What changed in this filing

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Item 9A. Controls and Procedures

2022-03-09 compared with 2021-03-25 · 219 added, 250 removed, 723 unchanged (39% of the section changed)

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Management’s Annual Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies.

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) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our 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 the assets of the company;

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

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

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

Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 framework) (COSO).

Based on its assessment, management concludes that, as of December 31, 2021, our internal control over financial reporting is effective based on those criteria.

This Annual Report on Form 10-K does not include an attestation report of our independent registered accounting firm regarding internal control over financial reporting due to a transition period established by rules of the SEC for an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012.

Changes in Internal Control over Financial Reporting

There was no other change 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 fiscal quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that continuing their work outside of our office due to the COVID-19 pandemic.

There were 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 fiscal quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain of our employees are continuing their work outside of our office due to the COVID-19 pandemic.

We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize any potential impact on the design and operating effectiveness of such controls.

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

We will file a definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, or our 2022 Proxy Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year.

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(1) The Consolidated Financial Statements required to be filed by Item 8 of this Annual Report on Form 10-K, and filed in this Item 15, are as follows:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Consolidated Balance Sheets

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S-1 333-237212 10.8 March 16, 2020

10.9+ Offer Letter Agreement by and between the registrant and Claudia Ordonez, dated as of August 20, 2019.

S-1 333-237212 10.9 March 16, 2020

10.9# Exclusive Patent License Agreement by and between the registrant and The General Hospital Corporation, d/b/a Massachusetts General Hospital, or MGH, dated as of April 5, 2016, as amended by Amendment #1 by and between the registrant and The Brigham and Women’s Hospital, Inc.

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S-1 333-237212 10.10 March 16, 2020

10.11# Research Collaboration and Exclusive License Agreement by and between the registrant and Novo Nordisk A/S, dated as of December 14, 2017.

S-1 333-237212 10.11 March 16, 2020

10.10*# License Agreement by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd., dated as of December 12, 2021, as amended by Amendment No.

1 by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd., dated as of February 10, 2022.

10.11 Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated March 20, 2017, as amended by the First Amendment to Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated July 1, 2019 and by the Second Amendment to Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated August 8, 2019.

S-1 333-237212 10.12 March 16, 2020

10.12 Third Amendment to Lease Agreement by and between the registrant and 99 Hayden LLC, dated August 4, 2021.

10-Q 001-39264 10.3 August 5, 2021

10.13+ Offer Letter Agreement by and between the registrant and Keith Regnante, dated as of February 7, 2020.

S-1 333-237212 10.13 March 16, 2020

10.14+ Employment Agreement by and between the registrant and Jasbir Seehra, dated as of March 31, 2020, effectiv e as of April 13, 2020 .

10.14+ Employment Agreement by and between the registrant and Jasbir Seehra, dated as of March 31, 2020, effective as of April 13, 2020.

S-1/A 333-237212 10.14 April 1, 2020

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S-1/A 333-237212 10.15 April 1, 2020

10.16+ Employment Agreement by and between the registrant and Claudia Ordonez, dated as of March 31, 2020, effective as of April 13 , 2020 .

S-1/A 333-237212 10.16 April 1, 2020

10.16+ Employment Agreement by and between the registrant and Keith Regnante, dated as of March 31, 2020, effective as of April 13, 2020.

S-1/A 333-237212 10.17 April 1, 2020

10.17+ Separation and Release Agreement by and between the registrant and Claudia Ordonez, dated and effective as of July 30, 2021.

8-K 001-39264 10.1 August 2, 2021

10.18+ Employment Agreement by and between the registrant and Simon Cooper, dated as of July 30, 2021 effective as of August 2, 2021.

8-K 001-39264 10.2 August 2, 2021

10.19+ Employment Agreement by and between the registrant and Christopher Rovaldi, dated as of January 28, 2022 effective as of February 1, 2022.

8-K 001-39264 10.1 January 31, 2022

10.20*+ First Amendment to the Employment Agreement by and between the registrant and Jenn Lachey, dated as of January 1, 2022.

10.21*+ First Amendment to the Employment Agreement by and between the registrant and Keith Regnante, dated as of January 1, 2022.

10.22*+ First Amendment to the Employment Agreement by and between the registrant and Simon Cooper, dated as of January 1, 2022.

10.23 Indenture of Lease by and between the registrant and Revolution Labs Owner, LLC, dated September 7, 2021.

10-Q 001-39264 10.1 November 4, 2021

21.1* Subsidiaries of Keros Therapeutics, Inc.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its 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 - the cover page interactive data is embedded within the Inline XBRL document or included within the Exhibit 101 attachments

* Filed herewith

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ))

Consolidated Balance Sheets

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Cash and cash equivalents $ 230,042 $ 265,876

Accounts receivable 18,000 —

Prepaid expenses and other current assets 3,398 1,850

Deferred initial public offering costs — 604

Research and development incentive receivable — 922

Total current assets 251,440 267,726

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Restricted cash 1,327 115

Other long term assets 82 —

TOTAL ASSETS $ 255,251 $ 269,443

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

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Operating lease liabilities, net of current portion 231 476

Preferred stock tranche liability — 4,956

Other liabilities — 62

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COMMITMENTS AND CONTINGENCIES (Note 12)

Series A convertible preferred stock, par value of $ 0.0001 per share;

0 and 10,000,000 shares authorized as of December 31, 2020 and December 31, 2019, respectively;

0 and 4,607,652 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively;

liquidation and redemption value of $ 0 as of December 31, 2020

Series A-1 convertible preferred stock, par value of $ 0.0001 per share;

0 and 800,000 shares authorized as of December 31, 2020 and December 31, 2019, respectively;

0 and 368,612 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively;

liquidation and redemption value of $ 0 as of December 31, 2020

Series B-1 convertible preferred stock, par value of $ 0.0001 per share;

0 and 3,427,004 shares authorized as of December 31, 2020 and December 31, 2019, respectively;

0 and 1,579,043 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively;

liquidation and redemption value of $ 0 as of December 31, 2020

STOCKHOLDERS’ EQUITY (DEFICIT):

STOCKHOLDERS’ EQUITY:

Common stock, par value of $ 0.0001 per share;

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Accumulated deficit ( 123,755 ) ( 65,011 )

Total stockholders’ equity (deficit) 261,721 ( 19,446 )

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 269,443 $ 10,955

Total stockholders’ equity 243,174 261,721

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 255,251 $ 269,443

See notes to consolidated financial statements.

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Loss before income taxes ( 56,733 ) ( 45,533 )

Income tax benefit 172 —

Income tax (provision) benefit ( 2,011 ) 172

Net loss $ ( 58,744 ) $ ( 45,361 )

Net loss attributable to common stockholders—basic and diluted (Note 12) $ ( 45,361 ) $ ( 14,136 )

Net loss attributable to common stockholders—basic and diluted $ ( 58,744 ) $ ( 45,361 )

Net loss per share attributable to common stockholders—basic and diluted $ ( 2.52 ) $ ( 2.93 )

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CAPITAL ACCUMULATED

DEFICIT TOTAL

STOCKHOLDERS’

EQUITY (DEFICIT)

DEFICIT TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

$ 0.0001 PAR VALUE

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BALANCE, January 1, 2020 4,607,652 $ 9,891 368,612 $ 944 1,579,043 $ 9,106 — $ — 2,429,705 $ 1 $ 203 $ ( 19,650 ) $ ( 19,446 )

Exercise of common stock options — — — — — — 82,387 — 14 — 14

Vesting of restricted stock — — — — — — 103,670 — — — —

Stock-based compensation — — — — — — — — 59 — 59

Net loss — — — — — — — — — ( 12,336 ) ( 12,336 )

BALANCE, December 31, 2019 4,607,652 $ 9,891 368,612 $ 944 1,579,043 $ 9,106 — $ — 2,429,705 $ 1 $ 203 $ ( 19,650 ) $ ( 19,446 )

Issuance of Series C convertible preferred stock, net of issuance costs of $ 227

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BALANCE, December 31, 2020 — $ — — $ — — $ — — $ — 23,192,866 $ 2 $ 326,730 $ ( 65,011 ) $ 261,721

Issuance of common stock under the ATM agreement, net of commissions and offering cost of $ 475

— — — — — — — — 520,000 — 28,096 — 28,096

Exercise of common stock options — — — — — — — — 261,968 — 379 — 379

Stock-based compensation — — — — — — — — — — 11,722 — 11,722

Net loss — — — — — — — — — — — ( 58,744 ) ( 58,744 )

BALANCE, December 31, 2021 — $ — — $ — — $ — — $ — 23,974,834 $ 2 $ 366,927 $ ( 123,755 ) $ 243,174

See notes to consolidated financial statements.

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Depreciation expense 378 278

Loss on disposal of fixed asset 46 —

Stock-based compensation expense 11,722 4,097

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Changes in operating assets and liabilities:

Accounts receivable ( 18,000 ) —

Research and development incentive receivable — 922

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Accounts payable 1,485 61

Operating lease liabilities ( 376 ) ( 213 )

Deferred revenue — ( 10,000 )

Right-of-use assets and operating lease liabilities ( 597 ) ( 376 )

Accrued expenses and other current liabilities 2,652 2,590

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock, net of offering cost 28,171 —

Proceeds from issuance of Series C preferred stock — 56,000

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Net cash provided by financing activities 28,550 296,044

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 258,856 ( 16,255 )

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 34,622 ) 258,856

Cash, cash equivalents and restricted cash at beginning of year 265,991 7,135

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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for taxes $ — $ 256

Settlement of preferred stock tranche obligation $ — $ 6,446

Right-of-use assets obtained in exchange for operating lease obligation $ 44 $ 700

Deferred IPO costs in accounts payable and accrued expenses $ — $ 304

Property and equipment purchases still in accounts payable $ 11 $ —

Issuance cost still in accrued and accounts payable $ 75 $ —

Conversion of preferred stock into common stock upon closing of initial public offering $ — $ 75,714

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Its principal offices are in Lexington, Massachusetts.

The Company is a clinical stage company dedicated to the discovery and development of breakthrough therapeutics for neuromuscular diseases.

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, Keros Therapeutics Australia Pty Ltd (“Keros Australia”) and Keros Security Corporation, a Massachusetts securities corporation.

The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological and musculoskeletal disorders with high unmet medical need.

The Company’s lead protein therapeutic product candidate, KER-050, is an engineered ligand trap comprised of a modified ligand-binding domain of the transforming growth factor-beta (“TGF-ß”) receptor known as activin receptor type IIA that is fused to the portion of the human antibody known as the Fc domain.

KER-050 is being developed for the treatment of low blood cell counts (“cytopenias”), including anemia and thrombocytopenia, in patients with myelodysplastic syndromes (“MDS”) and in patients with myelofibrosis.

The Company has initiated a Phase 2 clinical trial in patients with MDS and reported preliminary data from Part 1 of this trial most recently in December 2021.

The Company’s lead small molecule product candidate, KER-047, is designed to selectively and potently inhibit activin receptor-like kinase-2 (“ALK2”), a TGF-ß receptor.

KER-047 is being developed for the treatment of anemia resulting from iron imbalance as a direct consequence of elevated ALK2 signaling, including the Company’s initial target, iron-refractory iron deficiency anemia (“IRIDA”).

In December 2020, the Company reported topline data from its completed Phase 1 clinical trial of KER-047 in healthy volunteers.

The Company’s third product candidate, KER-012, is designed to bind to and inhibit the signaling of TGF-ß ligands that suppress bone growth, including activin A and activin B, to potentially promote bone growth.

KER-012 is being developed for the treatment of pulmonary arterial hypertension (“PAH”) and for the treatment of disorders associated with bone loss, such as osteoporosis and osteogenesis imperfecta.

In September 2021, the Company commenced a Phase 1 clinical trial of KER-012 in healthy volunteers.

Since its inception in 2015, the Company has devoted the majority of its resources to business planning, research and development of its product candidates, including conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations.

To date, the Company has not generated any revenue from product sales as none of its product candidates have been approved for commercialization.

On April 13, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 6,900,000 shares of its common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 16.00 per share, for aggregate gross proceeds of $ 110.4 million.

The Company received approximately $ 100.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, the Company's board of directors (the "Board") and stockholders approved an amended and restated certificate of incorporation to, among other things, effect a one-for-2.1703 reverse stock split of its issued and outstanding shares of common stock and convertible preferred stock, as well as to effect a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock.

The reverse stock split was effected on March 31, 2020.

Accordingly, all share and per share amounts of common stock for all periods presented in the accompanying audited consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of preferred stock conversion ratios.

Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 10,725,129 shares of common stock at the applicable conversion ratio then in effect.

Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

On November 17, 2020, the Company completed an underwritten public offering in which the Company issued and sold 2,990,000 shares of common stock at a public offering price of $ 50.00 per share, which includes 390,000 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters.

The aggregate gross proceeds to the Company from the public offering were approximately $ 149.5 million.

The Company received approximately $ 140.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In May 2021, the Company filed a registration statement on Form S-3, which was automatically effective upon filing.

Pursuant to this registration statement, the Company may issue up to $ 150.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act, and, so long as the Company qualifies as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unspecified amount of shares of the Company common stock, preferred stock, debt securities and warrants.

Liquidity and Capital Resources

The Company’s consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months.

Management believes that the Company’s existing cash and cash equivalents, will allow the Company to continue its operations for at least the next 12 months.

Management believes that the Company’s existing $ 230.0 million in cash and cash equivalents, will allow the Company to continue its operations for at least the next 12 months.

In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations.

If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

The accompanying consolidated financial statements have been prepared by the Company in conformity with U.S.

COVID -19 Considerations

The impact of the COVID-19 pandemic on the financial performance of the Company will depend on future developments, including the continued duration and spread of the outbreak and related governmental advisories and restrictions.

These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy are impacted for an

extended period, the Company’s results may be materially adversely affected.

The Company is currently unable to determine the extent of the impact of the pandemic to its operations and financial condition.

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent

assets and liabilities as of and during the reporting period.

The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

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The money market account is valued using quoted market prices with no valuation adjustments applied and is categorized as Level 1.

The Company had restricted cash of $ 0.1 million in the form of a certificate of deposit related to its operating leases in Lexington, Massachusetts as of December 31, 2020 and 2019.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of proceeds generated as a result of the offering.

Should a planned equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the consolidated statement of operations.

Upon closing the IPO in April 2020, deferred offering costs were reclassified to additional paid-in capital, representing a reduction in IPO proceeds.

As of December 31, 2020 and 2019, the Company had deferred offering costs of $ 0 and $ 0.6 million, respectively.

The Company had restricted cash of $ 1.3 million and $ 0.1 million in the form of a certificate of deposit related to its operating leases in Lexington, Massachusetts as of December 31, 2021 and 2020, respectively.

Concentrations of Credit Risk

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Expenditures for repairs and maintenance are expensed as incurred.

When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and any resulting gain or loss is included in the determination of net loss.

When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and

any resulting gain or loss is included in the determination of net loss.

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets as follows:

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The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the

Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

In transition to ASC 842, the Company utilized the remaining lease term of its lease in determining the appropriate incremental borrowing rate.

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The Company recognizes research and development incentive income when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured.

The Company has recorded a research and development incentive receivable of $ 0.0 and $ 0.9 million and other income from Australian research and development incentives of $ 2.5 million and $ 0.6 million for the years ended December 31, 2020 and 2019, respectively, related to refundable research and development incentive income payments in Australia.

The Company has no research and development incentive receivable and other income from Australian research and development incentives of $ 0.0 million and $ 2.5 million for the years ended December 31, 2021 and 2020, respectively, related to refundable research and development incentive income payments in Australia.

Revenue Recognition

To date, the Company has earned revenue solely under the license agreement with Novo Nordisk A/S, which was terminated in October 2020 (see Note 14).

To date, the Company has earned revenue under the license agreement with Novo Nordisk A/S, which was terminated in October 2020, the license agreement with Neurona Therapeutics, Inc.

(“Neurona”) (see Note 13) and the license agreement with Hansoh (Shanghai) Healthtech Co., Ltd.

(“Hansoh”) (see Note 13).

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

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non-refundable, upfront fees;

reimbursement of research and

development costs;

reimbursement of research and development costs;

development, clinical, regulatory and commercial sales milestone payments, and royalties on net sales of licensed products.

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The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services.

For performance obligations which consist of licenses and other promises, the Company

utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress.

For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

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Common Stock Valuation

Prior to the Company’s IPO in April 2020, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid ( Valuation of Privately-Held Company Equity Securities Issued as Compensation ) to estimate the fair value of its common stock.

Prior to the IPO, the fair value of the shares of common stock underlying the stock-based awards were determined by the Board with input from management.

Prior to the Company’s initial public offering (“IPO”) in April 2020, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid ( Valuation of Privately-Held Company Equity Securities Issued as Compensation ) to estimate the fair value of its common stock.

Prior to the IPO, the fair value of the shares of common stock underlying the stock-based awards were determined by the Company's board of directors (the "Board") with input from management.

Since there was no public market for the common stock prior to April 8, 2020, the Board had determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having valuations of the common stock performed by a third-party valuation specialist.

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The Company has classified convertible preferred stock, referred to as preferred stock, as temporary equity in the accompanying consolidated balance sheet due to terms that allow for redemption of the shares in cash upon certain change in control events that are outside of the Company’s control, including sale or transfer of control of the Company as holders of the preferred stock could cause redemption of the shares in these situations.

The Company did not accrete the carrying values of the preferred stock to the redemption values since a liquidation event was not considered probable as of December 31, 2020.

Subsequent adjustments of the carrying values to the ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur.

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The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is the vesting period, on a straight-line basis.

Prior to the adoption of Accounting Standards Update (“ASU”) No.

2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting (“ASU No.

2018-07”) as discussed below under “Recently Adopted Accounting Pronouncements”, the measurement date for non-employee awards was generally the date the services were completed, resulting in financial reporting period adjustments to stock-based compensation during the vesting terms for changes in the fair value of the awards.

Since the adoption of ASU 2018-07, the measurement date for non-employee awards is the date of grant without changes in the fair value of the award.

Stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis.

Stock-based compensation expense is classified in the

accompanying consolidated statement of operations based on the function to which the related services are provided.

Stock-based compensation expense is classified in the accompanying consolidated statement of operations based on the function to which the related services are provided.

The Company recognizes stock-based compensation expense for the portion of awards that have vested.

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The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common stock equivalent shares, including outstanding stock options and preferred stock.

Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company reported net losses attributable to common stockholders for the years ended December 31, 2020 and 2019.

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued ASU No.

The Company’s potentially dilutive securities, which include stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders as of December 31, 2021 and 2020, because including them would have had an anti-dilutive effect:

Options to purchase common stock 2,810,684 2,499,603

2,810,684 2,499,603

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Financial Accounting Standards Board Accounting Standards Update No.

2019-12, Income Taxes Simplifying the Accounting for Income Taxes ("ASU No.

2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

2019-12 is effective for annual periods beginning after

December 15, 2020 and interim periods within those fiscal years, with early adoption permitted.

Adoption of the standard requires certain changes to be made prospectively and certain others to be made retrospectively.

The Company is currently assessing the impact of this standard on its financial condition and results of operations.

2019-12 also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The adoption of this standard did not have an impact on the Company’s consolidated financial statements and related disclosures.

Risks and Uncertainties

As a result of the continuing global COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business operations, including its preclinical studies and clinical trials, supply chains and third-party providers.

Additionally, in response to ongoing COVID-19 pandemic, the Company closed its principal executive office in March 2020.

Currently, the Company’s administrative employees continue to work outside of the principal executive office, and the Company maintains a limited the number of staff in any given research laboratory.

The Company anticipates that the COVID-19 pandemic will continue to have an impact on the development timelines for several of its preclinical and clinical programs.

The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development, its regulatory efforts, its corporate development objectives and the value of and market for its common stock will depend on future developments which are highly uncertain and cannot be predicted with confidence at this time, including, without limitation:

the ultimate duration of the pandemic;

travel restrictions;

home quarantine orders;

social distancing and business closure requirements in the United States, Australia, New Zealand and other countries;

and the effectiveness of actions taken globally to mitigate the spread of the COVID-19 virus.

The overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biopharmaceutical industry with research and development operations, including, without limitation, risks and uncertainties associated with:

obtaining regulatory approval of its product candidates;

delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations;

product development and the inherent uncertainty of clinical success;

the challenges of protecting and enhancing its intellectual property rights;

the challenges of complying with applicable regulatory requirements;

and identifying, acquiring or in-licensing additional products or product candidates.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.

FAIR VALUE MEASUREMENTS

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Total financial assets $ 262,043 $ 262,043 $ — $ —

Preferred stock tranche obligation $ ( 4,956 ) $ — $ — $ ( 4,956 )

Total financial liabilities $ ( 4,956 ) $ — $ — $ ( 4,956 )

There have been no transfers between fair value levels during the years ended December 31, 2021 and 2020.

Prior to settlement, the Company’s Preferred Stock Tranche Obligation (defined below) was carried at fair value determined according to Level 3 inputs in the fair value hierarchy as described below.

The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

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the issuance price) in subsequent tranches following the initial closings of the series A, series A-1, and series B-1 convertible preferred stock (respectively, the “Series A Preferred Stock,” “Series A-1 Preferred Stock,” and “Series B-1 Preferred Stock”, which are referred to collectively with the series B-2 convertible preferred stock (the “Series B-2 Preferred Stock”) and the series C convertible preferred stock (the “Series C Preferred Stock”) as the “Preferred Stock”) financings represented a freestanding financial instrument (the “Preferred Stock Tranche Obligation”).

The freestanding financial instrument was classified as a liability on the

Company’s consolidated balance sheets and initially recorded at fair value, with changes in fair value for each reporting period recognized in other expense, net in the consolidated statement of operations.

The freestanding financial instrument was classified as a liability on the Company’s consolidated balance sheets and initially recorded at fair value, with changes in fair value for each reporting period recognized in other expense, net in the consolidated statement of operations.

The Board determined it was probable that the Series B-2 Preferred Stock milestone would be met, and the stockholders and the Board subsequently waived the milestone and the issuance of the Series B-2 Preferred Stock on March 2, 2020.

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Prepaid sales tax 255 188

Prepaid rent — 64

R&D payroll tax credit 167 44

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Total accrued expenses and other current liabilities $ 7,339 $ 4,612

Accrued compensation and benefits consists primarily of accrued vacation and accrued bonus.

LICENSE AGREEMENTS

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Additionally, the Company is required to pay a low-five digit to mid-five digit annual maintenance fee prior to the first commercial sale of its first product or process, a mid-five digit annual maintenance fee after the first commercial sale of its first product or process that is creditable against royalties, certain clinical and regulatory milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $ 8.6 million in the aggregate, and certain commercial milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $ 18.0 million in the aggregate.

We made payments of $ 50,000 and $ 300,000 in 2020 and 2021, respectively, for the achievement of the clinical and regulatory milestones of (i) filing of an IND in the first country and (ii) the completion of a Phase 1 clinical trial, respectively.

The Company is also obligated to pay tiered royalties on net sales of licensed products ranging in the low-single digits to mid-single digits.

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The Company may terminate the agreement for any reason upon specified prior written notice to MGH.

Novo Nordisk A/S

In addition, on December 14, 2017, the Company entered into a research collaboration and exclusive license agreement with Novo Nordisk A/S.

Neurona Agreement

On June 22, 2021, the Company entered into a license agreement with Neurona.

Refer to Note 13, Revenue from Contracts with Customers, for more information regarding this agreement.

LakePharma, Inc.

On April 22, 2019, the Company entered into an exclusive license agreement with LakePharma, Inc.

(“LakePharma”) whereby the Company licensed LakePharma’s intellectual property for research and development efforts for a license fee of $ 0.3 million, which is recorded as research and development expense in the Company’s consolidated statements of operations.

The agreement will continue in perpetuity unless terminated by either party.

LakePharma may terminate the agreement at any time.

Hansoh Agreement

On December 12, 2021, the Company entered into a license agreement with Hansoh.

Refer to Note 13, Revenue from Contracts with Customers, for more information regarding this agreement.

CONVERTIBLE PREFERRED STOCK

On March 2, 2020, the Company authorized the sale and issuance of up to 9,049,783 shares of Series C Preferred Stock, par value $ 0.0001 per share, of which 4,169,822 shares were sold at a purchase price of $ 13.43 per share for gross proceeds of $ 56.0 million.

$ 56.0 million.

Issuance costs were approximately $ 0.2 million.

As part of the Company's Series C Preferred Stock issuance, 3,078,968 of the shares were issued to certain members and affiliates of members of the Board.

As part of the Company's Series C Preferred Stock issuance, 3,078,968 of the shares were issued to affiliates of members of the Board.

All issued shares reflect the reverse stock split effected March 31, 2020 while the Board authorized shares reflect the original number of shares authorized pre-split.

On April 13, 2020, upon the closing of the Company's IPO, all outstanding shares of Preferred Stock converted into 10,725,129 shares of the Company's common stock.

Additionally, effective April 13, 2020, the Company's amended and

restated certificate of incorporation authorized the issuance of 10,000,000 shares of preferred stock.

There were no outstanding shares of Preferred Stock as of December 31, 2020.

As of December 31, 2019, Preferred Stock consisted of the following (in thousands, except share data):

DECEMBER 31, 2019

AUTHORIZED PREFERRED

OUTSTANDING CARRYING

VALUE LIQUIDATION

VALUE COMMON STOCK

ISSUABLE UPON

Series A Preferred Stock 10,000,000 4,607,652 $ 9,891 $ 12,271 4,607,652

Series A1 Preferred Stock 800,000 368,612 944 1,171 368,612

Series B1 Preferred Stock 3,427,004 1,579,043 9,106 12,596 1,579,043

Series B2 Preferred Stock 3,062,891 — — — —

17,289,895 6,555,307 $ 19,941 $ 26,038 6,555,307

The following is a summary of the rights and privileges of the preferred stockholders as of December 31, 2020 and 2019.

Shares of Preferred Stock are convertible, at the option of the holder, at any time, into shares of common stock.

The number of shares is determined by dividing the original issuance price by the conversion price.

As such, the shares of Preferred Stock effectively convert on a one -for-one basis.

These rights terminate in the event of a liquidation or winding up of the Company.

No fractional shares will be issued.

Liquidation Preference:

While the Preferred Stock is not redeemable, the shares are redeemable for cash in certain change of control events that are beyond the control of the Company.

In the event of any liquidation or Deemed Liquation Event (as defined in the Company’s articles of incorporation), the Preferred Stockholders are entitled to the greater of (i) the original issue price of the Preferred Stock plus any accrued dividends not yet paid plus any other dividends declared and unpaid or ii) the amount payable had all classes of shares been converted to common stock.

In the event of a Deemed Liquidation Event, if the assets of the Company available for distribution are insufficient to pay the Preferred Stockholders in the full amount to which they are entitled, the Preferred Stockholders shall share ratably in any distribution of the assets available for distribution in proportion to the number of shares of Preferred Stock that they hold.

Note that in relation to the above, the holders of Series B-1/B-2 Preferred Stock are entitled to be paid out prior to the holders of common stock, Series A Preferred Stock and Series A-1 Preferred Stock.

Dividends accrue at a rate of $ 0.17 , $ 0.21 , $ 0.582630 and $ 0.651888 per share, per year on the anniversary of the issuance date for Series A Preferred Stock, Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock, respectively.

Dividends are cumulative;

however, accrued dividends will be payable only if and when declared by the Board.

Dividends on other classes of the Company’s stock may not be declared or paid unless the Preferred Stockholders are first paid (i) all dividends accrued and not yet paid plus (ii) the product of (a) dividends declared on an as converted basis and (b) Preferred Stock on an as converted basis.

That is, if the Company declared dividends on outstanding common stock, Preferred Stockholders would receive both the dividends owed for the Preferred Stock plus that which would be owed if the Preferred Stock were converted to common stock.

No dividends have been declared through December 31, 2020.

Voting Rights:

Each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.

Preferred stockholders and common stockholders vote together as a single class.

Additionally, effective April 13, 2020, the Company's amended and restated certificate of incorporation authorized the issuance of 10,000,000 shares of preferred stock.

There were no outstanding shares of Preferred Stock as of December 31, 2021 and 2020.

As of December 31, 2021, the Company’s certificate of incorporation authorized the Company to issue 200,000,000 shares of $ 0.0001 par value common stock.

In conjunction with the Company's April 2020 IPO closing, the Company issued and sold 6,900,000 shares of its common stock, including 900,000 shares pursuant to the full exercise of the underwriters option to purchase additional shares, at a public offering price of $ 16.00 per share, for aggregate net proceeds of $ 100.1 million after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, all outstanding shares of Preferred Stock converted into 10,725,129 shares of common stock.

In conjunction with the Company's November 2020 public offering closing, the Company issued and sold 2,990,000 shares of its common stock, which includes 390,000 shares pursuant to the full exercise of the underwriters option to purchase additional shares, at a public offering price of $ 50.00 per share, for aggregate net proceeds of $ 140.1 million after deducting underwriting discounts and commissions and offering costs.

On April 13, 2020, the Company completed its IPO, in which the Company issued and sold 6,900,000 shares of its common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 16.00 per share, for aggregate gross proceeds of $ 110.4 million.

The Company received approximately $ 100.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, all outstanding shares of Preferred Stock automatically converted into 10,725,129 shares of common stock at the applicable conversion ratio then in effect.

In connection with the IPO, the Board and stockholders approved an amended and restated certificate of incorporation to, among other things, effect a one-for-2.1703 reverse stock split of its issued and outstanding shares of common stock and convertible preferred stock, as well as to effect a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock.

The reverse stock split was effected on March 31, 2020.

The aggregate gross proceeds to the Company from the public offering were approximately $ 149.5 million.

The Company received approximately $ 140.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

For the year ended December 31, 2021, the Company raised gross proceeds of $ 28.6 million pursuant to the ATM Offering through the sale of 520,000 shares of common stock at a weighted average price of $ 55.00 per share.

The net proceeds from the ATM Offering were approximately $ 28.1 million after deducting sales agent commissions of $ 0.4 million and offering expenses of $ 0.1 million.

As of December 31, 2021, the Company was eligible to offer and sell, from time to time, shares of its common stock for an aggregate offering amount of up to the remaining $ 121.4 million available under the ATM Offering.

The following is a summary of the rights and privileges of the holders of common stock as of December 31, 2021:

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The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.

As of December 31, 2020 and 2019, the Company has reserved the following shares of common stock for potential conversion of outstanding Preferred Stock, the vesting of restricted stock and exercise of stock options:

Preferred Stock — 6,555,307

Unvested restricted stock — 34,557

As of December 31, 2021 and 2020, the Company has reserved the following shares of common stock for the potential exercise of stock options:

Options to purchase common stock 2,810,684 2,499,603

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Any previously granted awards under the 2017 Plan will remain outstanding in accordance with their respective terms.

In March 2020, the Board approved an aggregate of 1,991,530 options under the 2020 Plan.

No shares of common stock have been issued under the 2020 Plan.

As of December 31, 2020, the number of shares of common stock

reserved for issuance under the 2020 Plan was 1,991,530 .

The number of shares of common stock initially reserved for issuance under the 2020 Plan is the sum of (i) 1,002,874 new shares of common stock, plus (ii) an additional number of shares not to exceed 2,104,937 shares, consisting of (A) the number of shares remaining available for issuance under the 2017 Plan when the 2020 Plan became effective and (B) the number of shares of common stock subject to outstanding awards under the 2017 Plan when the 2020 Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, reacquired by the Company or are otherwise terminated.

The number of shares of common stock reserved for issuance under the 2020 Plan will automatically increase on January 1 of each year, for a period of ten years , from January 1, 2021 continuing through January 1, 2030, by 4.0 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board.

Accordingly, on January 1, 2021, 927,714 shares were added to the number of available shares under the 2020 Plan.

Under the 2020 Plan, there is an annual increase on January 1 of each year from January 1, 2021 continuing through January 1, 2030, by 4.0 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board.

On January 1, 2021, the Company increased the number of shares available for future grant under the 2020 Plan by 927,714 shares.

On January 1, 2022, the Company increased the number of shares available for future grant under the 2020 Plan by 958,993 shares.

The awards granted under the 2020 Plan typically vest over a four-year period and have a 10-year contractual term.

As of December 31, 2021, there were an aggregate of 2,082,942 shares of common stock issuable upon the exercise of outstanding options under the 2020 Plan.

Additionally, there were an aggregate of 539,439 shares reserved for future issuance under the 2020 Plan.

Additionally, there were an aggregate of 894,104 shares reserved for future issuance under the 2020 Plan, including shares forfeited from the 2017 Plan.

Stock Option Valuation

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Expected dividend yield 0.00 % 0.00 %

Fair value of underlying common stock $ 15.57 $ 0.32

A summary of option activity during the years ended December 31, 2021 and 2020 is as follows (in thousands except share and per share data):

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Cancelled or forfeited ( 175,984 ) 28.67

Expired ( 1,375 ) 50.77

Outstanding as of December 31, 2021 2,810,684 $ 24.62 8.11 $ 11,383

Options exercisable as of December 31, 2021 1,223,019 $ 10.48 7.37 $ 9,524

Options exercisable as of December 31, 2020 723,130 $ 0.57 7.38 $ 50,599

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The weighted-average grant date fair value price per share of options granted during each of the years ended December 31, 2021 and 2020 was $ 42.29 and $ 15.57 , respectively.

As of December 31, 2020, there was $ 18.7 million and of unrecognized stock-based compensation expense related to unvested stock options.

As of December 31, 2021, there was $ 35.3 million of unrecognized stock-based compensation expense related to unvested stock options.

The unrecognized stock-based compensation expense is estimated to be recognized over a period of 2.60 years.

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Total stock-based compensation expense $ 11,722 $ 4,097

Loss before benefit from income taxes for the years ended December 31, 2020 and 2019 consisted of the following (in thousands):

Loss before provision from income taxes for the years ended December 31, 2021 and 2020 consisted of the following (in thousands):

YEAR ENDED DECEMBER 31,

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Foreign ( 772 ) ( 13,635 )

Loss before benefit from income taxes $ ( 45,533 ) $ ( 12,336 )

The components of income tax benefit for the years ended December 31, 2020 and 2019 consisted of the following (in thousands):

Loss before provision from income taxes $ ( 56,733 ) $ ( 45,533 )

The components of income tax provision (benefit) for the years ended December 31, 2021 and 2020 consisted of the following (in thousands):

YEAR ENDED DECEMBER 31,

Current income tax benefit:

United States $ ( 172 ) $ —

Total income tax benefit $ ( 172 ) $ —

Current income tax provision (benefit):

Federal $ — $ ( 172 )

Foreign 2,000 —

Total current income tax provision (benefit) $ 2,011 $ ( 172 )

Total deferred income tax benefit $ — $ —

Total income tax benefit $ ( 172 ) $ —

Total income tax provision (benefit) $ 2,011 $ ( 172 )

A reconciliation of the U.S.

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State income tax, net of federal benefit 6.7 4.7

Stock compensation ( 1.5 ) ( 1.1 )

Permanent differences — ( 0.3 )

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Impact of foreign operations ( 0.6 ) 2.0

Foreign withholding taxes ( 2.8 ) —

Other ( 0.3 ) ( 0.3 )

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federal, state and foreign net operating loss carryforwards of $ 85.8 million, $ 90.3 million and $ 16.4 million, respectively.

Of the $ 85.8 million federal net operating losses, $ 0.2 million will expire in 2035 and the remaining $ 85.6 million can be carried forward indefinitely.

The federal and foreign net operating losses can be carried forward indefinitely.

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federal taxable income may be subject to limitations, which could potentially result in increased future tax liability.

In addition, at

the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of research and development credits and net operating losses.

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These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

As of December 31, 2020, the Company has not recorded any uncertain tax positions in its financial statements.

As of December 31, 2021 and 2020, the Company has not recorded any uncertain tax positions in its financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

As of December 31, 2020, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

As of December 31, 2021 and 2020, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

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To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period.

LOSS PER SHARE

Basic and diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding (in thousands, except share and per share data):

YEAR ENDED DECEMBER 31,

Net loss $ ( 45,361 ) $ ( 12,336 )

accruals of dividends of preferred stock — ( 1,800 )

Net loss attributable to common stockholders—basic and diluted $ ( 45,361 ) $ ( 14,136 )

Weighted-average common stock outstanding 15,506,397 2,326,857

Net loss per share attributable to common stockholders—basic and diluted $ ( 2.93 ) $ ( 6.08 )

The Company’s potentially dilutive securities, which include Preferred Stock, restricted stock, and stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following from the

computation of diluted net loss per share attributable to common stockholders at December 31, 2020 and 2019 because including them would have had an anti-dilutive effect:

Preferred stock — 6,555,307

Unvested restricted stock — 34,557

Options to purchase common stock 2,499,603 1,164,017

2,499,603 7,753,881

COMMITMENTS AND CONTINGENCIES

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In July and August 2019, the Company entered into the first and second amendment, respectively, to its Lexington Lease to expand the rental space to 10,417 square feet.

In August 2021, the Company entered into a third amendment to its Lexington Lease (the "Third Amendment") to extend the lease term through March 31, 2023 and to further expand the rental space to 15,622 square feet.

The lease modification from the Third Amendment resulted in a non-cash increase to the Company's operating lease liabilities and right-of-use assets of $ 0.7 million in the quarter ended September 30, 2021.

As required under the term of the lease agreement as collateral for the facility lease, the Company had restricted cash of $ 0.1 million in the form of a certificate of deposit as of December 31, 2021 and 2020.

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Total operating lease liabilities $ 1,093

On September 7, 2021, the Company entered into an indenture of lease (the “1050 Waltham Lease”) with Revolution Labs Owner, LLC (the “Landlord”), pursuant to which the Company will lease approximately 35,662 square feet of office and laboratory space located at 1050 Waltham Street, Lexington, Massachusetts for its new principal executive office.

The 1050 Waltham Lease has not yet commenced as of December 31, 2021 and is therefore not included in the maturity table above.

The term of the 1050 Waltham Lease is currently expected to commence in the fourth quarter of 2022, on the date that the Landlord delivers the premises to the Company, which shall be after the substantial completion of agreed upon improvements to be performed by the Landlord (such date, the "Commencement Date").

This work is not expected to begin until the second quarter of 2022.

The Company’s obligation for the payment of base rent for the premises begins four months after the Commencement Date (the “Rent Commencement Date”) and will initially be fixed at $ 0.2 million per month, which will increase by approximately 3 % per annum.

The Company will be obligated to reimburse the Landlord for certain variable costs, including its proportional share (approximately 20 % of the rentable area of the building) of taxes and operating expenses, as specified in the 1050 Waltham Lease.

The 1050 Waltham Lease has a term of eight years and four months, measured from the Commencement Date.

The Company has the option to extend the term of the 1050 Waltham Lease for a period of an additional five years .

In connection with its entry into the 1050 Waltham Lease and as a security deposit, the Company has provided the Landlord a letter of credit in the amount of approximately $ 1.2 million.

The Landlord has the right to terminate the 1050 Waltham Lease upon customary events of default.

The Company has the right to terminate the 1050 Waltham Lease if (i) the Landlord work on the premises has not commenced on or prior to July 1, 2022 or (ii) the premises are not ready for occupancy within a specified time period after October 21, 2022.

Short-term Leases

The Company enters into short-term leasing arrangements related to storage of clinical trial materials.

The Company has $ 36,290 and $ 1,544 related to rent expense for the years ended December 31, 2020 and 2019.

The Company has $ 5,089 and $ 36,290 related to rent expense for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the Company classified its short-term operating lease liabilities within accrued expenses and other current liabilities, as the Company has elected the practical expedient whereby it will not recognize leases with terms of 12 months or less on the balance sheet.

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REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company adopted ASC Topic 606 on January 1, 2018 applying the full retrospective method to all contracts that were not completed as of January 1, 2018.

While the timing of future revenue under ASC Topic 606 may differ from the Company’s historical accounting practices under ASC Topic 605, the cumulative effect recognized in the consolidated statement of stockholder’s equity (deficit) was $ 0 because there was no change in timing or measurement of revenue for open contracts at January 1, 2018.

Agreement Background

On December 14, 2017, the Company entered into a research collaboration and exclusive license agreement with Novo Nordisk A/S (“Novo,” agreement referred to as the “Novo Agreement”).

The Novo Agreement stipulates that the two parties will work together on the discovery and development of new ligand traps for two years.

Under the Novo Agreement, Keros granted Novo an exclusive license to develop and commercialize the licensed products listed as part

of Keros’ intellectual property and Novo granted Keros a non-exclusive license to Novo’s intellectual property so that Keros could perform the activities for which it is responsible under the Novo Agreement.

The Company does not share in the rights to the results of the Novo Agreement.

On October 26, 2020, Novo provided the Company with written notice of termination of the Novo Agreement, effective April 26, 2021.

Upon the termination of the Novo Agreement, the license granted by the Company to Novo will be automatically terminated.

Accordingly, the Company's singular performance obligation will be fully satisfied upon termination.

Novo Nordisk is obligated to continue to reimburse the Company for certain research and development costs through April 26, 2021.

Upon effectiveness of the termination, such reimbursements will cease.

Accounting Treatment

As consideration, the Company received an initial license payment in 2018 from Novo in the amount of $ 16.0 million.

Novo has also paid the Company research collaboration budget funding payments of $ 2.0 million per each collaboration year, for $ 4.0 million total.

Both of these research collaboration budget funding payments were received in 2018.

Additionally, there are performance-based and sales-based milestone payments and sales-based royalties that have been determined to be variable consideration and constrained due to uncertainty of achievement.

The sales-based royalties will be included in the transaction price and recognized as revenue once a sale occurs, and performance-based and sales-based milestone payments will be included in the transaction price and recognized as revenue if and when the cumulative revenue associated with the consideration is no longer probable of significant reversal.

The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Novo, is a customer.

The Company identified the following material promises at the outset of the Novo Agreement:

(1) an exclusive license to use the Company’s intellectual property to conduct research activities;

(2) research and development (“R&D”) services for activities under the research plan;

(3) an option to extend the Novo Agreement;

(4) participation on the joint steering committee (“JSC”);

and (5) technology transfer associated with the research and development outputs.

The Company determined that these promises were not capable of being distinct from one another and were not distinct in the context of the contract, as the license has no true value without the performance of the R&D activities and the technology transfer and JSC participation depend on these activities.

Novo would not be able to use the license without the performance of R&D activities by the Company, as the research is novel in nature and could not be performed by another company.

Additionally, the technology transfer is inherently dependent on the outcome of the Company’s R&D activities, and as such is not capable of being distinct.

As indicated in number (3) above, Novo may elect to extend the term of the Novo Agreement to a third year on similar terms and conditions, subject to mutual written agreement of Novo and the Company.

The Company assessed this option as a potential material right and determined that the additional work would be performed based on negotiated rates at the standalone selling price, and as such these services would not be provided at a significant or incremental discount and the option does not provide Novo with a material right.

The Novo Agreement did not contain a significant financing component as of December 31, 2020 and 2019.

In accordance with the Company’s ASC 606 assessment, the Novo Agreement was determined to contain a single combined performance obligation made up of the promises above, which does not require further allocation as the entire transaction price is allocated to this performance obligation.

The Company determined the contract term of the Novo Agreement to be two years.

The Company identified an appropriate measure of progress for the recognition of revenue and determined it would recognize the revenue over the term of the Novo Agreement using an input method based on full-time employee (“FTE”) costs incurred, as this appropriately depicts the Company’s performance in satisfaction of the performance obligation.

As such, the Company is recognizing the transaction price for its single performance obligation as Novo uses the license and research and development services performed by the Company and as the Company participates on the JSC.

Amounts received that have not yet been recognized as revenue are recorded in deferred revenue on the Company’s consolidated balance sheet.

The Company recognized $ 0 and $ 10.0 million for the years ended December 31, 2020 and 2019, respectively, related to the Novo Agreement.

As of December 31, 2019, there was no remaining revenue or deferred revenue to be recognized under the Novo Agreement.

SUBSEQUENT EVENTS

In March 2021, the Company signed a license agreement for approximately 2,550 square feet of office and laboratory space to expand our principal office, with a commencement date of March 18, 2021.

This agreement expires in September 2021, unless earlier terminated.

Under the agreement, the Company is required to make monthly payments of $ 14,000 .

Neurona License Agreement

On June 22, 2021, the Company entered into a license agreement (the "Neurona Agreement") with Neurona.

Under the Neurona Agreement, the Company granted Neurona a non-exclusive license to use LDN-193189, an early-stage research compound, which the Company licenses from a third party, solely as a reagent in connection with the manufacturing of diagnostic and/or therapeutic products to make, have made, use, import, offer for sale and sell products and services arising therefrom, and to make, have made, acquire, transfer, import and export the compound for such use.

The license excludes Neurona from any rights to use, sell or distribute the compound for any therapeutic or diagnostic purpose.

Unless terminated by either party for breach of contract or insolvency, the Neurona Agreement, which commenced on the execution date, will continue in perpetuity until the last patent expires.

Under the Neurona Agreement, the Company was paid a one-time, upfront license payment of $ 0.1 million from Neurona as of December 31, 2021.

In accordance with the Company's ASC 606 assessment, Neurona is considered to be a customer.

The Company identified a single performance obligation, the non-exclusive license, that was satisfied on the date of the execution of the Neurona Agreement when control of the license was transferred.

The Company determined that the upfront license fee of $ 0.1 million constitutes the entire transaction price and does not require further allocation as there was only one performance obligation.

The Company determined that the $ 0.1 million represented the point at which the licensee was able to use and benefit from the license and recognized revenue from upfront license fees when the license was transferred to Neurona upon execution of the Neurona Agreement.

The Company recognized the upfront fee as revenue on its consolidated statement of operations for the year ended December 31, 2021.

Hansoh License Agreement

In December 2021, the Company entered into a license agreement with Hansoh (the “Hansoh Agreement”).

Under the Hansoh Agreement, the Company granted to Hansoh the exclusive right to develop, manufacture and commercialize KER-050 and licensed products containing KER-050 within the territories of mainland China, Hong Kong and Macau (the “Territory”).

In connection with the Hansoh Agreement, Hansoh will purchase clinical trial supply of KER-050 from the Company, and the parties will also negotiate in good faith to enter into an agreement for commercial supply prior to any anticipated commercialization in the Territory.

In addition, Hansoh will use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize licensed products in any region in the Territory.

Pursuant to the Hansoh Agreement, the Company is due a one-time, $ 20.0 million upfront license payment and will also be eligible to receive up to an aggregate of (i) $ 26.5 million upon the achievement of specified development milestones and (ii) $ 144.0 million upon the achievement of specified net sales thresholds for all licensed products in the Territory.

If a licensed product is approved for marketing in the Territory, the Company will be entitled to receive royalty payments based on a tiered percentage of annual net sales in each region within the Territory, with such percentage ranging from the low double digit to high teens, subject to specified potential royalty reductions.

Hansoh’s obligation to pay royalties for a given licensed product in a given region in the Territory will begin on the date of the first commercial sale for such licensed product in such region and continue until the latest of (i) 10 years from the date of the first commercial sale for such licensed product in such region, (ii) the expiration of the last valid claim of certain licensed patents or joint patents, and (iii) expiration of regulatory exclusivity in such region.

During the royalty term, neither party will directly or indirectly commercialize a competing product in the Territory.

The Hansoh Agreement will continue in force on a region-by-region basis until the expiration of the royalty term.

Hansoh may terminate the Agreement in its entirety for convenience, with notice.

The Company may terminate the Hansoh Agreement in its entirety for a patent challenge brought by Hansoh or its affiliates or their sublicensees.

Either party may terminate the Hansoh Agreement in its entirety (i) if the other party materially breaches the Hansoh Agreement and fails to cure such breach or (ii) upon the bankruptcy of the other party.

The Company evaluated the Hansoh Agreement and concluded that it was subject to ASC 606, as the Company viewed the Hansoh Agreement as a contract with a customer.

As such, the Company assessed the terms of the Hansoh Agreement and identified a single performance obligation for the Company to provide Hansoh an exclusive license to develop, manufacture and commercialize KER-050 and licensed products containing KER-050 in the Territory, including the underlying know-how related to such licenses.

All other promised goods/services were deemed immaterial in the context of the Hansoh Agreement.

The transaction price of the Hansoh Agreement is equal to the full $ 20.0 million, which includes the one-time, non-refundable, non-creditable initial payment.

All potential milestone payments (development and commercial), and royalty payments are

forms of variable consideration that are fully constrained as of the date of the Hansoh Agreement, and therefore, excluded from the transaction price.

The Company allocated 100 % of the transaction price to the single performance obligation.

The Company recognized the upfront fee of $ 20.0 million as revenue and $ 2.0 million in withholding tax on its consolidated statement of operations for the year ended December 31, 2021, and a receivable, net of withholding tax on its consolidated balance sheet as of December 31, 2021.

The Company received the one-time upfront license payment from Hansoh in January 2022.

The Company will recognize development milestone payments as revenue at the point in time when it is determined that it is probable such milestones will be achieved as all performance obligations will have been satisfied at the point which a milestone might occur (i.e., Hansoh will have assumed all responsibility for the activities under the Hansoh Agreement).

The Company will recognize royalty payments and commercial milestone payments as the associated sales of licensed products are recorded by Hansoh, as they predominantly relate to the license granted with the Hansoh Agreement.

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