revenue Service, or IRS, and state tax authorities is closed for tax years prior to 2021, although carryforward attributes that were generated prior to 2021 may still be adjusted upon examination by the IRS or state tax authorities if they either have been or will be used in a future period. 12. Related Parties In May 2022, we entered into a sublease agreement with Crossbow, for which entities affiliated with MPM Capital (“MPM Capital”) are also beneficial owners, to sublease the entirety of our office and laboratory space in Cambridge, Massachusetts. Luke Evnin, Ph.D., the chair of our board of directors, co-founded MPM Capital and serves as Managing Director of MPM Capital. 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 (see Note 10, Commitments and Contingencies ). We received cash payments under our sublease of $ 0.4 million and $ 1.6 million during the years ended December 31, 2024 and 2023, respectively. 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. The security deposit was included within accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of December 31, 2023. 13. Defined Contribution Benefit Plan We sponsor a defined contribution benefit plan under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to contribute a portion of their annual compensation, subject to statutory limitations. We match 50 % of each participant’s contribution up to a maximum of 6 % of such participant’s eligible compensation paid in a calendar year. During the years ended December 31, 2024 and 2023, we recognized expense of $ 0.3 million and $ 0.2 million related to matching contributions, respectively. 131 Table of Contents 14. 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, 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 weighted-average amounts were excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive: December 31, 2024 2023 Outstanding stock options 7,634,937 5,700,070 Unvested RSUs — 361,500 Warrants to purchase common stock 58,904 58,904 Common stock to be issued under the 2021 ESPP 67,445 22,611 Total 7,761,286 6,143,085 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 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. 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 year ended December 31, 2024. Pursuant to 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 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 consolidated statements of operations: Year Ended December 31, 2024 2023 (in thousands, except share and per share amounts) Numerator Net loss $ ( 70,515 ) $ ( 37,368 ) Less: change in fair value of derivative liability ( 1,621 ) — Plus: interest expense on converted term loan 493 — Adjusted net loss $ ( 71,643 ) $ ( 37,368 ) Denominator Weighted-average common stock outstanding, basic 43,332,088 35,646,572 Dilutive effect of common stock issuable from assumed conversion of convertible term loan 527,576 — Weighted-average common stock outstanding, diluted 43,859,664 35,646,572 Net loss per share Basic $ ( 1.63 ) $ ( 1.05 ) Diluted $ ( 1.63 ) $ ( 1.05 ) 15. Segment Information We have one reportable segment which focuses on the discovery and development of cancer therapeutics. The segment derives its revenues from the Collaboration Agreement with Jazz (see Note 3, Jazz Collaboration and License Agreement ). Our CODM manages our operations on an integrated basis for the purpose of allocating resources. When evaluating our financial performance, our CODM regularly reviews total expenses and expenses by function and makes decisions using this information based on the performance of the enterprise as a whole. Our CODM primarily evaluates the performance of the 132 Table of Contents enterprise based on results that have a direct impact on our available cash and cash equivalents and accordingly places less significance on non-cash expenses such as stock-based compensation and depreciation expenses in determining how to allocate resources. Segment assets regularly reviewed by our CODM include measures of liquidity, primarily available cash and cash equivalents, and are consistent with the presentation of cash and cash equivalents reported in our consolidated balance sheets. The following is a summary of our segment and consolidated net loss, including significant segment expenses: Year Ended December 31, 2024 2023 (in thousands) Collaboration revenue $ 1,885 $ 19,943 Less: Manufacturing 19,759 10,521 Clinical development 16,361 9,335 Research and discovery 14,389 16,673 General and administrative support 14,330 14,145 Other segment expenses (a) 10,640 9,772 Interest income 6,673 7,416 Interest expense ( 4,656 ) ( 3,139 ) Loss on extinguishment of debt ( 553 ) — Other income (expense), net 1,615 ( 1,142 ) Segment and consolidated net loss $ ( 70,515 ) $ ( 37,368 ) (a) Other segment expenses includes non-cash expenses for stock-based compensation and depreciation expenses. 133 Table of Contents EXHIBIT INDEX Exhibit No. Description of Exhibit 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 5, 2021, File No. 001-40366). 3.2 Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 27, 2023). 4.1 Specimen Stock Certificate evidencing the shares of common stock of the Registrant (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 4.2 Description of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 24, 2022). 4.3 Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 8, 2024). 10.1 2017 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.2 Form of Stock Option Agreement under 2017 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.3 Form of Restricted Stock Agreement under 2017 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.4 2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.5 Form of Stock Option Agreement under 2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.6 Form of Restricted Stock Agreement under 2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.7 Form of Restricted Stock Unit Agreement under 2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.8 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.9 Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 8, 2021, File No. 333-255132). 10.10# Second Amended and Restated Assignment and License Agreement dated as of December 20, 2019, by and between the Registrant and Harpoon Therapeutics, Inc (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 8, 2021, File No. 333-255132). 10.11 Amended and Restated Royalty Transfer Agreement dated as of August 2, 2019, by and among MPM Oncology Impact Fund Charitable Foundation, Inc. and UBS Optimus Foundation (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 8, 2021, File No. 333-255132). 10.12 Lease Agreement dated as of June 1, 2021, by and between the Registrant and ARE-MA Region No. 75, LLC. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2021, File No. 001-40366). 10.13+ Employment Agreement dated as of April 23, 2021, by and between the Registrant and Daniel J. Hicklin, Ph.D. (incorporated by reference to Exhibit 10.15 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 134 Table of Contents 10.14+ Employment Agreement dated as of April 23, 2021, by and between the Registrant and Randi Isaacs M.D. (incorporated by reference to Exhibit 10.16 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.15+ Employment Agreement dated as of April 23, 2021, by and between the Registrant and Ellen Lubman, M.B.A. (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.16+ Employment Agreement dated as of April 23, 2021, by and between the Registrant and Timothy W. Trost (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, File No. 333-255132). 10.17+ Employment Agreement dated as of April 30, 2021 by and between the Registrant and Chulani Karunatilake (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 10, 2021, File No. 001-40366). 10.18# Collaboration and License Agreement, dated as of April 6, 2022, by and between the Registrant and Jazz Pharmaceuticals Ireland Limited (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 10, 2022). 10.19 Form of Restricted Stock Unit Agreement under 2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2024). 10.20 Loan and Security Agreement, dated as of May 2, 2024, by and among the Registrant, each other person party thereto as a borrower from time to time, each person party thereto as a guarantor from time to time, the lenders from time to time party thereto, K2 HealthVentures LLC, as administrative agent for the lenders, and Ankur a Trust Company LLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 8, 2024). 10.21* First Amendment to Lease dated as of December 31, 2024 by and between the Registrant and ARE-MA Region No. 75, LLC. 10.22* Non-Employee Director Compensation Policy. 19* Insider Trading Policy 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 26, 2021, Registration No. 333-255132). 23.1* Consent of Ernst & Young LLP, Independent Registered Accounting Firm. 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1† Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 Dodd-Frank Compensation Recovery Policy (incorporated by reference to Exhibit 97 to the Registrant's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2024). 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) * Filed herewith. † The certifications attached as Exhibit 32.1 that accompany this Annual Report, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Werewolf Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing. + Indicates management contract. # Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is not material and is the type of information that the registrant treats as private or confidential. 135 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WEREWOLF THERAPEUTICS, INC. Date: March 11, 2025 By: /s/ Daniel J. Hicklin Daniel J. Hicklin, Ph.D. President and Chief Executive Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Daniel J. Hicklin President, Chief Executive Officer and Director (Principal Executive Officer) March 11, 2025 Daniel J. Hicklin, Ph.D. /s/ Timothy W. Trost Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) March 11, 2025 Timothy W. Trost /s/ Luke Evnin Chair of the Board of Directors March 11, 2025 Luke Evnin, Ph.D. /s/ Michael B. Atkins Director March 11, 2025 Michael B. Atkins, M.D. /s/ Meeta Chatterjee Director March 11, 2025 Meeta Chatterjee, Ph.D. /s/ Derek DiRocco Director March 11, 2025 Derek DiRocco, Ph.D. /s/ Alon Lazarus Director March 11, 2025 Alon Lazarus, Ph.D. /s/ Briggs W. Morrison Director March 11, 2025 Briggs W. Morrison, M.D. /s/ Michael A. Sherman Director March 11, 2025 Michael A. Sherman, M.B.A. /s/ Anil K. Singhal Director March 11, 2025 Anil K. Singhal 136