What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-28 compared with 2023-03-03 · 243 added, 232 removed, 651 unchanged (42% of the section changed)

17 unchanged sentences

Based on its assessment, management concludes that, as of December 31, 2023, 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 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, 2023 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.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain of our employees are continuing to partially work remotely.

We are continually monitoring and assessing the hybrid work model on our internal controls to minimize any potential impact on the design and operating effectiveness of such controls.

Inherent Limitations on Effectiveness of Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives.

Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

Our management recognizes that any control system, no matter how

well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Our independent registered public accounting firm, Deloitte & Touche LLP, has audited our internal control over financial reporting as of December 31, 2023 as stated in their report set forth below:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Keros Therapeutics, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Keros Therapeutics, Inc.

and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 28, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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

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

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

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

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

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

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

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

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

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

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

/s/ Deloitte & Touche LLP

Boston, Massachusetts

February 28, 2024

OTHER INFORMATION

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K .

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

21 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

25 unchanged sentences

S-1/A 333-237212 10.6 April 1, 2020

Amended and Restated Non-Employee Director Compensation Policy

001-39264 10.2

Offer Letter Agreement by and between the registrant and Jasbir Seehra, dated as of December 14, 2015.

S-1 333-237212 10.7 March 16, 2020

10.8+ Offer Letter Agreement by and between the registrant and Jenn Lachey, dated as of April 20, 2016.

S-1 333-237212 10.8 March 16, 2020

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.

7 unchanged sentences

3, dated as of December 11, 2022, to License Agreement by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd.

001-39264 10.11

March 9, 2023

Amendment No.

4 dated as of April 1 2 , 202 3 , to License Agreement by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd.

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.

6 unchanged sentences

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

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

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

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

10.18+ 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

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

2 unchanged sentences

8-K 001-39264 10.1 January 31, 2022

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

10-K 001-39264 10.20 March 9, 2022

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

2 unchanged sentences

10-K 001-39264 10.22 March 9, 2022

10.24+ Amendment to Offer Letter by and between the registrant and Jennifer Lachey, dated August 1, 2022.

10-Q 001-39264 10.1 November 3, 2022

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

First Amendment to Lease, by and between the r egistrant and Revolution Labs Owner, LLC, dated January 6, 2023.

10-Q 001-39264 10.1 May 4, 2023

21.1* Subsidiaries of Keros Therapeutics, Inc.

4 unchanged sentences

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

Incentive Compensation Recoupment Policy.

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

16 unchanged sentences

Keros Therapeutics, Inc.

March 3, 2023 By:

February 28, 2024

/s/ Jasbir Seehra

10 unchanged sentences

(Principal Executive Officer)

March 3, 2023

February 28, 2024

Jasbir Seehra, Ph.D.

1 unchanged sentence

(Principal Financial Officer and Principal Accounting Officer)

March 3, 2023

February 28, 2024

Keith Regnante

/s/ Nima Farzan Director March 3, 2023

/s/ Carl Gordon Director March 3, 2023

/s/ Nima Farzan Director February 28, 2024

/s/ Carl Gordon Director February 28, 2024

Carl Gordon, Ph.D., C.F.A.

/s/ Mary Ann Gray Director March 3, 2023

/s/ Mary Ann Gray Director February 28, 2024

Mary Ann Gray, Ph.D.

/s/ Tomer Kariv Director March 3, 2023

/s/ Julius Knowles Director March 3, 2023

/s/ Tomer Kariv Director February 28, 2024

/s/ Julius Knowles Director February 28, 2024

Julius Knowles

/s/ Ran Nussbaum Director March 3, 2023

/s/ Ran Nussbaum Director February 28, 2024

/s/ Alpna Seth

Director February 28, 2024

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of Keros Therapeutics Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, statements of stockholders’ equity and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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

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

1 unchanged sentence

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

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

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

Accordingly, we express no such opinion.

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

2 unchanged sentences

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

Accrued and Prepaid Research and Development and Manufacturing Expenses — Refer to Notes 2, 4 and 6 to the financial statements

Critical Audit Matter Description

As disclosed in Note 2 to the financial statements, the Company records accrued and prepaid research and development expenses for external clinical trial costs and manufacturing activities based on estimates of the progress to completion of specific tasks within individual contract research and contract manufacturing arrangements.

Estimates of expenses incurred are determined by reviewing information provided to the Company by its vendors and through discussions with both internal personnel and vendors as to the status of specific tasks within arrangements.

Expenses incurred in excess of amounts invoiced are recorded as accrued expenses.

Payments made in excess of expenses incurred are recorded as prepaid costs.

As of December 31, 2023, the Company has recorded accrued external research, development, and manufacturing costs of $9.2 million and prepaid external research, development and manufacturing costs of $12.4 million.

We identified auditing the estimates of the progress to completion of specific tasks performed by contract research and contract manufacturing vendors as a critical audit matter due to the (i) the level of judgment required by management and the volume of such estimates made by management and (ii) the high degree of auditor judgment, subjectivity, and an increased extent of effort in performing procedures to evaluate the reasonableness of management’s estimates of progress to completion.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accrued and prepaid external research and development expenses and manufacturing costs included the following, among others:

• We tested the effectiveness of relevant controls over the estimation of accrued and prepaid research and development expenses and manufacturing costs.

• For a sample of contracts with vendors performing research and development, and manufacturing activities, we performed the following:

◦ Evaluated the appropriateness of the method used by management to develop its estimates of progress to completion of specific tasks.

◦ Tested the completeness and accuracy of the underlying data used in the estimates of progress to completion through inspection of the terms of contracts and statements of work between the Company and its vendors and testing of actual billed expenses under the contracts.

◦ Performed corroborating inquiries with Company personnel responsible for overseeing the activities performed by the Company’s contract research and contract manufacturing vendors, which may include the vendors’ estimate of completed tasks or progress of completion of certain tasks within the arrangement.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

March 3, 2023

February 28, 2024

We have served as the Company's auditor since 2019.

26 unchanged sentences

Common stock, par value of $ 0.0001 per share;

200,000,000 and 200,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively;

200,000,000 shares authorized as of December 31, 2023 and December 31, 2022;

31,841,084 and 27,543,453 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

8 unchanged sentences

YEAR ENDED DECEMBER 31,

Research collaboration revenue $ — $ 20,100

2023 2022 2021

Service and other revenue $ 151 $ — $ —

License revenue — — 20,100

Total revenue 151 — 20,100

7 unchanged sentences

Research and development incentive income 2,400 7,081 —

Dividend income 14,755 3,644 27

Other income (expense), net ( 206 ) ( 613 ) ( 383 )

27 unchanged sentences

BALANCE, December 31, 2022 27,543,453 $ 2 $ 505,855 $ ( 228,434 ) $ 277,423

Issuance of common stock under the ATM agreement, net of commissions and offering cost of $ 2,708

4,061,606 1 175,793 — 175,794

Exercise of common stock options 236,025 — 3,225 — 3,225

Stock-based compensation — — 28,763 — 28,763

Net loss — — — ( 152,992 ) ( 152,992 )

BALANCE, December 31, 2023 31,841,084 $ 3 $ 713,636 $ ( 381,426 ) $ 332,213

See notes to consolidated financial statements.

3 unchanged sentences

YEAR ENDED DECEMBER 31,

2023 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

22 unchanged sentences

Net cash provided by financing activities 178,956 120,309 28,550

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 49,006 ( 34,622 )

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 51,984 49,006 ( 34,622 )

Cash, cash equivalents and restricted cash at beginning of year 280,375 231,369 265,991

6 unchanged sentences

YEAR ENDED DECEMBER 31,

2023 2022 2021

Cash and cash equivalents $ 331,147 $ 279,048 $ 230,042

8 unchanged sentences

Its principal offices are in Lexington, Massachusetts.

The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological, pulmonary and cardiovascular 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’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 functional iron deficiency which is a consequence of elevated ALK2 signaling, including the Company’s initial target, iron-refractory iron deficiency anemia (“IRIDA”).

The Company’s third product candidate, KER-012, is designed to bind to and inhibit the signaling of TGF-ß ligands that stimulate smooth muscle hypertrophy and fibrosis, including activin A, activin B and myostatin (GDF8).

KER-012 is being developed for the treatment of pulmonary arterial hypertension (“PAH”) and for the treatment of cardiovascular disorders.

The Company is a clinical-stage biopharmaceutical company focused on developing and commercializing novel therapeutics to treat a wide range of patients with disorders that are linked to dysfunctional signaling of the transforming growth factor-beta (“TGF-ß”) family of proteins.

The Company’s lead product candidate, KER-050 (elritercept), 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’s second product candidate, KER-012, is being developed for the treatment of pulmonary arterial hypertension (“PAH”) and for the treatment of cardiovascular disorders.

The Company's third product candidate, KER-065, is being developed for the treatment of obesity and for the treatment of neuromuscular diseases.

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.

5 unchanged sentences

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 $ 279.0 million in 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 cash and cash equivalents, which include the net proceeds of approximately $ 151.0 million from its public offering of common stock in January 2024, 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.

10 unchanged sentences

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.

may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, useful lives assigned to property and equipment, the fair values of common and preferred stock and the fair value of the preferred stock tranche obligation.

This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, useful lives assigned to property and equipment and accrued and prepaid research and development expenses.

The Company assesses estimates on an ongoing basis;

11 unchanged sentences

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

An entity may choose to measure many financial instruments and certain other items at fair value at specified election dates.

Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings.

The Company had no financial instruments measured at level 3 as of December 31, 2023.

2 unchanged sentences

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents.

The Company’s cash equivalents, which are funds held in a money market account, are measured at fair value on a recurring basis.

The carrying amount of cash equivalents was $ 279.0 million and $ 230.0 million as of December 31, 2022 and 2021, respectively, which approximates fair value and was determined based upon Level 1 inputs.

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 in the form of two certificates of deposit related to its two operating leases in Lexington, Massachusetts of $ 1.3 million each as of December 31, 2022 and 2021.

The Company had restricted cash in the form of a certificate of deposit related to its operating lease in Lexington, Massachusetts of $ 1.2 million and $ 1.3 million as of December 31, 2023 and December 31, 2022, respectively.

The certificate of deposit related to the Company’s operating lease at 99 Hayden Avenue in Lexington, Massachusetts was returned in 2023 upon the lease termination.

Concentrations of Credit Risk

7 unchanged sentences

Expenditures for repairs and maintenance are expensed as incurred.

When assets are retired or disposed of, the assets and related accumulated depreciation are written off 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 written off 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:

12 unchanged sentences

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than 12 months are recognized on the balance sheet as ROU assets and current and non-current lease liabilities, as applicable.

Leases with a term greater than 12 months are recognized on the balance sheet as right-of-use, or ROU, assets and current and non-current lease liabilities, as applicable.

The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.

1 unchanged sentence

Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

The Company monitors its material leases on a quarterly basis.

Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term.

3 unchanged sentences

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.

For all asset classes of its leases, the Company has elected to account for the lease and non-lease components together for existing classes of underlying assets.

5 unchanged sentences

Research and development costs are charged to expense as incurred.

Research and development costs consist of expenses incurred in performing research and development activities, including salaries and benefits, materials and supplies, preclinical expenses, stock-based compensation expense, depreciation of equipment, contract services with contract research organizations that conduct research, preclinical and clinical activities on the Company’s behalf, as well as contract manufacturing organizations that manufacture drug product for use in the Company’s preclinical studies and clinical trials, facilities, and other outside expenses.

Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors.

3 unchanged sentences

Research and development incentive income includes payments under the Research and Development Tax Incentive (the “R&D Incentive”) from the Australian government.

The R&D Incentive is one of the key elements of the Australian government’s support for Australia’s innovation system and was developed to assist businesses recover some of the costs of

undertaking research and development.

Since July 1, 2021, the R&D Incentive has provided a non-refundable tax offset up to 16.5% above the Company’s underlying income tax rate, as the Company qualified as an eligible company with an aggregated turnover of more than $20.0 million per annum that engages in research and development activities.

The Company has assessed its research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the R&D Incentive.

The Company estimates the non-refundable tax offset available to it based on available information at the time.

The R&D Incentive is one of the key elements of the Australian government’s support for Australia’s innovation system and was developed to assist businesses recover some of the costs of undertaking research and development.

Since July 1, 2021, the R&D Incentive has provided eligible companies that engage in research and development activities with either a refundable or non-refundable tax offset depending on a company’s aggregated revenue as follows:

• Refundable tax offset of up to 18.5% above a company’s underlying tax rate where aggregated revenue is less than AUD$20.0 million per annum, or

• Non-refundable tax offset of up to 16.5% above a company’s underlying tax rate where aggregated revenue is equal to or greater than AUD$20.0 million per annum.

The Company has assessed its research and development (“R&D”) activities and expenditures to determine which activities and expenditures in Australia are likely to be eligible under the R&D Incentive.

The Company estimates the refundable or non-refundable tax offset available to it based on available information at the time.

This estimate is also reviewed by the Company’s external tax advisors on an annual basis.

The Company’s estimate of the cash refund it expects to receive related to the R&D Incentive is included in other assets in the accompanying consolidated balance sheet and such amounts are recorded as research and development incentive income in the statement of operations.

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 no research and development incentive receivable and has recorded other income from the R&D Incentive of $ 7.1 million for the year ended December 31, 2022 and no income from the R&D Incentive for the year ended December 31, 2021 related to refundable research and development incentive income payments in Australia.

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 received payments and has recorded other income from the R&D Incentive of $ 2.4 million and $ 7.1 million for the year ended December 31, 2023 and December 31, 2022, respectively, related to the R&D Incentive as defined above.

The Company had no income from the R&D Incentive for the year ended December 31, 2021.

Revenue Recognition

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 12) and the license agreement with Hansoh (Shanghai) Healthtech Co., Ltd.

(“Hansoh”) (see Note 12).

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

23 unchanged sentences

Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts

its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and other research and development revenue in the period of adjustment.

At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

19 unchanged sentences

Stock-Based Compensation

The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at fair value.

The Company’s stock-based payments include stock options and grants of common stock, including common stock subject to vesting.

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.

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

The Company accounts for all stock-based awards granted to employees and non-employees as stock-based compensation expense at fair value.

The Company’s stock-based awards include stock options.

The measurement date for employee and non-employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the requisite service period, which is 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.

8 unchanged sentences

Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns.

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the year in which the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination.

If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized.

The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency.

The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

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

The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized.

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.

If the Company determines that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company accounts for interest and penalties related to uncertain tax positions within the provision for income taxes.

As of December 31, 2023, there have been no interest or penalties recorded.

Comprehensive Loss

2 unchanged sentences

Net Loss Per Share

Basic net loss per share and diluted net loss per share are computed using the weighted-average number of shares of common stock outstanding for the period.

Net loss per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of shares of the Company’s common stock and participating securities.

The Company’s preferred stock contains participation rights in any dividend paid by the Company and is deemed to be a participating security.

The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded.

Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method.

The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests.

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.

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.

Basic net loss per share is computed by dividing the net loss by the weighted- average number of common shares outstanding during the period, without consideration of potential dilutive securities.

Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period, and if dilutive, the weighted-average number of potential shares of common shares.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 is the same.

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders as of December 31, 2023, 2022, and 2021 because including them would have had an anti-dilutive effect:

Options to purchase common stock 3,533,169 2,810,684

2023 2022 2021

Options to purchase common stock 4,394,807 3,533,169 2,810,684

Total 4,394,807 3,533,169 2,810,684

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.

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.

The Company has not recently adopted any accounting pronouncements.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU No.

2023-09 requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented.

The Company is currently evaluating the impact of this ASU on its 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.

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 and 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, such as the ultimate duration of the pandemic, particularly in light of variant strains of the COVID-19 virus, travel restrictions, quarantines, social distancing

and business closure requirements in the United States, Australia, New Zealand, Europe, the United Kingdom, South Korea and other countries and the effectiveness of actions taken globally to contain and treat the disease.

The global economic slowdown, manufacturing and supply chain issues, 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.

There have been significant disruptions to global financial markets that have contributed to a general global economic slowdown.

While recent trends towards rising inflation have eased, prices continue to rise, which may materially affect the Company's business and corresponding financial position and cash flows.

Inflationary factors, such as increases in the cost of materials and supplies relating to the Company's preclinical studies and clinical trials, interest rates and overhead costs may adversely affect its operating results.

Rising interest rates present a recent challenge impacting the U.S.

economy and could make it more difficult for the Company to obtain traditional financing on acceptable terms, if at all, in the future.

Although the Company does not believe that inflation or higher interest rates have had a material impact on its financial position or results of operations to date, the Company may experience increases in the near future (especially if inflation rates rise more quickly) on its operating costs, including its labor costs and research and development costs, due to supply chain constraints, consequences associated with public health crises and global geopolitical tensions, such as the ongoing war between Russia and Ukraine and the war in Israel, worsening global macroeconomic conditions and employee availability and wage increases, which may result in additional stress on the Company's working capital resources.

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.

1 unchanged sentence

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;

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;

3 unchanged sentences

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

19 unchanged sentences

There have been no transfers between fair value levels during the years ended December 31, 2023 and 2022.

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.

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

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of December 31, 2023 and 2022 consisted of the following (in thousands):

Prepaid service contracts 3,319 1,613

Income tax credit receivable — 30

Prepaid external R&D costs $ 10,116 $ 3,303

Prepaid external manufacturing costs 2,303 16

Prepaid sales tax 429 872

Prepaid rent 96 —

R&D payroll tax credit — 167

Prepaid insurance 638 941

12 unchanged sentences

Property and equipment, net $ 4,134 $ 2,021

Depreciation expense was $ 0.7 million and $ 0.4 million for each of the years ended December 31, 2022 and 2021, respectively.

Depreciation expense was $ 0.8 million, $ 0.7 million, and $ 0.4 million for each of the years ended December 31, 2023, 2022, and 2021, respectively.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

3 unchanged sentences

Accrued compensation and benefits 7,542 4,811

Accrued tax 50 110

Accrued legal and consultants 519 523

5 unchanged sentences

Under the license agreement with MGH (as amended in May 2017 and February 2018, the “MGH Agreement”), the Company obtained an exclusive, worldwide license, with the right to sublicense, under certain patents and technical information of MGH, to make, have made, use, have used, sell, have sold, lease, have leased, import, have imported or otherwise transfer licensed products and processes for use in the treatment, diagnosis, palliation and prevention of diseases and disorders in humans and animals.

The Company is required to use commercially

reasonable efforts to develop and commercialize licensed products and processes and must achieve certain required diligence milestones.

Under the terms of the MGH Agreement, the Company paid an initial license payment of $ 0.1 million in 2016, and reimbursed MGH approximately $ 0.3 million of prior patent prosecution expenses related to the licensed patents in 2017.

The Company also issued MGH an aggregate of 358,674 shares of its common stock.

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.

The Company is required to use commercially reasonable efforts to develop and commercialize licensed products and processes and must achieve certain required diligence milestones.

Under the terms of the MGH Agreement, 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.

The Company 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.

6 unchanged sentences

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

Neurona Agreement

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

Refer to Note 12, Revenue from Contracts with Customers, for more information regarding this agreement.

Hansoh Agreement

2 unchanged sentences

As of December 31, 2023, the Company’s amended and restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock at a par value of $ 0.0001 per share.

On May 3, 2021, the Company entered into a Sales Agreement (the “ATM Sales Agreement”) with SVB Securities LLC (formerly SVB Leerink LLC) (“SVB Securities”), as agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock through SVB Securities (the “ATM Offering”).

On May 3, 2021, the Company entered into a Sales Agreement (the “ATM Sales Agreement”) with Leerink Partners LLC (“Leerink”), as agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock through Leerink (the “ATM Offering”).

On May 3, 2021, the Company filed the Shelf Registration Statement, including a base prospectus and sales agreement prospectus, with the Securities and Exchange Commission (the “SEC”), which became effective immediately upon filing, for the issuance and sale of up to $ 150.0 million of shares of the Company’s common stock under the ATM Sales Agreement.

3 unchanged sentences

For the year ended December 31, 2023, the Company raised gross proceeds of $ 178.5 million pursuant to the ATM Offering through the sale of 4,061,606 shares of common stock at a weighted average price of $ 43.95 per share.

The net proceeds from the ATM Offering for the year ended December 31, 2022 were approximately $ 119.4 million after deducting sales agent commissions of $ 1.8 million and offering expenses of $ 0.2 million.

The net proceeds from the ATM Offering for the year ended December 31, 2023 were approximately $ 175.8 million after deducting sales agent commissions of $ 2.7 million.

As of December 31, 2023, 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 $ 71.5 million available under the ATM Offering.

On January 8, 2024, the Company closed an underwritten public offering in which 4,025,000 shares of common stock were issued and sold, which included 525,000 shares of common stock issued and sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $ 40.00 per share.

The aggregate net proceeds from the public offering were approximately $ 151.0 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The following is a summary of the rights and privileges of the holders of common stock as of December 31, 2023:

11 unchanged sentences

As of December 31, 2023, 2022, and 2021, the Company has reserved the following shares of common stock for the potential exercise of stock options:

2023 2022 2021

Options to purchase common stock 4,394,807 3,533,169 2,810,684

Total 4,394,807 3,533,169 2,810,684

The Company’s potentially dilutive securities 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 shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

STOCK-BASED COMPENSATION

12 unchanged sentences

On January 1, 2023, the Company increased the number of shares available for future grant under the 2020 Plan by 1,101,738 shares.

On January 1, 2024, the Company increased the number of shares available for future grant under the 2020 Plan by 1,273,643 shares.

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

2 unchanged sentences

Stock Option Valuation

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted for the years ended December 31, 2022 and 2021 were as follows:

The weighted-average assumptions that the Company used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted for the years ended December 31, 2023, 2022, and 2021 were as follows:

YEAR ENDED DECEMBER 31,

Weighted-average risk-free interest rate 2.24 % 0.88 %

2023 2022 2021

Risk-free interest rate

3.96 % 2.24 % 0.88 %

Expected term (in years) 6.05 6.06 6.05

1 unchanged sentence

Expected dividend yield 0.00 % 0.00 % 0.00 %

Fair value of underlying common stock $ 31.18 $ 42.29

A summary of option activity during the years ended December 31, 2022 and 2021 is as follows (in thousands except share and per share data):

A summary of option activity during the year ended December 31, 2023 is as follows (in thousands except share and per share data):

OPTIONS WEIGHTED-

8 unchanged sentences

Outstanding as of December 31, 2023 4,394,807 $ 36.08 7.31 $ 46,319

Options vested as of December 31, 2022 1,749,888 $ 19.59 6.93 $ 53,895

Options unvested as of December 31, 2022 1,783,281 $ 40.72

Options exercisable as of December 31, 2023 2,375,136 $ 26.40 6.11 $ 43,205

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, 2022 and 2021 was $ 31.18 and $ 42.29 , respectively.

The weighted-average grant date fair value per share of options granted during each of the years ended December 31, 2023, 2022, and 2021 was $ 35.24 , $ 31.18 , and $ 42.29 , respectively.

As of December 31, 2023, there was $ 57.8 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 2.57 years.

The total fair value of options vested during the years ended December 31, 2022 and 2021 was $ 16.5 million and $ 10.1 million, respectively.

Stock-Based Compensation Expense

1 unchanged sentence

YEAR ENDED DECEMBER 31,

2023 2022 2021

Research and development $ 14,082 $ 8,205 $ 4,258

1 unchanged sentence

Total stock-based compensation expense $ 28,763 $ 18,682 $ 11,722

Loss before provision from income taxes for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):

Loss before income taxes for the years ended December 31, 2023, 2022, and 2021 consisted of the following (in thousands):

YEAR ENDED DECEMBER 31,

2023 2022 2021

United States $ ( 156,571 ) $ ( 112,240 ) $ ( 55,961 )

Foreign 3,579 7,561 ( 772 )

Loss before provision from income taxes $ ( 104,679 ) $ ( 56,733 )

The components of income tax provision (benefit) for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):

Loss before income taxes

$ ( 152,992 ) $ ( 104,679 ) $ ( 56,733 )

The components of the provision for income taxes for the years ended December 31, 2023, 2022, and 2021 consisted of the following (in thousands):

YEAR ENDED DECEMBER 31,

Current income tax provision (benefit):

2023 2022 2021

Current income tax provision:

Federal $ — $ — $ —

Foreign — — 2,000

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

Total deferred income tax benefit $ — $ —

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

A reconciliation of the U.S.

federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2022 and 2021 was as follows:

Total current income tax provision

$ — $ — $ 2,011

Total deferred income tax provision

Total income tax provision

$ — $ — $ 2,011

A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2023, 2022, and 2021 was as follows:

YEAR ENDED DECEMBER 31,

Federal income tax at statutory rate 21.0 % 21.0 %

State income tax, net of federal benefit 5.2 6.7

2023 2022 2021

Income at U.S.

statutory rate 21.0 % 21.0 % 21.0 %

State taxes 1.2 5.2 6.7

Stock compensation ( 0.6 ) ( 2.8 ) ( 1.5 )

Permanent differences ( 1.4 ) —

Other permanent differences ( 3.0 ) ( 1.4 ) —

Research and development credits 3.0 2.5 4.8

5 unchanged sentences

Effective tax rate — % — % ( 3.5 ) %

Net deferred tax assets as of December 31, 2022 and 2021 consisted of the following (in thousands):

The net deferred income tax asset balance as of December 31, 2023 and 2022 related to the following (in thousands):

YEAR ENDED DECEMBER 31,

Net operating loss carryforwards $ 36,245 $ 37,687

Research and development credits 10,459 6,315

Research and development tax credits 14,134 10,459

Capitalized research and development expenses 36,363 10,822

Stock-based compensation 10,794 —

Operating lease liability 3,457 3,602

Accrueds 1,275 597

Accrued expenses 1,774 1,275

Intangibles — 115

5 unchanged sentences

Operating lease right-of-use asset ( 3,662 ) ( 4,218 )

Net deferred tax assets (liability) $ — $ —

As of December 31, 2022, the Company had U.S.

federal, state and foreign net operating loss (“NOL”) carryforwards of $ 138.7 million, $ 137.8 million and $ 0 million, respectively.

Of the $ 138.7 million federal NOLs, $ 0.2 million will expire in 2035 and the remaining $ 138.5 million can be carried forward indefinitely.

The previously reported foreign tax loss carryforwards were fully absorbed in 2022.

The state NOL carryforwards expire in 2039.

Net deferred tax assets

As of December 31, 2023, the Company had U.S.

federal and state research and development tax credit carryforwards of $ 6.0 million and $ 3.5 million, respectively.

federal and state net operating loss (“NOL”) carryforwards of $ 135.2 million and $ 124.4 million, respectively.

Of the $ 135.2 million in federal NOLs, $ 0.2 million will expire in 2035 while the remaining $ 135.0 million can be carried forward indefinitely.

The state NOL carryforwards begin to expire in 2039.

As of December 31, 2023, the Company had U.S.

1 unchanged sentence

The tax credits begin to expire in 2034.

As of December 31, 2022, the Company had foreign research and development tax credit carry forward of $ 1.6 million.

Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the NOL and tax credit carryforwards are subject to review and potential adjustments by the Internal Revenue Services and state tax authorities.

Under Section 382 of the Code (“Section 382”), certain substantial changes in the Company’s ownership, including the sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of NOL carryforwards or tax credits which could be used annually to offset future taxable income.

The Company completed an analysis under Section 382 through November 17, 2020 and determined that on April 15, 2016 and April 13, 2020, ownership changes had occurred.

Based on the Company’s analysis, the Company has determined that $ 0.3 million and $ 0.3 million of its federal and state NOL carryforwards, respectively, are limited by Section 382 as of December 31, 2022 and have been written off in the prior period.

The Company completed analyses under Section 382 through December 31, 2022, and determined that on April 15, 2016 and April 13, 2020, ownership changes had occurred.

The remaining unused carryforwards remain available for future periods.

3 unchanged sentences

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 NOLs.

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 NOL, research and development tax credit carryforwards, and capitalized R&D.

Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets.

Accordingly, a full valuation allowance was maintained as of December 31, 2023, 2022 and 2021.

A change in the Company’s valuation allowance was recorded in 2022 and 2021, in the amount of $ 25.2 million and $ 17.5 million, respectively, due primarily to the generation of additional net deferred tax assets.

The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research and developmental (“R&D”) expenditures under Section 174.

The Company’s valuation allowance has increased by $ 38.7 million, $ 25.2 million and $ 17.5 million for the years ended December 31, 2023, 2022, and 2021, respectively, due primarily to the generation of additional NOLs and the associated gross deferred tax assets.

The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research and development (“R&D”) expenditures under Section 174.

For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business.

Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years – both using a midyear convention.

During the year ended December 31, 2022, the Company capitalized $ 44.3 million of R&D expenses.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in.

A tax benefit from an

uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records tax positions as liabilities and adjusts these liabilities when its judgement changes as a result of the evaluation of new information not previously available.

Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the recognized tax benefit liabilities.

The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and in the various states in which it operates or does business in.

ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available.

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, 2022 and 2021, 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, 2022 and 2021, 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.

In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable.

There are currently no pending tax examinations.

The Company’s tax years are still open under statute from December 31, 2016, to the present.

As of December 31, 2023, 2022 and 2021, the Company has not recorded any uncertain tax positions in its consolidated financial statements.

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

In the normal course of business, the Company is subject to income tax examination by federal, state and foreign jurisdictions, where applicable.

There are currently no pending income tax examinations.

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.

The Company’s tax years are still open under statute for income tax examination by the Internal Revenue Service from December 31, 2020 to the present.

There are currently no pending income tax examinations.

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

COMMITMENTS AND CONTINGENCIES

Operating Leases

Operating lease liabilities are measured based on the present value of future lease payments over the expected remaining lease term.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and are initially equal to their corresponding lease liabilities, subject to certain adjustments such as prepaid lease payments, initial direct costs and lease incentives.

When the rate implicit in the lease is not readily determinable, the Company uses an incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

The incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The Company estimates this rate based on prevailing market conditions, comparable company and credit analyses, the impact of collateralization, and the term of each of the Company’s lease agreements.

In March 2017, the Company entered into a lease agreement (the “99 Hayden Lease”) with 99 Hayden LLC for its prior headquarters located in Lexington, Massachusetts.

In July and August 2019, the Company entered into the first and second amendment, respectively, to its 99 Hayden Lease to expand the rental space to 10,417 square feet.

In August 2021, the Company entered into a third amendment to its 99 Hayden 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 99 Hayden Lease as collateral for the 99 Hayden Lease, the Company had restricted cash of $ 0.1 million in the form of a certificate of deposit as of December 31, 2022 and 2021.

The 99 Hayden Lease provides for scheduled annual rent increases throughout the lease term and does not include termination or purchase options.

As part of the 99 Hayden Lease, the Company is obligated to pay certain variable payments related to its pro rata share of operating costs including taxes, utilities, and insurance premiums.

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 is leasing approximately 35,662 square feet of office, laboratory and vivarium space located at 1050 Waltham Street, Lexington, Massachusetts (the “Premises”) for its new principal executive office.

In December 2022, the Company received access to a portion of the Premises pertaining to the office and laboratory space (the “Initial Premises”) in order to begin getting it ready for use.

Accordingly, the 1050 Waltham Lease for the Initial Premises, which is considered a distinct lease component, was determined to be classified as an operating lease and the Company recorded an ROU asset of $ 15.4 million and a lease liability of $ 12.9 million on the consolidated balance sheets.

The portion of the Premises pertaining to the vivarium space (the “Vivarium Premises”) was not made available for use by the Landlord as improvement work was still in progress.The Company’s obligation for the payment of base rent for the Premises begins four months after the Landlord reaches substantial completion of all agreed upon improvements to the Premises (the “Rent Commencement Date”), which is currently expected to occur in the first quarter of 2023.

Costs incurred for tenant improvements of $ 0.4 million are recorded as other long term assets on the consolidated balance sheets as they have been incurred prior to the Rent Commencement Date.

Base rent will initially be fixed at $ 0.2 million per month and will increase by approximately 3 % per annum.

In connection with its entry into the 1050 Waltham Lease, the Company has provided the Landlord a letter of credit in the amount of approximately $ 1.2 million, which is recognized as restricted cash within other assets on the consolidated balance sheets.

In accordance with the 1050 Waltham Lease, the Company is obligated to reimburse the Landlord for certain variable costs, including its proportional share of taxes and operating expenses which are not included in the measurement of the 1050 Waltham Lease.

The 1050 Waltham Lease has a non-cancelable term of eight years and four months, measured from the date of completion of all Landlord required

improvements, and therefore, the 1050 Waltham Lease is currently expected to expire on July 31, 2031.

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

In December 2022, the Company received access to approximately 31,991 square feet of the Premises (the “Phase A Premises”) pertaining to the office and laboratory space in order to prepare for use.

Accordingly, the 1050 Waltham Lease for the Phase A Premises, which is considered a distinct lease component, was determined to be classified as an operating lease and the Company recorded an ROU asset of $ 15.4 million and a lease liability of $ 12.9 million on the consolidated balance sheet as of December 31, 2022.

The difference between the ROU asset and lease liability pertains to payments made prior to the Phase A Premises commencement date for leasehold improvements that were deemed to be lessor owned.

In January 2023, the Company entered into a first amendment to the 1050 Waltham Lease (the “Lease Amendment”).

Under the terms of the Lease Amendment, a phased delivery of the Premises by the Landlord was established as follows:

(i) the delivery of the Phase A Premises in January 2023 and (ii) the delivery of the additional approximately 3,671 rentable square feet of vivarium space (the “Phase B Premises”) in March 2023.

As a result of the Lease Amendment, the lease liability for the Phase A Premises was remeasured, resulting in a non-cash decrease to the Company’s operating lease liabilities and ROU assets of $ 0.5 million in the quarter ended March 31, 2023.

Upon delivery of the Phase B Premises in March 2023, the Phase B Premises was determined to be classified as an operating lease and the Company recorded an ROU asset of $ 1.9 million, inclusive of lease payments made prior to commencement, and a lease liability of $ 1.4 million on the consolidated balance sheets.

Upon delivery of the Phase B Premises, the rent commencement date of the Premises was determined to begin in November 2023, with base rent will initially be fixed at $ 0.2 million per month and will increase by approximately 3 % per annum until the 1050 Waltham Lease expires on November 30, 2031.

The Company is obligated to reimburse the Landlord for certain variable costs, including its proportional share of taxes and operating expenses which are not included in the measurement of the 1050 Waltham Lease liability.

balance sheets.

The Company has the option to extend the term of the 1050 Waltham Lease for a period of an additional 5 years.

As of December 31, 2023, the Company has no reasonable certainty that this option to extend will be exercised.

Total lease costs were $ 1.1 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

Cash paid for operating leases was $ 0.9 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

The weighted average remaining lease term is 4.0 years at December 31, 2022.

The weighted average discount rate is 10.0 %.

The components of the lease cost as of December 31, 2023, 2022, and 2021 consisted of the following (in thousands):

YEAR ENDED DECEMBER 31,

2023 2022 2021

Operating lease cost $ 2,950 $ 1,089 $ 587

Variable payments 1,317 555 295

Total lease cost $ 4,267 $ 1,644 $ 882

Other information as of December 31, 2023, 2022 and 2021 (in thousands):

2023 2022 2021

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 1,122 $ 913 $ 587

Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,338 $ 15,423 $ —

The weighted-average remaining lease term and discount rate for the leases as of December 31, 2023 and 2022 were as follows:

Weighted-average remaining lease term — operating leases 7.9 4.0

Weighted-average discount rate — operating leases 10.3 % 10.0 %

Maturities of operating lease liabilities at December 31, 2023 are as follows (in thousands):

7 unchanged sentences

Total operating lease liabilities $ 14,444

The Vivarium Premises had not yet been made available to the Company as of December 31, 2022, therefore the commitment of $ 2.2 million, undiscounted, associated with this 1050 Waltham Lease component is not included in the table or values above.

This Vivarium Premises component of the 1050 Waltham Lease is currently expected to commence in first half of 2023.

Short-term Leases

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

For the year ended December 31, 2022, the Company engaged with a third-party vendor for master cell bank storage for various program trials, as well as extra space for additional storage for the Company’s lab equipment.

The Company incurred $ 23,627 and $ 5,089 related to lease expense for the years ended December 31, 2022 and 2021, respectively.

Legal Proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

In connection with the 99 Hayden Lease entered into in March 2017, the Company received a loan from the landlord of $ 0.2 million related to its tenant improvement allowance, which is recorded as a non-current liability in the Company’s consolidated balance sheets.

The Company is required to repay interest only on the loan of 8.0 % for the first 18 months of the 99 Hayden Lease and will then repay the full amount plus interest in installments over the remaining 3.5 year term of the 99 Hayden Lease.

This loan expired in December 2022.

The Company made payments totaling $ 65,000 related to the loan in 2022.

There is no future payment obligation as of December 31, 2022.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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

18 unchanged sentences

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.

Subsequent Events

In January 2023, the Company entered into a first amendment to the 1050 Waltham Lease (the “Lease Amendment”).

Under the terms of the Lease Amendment, a phased delivery of the Premises by the Landlord was established as follows:

(i) the Landlord will deliver approximately 31,991 square feet of the Premises (the “Phase A Premises”), on or before January 4, 2023 (the “Phase A Premises Commencement Date”) and (ii) the Landlord will deliver the additional approximately 3,671 rentable square feet of vivarium space (the “Phase B Premises”), when the Landlord substantially completes work on the Phase B Premises, which is estimated to be on or before May 1, 2023 (the “Phase B Premises Commencement Date”).

Per the Lease Amendment, the term of the 1050 Waltham Lease will now commence on the Phase A Premises Commencement Date.

The 1050 Waltham Lease has a term of eight years , measured from the Phase A Premises Commencement Date.

The Company’s obligation for the payment of base rent for the Phase A Premises begins on the date which is earlier to occur of (i) eight months following the Phase B Premises Commencement Date or (ii) 11 months following the Phase A Premises Commencement Date (such earlier date, the “Phase A Rent Commencement Date”).

The Company’s obligation for the payment of base rent for the Phase B Premises begins on the date which is eight months following the Phase B Premises Commencement Date (the “Phase B Rent Commencement Date”).

Base rent will initially be fixed at $ 202,085 per month, which will increase by approximately 3 % per annum.

From and after the Phase A Rent Commencement Date and until the occurrence of the Phase B Rent Commencement Date, the Company will be obligated to pay base rent at the per square foot rent for the Phase A Premises only.

Upon the Phase B Rent Commencement Date, the Company will be obligated to pay the base rent for the entirety of the Premises.

The Company will be obligated to pay the Landlord for certain costs, taxes and operating expenses as specified in the Lease Amendment.

No milestones have been achieved as of December 31, 2023.

In connection with the Hansoh Agreement, the Company entered into a manufacturing technology transfer agreement (the “Tech Transfer Agreement”) with Hansoh, effective in June 2023.

The Tech Transfer Agreement governs the transfer to Hansoh, by the Company of all documents and information required to complete the manufacturing technology transfer.

Under the Tech Transfer Agreement, Hansoh is obligated to make certain payments to the Company, at the rates set forth in the Tech Transfer Agreement, as manufacturing technology transfer services are provided over the term of the Tech Transfer Agreement.

The Tech Transfer Agreement is set to expire on December 30, 2024, unless extended pursuant to its terms.

As of December 31, 2023, work under the Tech Transfer Agreement has begun.

The Company recognized $ 0.2 million of service and other revenue for the year ended December 31, 2023.

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