What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 66 added, 94 removed, 157 unchanged (50% of the section changed)

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The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of LENZ’ consolidated results of operations and financial condition.

The discussion should be read together with the condensed consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2023 and the related notes included in the Company’s final 424B3 prospectus filed with the SEC on September 19, 2024.

The discussion should be read together with the condensed consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 .

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.

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Based on these results, we selected LNZ100 as our lead product candidate, for which we submitted a New Drug Application (“NDA”) to Food and Drug Administration (“FDA”) in August 2024.

In October 2024, the FDA assigned a Prescription Drug User Fee Act ("PDUFA") target action date of August 8, 2025, followed by a potential commercial launch as early as fourth quarter 2025, if approved.

In October 2024, the FDA assigned a Prescription Drug User Fee Act (“PDUFA”) target action date of August 8, 2025, which, if approved, will be immediately followed by a commercial launch in the United States, with the product anticipated to be available in the market in the fourth quarter of 2025.

We believe that LNZ100 could be the first and only aceclidine-based product approved by the FDA and would then be eligible for five years of new chemical entity (“NCE”) exclusivity in the United States.

As of September 30, 2024 , we had $217.2 million of cash, cash equivalents, restricted cash, and marketable secu rities.

We believe that our existing cash, cash equivalents and marketable securities as of September 30, 2024 will allow us to continue to build infrastructure and commercialize LNZ100, subject to FDA approval, and will be sufficient to fund the Company to positive operating cash flow subsequent to such commercial launch.

We do not expect to generate any revenues from product sales unless and until we suc cessfully obtain regulatory approval for LNZ100 .

We have incurred net losses in each year since inception, and as of September 30, 2024 , we had an accumulated deficit of $132.4 million .

As of March 31, 2025 , we had $194.1 million of cash, cash equivalents, restricted cash, and marketable secu rities.

We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will allow us to continue to build infrastructure and commercialize LNZ100, subject to FDA approval, and will be sufficient to fund the Company to positive operating cash flow subsequent to such commercial launch.

We do not expect to generate any revenue from product sales unless and until we suc cessfully obtain regulatory approval for LNZ100 .

We have incurred net losses in each year since inception, and as of March 31, 2025 , we had an accumulated deficit of $159.6 million .

These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations.

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Additionally, we anticipate incurring expenses related to product sales, marketing, manufacturing, and distribution, and additional costs associated with being a public company, including audit, legal, regulatory and tax-related services associated with maintaining compliance with an exchange listing and SEC requirements.

As a result of these and other factors, while we believe that our existing cash, cash equivalents and marketable securities as of September 30, 2024 will fund the Company to positive operating cash flow subsequent to commercial launch, if LNZ100 is approved, it is possible that we may require additional financing to fund our operations and planned growth.

As a result of these and other factors, while we believe that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will fund the Company to positive operating cash flow subsequent to commercial launch, if LNZ100 is approved, it is possible that we may require additional financing to fund our operations and planned growth.

Through the completion of the Merger, L ENZ OpCo financed its operations primarily through private placements of its common stock and convertible preferred stock.

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CORXEL License and Collaboration Agreement

In April 2022, we entered into a License and Collaboration Agreement with Corxel Pharmaceuticals (formerly known as Ji Xing Pharmaceuticals Hong Kong Limited) (“CORXEL”) granting CORXEL an exclusive license (the “CORXEL

License” formerly referred to as the "Ji Xing License") to certain of our intellectual property rights to develop, use, import, and sell products containing LNZ100 (“Products”) for use in the treatment of presbyopia in humans in mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (collectively, “Greater China”).

In April 2022, we entered into a License and Collaboration Agreement with CORXEL Pharmaceuticals (formerly known as Ji Xing Pharmaceuticals Hong Kong Limited) (“CORXEL”) granting CORXEL an exclusive license (the “CORXEL License” formerly referred to as the “Ji Xing License”) to certain of our intellectual property rights to develop, use, import,

and sell products containing LNZ100 (“Products”) for use in the treatment of presbyopia in humans in mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (collectively, “Greater China”).

We also granted CORXEL (i) the right to negotiate in good faith and enter into agreements to purchase Products from us for clinical and commercial uses at cost plus a negotiated percentage and (ii) the right of first negotiation to obtain a regional license from us on other products we might develop outside of the field of presbyopia for commercialization in Greater China.

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The $15.0 million upfront payments allocated to that single performance obligation was recognized on execution of the CORXEL License during the year ended December 31, 2022.

No contractual milestones were met under the CORXEL License during the nine months ended September 30, 2024 or 2023.

No contractual milestones were met under the CORXEL License during the three months ended March 31, 2025 or 2024.

On October 27, 2024, CORXEL and the Company announced positive topline data from the Phase 3 JX07001 clinical trial of LNZ100 in patients with presbyopia in China.

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Key Trends and Factors Affecting Comparability Between Periods

• Our research and development costs decreased during the three and nine months ended September 30, 2024, relative to the three and nine months ended September 30, 2023, primarily as a result of reduced contract manufacturing expenses and clinical research expenses related to the substantial completion of our Phase 3 CLARITY trials in March 2024.

• Our research and development costs decreased during the three months ended March 31, 2025, relative to the three months ended March 31, 2024, primarily as a result of reduced clinical research expenses related to the substantial completion of our Phase 3 CLARITY trials in March 2024.

We expect our research and development costs will continue to decrease in 2025, relative to 2024, given the completion of the CLARITY trials and subsequent wind-down of clinical activities over 2024.

• We expect that selling, general and administrative expenses will continue to increase in 2024, relative to 2023, as we have built a cross-functional commercial team consisting of marketing and commercial operations and will continue to strategically build our sales and commercial infrastructure with capabilities designed to scale when necessary to support a potential commercial launch of LNZ100 as early as fourth quarter 2025, subject to FDA approval.

These expenses increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, and we expect such expenses to continue to increase for the foreseeable future.

• As a result of the Merger, the Company’s corporate general and administrative expenses have increased and will continue to increase from those that we incurred in prior years as a privately held company, including costs related to (i) compliance with the rules and regulations of the SEC and those of Nasdaq, (ii) legal, accounting and other professional services, (iii) insurance, (iv) investor relations activities, and (v) other administrative and professional services.

• We expect that selling, general and administrative expenses will continue to increase in 2025, relative to 2024, as we have built a cross-functional commercial team consisting of marketing and commercial operations and will continue to strategically build our sales and commercial infrastructure with capabilities designed to scale when necessary to support a potential commercial launch of LNZ100, subject to FDA approval.

These expenses increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, and we expect such expenses to continue to increase for the foreseeable future.

• The Company’s corporate general and administrative expenses increased during the three months ended March 31, 2025 relative to the three months ended March 31, 2024 as a result of the Merger, given we operated for most of the prior period as a privately held company.

These costs are related to (i) compliance with the rules and regulations of the SEC and those of Nasdaq, (ii) legal, accounting and other professional services, (iii) insurance, (iv) investor relations activities, and (v) other administrative and professional services.

Recent Developments

NDA Filing and PDUFA Date

On October 21, 2024, we announced the FDA has assigned a Prescription Drug User Fee Act (PDUFA) target action date of August 8, 2025 for LNZ100.

The FDA noted that it is not planning to hold an advisory committee meeting to discuss this application.

Private Placement

On July 14, 2024, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) for the July 2024 PIPE Financing.

Pursuant to the Purchase Agreement, we agreed to sell 1,578,947 shares of our common stock, representing over 5% of the Company's outstanding common stock, at a purchase price of $19.00 per share.

The gross proceeds of the July 2024 PIPE Financing were $30.0 million.

The July 2024 PIPE Financing closed on July 17, 2024.

On October 21, 2024, we announced the FDA has assigned a PDUFA target action date of August 8, 2025 for LNZ100.

The FDA notified the Company in its letter to notify its acceptance to review the NDA that they do not plan to hold an advisory committee meeting, which was reiterated during the mid-cycle review.

Basis of Presentation

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the balance sheets and statements of operations and comprehensive loss presented herein.

The following discussion and analysis are based on our audited financial statements and related notes thereto, which we have prepared in accordance with U.S.

You should read the discussion and analysis together with such audited financial statements and the related notes thereto.

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the unaudited condensed consolidated balance sheets and statements of operations and comprehensive loss presented herein.

The following discussion and analysis are based on our unaudited condensed consolidated financial statements and related notes thereto, which we have prepared in accordance with U.S.

You should read the discussion and analysis together with such unaudited condensed consolidated financial statements and the related notes thereto.

Components of Statements of Operations and Comprehensive Loss

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Selling, general and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, business development, sales and marketing, human resources, and other corporate functions.

Other selling, general and administrative expenses include marketing and advertising costs, professional fees for legal, auditing, tax and business consulting services, insurance costs, intellectual property and patent costs, facility costs and travel costs.

Other selling, general and administrative expenses include marketing and advertising costs, professional fees for legal, tax and business consulting services, public company related expenses such as audit fees and insurance costs, intellectual property and patent costs, facility costs and travel costs.

Other Income (Expense), Net

Other income (expense), net consists of the change in fair value of preferred stock warrants liability, interest income earned on cash, cash equivalents, and short-term investments, and changes in the fair value of long-term investments due to observable price changes in orderly transactions for an identical or similar investment.

Other income (expense), net consists of interest income earned on cash, cash equivalents, and short-term investments, and changes in the fair value of long-term investments due to observable price changes in orderly transactions for an identical or similar investment, and the change in fair value of preferred stock warrants liability.

Upon completion of the Merger, the preferred stock warrants became exercisable into shares of common stock and will no longer continue to be remeasured at each reporting date.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table presents the results of operations for the periods indicated (amounts in thousands, except percentages):

Three Months Ended September 30,

2024 2023 $ Change % Change

Research and development $ 6,451 $ 17,004 $ (10,553) (62) %

Selling, general and administrative 6,494 2,861 3,633 127 %

Other income (expense), net 2,730 985 1,745 177 %

Research and Development

Research and development expenses incurred for the three months ended September 30, 2024 were primarily incurred to further refine the manufacturing process for LNZ100, while research and development expenses for the three months ended September 30, 2023 were substantially all related to the development of LNZ100 in our INSIGHT and CLARITY trials.

Research and development expenses decreased by $10.6 million, or 62%, to $6.5 million for the three months ended September 30, 2024 compared to $17.0 million for the three months ended September 30, 2023.

The decrease was

primarily driven by an $11.4 million decrease in contract research expense for our clinical trials, as our Phase 3 CLARITY trials were substantially completed in March 2024, and a $0.8 million decrease in nonclinical research expense, partially offset by a $1.1 million increase in non-clinical regulatory and chemistry, manufacturing, and control ("CMC") employee salaries and related expenses due to increased headcount and a $0.6 million increase in contract regulatory consulting expenses associated with the preparation and filing of our NDA for LNZ100.

Selling, General and Administrative

Selling, general and administrative expenses increased $3.6 million, or 127%, to $6.5 million for the three months ended September 30, 2024 compared to $2.9 million for the three months ended September 30, 2023.

The change was primarily driven by a $1.6 million increase in employee salaries and related expenses due to a rise in headcount, a $1.0 million increase in marketing and advertising expenses as we expanded our pre-commercial planning initiatives for a potential commercial launch of LNZ100, and a $0.4 million increase in legal and other professional services.

Other Income (Expense), net

Other income, net for the three months ended September 30, 2024, was $2.7 million, compared to $1.0 million for the three months ended September 30, 2023.

The change was primarily driven by additional interest income earned on our cash, cash equivalents, and marketable securities of $1.7 million as a result of an overall increase in cash on-hand in 2024 over the comparative period.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table presents the results of operations for the periods indicated (amounts in thousands, except percentages):

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

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Research and Development

Research and development expenses incurred for the nine months ended September 30, 2024 were primarily incurred to further refine the manufacturing process for LNZ100, while research and development expenses incurred for the nine months ended September 30, 2023 were substantially all related to the development of LNZ100 in our INSIGHT and CLARITY trials.

Research and development expenses decreased $16.0 million, or 40%, to $23.9 million for the nine months ended September 30, 2024 compared to $40.0 million for the nine months ended September 30, 2023.

The decrease was primarily driven by a $21.5 million decrease in contract research expense for our clinical trials, as our Phase 3 CLARITY trials were substantially completed in March 2024, partially offset by a $2.9 million increase in employee salaries and related expenses due to increased non-clinical regulatory and CMC headcount, a $1.0 million increase in nonclinical research expense, and a $1.3 million increase in contract regulatory consulting expenses associated with the preparation and filing of our NDA for LNZ100.

Research and development expenses incurred for the three months ended March 31, 2025 were primarily incurred to further refine the manufacturing process for LNZ100, while research and development expenses for the three months ended March 31, 2024 were substantially all related to the development of LNZ100 in our Phase 3 CLARITY trials.

Research and development expenses decreased by $4.7 million, or 45%, to $5.8 million for the three months ended March 31, 2025 compared to $10.5 million for the three months ended March 31, 2024.

The decrease was primarily driven by a $4.8 million decrease in contract research expense for our clinical trials, as our Phase 3 CLARITY trials were substantially completed in March 2024, and a $1.3 million decrease in nonclinical research expense primarily due to a reduction in costs related to toxicology studies, partially offset by a $1.2 million increase in non-clinical regulatory and chemistry, manufacturing, and control ("CMC") employee salaries and related expenses due to increased headcount and non-cash share-based compensation expense.

Selling, General and Administrative

Selling, general and administrative expenses increased $12.0 million, or 160%, to $19.5 million for the nine months ended September 30, 2024 compared to $7.5 million for the nine months ended September 30, 2023.

Increases in the comparative period included $4.4 million in employee salaries and related expenses due to a rise in headcount (including a one-time, non-cash stock-based compensation charge of $0.3 million for the acceleration of vesting of stock options as a result of the Merger), $3.4 million in marketing and advertising expenses as we expanded our pre-commercial planning initiatives for a potential commercial launch of LNZ100, subject to FDA approval, $3.0 million in legal and other professional services, and $0.6 million in other general and administrative expenses.

Selling, general and administrative expenses increased $5.6 million, or 100%, to $11.1 million for the three months ended March 31, 2025 compared to $5.6 million for the three months ended March 31, 2024.

The change was primarily driven by increases of $2.7 million in employee salaries and related expenses due to a rise in headcount and non-cash share-based compensation expense, $1.8 million in pre-commercial marketing, advertising and sales infrastructure expenses as we prepare for a potential commercial launch of LNZ100, subject to FDA approval, and $0.7 million in corporate general and administrative expenses as we operated as a public company for the full three months ended March 31, 2025.

Other Income (Expense), net

Other income, net for the nine months ended September 30, 2024, was $6.3 million, compared to $1.2 million for the nine months ended September 30, 2023.

The change was primarily driven by additional interest income earned on our cash, cash equivalents, and marketable securities of $4.6 million as a result of an overall increase in cash on-hand in 2024 over the

comparative period, and an increase of $1.3 million in the fair value of the Company's equity investment without a readily determinable fair value, partially offset by a $1.0 million increase in the fair value of the preferred stock warrants liability, resulting in a non-recurring, non-cash charge at the close of the Merger.

Other income, net for the three months ended March 31, 2025, was $2.3 million, compared to expense of $0.6 million for the three months ended March 31, 2024.

The change was primarily driven by additional interest income earned on our cash, cash equivalents, and marketable securities of $1.5 million as a result of an overall increase in cash on-hand during the three months ended March 31, 2025 over the comparative period, and by a non-recurring, non-cash charge at the close of the Merger of $1.0 million related to the fair value of the preferred stock warrants liability.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2024, we had $217.2 million of cash, cash equivalents, restricted cash, and marketable securities.

We have incurred net losses in each year since inception and as of September 30, 2024, we had an accumulated deficit of $132.4 million.

Our net losses were $10.2 million and $18.9 million for the three months ended September 30, 2024 and 2023, respectively, and $37.1 million and $46.3 million for the nine months ended September 30, 2024 and 2023, respectively.

As of March 31, 2025, we had $194.1 million of cash, cash equivalents, restricted cash, and marketable securities.

We have incurred net losses in each year since inception and as of March 31, 2025, we had an accumulated deficit of $159.6 million.

Our net losses were $14.6 million and $16.6 million for the three months ended March 31, 2025 and 2024, respectively.

These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations.

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These costs include expenses associated with the regulatory approval process for LNZ100, and the preparation for the potential commercial launch of our product, subject to FDA approval.

From inception through September 30, 2024, we received funding of $13.0 million from our initial seed financing, $47.0 million from the sale of Series A Convertible Preferred Stock, $10.0 million from the sale of Series A-1 Convertible Preferred Stock, gross proceeds of $83.5 million from the sale of Series B Convertible Preferred Stock, approximately $117.8 million in cash and cash equivalents from the Merger, approximately $53.5 million in gross cash proceeds from the March 2024 PIPE Financing, and $30.0 million in gross cash proceeds from the July 2024 PIPE Financing.

From inception through March 31, 2025, we received funding of $13.0 million from our initial seed financing, $47.0 million from the sale of Series A Convertible Preferred stock, $10.0 million from the sale of Series A-1 Convertible Preferred Stock, gross proceeds of $83.5 million from the sale of Series B Convertible Preferred stock, approximately $117.8 million in cash and cash equivalents from the Merger, approximately $53.5 million in gross cash proceeds from the March 2024 PIPE Financing, and $30.0 million in gross cash proceeds from the July 2024 PIPE Financing.

On April 4, 2025, we entered into a sales agreement (the “Sales Agreement”) with TD Securities (USA) LLC (“TD Cowen”) under which we may offer and sell up to $150.0 million of shares of our common stock from time to time through an “at the market” offering program under which TD Cowen will act as sales agent.

Under the Sales Agreement, we set the parameters for the sale of shares, including the number or dollar amount of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar amount of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

Subject to the terms and conditions of the Sales Agreement, TD Cowen may sell the shares by methods deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement.

The shares will be issued pursuant to our shelf registration statement on Form S-3, including the prospectus supplement contained therein, which was declared effective by the SEC on April 14, 2025.

In April 2025, we sold 600,500 shares of common stock at a price of $27.55 per share for total gross proceeds of $16.5 million pursuant to the Sales Agreement.

After deducting commissions and expenses of $0.2 million, net proceeds to the Company were $16.3 million.

Funding Requirements

We believe that our cash, cash equivalents, and marketable securities as of September 30, 2024 will allow us to continue to build infrastructure and commercialize LNZ100 , subject to FDA approval, and such funds are anticipated to fund the Company to positive operating cash flow subsequent to such commercial launch.

We believe that our cash, cash equivalents, and marketable securities as of March 31, 2025 will allow us to continue to build infrastructure and commercialize LNZ100, subject to FDA approval, and such funds are anticipated to fund the Company to positive operating cash flow subsequent to such commercial launch.

This belief is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than expected.

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We cannot be assured that additional financing will be available to us on favorable terms when required, or at all.

If we raise additional funds through the issuance of equity or equity-linked securities, those securities

may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution.

If we raise additional funds through the issuance of equity or equity-linked securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution.

If we raise additional funds through the incurrence of indebtedness, then we may be subject to increased fixed payment obligations and could be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business.

The following table summarizes our cash flows for the years presented (amounts in thousands):

Nine Months Ended September 30,

The following table summarizes our cash flows for the periods presented (amounts in thousands):

Three Months Ended March 31,

Net cash (used in) provided by:

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Financing activities 44 171,268

Net increase (decrease) in cash and cash equivalents

$ 6,020 $ (1,593)

Net increase in cash and cash equivalents $ 2,884 $ 165,331

Net Cash Used in Operating Activities

Net cash used in operating activities primarily results from net loss adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs, manufacturing of drug product and employee-related expenditures for research and development and selling, general and administrative activities.

Cash flows from operating activities will continue to be impacted by spending to develop and pursue regulatory approval for LNZ100 and commercialization activities, if approval is obtained, and will also be impacted by any potential future revenues from commercialization activities.

Cash flows will also continue to be affected by other operating and general administrative activities, including operating as a public company.

For the nine months ended September 30, 2024, cash used in operating activities was $50.3 million and resulted from a net loss of $37.1 million, in addition to an approximate $14.4 million cash outflow from the payment of accounts payable and accrued liabilities associated with the Merger and accrued clinical activities, offset by $3.2 million in non-cash adjustments primarily driven by share-based compensation expense and the change in the fair value of preferred warrants.

For the nine months ended September 30, 2023, cash used in operating activities was $39.4 million primarily resulting from a net loss of $46.3 million and partially offset by a $5.9 million increase in accounts payable and accrued liabilities.

Net Cash Used in Investing Activities

Cash used in investing activities for the nine months ended September 30, 2024 was $142.6 million, primarily due to $195.3 million of purchases of marketable securities, and partially offset by $53.0 million in proceeds from maturities of marketable securities.

Cash used in investing activities for the nine months ended September 30, 2023 was $44.8 million, primarily due to $46.3 million of purchases of marketable securities, and partially offset by $1.5 million in proceeds from maturities of marketable securities.

For the three months ended March 31, 2025, cash used in operating activities was $16.0 million and resulted from a net loss of $14.6 million, in addition to an approximate $2.0 million cash outflow from the payment of accounts payable and accrued liabilities and a $1.0 million increase in operating assets, offset by $1.5 million in non-cash adjustments primarily driven by share-based compensation expense.

For the three months ended March 31, 2024, cash used in operating activities was $23.9 million primarily resulting from a net loss of $16.6 million plus an $8.5 million cash outflow from the payment of accounts payable and accrued liabilities associated with the Merger and accrued clinical activities and a $0.5 million increase in operating assets, offset by $1.7

million in non-cash adjustments primarily related to the change in the fair value of preferred warrants and share-based compensation expense.

Net Cash Provided by Investing Activities

Cash provided by investing activities for the three months ended March 31, 2025 was $18.9 million, primarily due to $52.1 million in proceeds from maturities of marketable securities, and partially offset by $33.1 million of purchases of marketable securities.

Cash provided by investing activities for the three months ended March 31, 2024 was $18.0 million, due to proceeds from maturities of marketable securities.

Net Cash Provided by Financing Activities

For the nine months ended September 30, 2024, cash provided by financing activities was $198.9 million and includes $117.8 million in cash and cash equivalents acquired in the Merger, $53.5 million in gross cash proceeds from the March 2024 PIPE Financing, $30.0 million in gross cash proceeds from the July 2024 PIPE Financing, and approximately $3.9 million in net cash proceeds from exercises of stock options.

For the nine months ended September 30, 2023, cash provided by financing activities was $82.6 million, primarily due to $83.0 million in proceeds from the sale by LENZ OpCo of Series B Convertible Preferred Stock.

Cash provided by financing activities for the three months ended March 31, 2025 was immaterial.

For the three months ended March 31, 2024, cash provided by financing activities was $171.3 million and includes $117.8 million in cash and cash equivalents acquired in the Merger and $53.5 million in gross cash proceeds from the March 2024 PIPE Financing.

Material Cash Requirements from Contractual Obligations

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In April 2024, we entered into a lease for 9,795 square feet of office space in Solana Beach, California.

The term of the lease is 39 months from the commencement date of July 1, 2024, ending September 30, 2027.

The term of the lease is thirty-nine months from the commencement date of July 1, 2024, ending September 30, 2027.

See Note 6 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details related to our office leases.

Rent expense is recorded on a straight-line basis.

Cash paid for rent for the three months ended September 30, 2024 and 2023 was $76,000 and $38,000, respectively.

We expect cash paid for rent to remain flat during the three months ended December 31, 2024 compared to the three months ended September 30, 2024.

See Note 6 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for details related to future lease payments as of September 30, 2024.

We also have contracts with various organizations to conduct research and development activities, including clinical trial organizations to manage regulatory and any remaining clinical trial activities, and manufacturing companies to manufacture the drug product used in the regulatory process and clinical trials.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of the financial condition and results of operations is based on our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S.

The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgements and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of expenses during the periods presented.

Our management’s discussion and analysis of the financial condition and results of operations is based on our consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S.

The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of expenses during the periods presented.

We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

To the extent there are material differences between these estimates, judgments or assumptions and actual results, our condensed consolidated financial statements will be affected.

To the extent there are material differences between these estimates, judgments or assumptions and actual results, our consolidated financial statements will be affected.

Historically, revisions to our estimates have not resulted in a material change to our condensed consolidated financial statements.

While our significant accounting policies are described in more detail in the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.

Preferred Stock Warrants Liability

LENZ OpCo had freestanding warrants to purchase shares of Series A convertible preferred stock, referred to herein as the Series A Warrants.

Upon certain change in control events that were outside of LENZ OpCo's control, including liquidation, sale or transfer of control, holders of the preferred stock could cause redemption of such warrants.

The Series A Warrants were revalued at each subsequent balance sheet date, with fair value changes recognized as increases or reductions to other income (expense), net in the accompanying statements of operations.

See Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information concerning certain of the specific assumptions we used in determining the value of the Series A Warrants at each reporting period.

Upon completion of the Merger, the Series A Warrants became exercisable into shares of our common stock and are no longer remeasured at each reporting date.

Stock-Based Compensation Expense

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We estimate the fair value of equity awards using the Black-Scholes option pricing model and recognize forfeitures as they occur.

Estimating the fair value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant.

Estimating the fair

value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant.

Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized.

We determine the inputs and assumptions to the Black-Scholes option pricing model in the following manner:

Fair Value of Common Stock— Prior to the Merger, since there was no public market for our common stock, our board of directors, with input from management, determined the fair value of our common stock on each grant date by considering a number of objective and subjective factors, the achievement of clinical and operational milestones by the Company, the significant risks associated with the Company’s stage of development, capital market conditions for life science companies, particularly similarly situated, privately held, early-stage life science companies, the Company’s available cash, financial condition, and results of operations, the most recent sales of the Company’s convertible preferred stock, the preferential rights of the outstanding convertible preferred stock and Class B convertible common stock.

Historically, these independent third-party valuations of our equity instruments were generally performed contemporaneously with identified value inflection points.

Following the Merger, the fair market value of our common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded, adjusted for special dividends, if any.

Fair Value of Common Stock —The fair market value of our common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded, adjusted for special dividends, if any.

Expected Term —The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No.

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We may continue to be a smaller reporting company in any given year if either (i) the market value of our stock held by non-affiliates is less than $250 million as of June 30 in the most recently completed fiscal year or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of June 30 in the most recently completed fiscal year.

If we are a smaller

reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual

Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis