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Item 9A. Controls and Procedures

2025-03-27 compared with 2024-03-25 · 147 added, 118 removed, 583 unchanged (31% of the section changed)

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Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “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, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, 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.

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Rule 10b5-1 Plans

On November 16, 2023 , Benjamin Dake , our President , adopted a trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) (the Dake 10b5-1 Plan).

Between March 18, 2024 and December 31, 2024, the Dake 10b5-1 Plan provides for the potential sale of approximately 193,530 of our common stock.

The plan expires on December 31, 2024 , or upon the earlier completion of all authorized transactions under the plan .

On November 17, 2023 , Marinus Verwijs , our Chief Technology Officer , adopted a trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1 (c) (the Verwijs 10b5-1 Plan).

Between March 19, 2024 and October 1, 2024, the Verwijs 10b5-1 Plan provides for the potential sale of approximately 42,400 of the our common stock.

The plan expires on December 31, 2024 , or upon the earlier completion of all authorized transactions under the plan.

On November 24, 2023 , Timothy Noyes , our Chief Executive Officer , adopted a trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1 (c) (the Noyes 10b5-1 Plan).

Between April 1, 2024 and July 16, 2025, the Noyes 10b5-1 Plan provides for the potential sale of approximately 280,000 of our common stock.

The plan expires on July 31, 2025 , or upon the earlier completion of all authorized transactions under the plan.

On November 4, 2024 , Timothy Noyes , our Chief Executive Officer , terminated a trading arrangement that was intended to satisfy the affirmative defense of Rule 10b5-1(c), or the Noyes 10b5-1 Plan.

The Noyes 10b5-1 Plan was entered into on November 27, 2023, and commenced on April 1, 2024, with a termination date of the earlier of July 31, 2025, or the date all shares under the plan were sold.

The aggregate number of securities sold under the Noyes 10b5-1 Plan was 40,000 .

On November 4, 2024 , Ralph Niven , our former Chief Scientific Officer , terminated a trading arrangement that was intended to satisfy the affirmative defense of Rule 10b5-1(c), or the Niven 10b5-1 Plan.

The Niven 10b5-1 Plan was entered into on April 9, 2024, and commenced on August 8, 2024, with a termination date of the earlier of April 9, 2025, or the date all shares under the plan were sold.

There were no securities sold under the Niven 10b5-1 Plan.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this Item 10 is incorporated herein by reference from our Registration Statement on Form S-4, as amended, which is deemed to be a definitive proxy statement under Section 14a-6 of the Exchange Act, that has been filed with the SEC on March 25, 2025, or the 2025 Proxy Statement, under the captions “Proposal No.

7 – The Director Election Proposal,” “Aerovate Executive Officers and Corporate Governance,” and “Proposal No.

8 – The Auditor Ratification Proposal.”.

Executive Compensation.

The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this Item 11 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Aerovate Executive Compensation” and “Aerovate Executive Officers and Corporate Governance.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this Item 12 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Equity Compensation Plan Information” and “Principal Stockholders of Aerovate.”

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this Item 13 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Certain Relationships and Related Party Transactions of the Combined Company” and “Proposal No.

7 – The Director Election Proposal.”

Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, San Diego, California (PCAOB Auditor ID:

The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this Item 14 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the caption “Proposal No.

8 – The Auditor Ratification Proposal.”.

Exhibits, Financial Statement Schedules

All financial statements.

The consolidated financial statements of Aerovate Therapeutics, Inc., together with the report thereon of KPMG LLP, an independent registered public accounting firm, are included in this annual report on Form 10-K beginning on page F-1.

Our consolidated financial statements, together with the report thereon of KPMG LLP, our independent registered public accounting firm, are included in this annual report on Form 10-K beginning on page F-1.

Financial statement schedules.

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Form 10-K Summary

The Company has elected not to include summary information.

We have elected not to include summary information.

AEROVATE THERAPEUTICS, INC.

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San Diego, California

March 25, 2024

February 24, 2025

AEROVATE THERAPEUTICS, INC.

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive gain

Accumulated deficit

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Other comprehensive loss:

Unrealized gain (loss) on securities

Unrealized (loss) gain on securities

Comprehensive loss

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Balance at December 31, 2022

Unrealized loss on investments

Unrealized gain on investments

Stock based compensation

Issuance of common stock in connection with ATM, net

Vesting of restricted stock units

Issuance of common stock upon exercise of stock options

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Balance at December 31, 2023

Unrealized gain on investments

Stock based compensation

Unrealized loss on investments

Issuance of common stock in connection with ATM, net

Vesting of restricted stock units

Issuance of common stock upon exercise of stock options

Issuance of common stock under ESPP

Vesting of restricted stock units

Stock based compensation

Balance at December 31, 2024

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Depreciation and amortization expense

Impairment of right-of-use asset

Accretion of discounts and amortization of premiums on investments, net

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

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Right-of-use asset obtained in exchange for operating lease liability

Deferred offering costs included in accounts payable

See accompanying notes to consolidated financial statements.

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The Company has a wholly owned subsidiary, Aerovate Securities Corporation.

The Company is a clinical-stage biopharmaceutical company that is focused on the development of drugs that meaningfully improve the lives of patients with rare cardiopulmonary disease.

The Company’s initial focus is on advancing AV-101, the Company’s dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension (“PAH”).

The Company initiated a global Phase 2b/Phase 3 trial of AV-101 in adults with PAH in December 2021 and announced in November 2023 completion of enrollment of the Phase 2b portion of this trial and enrollment of the first patient in the Phase 3 portion of this trial.

The Company is a biopharmaceutical company.

The Company’s initial focus was on advancing AV-101, the Company’s dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension (“PAH”).

However, in June 2024, the Company announced negative results from the Phase 2b portion of its global Phase 2b/Phase 3 trial of AV-101 in adults with PAH, and, as a result, the Company decided to halt enrollment and shut down the Phase 3 portion of the Phase 2b/Phase 3 trial as well as the long-term extension study.

In June 2024, the Company announced a corporate restructuring and in July 2024, the Company engaged Wedbush Securities Inc.

as the Company’s exclusive strategic financial advisor to assist in the process of exploring strategic alternatives, including but not limited to an acquisition, merger, reverse merger, business combination, liquidation or other transaction.

On October 30, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Caribbean Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub I”), Caribbean Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”), and Jade Biosciences, Inc., a Delaware corporation (“Jade”), pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, among other things, Merger Sub I will merge with and into Jade, with Jade surviving the merger as the surviving corporation (the “First Merger”), and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Second Merger” and together with the First Merger, the “Merger”).

In addition, in connection with the closing of the Merger (the “Closing”), the Company expects to declare a cash dividend to its pre-Merger stockholders of approximately $ 65.0 million in the aggregate (the “Cash Dividend”), provided such amount is subject to adjustment as set forth in the Merger Agreement.

The Merger was approved by the Company’s board of directors (the “Board”), and the Board resolved to recommend approval of the Merger Agreement to the Company’s stockholders.

The Closing is subject to approval by the stockholders of the Company and Jade as well as other customary closing conditions, including the effectiveness of a registration statement filed with the U.S.

Securities and Exchange Commission (“SEC”) in connection with the transaction.

If the Merger is completed, the business of Jade will continue as the business of the combined company.

At-the-Market Offering

On April 5, 2023, the Company entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which the Company can sell, from time to time, at its option, up to an aggregate of $ 75.0 million of shares of its common stock, through the Agent, as its sales agent.

As of December 31, 2023, 2,662,721 shares have been sold under the Sales Agreement, generating approximately $ 44.3 million of net proceeds after deducting commissions to the sales agent and other offering costs, and up to $ 30.0 million of shares of the Company’s common stock remain available for sale from time to time under the Sales Agreement.

On April 5, 2023, the Company entered into an ATM Equity Offering SM Sales Agreement (the “Sales Agreement”) with BofA Securities, Inc., or the Agent, pursuant to which the Company can sell, from time to time, at its option, up to an aggregate of $ 75.0 million of shares of its common stock, through the Agent, as its sales agent.

As of December 31, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $ 67.9 million of net proceeds after deducting commissions to the Agent and other offering costs.

As of the date of this Annual Report on Form 10-K, up to $ 6.0 million of shares of the Company’s common stock remain available for sale from time to time under the Sales Agreement.

Liquidity and Management Plans

Since inception, the Company has devoted substantially all of its resources to research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations and has not realized revenues from its planned principal operations.

The Company has incurred losses and negative cash flows from operations since inception.

In addition, the Company expects to incur substantial operating losses for the next several years as it continues its research and development activities.

The Company has incurred losses and negative cash flows from operations since

As of December 31, 2024, the Company had cash and cash equivalents and short-term investments of $ 78.6 million.

Management plans to continue to incur substantial costs in order to conduct research and development activities and additional capital will be needed to undertake these activities.

The Company intends to raise such capital through debt or equity financings or other arrangements to fund operations.

Management believes that the Company’s current cash and cash equivalents and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

(2) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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Such deposits may be in excess of federally insured limits.

Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Management believes that the Company is not exposed to

significant credit risk due to the financial position of the depository institutions in which those deposits are held.

The Company has not experienced any losses on deposits since inception.

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Fair value is defined as an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in

pricing an asset or liability.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

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Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value.

Through December 31, 2023, there has been no such impairment losses recorded by the Company.

Following the Company’s Workforce Reduction Plan, the Company terminated all employees in the Foster City office and vacated the premises in September 2024.

As a result, the Company impaired the related right-of-use asset of approximately $ 0.3 million, and recognized a loss on impairment in its general and administrative operating expenses during the year ended December 31, 2024.

At the commencement date of a lease, the Company recognizes lease liabilities which represent its obligation to make lease payments, and right-of-use assets (“ROU assets”) which represent its right to use the underlying asset during the lease term.

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The Company has elected not to separate lease and non-lease components and not recognize lease liabilities and ROU assets for short-term leases with terms of twelve months or less.

Convertible Preferred Stock

The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs.

Upon the occurrence of certain events that are outside the Company’s control, including a deemed liquidation event, holders of the convertible preferred stock can cause redemption for cash.

Therefore, convertible preferred stock is classified outside of stockholders’ deficit on the balance sheets as events triggering the liquidation preferences are not solely within the Company’s control.

The carrying values of the convertible preferred stock are adjusted to their liquidation preferences if and when it becomes probable that such a liquidation event will occur.

Research and Development Expenses

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Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax

assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance against deferred tax assets is recorded if, based upon the weight of all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

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The Company views its operations and manages its business as one operating segment.

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

Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted this standard in the current period and disclosed a summary of significant segment expenses in Note 9 to our consolidated financial statements.

Net Loss Per Share

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Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive.

The Company’s potentially dilutive securities, which include convertible preferred stock prior to the conversion of such shares to common stock and outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share.

The Company’s potentially dilutive securities, which include outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

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Year Ended December 31,

Net loss available to common stockholders

Net loss attributable to common stockholders

Weighted-average common stock outstanding, basic and diluted

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Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No.

2023-09, "Improvements to Income Tax Disclosures." ASU 2023-09 requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as

information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024 and for private businesses for annual periods beginning after December 15, 2025, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its financial statement disclosures.

In June 2022, the FASB issued ASU No.

2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This standard clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

This standard will be effective for the Company on January 1, 2024, and is not expected to have an impact on the Company’s financial position or results of operations upon adoption.

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

Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The standard is effective for fiscal years beginning after December 15, 2024, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact the adoption of this standard may have on its consolidated financial statements and related disclosures, and does not anticipate this ASU to materially impact our consolidated financial statements and related disclosures.

On November 4, 2024, the FASB issued ASU 2024-03 Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) , which requires disaggregated disclosure of income statement expenses for public business entities.

ASU 2024-03 requires, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (DD&A) recognized as part of oil- and gas-producing activities or other types of depletion expenses.

The tabular disclosure would also include certain other expenses, when applicable.

The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS

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Short-term investments

Commercial Paper

Treasury bills

Corporate debt securities

Treasury bills

Total short-term investments

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Treasury bills

Corporate debt securities

Total short-term investments

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Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and short-term investments.

Cash equivalents consisted of cash, money market funds and commercial paper, and short-term investments consisted of U.S.

Cash equivalents consisted of money market funds and commercial paper, and short-term investments consisted of U.S.

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

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Estimated fair

1 year or less

Corporate debt securities

1 year or less

Treasury bills

1 year or less

As of December 31, 2023

Estimated fair

2 years or less

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2 years or less

As of December 31, 2022

Estimated fair

Commercial paper

1 year or less

Treasury bills

1 year or less

2 years or less

The following tables summarize the Company’s short-term investments with unrealized losses for less than 12 months and 12 months or greater:

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Total Unrealized

Commercial paper

Treasury bills

Corporate debt securities

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Treasury bills

Corporate debt securities

The Company considers whether unrealized losses have resulted from a credit loss or other factors.

The unrealized losses on the Company’s available-for-sale securities as of December 31, 2023 were caused by fluctuations in market value and interest rates as a result of the economic environment and not credit risk.

The unrealized losses on the Company’s short-term investments as of December 31, 2024, were caused by fluctuations in market value and interest rates as a result of the economic environment and not credit risk.

The Company concluded that an allowance for credit losses was unnecessary as of December 31, 2024.

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Prepaid expenses and other current assets consisted of the following (in thousands):

Other current assets

Prepaid expenses

Prepaid research and development

Other current assets

Total prepaid expenses and other current assets

Accrued and Other Current Liabilities

In June 2024, following the Company’s decision to halt further development of AV-101, the Company announced its plan to terminate nearly all of its workforce in the coming months (the “Workforce Reduction Plan”).

As of December 31, 2024, 47 individuals, or approximately 92 % of the Company’s workforce, have been terminated.

The affected individuals have been and will be provided severance benefits, including cash severance payments.

Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against the Company.

In connection with the Workforce Reduction Plan, the Company incurred costs (in consideration of releases) of approximately $ 6.7 million, which are primarily one-time severance benefits, during the year ended December 31, 2024.

The Company has paid approximately $ 3.8 million of severance benefits, and liabilities associated with the Workforce Reduction Plan were approximately $ 2.9 million as of December 31, 2024.

The Company estimates that the remaining liabilities will be paid in the first quarter of 2025.

Accrued and other current liabilities consisted of the following (in thousands):

Accrued research and development

Accrued payroll and other employee benefits

Accrued research and development

Total accrued and other current liabilities

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The Foster City Lease has a term of thirty-nine months , unless extended or earlier terminated.

The Company has the option to extend the Foster City Lease for on

additional period of one year .

The Company has the option to extend the Foster City Lease for on additional period of one year .

The base rent payable under the Lease Term will be $ 22,600 per month and will be subject to annual increase of 3 % on each anniversary.

As of December 31, 2023, the consolidated balance sheet includes an operating lease right-of-use asset of $ 0.6 million and operating lease liability of $ 0.7 million.

The total operating lease expense was $ 0.4 million for both of the years ended December 31, 2023 and 2022.

Following the Company’s Workforce Reduction Plan, the Company terminated all employees in the Foster City office and vacated the premises in September 2024.

As of December 31, 2024, the future minimum annual lease payments under the operating leases were as follows (in thousands):

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Present value of net minimum lease payments

The components of operating leases for the years ended December 31, 2023 and December 31, 2022 were as follows (in thousands except lease term and discount rate):

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date.

The components of operating leases for the years

ended December 31, 2024 and December 31, 2023 were as follows (in thousands except lease term and discount rate):

Operating lease liabilities:

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Weighted-average incremental borrowing rate

Legal Proceedings

The Company may from time to time be party to litigation arising in the ordinary course of business.

The Company was not subject to any material legal proceedings during the years ended December 31, 2023 and 2022, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Supplemental cash flow information related to cash paid for amounts included in the measurement of operating lease liabilities was as follows (in thousands):

Year ended December 31,

Cash paid included in operating cash flows

Rent expense was as follows (in thousands):

Year ended December 31,

Operating lease

Short-term lease

Total rent expense

(6) STOCKHOLDERS’ EQUITY

Under the Company’s Amended and Restated Certificates of Incorporation dated August 3, 2020, the Company had a total of 94,052,154 shares of capital stock authorized for issuance, consisting of 50,000,000 shares of common stock, par value of $ 0.0001 per share, and 44,052,154 shares of convertible preferred stock, par value of $ 0.0001 per share.

Shares of authorized convertible preferred stock were designated as 4,000,000 shares of Series Seed redeemable convertible preferred stock and 40,052,154 shares of Series A redeemable convertible preferred stock.

On July 2, 2021, the Company’s certificate of amendment to its certificate of incorporation became effective, which provided 150,000,000 authorized shares of common stock with a par value of $ 0.0001 per share and 10,000,000 authorized shares of undesignated preferred stock with a par value of $ 0.0001 per share.

In August 2018, the Company issued 241,467 shares of common stock to RA Capital Healthcare Fund, L.P.

at a price of $ 0.0012 per share.

On July 2, 2021, in conjunction with the Company’s initial public offering, or IPO, the Company issued 9,984,463 shares of its common stock and all outstanding shares of the Company’s redeemable convertible preferred stock were converted into 14,182,854 shares of the Company’s common stock.

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders.

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Shares reserved for issuance under the 2021 Plan

Reserved for vesting of outstanding restricted stock units

Reserved for future ESPP issuances

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The Company’s 2021 Stock Option and Incentive Plan (the “2021 Plan”) was adopted by the Company’s board of directors and approved by the Company’s stockholders in June 2021 and became effective as of June 29, 2021.

Upon the effectiveness of the 2021 Plan, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) was terminated and no further grants may be made thereunder.

Upon the effectiveness of the 2021 Plan, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) was

terminated and no further grants may be made thereunder.

The Company’s 2021 Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards to its officers, directors, employees, consultants and advisors.

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Any shares subject to awards granted under the 2021 Plan or the 2018 Plan that are not paid, delivered or exercised before they expire or are canceled or terminated, or otherwise fail to vest, as well as shares used to pay the purchase or exercise price of such awards or related tax withholding obligations, will become available for new award grants under the 2021 Plan.

As of December 31, 2023, 3,931,887 options had been granted under the 2021 Plan, with 604,363 shares authorized under the 2021 Plan available for future issuance.

As of December 31, 2023, a total of 1,298,457 options had been granted and were outstanding under the 2018 Plan.

As of December 31, 2024, 1,676,073 and 758,462 options been granted and outstanding under the 2021 Plan and 2018 Plan, respectively.

The options that are granted under the 2021 Plan and the 2018 Plan are exercisable at various dates as determined upon grant and terminate within 10 years of the date of grant.

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(in thousands)

Vested and expected to vest at December 31, 2022

Outstanding at December 31, 2023

Cancelled/Forfeited

( 3,902,210 )

Outstanding at December 31, 2024

Vested and exercisable at December 31, 2024

Vested and expected to vest at December 31, 2023

The weighted-average grant date fair value of stock option grants was $ 15.69 and $ 10.48 per share for the years ended December 31, 2023 and December 31, 2022, respectively.

All exercisable options are vested and all outstanding options are vested or expected to vest.

The weighted-average grant date fair value of stock option grants was $ 14.92 and $ 15.69 per share for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024 there was approximately $ 7.1 million of unrecognized stock-based compensation expense related to nonvested stock-based compensation arrangements granted under the 2021 Plan and 2018 Plan, which is expected to be recognized over a weighted-average period of 1.7 years.

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A total of 230,000 shares of the Company’s common stock is initially available for issuance under the ESPP.

The share limit will automatically increase on the first trading day in January of each year (commencing with 2022) by an amount equal to the lesser of (1) 1 % of the total number of outstanding shares of the Company’s common stock on the last trading day in December in the prior year, or (2) such lesser number as determined by the Company’s board of directors.

The number of shares available under the 2021 Plan increased by 247,229 shares effective January 1, 2023 as determined by the Company’s board of directors.

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The vesting period generally occurs over one to four years .

As of December 31, 2023, the Company had unrecognized stock-based compensation expense related to its unvested restricted stock units of $ 0.9 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.4 years.

As of December 31, 2024, the Company had had no unrecognized stock-based compensation expense related to its unvested restricted stock units.

(d) Stock-Based Compensation Expense

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Year Ended December 31,

Research and development

General and administrative

Research and development

Stock-based compensation expense by type of award included within the consolidated statements of operations and comprehensive (loss) income was as follows:

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Stock options

Employee stock purchase plan awards

Restricted stock awards and units

(8) RELATED PARTY TRANSACTIONS

Services Agreement

In August 2018, the Company entered into a services agreement (“Services Agreement”) with Carnot, LLC (“Carnot”), an entity owned and controlled by RA Capital Management, L.P.

under which Carnot provides research and other services to the Company.

RA Capital Management, L.P.

is a related party due to its equity ownership of the Company.

The Company pays Carnot for services performed and costs incurred.

The Services Agreement is for a term of two years .

The Company may terminate the Services Agreement by giving 30 days ’ prior notice and either party can terminate the services agreement for a material breach, if not cured within 30 days following notice by the nonbreaching party.

In July 2019, the Services Agreement with Carnot was amended whereby research and other services are now performed by Carnot Pharma, LLC (“Carnot Pharma”), an entity owned and controlled by RA Capital Management, L.P., and the term was updated to the later of (i) two years from July 15, 2019 and (ii) completion of services under the agreement.

Expenses incurred by the Company under the Services Agreement with Carnot Pharma totaled $ 0 and less than $ 0.1 million for the years ended December 31, 2023 and December 31, 2022, respectively, and are presented in the statement of operations and comprehensive loss as research and development and general and administrative expenses.

No amount was due to Carnot Pharma, LLC as of December 31, 2023 and December 31, 2022.

Employee stock purchase plan awards

(8) INCOME TAXES

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Based on this evaluation, as of December 31, 2024 and December 31, 2023, a valuation allowance of $ 60.2 million and $ 43.6 million, respectively, has been recorded against all of the Company’s net deferred tax assets, as the Company has determined that none of the Company’s balance of net deferred tax assets is more likely than not to be realized.

The amount of the deferred tax assets considered realizable, however, could be

adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence, such as estimates of future taxable income during carryforward periods and the Company’s projections for growth.

The amount of the deferred tax assets considered realizable, however, could be adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence, such as estimates of future taxable income during carryforward periods and the Company’s projections for growth.

The future utilization of the Company’s NOL and tax credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of changes in ownership by stockholders that hold 5% or more of the Company’s common stock.

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The Company will examine the impact of any potential ownership changes in the future.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits at the beginning and end of the years ended December 31, 2023 and December 31, 2022 (in thousands):

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits at the beginning and end of the years ended December 31, 2024 and 2023 (in thousands):

Years ended December 31,

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The Company’s Federal and state returns are subject to examination, due to the carryforward of unutilized net operating losses and research and development credits.

(9) Segment Reporting

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision making group, in deciding how to allocate resources in assessing performance.

The Company has one reportable segment:

life science.

The life science segment consists of the development of clinical and preclinical product candidates.

The Company’s chief operating decision maker (“CODM”) is the chief executive officer.

The accounting policies of the life science segment are the same as those described in the summary of significant accounting policies.

The CODM assesses performance for the life science segment based on net loss, which is reported on the income statement as consolidated net loss.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

To date, the Company has not generated any product revenue and has incurred losses and negative cash flows from operations since inception.

The Company’s future life science expenses will be significantly dependent on our ability to successfully consummate the Merger, related audit and legal expenses and whether we decide to pursue any future product development efforts.

The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2024, and 2023.

Years ended December 31,

Operating expenses:

AV-101 clinical trials

Employee costs

Professional fees and services

Stock-based compensation

Chemistry, manufacturing, and controls

Other segment items (a)

Interest income

Consolidated net loss

(a) Other segment items include rent and facilities related expenses.

EXHIBIT INDEX

Agreement and Plan of Merger, dated as of October 30, 2024, by and among the Registrant, Caribbean Merger Sub I, Inc., Caribbean Merger Sub II, LLC and Jade Biosciences, Inc.

(incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-40544) filed with the SEC on November 12, 2024).

Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No.

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001 40544) filed with the SEC on August 12, 2021).

Lease, Amendment, dated January 2, 2024, by and between the Registrant and PDM 930 Unit, LLC .

Lease Amendment, dated January 2, 2024, by and between the Registrant and PDM 930 Unit, LLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K (File No.

001-40544) filed with the SEC on March 25, 2024).

Lease, dated April 26, 2022, by and between the Registrant and Hudson Metro Center, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

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001-40544) filed with the SEC on April 5, 2023).

Separation and Release Agreement, by and between the Registrant and Timothy Pigot, dated August 15, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-40544) filed with the SEC on November 12, 2024).

Aerovate Therapeutics, Inc.

Insider Trading Policy.

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K (File No.

001-40544) filed with the SEC on March 25, 2024).

List of Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K (File No.

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March 27, 2025

/s/ Maha Katabi, Ph.D.

March 25, 2024

Maha Katabi, Ph.

/s/ Joshua Resnick, M.D.

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

What changed 10-K

Item 9A. Controls and Procedures