What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-23 compared with 2022-02-24 · 170 added, 93 removed, 550 unchanged (32% of the section changed)

1 unchanged sentence

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e)

and 15d-15(e)

under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report.

1 unchanged sentence

Limitations on the Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute,

assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

1 unchanged sentence

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)

and 15d-15(f)

under the Exchange Act) for our company.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for our company.

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 GAAP.

11 unchanged sentences

Other Information.

Certain information required by Part III is omitted from this Annual Report on Form 10-K

because we intend to file our definitive Proxy Statement for our next Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, or the 2022 Proxy Statement, no later than April 30, 2022, and certain information to be included in the 2022 Proxy Statement is incorporated herein by reference.

Certain information required by Part III is omitted from this Annual Report on Form 10-K because we intend to file our definitive Proxy Statement for our next Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, or the 2023 Proxy Statement, no later than April 30, 2023, and certain information to be included in the 2023 Proxy Statement is incorporated herein by reference.

Directors, Executive Officers and Corporate Governance.

12 unchanged sentences

Item 15(a)(1) and (2)

The Consolidated Financial Statements beginning on page F-1

are filed as part of this Annual Report on Form 10-K.

The Consolidated Financial Statements beginning on page F-1 are filed as part of this Annual Report on Form 10-K.

Other financial statement schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes.

Item 15(a)(3)

We have filed, or incorporated into this Annual Report on Form 10-K

by reference, the exhibits listed on the accompanying Exhibit Index.

We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index.

See Item 15(a)(3) above.

3 unchanged sentences

Reference herein

Agreement and Plan of Merger and Reorganization, dated April 13, 2016, by and among Synta Pharmaceuticals Corp., the Registrant and Saffron Merger Sub, Inc.

(Exhibit 2.1)

Restated Certificate of Incorporation of the Registrant.

2 unchanged sentences

(Exhibit 3.1)

Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock

Form 8-K (Exhibit 3.1)

Bylaws of the Registrant, as amended April 13, 2016.

(Exhibit 3.1)

Form of Warrant Agreement, dated May 9, 2022, between the Registrant and Hercules Capital, Inc.

and affiliates.

Form 10-Q (Exhibit 4.1)

Form of Tranche 2 Warrant Agreement, dated February 3, 2023, by and among the Registrant and Hercules Capital, Inc.

and affiliates.

Form 8-K (Exhibit 4.1)

Description of Securities of the Registrant

(Exhibit 4.1)

Securities Purchase Agreement, dated June 20, 2017, by and among the Registrant and the investors party thereto, including the Registration Rights Agreement attached as Exhibit B thereto.

(Exhibit 10.1)

Equity Agreements

Sales Agreement, dated June 1, 2021, by and between Madrigal Pharmaceuticals, Inc.

and Cowen and Company, LLC (concerning at-the-market offerings of Madrigal common stock).

Securities Purchase Agreement, dated June 20, 2017, by and among the Registrant and the investors party thereto, including the Registration Rights Agreement attached as Exhibit B thereto.

(Exhibit 10.1)

2 unchanged sentences

Reference herein

Amendment No.

2, dated December 22, 2022, to Securities Purchase Agreement, dated June 20, 2017, by and among the Registrant and the investors listed on the signature pages thereto.

Form 8-K (Exhibit 10.2)

Sales Agreement, dated June 1, 2021, by and between Madrigal Pharmaceuticals, Inc.

and Cowen and Company, LLC (concerning at-the-market offerings of Madrigal common stock).

(Exhibit 1.1)

Securities Purchase Agreement, dated December 21, 2022, by and among the Registrant and the institutional investors listed on the signature pages thereto.

Form 8-K (Exhibit 10.1)

Debt Agreements

Loan and Security Agreement, dated May 9, 2022, by and among the Registrant, Canticle Pharmaceuticals, Inc., the several banks and other financial institutions or entities from time to time party thereto and Hercules Capital, Inc.

(Exhibit 10.1)

Loan and Security Agreement, dated May 9, 2022, as amended by the First Amendment to Loan and Security Agreement, dated February 3, 2023, by and among the Registrant, Canticle Pharmaceuticals, Inc., the several banks and other financial institutions or entities from time to time party thereto and Hercules Capital, Inc.

(Exhibit 10.1)

Agreements with Respect to Collaborations, Licenses, Research and Development

6 unchanged sentences

(Exhibit 10.10)

Exhibit Description

Incorporated by

Reference herein

Form of Nonqualified Stock Option Agreement under Amended 2015 Stock Plan.

3 unchanged sentences

Form of Restricted Stock Unit Agreement under Amended 2015 Stock Plan.

(Exhibit 10.1)

Non-Employee Director Equity Compensation Policy

10 unchanged sentences

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.

Exhibit Description

Incorporated by

Reference herein

Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

4 unchanged sentences

Inline XBRL Taxonomy Extension Schema Document.

Exhibit Description

Incorporated by

Reference herein

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

2 unchanged sentences

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Inline XBRL for the cover page of this Annual Report on Form 10-K,

included in the Exhibit 101 Inline XBRL Document Set.

Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set.

Indicates a management contract, compensatory plan or arrangement.

The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K

are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K,

regardless of any general incorporation language contained in any filing.

Confidential portions of these documents have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, regardless of any general incorporation language contained in any filing.

Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Form 10-K Summary.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

9 unchanged sentences

Howarth and Brian J.

Lynch, and each or either of them, acting individually, as his or her true and lawful attorney-in-fact

and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact

and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact

and agent, or any of them, or their or his or her substitutes, may lawfully do or cause to be done or by virtue hereof.

Lynch, and each or either of them, acting individually, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them, or their or his or her substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Exchange Act, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

67 unchanged sentences

Total research and development costs incurred during the year ended December 31, 2022 were $245.4 million and research and development costs accrued were $53.1 million as of December 31, 2022.

The principal considerations for our determination that performing procedures relating to research and development costs is a critical audit matter are the significant judgment by management when estimating the costs incurred for services performed by vendors that have not yet been invoiced in estimating the research and development costs to accrue in the reporting period.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate the audit evidence obtained relating to estimates of costs accrued.

The principal considerations for our determination that performing procedures relating to research and development costs is a critical audit matter are (i) the significant judgment by management when estimating:

the costs incurred for services performed by vendors that have not yet been invoiced, the completion of milestone events per underlying agreements, and invoices received and contracted costs, in estimating the research and development costs to accrue in the reporting period;

and (ii) the high degree of auditor judgment, subjectivity and effort in evaluating management’s significant assumption related to using contracted costs applied to the number of patients screened for and enrolled in the trials to reasonably estimate costs incurred that have not been invoiced.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls over management’s process relating to accruing research and development costs, including controls over estimating the costs incurred for services performed by vendors that have not yet been invoiced.

number of patients screened for and enrolled in the trial, testing the mathematical accuracy of the calculation of the accrual for research and development costs incurred, and evaluating the reasonableness of assumptions used in the estimate.

Evaluating the reasonableness of assumptions used in the estimate involved assessing management’s ability to reasonably estimate costs incurred that have not been invoiced by (i) performing a comparison of the estimated accrual to average procedure rates per contracts applied to the number of patients screened for and enrolled in the trial, and by (ii) performing a comparison of the estimated accrual to actual costs incurred on similar completed preclinical studies and clinical trials.

These procedures also included, among others, testing management’s process for estimating the research and development costs to accrue in the reporting period, evaluating the completeness and accuracy of underlying data used in management’s estimate by testing for consistency with a sample of contracts and invoices, testing the number of patients screened for and enrolled in the trial, testing the mathematical accuracy of the calculation of the accrual for research and development costs incurred, and evaluating the reasonableness of assumptions used in the estimate.

/s/ PricewaterhouseCoopers LLP

18 unchanged sentences

Long term liabilities:

Loan payable, net of discount

Lease liability

4 unchanged sentences

5,000,000 shares at December 31, 2022 and December 31, 2021;

1,969,797 shares issued and outstanding at December 31, 2021 and December 31, 2020

2,369,797 and 1,969,797 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Common stock, par value $ 0.0001 per share authorized:

2 unchanged sentences

Additional paid-in-capital

Accumulated other comprehensive gain (loss)

Accumulated other comprehensive loss

Accumulated deficit

13 unchanged sentences

Interest income

Interest expense

Net loss per common share:

18 unchanged sentences

Balance at December 31, 2019

Issuance of common shares in equity offering, excluding to related parties, net of transaction costs

Sale of common shares to related parties and exercise of common stock options, net of transaction costs

Compensation expense related to stock options for services

Unrealized gain on marketable securities

Unrealized loss on marketable securities

Balance at December 31, 2020

4 unchanged sentences

Balance at December 31, 2021

Issuance of common shares in equity offering, excluding to related parties, net of transaction costs

Issuance of common and preferred shares in equity offerings, excluding to related parties, net of transaction costs

Sale of common shares to related parties and exercise of common stock options, net of transaction costs

1 unchanged sentence

Unrealized loss on marketable securities

Hercules warrant

Balance at December 31, 2022

3 unchanged sentences

(in thousands, except share and per share amounts)

Years Ended December 31,

Year Ended December 31,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization expense

Amortization of debt issuance costs and discount

Changes in operating assets and liabilities:

12 unchanged sentences

Proceeds from the sale of related party stock and exercise of common stock options, net of transaction costs

Proceeds from issuance of loan payable

Payment of debt issuance costs

Net cash provided by financing activities

5 unchanged sentences

asset in exchange for a lease liability

Purchases of property and equipment in accounts payable at period end

See accompanying notes to consolidated financial statements.

9 unchanged sentences

The Company initiated two Phase 3 studies of resmetirom in NASH in 2019 that are ongoing.

The Company announced certain topline results from the Phase 3 MAESTRO-NAFLD-1

safety study of resmetirom in January 2022.

The Company announced certain topline results from the MAESTRO-NAFLD-1

safety study of resmetirom in January 2022 and the MAESTRO-NASH study in December 2022.

In August 2022, Madrigal initiated a third study, MAESTRO-NASH-OUTCOMES.

Certain prior period amounts have been reclassified to align with current period presentation.

Summary of Significant Accounting Policies

19 unchanged sentences

The Company includes such amortization and accretion as a component of interest income, net.

Realized gains and losses and declines in value, if any, that the Company judges to be other-

than-temporary on available-for-sale

Realized gains and losses and declines in value, if any, that the Company judges to be the result of impairment or as a result of recognizing an allowance for credit losses on available-for-sale

securities are reported as a component of interest income.

To determine whether other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis.

During the years ended December 31, 2021, 2020 and 2019, the Company determined it did not have any securities that were other-than-temporarily impaired.

To determine whether an impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis.

During the years ended December 31, 2022, 2021 and 2020, the Company determined it did not have any securities that were impaired or that required an allowance for credit losses.

Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity.

19 unchanged sentences

Research and development costs are expensed as incurred.

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including stock-based compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs.

In particular, the Company has conducted

safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3

Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs (including

compensation), costs for consultants, milestone payments under licensing agreements, and other costs associated with the Company’s preclinical and clinical programs.

In particular, the Company has conducted safety studies in animals, optimized and implemented the manufacturing of our drug, and conducted Phase 1-3

clinical trials, all of which are considered research and development expenditures.

6 unchanged sentences

Stock-Based Compensation

The Company recognizes

stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers and directors.

The Company recognizes stock-based compensation expense based on the grant date fair value of stock options granted to employees, officers and directors.

The Company uses the Black-Scholes option pricing model to determine the grant date fair value as management believes it is the most appropriate valuation method for its option grants.

23 unchanged sentences

Diluted net loss per common share is computed using the weighted average number of common shares outstanding and the weighted average dilutive potential common shares outstanding using the treasury stock method.

However, for the years ended December 31, 2021, 2020 and 2019, diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of unvested restricted common stock and common stock issuable upon the exercise of stock options would be anti-dilutive.

However, for the years ended December 31, 2022, 2021 and 2020, diluted net loss per share is the same as basic net loss per share because the inclusion of common stock issuable upon the exercise of stock options or warrants, and common stock issuable upon the conversion of preferred stock would be anti-dilutive.

The following table summarizes outstanding securities not included in the computation of diluted net loss per common share as their inclusion would be anti-dilutive:

1 unchanged sentence

Common stock options

Unvested restricted common stock

Preferred stock

21 unchanged sentences

Corporate debt securities due within 1 year of date of purchase (Level 2)

Corporate debt securities due within 1 to 2 years of date of purchase (Level 2)

Total cash, cash equivalents and marketable securities

12 unchanged sentences

Other clinical study related costs

Manufacturing and drug supply

Compensation and benefits

1 unchanged sentence

Total accrued liabilities

Long Term Debt

In May 2022 the Company and its wholly-owned subsidiary, Canticle Pharmaceuticals, Inc., entered into the $ 250.0 million Loan Facility (the “Loan Facility”) with the several banks and other financial institutions or entities party thereto (each, a “Lender” and collectively referred to as the “Lenders”), and Hercules Capital, Inc.

(“Hercules”), in its capacity

as administrative agent and collateral agent for itself and the Lenders.

Under the terms of the Loan Facility, the first $ 50.0 million tranche was drawn at closing.

The Company may also draw up to an additional $ 125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones.

A fourth tranche of $ 75.0 million may be drawn by the Company, subject to the approval of Hercules.

The Loan Facility had a minimum interest rate of 7.45 % and adjusted with changes in the prime rate.

The Company will pay interest-only monthly payments of accrued interest under the Loan Facility through May 1, 2025, for a period of 36 months, which period may be extended to May 1, 2026 and May 3, 2027, upon the achievement of regulatory approval milestones and future revenue covenants, subject to

compliance with applicable covenants.

The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain regulatory milestones.

The Loan Facility is secured by a security interest in substantially all of the Company’s assets, other than intellectual property.

It includes an end of term charge of 5.35 % of the aggregate principal amount, which is accounted for in the loan discount.

In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares of Company common stock, which had a Black-Scholes value of $ 0.6 million.

The Loan Facility includes affirmative and restrictive financial covenants commencing on January 1, 2023, including maintenance of a minimum cash, cash equivalents and liquid funds covenant of $ 35.0 million, which may decrease in certain circumstances if the Company achieves certain clinical milestones and a revenue milestone, and a revenue-based covenant that could apply commencing at or after the time that financial reporting is due for the quarter ending September 30, 2024 .

The Loan Facility contains event of default provisions for:

the Company’s failure to make required payments or maintain compliance with covenants under the Loan Facility;

the Company’s breach of certain representations or default under certain obligations outside the Loan Facility;

insolvency, attachment or judgment events affecting the Company;

and any circumstance which has occurred or could reasonably be expected to have a material adverse effect on the Company, provided that, any failure to achieve approval or certain other milestones

under the Loan Facility shall not in and of itself constitute a material adverse effect.

The Loan Facility also includes customary covenants associated with a secured loan facility, including covenants concerning financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts.

As of December 31, 2022, the outstanding principal under the Loan Facility was $ 50.0 million.

The interest rate as of December 31, 2022 was 11.45 %.

As of December 31, 2022, the Company was in compliance with all loan covenants and provisions.

Future minimum payments, including interest and principal, under the loans payable outstanding as of December 31, 2022 are as follows (in thousands):

Period Ending December 31, 2022:

Less amount representing interest

Less unamortized discount

Loans payable, net of discount

See Footnote 13 for a description of certain amended terms set forth in the First Amendment to this Loan Facility, which was entered into during the first quarter of 2023.

Stockholders’ Equity

Each common stockholder is entitled to one vote for each share of common stock held.

The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be

taken by the Company’s stockholders.

The common stock will vote together with all other classes and series of stock of the Company as a single class on all actions to be taken by the Company’s stockholders.

Each share of common stock is entitled to receive dividends, as and when declared by the Company’s board of directors.

1 unchanged sentence

Preferred Stock

The Series A Preferred Stock has a par value of $ 0.0001 per share and is convertible into shares of the common stock at a one -to-one

ratio, subject to adjustment as provided in the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 (the “Series A Certificate”).

The terms of the Series A Preferred Stock are set forth in the Series A Certificate.

Each share of the Series A Preferred Stock is convertible into shares of Common Stock following notice that may be given at the holder’s option.

The Series A and B Preferred Stock have a par value of $ 0.0001 per share and are convertible into shares of the common stock at a one -to-one

ratio, subject to adjustment as provided in the Certificates of Designation of Preferences, Rights and Limitations of Series A Preferred Stock and Series B Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on June 21, 2017 and December 22, 2022, respectively.

The terms of the Series A and B Preferred Stock are set forth in such Certificates of Designation.

Each share of the Series A and B Preferred Stock is convertible into shares of Common Stock following notice that may be given at the holder’s option.

Upon any liquidation, dissolution or winding-up

of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A Preferred Stock upon liquidation, the holders of the Series A Preferred Stock shall participate pari passu with the holders of the Common Stock (on an as-if-converted-to-Common-Stock

of the Company, whether voluntary or involuntary, after the satisfaction in full of the debts of the Company and the payment of any liquidation preference owed to the holders of shares of capital stock of the Company ranking prior to the Series A and B Preferred Stock upon liquidation, the holders of the Series A and B Preferred Stock shall participate pari passu with the holders of the Common Stock (on an as-if-converted-to-Common-Stock

basis) in the net assets of the Company.

Shares of the Series A Preferred Stock will generally have no voting rights, except as required by law.

Shares of the Series A Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) equal to the dividend payable on each share of the Common Stock, on an as-converted

Shares of the Series A and B Preferred Stock will generally have no voting rights, except as required by law.

Shares of the Series A and B Preferred Stock will be entitled to receive dividends before shares of any other class or series of capital stock of the Company (other than dividends in the form of the Common Stock) equal to the dividend payable on each share of the Common Stock, on an as-converted

December 2022 Registered Direct Offering

In December 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a group of institutional accredited investors, who were existing, non-controlling

stockholders of the Company, pursuant to which the Company sold securities to the Investors in an offering that was registered under the Company’s existing shelf registration statement (the “2022 Registered Direct Offering”).

Under the terms of the Purchase Agreement, the Company sold 44,444 shares of its common stock at a price of $ 225 per share, and 400,000 shares of its Series B Convertible Preferred Stock at a price of $ 225 per share.

The 2022 Registered Direct Offering resulted in gross proceeds to the Company of approximately $ 100.0 million, and net proceeds to the Company of approximately $ 99.5 million.

The 2022 Registered Direct Offering closed on December 23, 2022.

At-The-Market

8 unchanged sentences

Of those shares sold, 1,087,126 were sold in 2021, and 39,607 were sold in 2020.

In June 2021, the Company filed with the SEC and had declared effective a new shelf registration statement on Form S-3

and, in connection therewith, entered into a new at-the-market

sales agreement (the “2021 Sales Agreement”) with Cowen.

The terms of the 2021 Sales Agreement are substantially the same as the 2020 Sales Agreement.

The 2021 Sales Agreement authorizes an aggregate offering of up to $ 200 million in shares of our common stock, from time to time, at the Company’s option, through Cowen as its sales agent.

The 2021 Sales Agreement supersedes the 2020 Sales Agreement.

Subject to the terms and conditions of the 2021 Sales Agreement, Cowen will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose).

As of December 31, 2021, 497,043 shares had been sold under the 2021 Sales Agreement for an aggregate of approximately $ 40.8 million in gross proceeds, with net proceeds to the Company of approximately

$ 39.8 million after deducting commissions and other transaction costs.

As of December 31, 2021, $ 159.2 million remained reserved and available for sale under the 2021 Sales Agreement and the Company’s related prospectus supplement.

In June 2021, the Company entered into an at-the-market

sales agreement (the “2021 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company could, from time to time, issue and sell shares of its common stock.

The 2021 Sales Agreement authorized an aggregate offering of up to $ 200 million in shares of our common stock, at the Company’s option, through Cowen as its sales agent.

Sales of common stock through Cowen could be made by any method that is deemed an “at-the-market”

offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by the Company and Cowen.

Subject to the terms and conditions of the 2021 Sales Agreement, Cowen would use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company imposed).The 2021 Sales Agreement replaced the 2020 Sales Agreement.

In December 2022, the Company sold 738,900 shares under the 2021 Sales Agreement for an aggregate of $ 159.1 million in gross proceeds, with net proceeds to the Company of $ 155.9 million after deducting commissions and other transaction costs.

In total, under the 2021 Sales Agreement the Company sold 1,235,943 shares for an aggregate of $ 199.9 million in gross proceeds, with net proceeds to the Company of approximately $ 195.8 million after deducting commissions and other transaction costs.

Of those shares sold, 738,900 were sold in 2022, and 497,043 were sold in 2021.

All shares were sold pursuant to the Company’s effective shelf registration statement and the prospectus supplement relating thereto.

As of December 31, 2022, no amounts remained reserved and available for sale under the 2021 Sales Agreement and the related prospectus supplement.

Stock-based Compensation

The 2015 Stock Plan, as amended, is our primary plan through which

equity based grants are awarded.

The 2015 Stock Plan, as amended, is our primary plan through which equity based grants are awarded.

We ceased making new awards under the 2006 Stock Plan upon adoption of the 2015 Stock Plan.

19 unchanged sentences

The weighted-average grant date fair values, based on the Black-Scholes option model, of options granted during the year ended December 31, 2022, 2021 and 2020 was $ 54.68 , $ 73.29 , and $ 68.07 , respectively.

Restricted Common Stock

The Company’s share-based compensation plan provides for awards of restricted shares of common stock to employees, officers, directors and consultants to the Company.

Restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period.

Restricted shares vest over the service period.

There were no outstanding restricted shares or activity in 2021.

Stock-Based Compensation Expense

Stock-based compensation expense during the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):

Years Ended December 31,

Year Ended December 31,

Stock-based compensation expense by type of award:

Stock options

Restricted stock

Total stock-based compensation expense

4 unchanged sentences

Unrecognized stock-based compensation expense on stock options as of December 31, 2022 was $ 58.7 million with a weighted average remaining period of 2.57 years.

In 2019, the Company entered into an operating lease for office space, which was renewed and extended in 2020.

he Company entered into an operating lease for office space, which was renewed and extended in 2020.

We adopted ASU 2016-02,

11 unchanged sentences

As of December 31, 2022, the weighted average remaining operating lease term was 0.7 years and the weighted average discount rate used to determine the operating lease liabilities was 6.72 %.

Cash paid related to the lease liability was $ 0.4 and $ 0.3 million for years ended December 31, 2021 and 2020 respectively.

Cash paid related to

the lease liability was $ 0.7 and $ 0.4 million for years ended December 31, 2022 and 2021 respectively.

Operating lease costs were $ 0.8 and $ 0.4 million for years ended December 31, 2022 and 2021 respectively.

9 unchanged sentences

Except as described above, the Company has not achieved any additional product development or regulatory milestones and had no Licensed Product sales for the years ended December 31, 2022, 2021 and 2020.

The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of the Phase 3 clinical trials.

The Company has entered into customary contractual arrangements and letters of intent in preparation for and in support of the clinical trials.

At December 31, 2022, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 275.5 million available to reduce future taxable income, of which $ 40.4 million will expire between 2031 and 2037.

13 unchanged sentences

The 2018 through 2022 tax returns are open to review by the IRS and state taxing authorities.

Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision.

There was no income tax related interest and penalties included in the income tax provision for 2021.

Interest and penalties, if any, as they relate to

income taxes assessed, are included in the income tax provision.

income tax related interest and penalties included in the income tax provision for 2022.

Temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):

20 unchanged sentences

Stock based compensation

162M limitation

Other nondeductible expenses

7 unchanged sentences

Three months ended

March 31, 2022

June 30, 2022

September 30,

6 unchanged sentences

Interest income

Interest expense

Net loss per common share:

2 unchanged sentences

Three months ended

March 31, 2021

June 30, 2021

September 30,

6 unchanged sentences

Interest income

Interest expense

Net loss per common share:

1 unchanged sentence

Basic and diluted weighted average number of common shares outstanding

Subsequent Event

On February 3, 2023,

the Company entered into the First Amendment (the “Amendment”) to the Loan Facility described in Footnote 6 (as amended, the “Amended Loan Facility”).

Under the terms of the Loan

Facility, the first $ 50.0 million tranche was drawn at closing in May 2022 .

Under the Amended Loan Facility,

an additional $ 35.0 million was drawn

$ 65.0 million tranche (“Tranche 2”)

in February of

2023 following

the Company’s achievement of the Phase 3 clinical development milestone .

The Company has the ability to draw an additional $ 15.0 million under Tranche 2 by June 19, 2023 and an additional $ 15.0 million under Tranche 2 by September 30, 2023 (for a total of $ 30.0 million in additional committed Tranche 2 capacity).

The third tranche (“Tranche 3”) of $ 75.0 million remains unchanged by the Amendment, and such borrowings are available subject to the Company obtaining a certain FDA approval for resmetirom.

Coincident with the expansion of Tranche 2 borrowing capacity by

15 million, the Amendment reduced the fourth tranche

under the Loan Facility

15.0 million to $

60.0 million , which amount is available subject to Hercules’ sole discretion.

In connection with the $

35.0 million drawn under the second tranche at the closing of the Amendment, the Company issued

and affiliates

2 Warrants to purchase

2,453 shares of common stock

at an exercise price of $ 285.31 per share

The Amendment reduced the interest rate under the Amended Loan Facility to the greater of (i) the prime rate as reported in The Wall Street Journal plu

2.45 % and (ii)

The Amendment and the Amended Loan Facility summary terms were

disclosed in the Company’s Current Report on Form

filed with the Securities and Exchange Commission on February

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