What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-25 compared with 2023-03-30 · 214 added, 155 removed, 845 unchanged (30% of the section changed)

44 unchanged sentences

Operating lease right-of-use assets 19,884 21,483

Restricted cash 560 449

Other long-term assets 2,185 3,130

15 unchanged sentences

Total liabilities 60,640 79,839

Commitments and Contingencies (Note 9)

Stockholders’ equity:

1 unchanged sentence

100,000,000 shares authorized;

no shares issued and outstanding at December 31, 2022;

no shares authorized, issued and outstanding at December 31, 2021

no shares issued and outstanding at December 31, 2023 and December 31, 2022

Common stock, $ 0.0001 par value;

1,000,000,000 shares authorized;

115,218,229 shares issued and outstanding at December 31, 2022;

no shares authorized, issued and outstanding at December 31, 2021

1,000,000,000 shares authorized at December 31, 2023 and December 31, 2022;

116,859,468 and 115,218,229 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 353,890 330,100

Accumulated other comprehensive income 50 9

Retained earnings 11,252 —

Parent company net investment — 234,307

Retained earnings (accumulated deficit)

( 39,367 ) 11,252

Total stockholders’ equity 314,585 341,373

7 unchanged sentences

Total revenues 34,164 59,077

Operating costs and expenses:

Operating expenses:

Research and development 56,525 48,364

6 unchanged sentences

Interest income 5,055 587

Interest expense — ( 7 )

Other income, net 1 —

13 unchanged sentences

comprehensive

income (loss)

(accumulated deficit)

Parent company net investment Total

2 unchanged sentences

Balance at January 1, 2022

Net loss — — — — — ( 27,042 ) ( 27,042 )

Parent allocation of shared-based compensation — — — — — 15,065 15,065

Net transfers from parent company — — — — — 10,747 10,747

Balance at December 31, 2021 — $ — $ — $ — $ — $ 234,307 $ 234,307

— $ — $ — $ — $ — $ 234,307 $ 234,307

Parent allocation of shared-based compensation — — — — — 14,444 14,444

7 unchanged sentences

Balance at December 31, 2022 115,218,229 $ 12 $ 330,100 $ 9 $ 11,252 $ — $ 341,373

Issuance of common stock under employee stock compensation plans, net of tax 1,641,239 — 1,523 — — — 1,523

Share-based compensation — — 24,820 — — — 24,820

Unrealized net gain on available-for-sale securities — — — 41 — — 41

Adjustments to net transfers of deferred income taxes, net from former parent company — — ( 2,553 ) — — — ( 2,553 )

Net loss — — — — ( 50,619 ) — ( 50,619 )

Balance at December 31, 2023 116,859,468 12 353,890 50 ( 39,367 ) — 314,585

See accompanying notes to these consolidated and combined financial statements.

7 unchanged sentences

Share-based compensation 24,820 18,322

Amortization of discounts on short-term investments, net

( 3,441 ) ( 170 )

Deferred income taxes, net ( 12,540 ) ( 6,419 )

Short-term investments gain — ( 1,265 )

Change in estimated fair value of contingent liabilities ( 341 ) ( 592 )

8 unchanged sentences

Other long-term liabilities ( 16 ) 17

Net cash used in operating activities ( 3,587 ) ( 5,672 )

Net cash provided by (used in) operating activities

2,347 ( 3,587 )

Investing activities

1 unchanged sentence

Purchases of short-term investments ( 112,616 ) ( 54,775 )

Proceeds from the maturity of short-term investments

Proceeds from sale of short-term investments 3,424 70

Payments to CVR holders ( 4,440 ) ( 1,440 )

Other investing activities — ( 500 )

Net cash used in investing activities ( 18,376 ) ( 73,313 )

3 unchanged sentences

Proceeds from issuance of common stock from stock plans, net

Taxes paid related to net share settlement of equity awards

( 1,324 ) ( 189 )

Payments to CVR holders ( 300 ) ( 2,025 )

Payment of transaction costs

( 473 ) ( 4,327 )

Net transfer from parent — 18,572

Net cash provided by financing activities 110,739 9,697

Net cash provided by (used in) financing activities

( 892 ) 110,739

Net increase in cash, cash equivalents, and restricted cash ( 16,921 ) 33,839

53 unchanged sentences

These corporate expenses have been allocated to Legacy OmniAb based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount or a percentage of total operating expenses or other measures that management believes are consistent and reasonable.

See Note 3 – Relationship with Parent and Related Entities.

Ligand maintains various share-based compensation plans at a corporate level.

See Note 3 – Relationship with Ligand and Related Entities.

Ligand maintained various share-based compensation plans at a corporate level.

Legacy OmniAb employees participated in those programs, and a portion of the compensation cost associated with those plans are included in Legacy OmniAb’s combined statements of operations and Parent company net investment.

The amounts presented in the combined financial statements are not necessarily indicative of future awards and may not reflect the results that Legacy OmniAb would have experienced as a stand-alone entity.

See Note 3 – Relationship with Parent and Related Entities for additional discussion.

See Note 3 – Relationship with Ligand and Related Entities for additional discussion.

All of the allocations and estimates in the combined financial statements are based on assumptions that management believes are reasonable.

2 unchanged sentences

Following the Separation, the Company began accounting for its financial activities as an independent entity.

The Company’s financial statements as of December 31, 2022 and for the period from November 1, 2022 through December 31, 2022 are based on the reported results of OmniAb as a standalone company.

The Company’s financial statements as of December 31, 2023, December 31, 2022 and for the period from November 1, 2022 through December 31, 2022 are based on the reported results of OmniAb as a standalone company.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

1 unchanged sentence

Separation-related adjustments

Pursuant to the Separation Agreement, certain accounts receivables, accounts payables, and accrued liabilities included in Legacy OmniAb’s combined balance sheets immediately prior to the Separation were retained by Ligand, and therefore, were adjusted through net parent investment in Legacy OmniAb’s combined financial statements.

Pursuant to the Separation Agreement, certain accounts receivables, accounts payables, and accrued liabilities included in Legacy OmniAb’s combined balance sheets immediately prior to the Separation were retained by Ligand, and therefore, were adjusted through the net parent investment in Legacy OmniAb’s combined financial statements.

In addition, in connection with the Separation, certain equity awards were converted in accordance with the Employee Matters Agreement, as further described in Note 11 – Share-Based Compensation.

As a standalone entity, the Company will file tax returns on its own behalf, and tax balances and the effective income tax rate may differ from the amounts reported in the historical periods.

As a standalone entity, the Company files tax returns on its own behalf, and tax balances and the effective income tax rate may differ from the amounts reported in the historical periods.

The difference between the tax attributes the Company historically calculated on a carve-out basis and the actual tax attributes that the Company received as a standalone entity on November 1, 2022 was adjusted through additional paid-in-capital.

As of November 1, 2022 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity.

In connection with the Separation on November 1, 2022, the Company adjusted its deferred tax and additional paid-in capital balances during the years ended December 31, 2023 and December 31, 2022 and computed its related tax provision to reflect operations as a standalone entity.

The following represents the impact of these Separation-related adjustments to the Company’s balance sheet following the Separation on November 1, 2022:

40 unchanged sentences

See Note 4 – Business Combination, for further details.

In January 2023, the Company received an aggregate of $ 35.0 million in milestone payments in connection with teclistamab.

For the years ended December 31, 2022 and 2021, the Company’s revenue was $ 59.1 million and $ 34.7 million, respectively.

For the years ended December 31, 2022 and 2021, the Company’s net loss was $ 22.3 million and $ 27.0 million, respectively.

The Company expects to continue to incur losses for the foreseeable future, and anticipates these losses will increase substantially as it invests in research and development activities to improve its technology and platform, market and sell its solutions to existing and new partners, add operational, financial and management information systems and personnel to support its operations and incur additional costs associated with operating as a public company.

The Company’s ability to continue its operations is dependent upon its ability to obtain additional capital in the future and generate cash flows from operations.

The Company believes its existing cash, cash equivalents and marketable securities and the cash it expects to generate from operations, including milestone payments received in January 2023, will provide it the flexibility needed to meet operating, investing, and financing needs and support operations through at least the next 12 months.

The Company expects to continue to incur losses as it invests in research and development activities to improve its technology and platform, market and sell its technologies to existing and new partners, add operational, financial and management information systems and personnel to support its operations and incur ongoing costs associated with operating as a public company.

The Company’s ability to continue its operations is dependent upon its ability to generate cash flows from operations and potentially obtain additional capital in the future.

The Company believes its existing cash, cash equivalents and marketable securities and the cash it expects to generate from operations will provide it the flexibility needed to meet operating, investing, and financing needs and support operations through at least the next 12 months.

The accompanying consolidated and combined financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

11 unchanged sentences

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less when purchased.

As of December 31, 2022, cash and cash equivalents consisted of bank deposits, money market funds as well as U.S.

government agency and corporate debt securities.

Cash and cash equivalents consist of cash and highly liquid investments with maturities of three months or less when purchased.

As of December 31, 2023, cash and cash equivalents primarily consisted of bank deposits, money market funds as well as U.S.

government and agency securities.

The following table provides a reconciliation of the components of cash, cash equivalents and restricted cash reported in the consolidated and combined balance sheets to the total of the amount presented in the consolidated and combined statements of cash flows:

1 unchanged sentence

Cash and cash equivalents $ 16,358 $ 33,390

Restricted cash included in other non-current assets 449 —

Restricted cash

Total cash, cash equivalents and restricted cash presented in the consolidated and combined statements of cash flows $ 16,918 $ 33,839

The restricted cash relates to the Company’s property leases and is included in “Other long-term assets”.

The restricted cash relates to deposits for the Company’s property leases.

The restriction will lapse when the related leases expire.

Short-term Investments

Short-term investments primarily consist of commercial paper, corporate debt securities, and government and agency bonds.

Short-term investments primarily consist of commercial paper, corporate debt securities, asset-backed securities and government and agency securities.

The Company classifies short-term investments as “available-for-sale” as the sale of such investments may be required prior to maturity to implement management strategies.

Therefore, the Company has classified all investments with original maturity dates beyond three months as current assets in the accompanying consolidated and combined balance sheets.

Therefore, the Company has classified all investments with maturity dates beyond three months at the date of purchase as current assets in the accompanying consolidated and combined balance sheets based upon its ability and intent to use the investments to satisfy the liquidity needs of current operations.

Any premium or discount arising at purchase is amortized and/or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument.

Investments are reported at their estimated fair value.

Unrealized gains and losses are included in accumulated other comprehensive loss as a component of stockholders’ equity until realized.

Unrealized gains and losses are included in accumulated other comprehensive income as a component of stockholders’ equity until realized.

Accounts Receivable

The Company’s accounts receivable represents the amounts billed to its partners and that are due unconditionally for services the Company has performed.

Accounts receivable represents the amounts billed to the Company’s partners that are due unconditionally for services it has performed.

The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected.

The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experienced and adjusted for factors that are relevant to determining the expected collectability of accounts receivable.

The allowance requires an estimation based upon historical loss experienced and adjusted for factors that are relevant to determining the expected collectability of accounts receivable.

Some of these factors include historical loss experience, delinquency trends, aging behavior of receivables, credit and liquidity quality indicators for industry groups, customer classes or individual customers and the current and expected future economic and market conditions.

51 unchanged sentences

Revenue Recognition

The Company’s revenue is primarily generated from license fees for technology access, development, regulatory and sales based milestone payments, service revenue for performance of research, and royalties on product sales.

The Company applies the following five-step model in accordance with ASC 606, Revenue from Contracts with Customers, in order to determine revenue:

5 unchanged sentences

The Company’s revenue is typically derived from license agreements with its partners and consists of:

(i) upfront or annual payments for technology access (license revenue) and payments for performance of research services (service revenue);

(ii) downstream payments in the form of preclinical, intellectual property, clinical, regulatory, and commercial milestones (milestone revenue) and (iii) royalties on net sales from partners’ product sales, if any.

(i) upfront or annual payments for technology access (license revenue), (ii) payments for the performance of research services (service revenue), (iii) downstream payments in the form of preclinical, intellectual property, clinical, regulatory, and commercial milestones (milestone revenue) and (iv) royalties on net sales from partners’ product sales.

License fees are generally recognized at a point in time once the Company grants partners access to intellectual property rights.

19 unchanged sentences

Disaggregation of Revenue

The following table represents disaggregation of revenue by type:

(Dollars in thousands) 2022 2021

Milestone revenue $ 33,871 $ 10,164

Service revenue 18,784 20,084

License fees 5,055 4,500

Royalty revenue 1,367 —

Total revenue $ 59,077 $ 34,748

The disaggregated revenue categories are presented on the face of the consolidated and combined statements of operations and comprehensive loss.

Research and Development Expenses

26 unchanged sentences

Accordingly, the Company’s income tax provision was prepared following the “Separate Return Method.” The Separate Return Method applies Topic 740 to the combined financial statements of the OmniAb members of the consolidated group as if the group member were a separate taxpayer which joined in filing a consolidated federal income tax return and combined state income tax returns separate from Ligand.

In general, the taxable loss of Legacy OmniAb for the tax periods ended October 31, 2022 and 2021 was included in Ligand’s U.S.

In general, the taxable income or loss of Legacy OmniAb for the tax periods prior to November 1, 2022 were included in Ligand’s U.S.

consolidated federal and combined state income tax returns, where applicable.

As such, separate income tax returns were not prepared for OmniAb.

Consequently, income taxes currently payable are deemed to have been remitted to Ligand in the period the liability arose and income taxes currently receivable are deemed to have been received from Ligand in the period that a refund could have been recognized by OmniAb had we been a separate taxpayer, if applicable.

For the period from November 1 through December 31, 2022, the Company will file its own consolidated federal income tax return and combined state income tax returns separate from Ligand.

Any income taxes due for the tax year ended December 31, 2022 will be directly payable by the Company.

Consequently, income taxes currently payable are deemed to have been remitted by Ligand in the period the liability arose and income taxes currently receivable were deemed to have been received from Ligand in the period that a refund could have been recognized by OmniAb had the Company been a separate taxpayer, if applicable.

For the tax periods after October 31, 2022, the Company files its own consolidated federal income tax return and combined state income tax returns separate from Ligand.

Any income taxes due for the tax periods after October 31, 2022 are directly payable by the Company.

Income (Loss) Per Share

7 unchanged sentences

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date.

The Company has evaluated recently issued accounting pronouncements and does not currently believe that any of these pronouncements will have a material impact on its consolidated and combined financial statements and related disclosures.

The Company did not adopt any new accounting standards during the year ended December 31, 2022 which had a material impact on the consolidated and combined financial statements.

Unless otherwise discussed below, the Company believes that the impact of recently issued standards are either not applicable to the Company or will not have a material impact on its consolidated financial statements upon adoption.

The following table provides a brief description of recently issued accounting standards:

Effective Date

Effect on the Financial Statements or Other Significant Matters

ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ASU 2023-07 updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

Effective for the Company for fiscal years beginning after December 15, 2023 The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures The amendments in this ASU address investor requests for more transparency about income tax information through improvements to tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The ASU also includes certain other amendments to improve the effectiveness of income tax disclosures.

Effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision-maker in deciding how to allocate resources and assess performance.

The Company currently operates in one reportable business segment.

The Company operates in one reportable business segment.

Concentrations of Business Risk

4 unchanged sentences

Partner C 14 % 15 %

Partner D (1) 11 %

_____________

(1) less than 10%

Relationship with Parent and Related Entities

Prior to the Separation, the OmniAb business was managed and operated in the normal course of business consistent with other affiliates of the Parent.

As of December 31, 2023, amounts due from three partners exceeded 10% of gross trade receivables and accounted for 88 % of net trade receivables.

As of December 31, 2022, amounts due from one partner exceeded 10% of gross trade receivables and accounted for 83 % of net trade receivables.

Relationship with Ligand and Related Entities

Prior to the Separation, the OmniAb business was managed and operated in the normal course of business consistent with other affiliates of Ligand.

Accordingly, certain shared costs were allocated to the Company and reflected as expenses in the combined financial statements.

3 unchanged sentences

General Corporate Overhead

The combined statements of operations include expenses for certain centralized functions (such as information systems, accounting, treasury, audit, purchasing, human resources, legal and facilities), executive compensation and other programs provided and/or administered by Parent that were charged directly to the Company.

A portion of these costs benefited the Company and were allocated using a pro-rata method based on project-related costs or other measures that management believed were consistent and reasonable.

Costs of $ 5.5 million for the ten months ended October 31, 2022, and $ 6.1 million for the year ended December 31, 2021, respectively, have been reflected in the general and administrative expenses in our combined statements of operations for our allocated share of Parent’s corporate overhead.

Costs of $ 5.5 million for the ten months ended October 31, 2022 have been reflected in the general and administrative expenses in our combined statements of operations for our allocated share of Parent’s corporate overhead.

Cash Management and Financing

5 unchanged sentences

Equity-Based Incentive Plans

Certain of our employees participated in the former Parent’s equity-based incentive plans.

Certain of our employees participated in Ligand’s equity-based incentive plans.

Under the Ligand 2002 Stock Incentive Plan (2002 Plan), employees, directors, managers and advisors were awarded share-based incentive awards in a number of forms, including nonqualified stock options.

Under the 2002 Plan, employees could be awarded share-based incentive awards which included non-statutory stock options or incentive stock options, restricted stock units, performance stock units and other cash-based or share-based awards.

Awards granted to employees under the incentive plans typically vested 1/8 on the six month anniversary of the date of grant, and 1/48 each month thereafter for forty-two months.

Awards granted to employees under the incentive plans typically vested 1/8 on the six month anniversary of the date of grant, and 1/48 each month thereafter for 42 months.

The Company measured share-based compensation for all share-based incentive awards at fair value on the grant date.

Share-based compensation expense was generally recognized on a straight-line basis over the requisite service periods of the awards.

Compensation costs associated with the Company’s employees’ participation in the incentive plans were specifically identified for employees who exclusively supported the Company’s operations and were allocated to the Company as part of the cost allocations from the Company’s former Parent.

Total costs charged to the Company related to its employees’ participation in the former Parent’s incentive plans, depending on the nature of the employee’s role in our operations, were $ 14.4 million ($ 8.2 million in research and development expenses and $ 6.2 million in general and administrative expenses), $ 15.1 million ($ 9.0 million in research and development expenses and $ 6.1 million in general and administrative expenses), during the ten months ended October 31, 2022 and year ended December 31, 2021, respectively.

Total costs charged to the Company related to its employees’ participation in Ligand’s incentive plans, depending on the nature of the employee’s role in operations, was $ 14.4 million ($ 8.2 million in research and development expenses and $ 6.2 million in general and administrative expenses) during the ten months ended October 31, 2022.

Employee Stock Purchase Plan

3 unchanged sentences

The purchase price of the shares was 85 % of the lesser of the fair market value of the closing price per share on the first day of the offering period and the fair market value of the closing price per share on the last day of the offering period.

No participant may purchase more than $ 25,000 worth of common stock per calendar year.

Costs charged to the Company related to the Company’s participation in its former Parent’s ESPP was $ 0.1 million for each of the years ended December 31, 2022 and 2021.

Costs charged to the Company related to the Company’s participation in its former Parent’s ESPP was $ 0.1 million for the year ended December 31, 2022.

Business Combination

5 unchanged sentences

Holders of shares of Legacy OmniAb common stock and holders of Legacy OmniAb equity awards received an aggregate 14,999,243 Earnout Shares as consideration in the Business Combination.

50 % of the Earnout Shares will vest on the date on which the volume-weighted average price (“VWAP”) equals or exceeds $ 12.50 on any 20 trading days in any 30 consecutive trading-day period, and all remaining Earnout Shares will vest on the date on which the VWAP equals or exceeds $ 15.00 on any 20 trading days in any 30 consecutive trading-day period, in each case provided such vesting occurs during the five year period following the Closing Date (the “Earnout Period”);

Fifty percent of the Earnout Shares will vest on the date on which the volume-weighted average price (“VWAP”) equals or exceeds $ 12.50 on any 20 trading days in any 30 consecutive trading-day period, and all remaining Earnout Shares will vest on the date on which the VWAP equals or exceeds $ 15.00 on any 20 trading days in any 30 consecutive trading-day period, in each case provided such vesting occurs during the five year period following the Closing Date (the “Earnout Period”);

provided, that in the event of a Change of Control (as defined in the Merger Agreement) during the Earnout Period pursuant to which OmniAb or any of its stockholders have the right to receive, directly or indirectly, cash, securities or other property attributing a value of at least $ 12.50 (with respect to 50 % of the Earnout Shares) or $ 15.00 (with respect to all Earnout Shares) per share of OmniAb Common Stock, and such Change of Control has been approved by a majority of the independent directors of the OmniAb Board, then such Earnout Shares shall be deemed to have vested immediately prior to such Change of Control.

37 unchanged sentences

Financial Instruments Measured on a Recurring Basis

The following tables provide a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and 2021:

The following tables provide a summary of the assets and liabilities that are measured at fair value on a recurring basis as

of December 31, 2023 and 2022:

Fair Value Measurements as of

3 unchanged sentences

Money market funds $ 12,289 $ — — $ 12,289

Government and agency securities — 2,987 — 2,987

Corporate debt securities — 1,510 — 1,510

Total cash equivalents $ 12,289 $ — $ — $ 12,289

1 unchanged sentence

Government and agency securities $ 63,109 $ 4,998 — $ 68,107

Corporate debt securities — 1,983 — 1,983

Commercial paper — 17,491 — 17,491

Asset-backed securities — 2,518 — 2,518

2 unchanged sentences

Long-term contingent liabilities — — 3,203 3,203

Total liabilities $ — $ — $ 8,111 $ 8,111

Total contingent liabilities

$ — $ — $ 4,506 $ 4,506

Fair Value Measurements as of

1 unchanged sentence

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents

Money market funds $ 26,056 $ — — $ 26,056

Government and agency securities — 2,987 — 2,987

Corporate debt securities — 1,510 — 1,510

Total cash equivalents $ 26,056 $ 4,497 $ — $ 30,553

Short-term investments

Government and agency securities $ 29,951 $ 4,838 — $ 34,789

Corporate debt securities — 1,983 — 1,983

Commercial paper — 17,491 — 17,491

Asset-backed securities — 612 — 612

Total short-term investments $ 29,951 $ 24,924 $ — $ 54,875

Current contingent liabilities $ — $ — $ 4,022 $ 4,022

Long-term contingent liabilities — — 4,089 4,089

Total liabilities $ — $ — $ 7,364 $ 7,364

Total contingent liabilities

$ — $ — $ 8,111 $ 8,111

The carrying amounts reported in our consolidated and combined balance sheets for accounts receivable, other assets, accounts payable and other accrued expenses approximate fair value due to their relatively short periods to maturity.

8 unchanged sentences

A reconciliation of the Level 3 financial instruments as of December 31, 2023 and 2022 is as follows:

(in thousands) Crystal (1)

Beginning balance as of January 1, 2021 $ 800 $ — $ — $ 6,404 $ 7,204

(in thousands) Icagen (1)

Balance as of January 1, 2022 $ 7,364 $ — $ — $ 7,364

Payments to CVR holders

( 2,025 ) — ( 1,440 ) ( 3,465 )

Fair value adjustments to contingent liabilities

( 592 ) 1,600 3,204 4,212

Balance as of December 31, 2022 $ 4,747 $ 1,600 $ 1,764 $ 8,111

3 unchanged sentences

_____________

(1) Changes in the fair values of contingent liabilities in connection with the acquisition of Crystal and Icagen are recognized in Other operating (income) expense, net in the consolidated and combined statements of operations and comprehensive loss and in the operating section of the statements of cash flows .

(1) Changes in the fair values of contingent liabilities in connection with the acquisition of Icagen are recognized in Other operating (income) expense, net in the consolidated and combined statements of operations and comprehensive loss and in the operating section of the statements of cash flows.

Payments to CVR holders are disclosed in the financing section of the statements of cash flows.

(2) Changes in the fair values of contingent liabilities in connection with the acquisition of Taurus and xCella are recognized in Intangible assets, net in the consolidated and combined balance sheets.

(2) Changes in the fair values of contingent liabilities in connection with the acquisitions of Taurus and xCella are recognized in Intangible assets, net in the consolidated and combined balance sheets.

Payments to CVR holders are disclosed in the investing section of the statement of cash flows.

3 unchanged sentences

Assets Measured on a Non-Recurring Basis

The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to goodwill, finite-lived intangible assets, and long-lived assets.

The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to available-for-sale securities, goodwill, finite-lived intangible assets, and long-lived assets.

No such fair value impairment was recognized during the years ended December 31, 2023 or 2022.

Short-Term Investments

The Company classified short-term investments as available-for-sale securities, as the sale of such investments may be required prior to maturity to implement management strategies.

The Company did not have short-term investments as of December 31, 2021.

The following table summarizes short-term investments as of December 31, 2022:

As of December 31, 2022

The following tables summarize short-term investments as of December 31, 2023 and December 31, 2022:

December 31, 2023

(in thousands) Amortized Cost Gains Losses Estimated

Government and agency securities $ 68,054 $ 57 $ ( 4 ) $ 68,107

Asset-backed securities 2,522 — ( 4 ) 2,518

Total investments $ 70,576 $ 57 $ ( 8 ) $ 70,625

December 31, 2022

(in thousands) Amortized Cost Gains Losses Estimated

Government and agency securities $ 34,781 $ 15 $ ( 7 ) $ 34,789

Commercial paper 17,491 — — 17,491

6 unchanged sentences

Due in one year or less $ 68,853 $ 68,904

Due after one year — —

Due after one year through five years

Total investments $ 70,576 $ 70,625

The following table summarizes the Company’s available-for-sale investments’ gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of December 31, 2022:

As of December 31, 2022

The following tables summarize the Company’s available-for-sale investments’ gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of December 31, 2023 and December 31, 2022:

December 31, 2023

Less than 12 months More than 12 months Total

6 unchanged sentences

Government and agency securities 5 $ 10,402 $ ( 4 ) — $ — $ — 5 $ 10,402 $ ( 4 )

Asset backed securities 3 2,518 ( 4 ) — — — 3 2,518 ( 4 )

8 $ 12,920 $ ( 8 ) — $ — $ — 8 $ 12,920 $ ( 8 )

December 31, 2022

Less than 12 months More than 12 months Total

(in thousands) Count Fair

Value Unrealized

Losses Count Fair

Value Unrealized

Losses Count Fair

Value Unrealized

Government and agency securities 7 $ 13,667 $ ( 7 ) — $ — $ — 7 $ 13,667 $ ( 7 )

7 $ 13,667 $ ( 7 ) — $ — $ — 7 $ 13,667 $ ( 7 )

The Company had certain available-for-sale debt securities in an unrealized loss position without an allowance for credit losses as of December 31, 2023.

17 unchanged sentences

Compensation $ 5,247 $ 4,101

Royalties owed to third parties 739 296

Due to former parent Ligand

Professional service fees 431 664

Acquisitions related liabilities — 1,000

Royalties owed to third parties 139 739

Total accrued expenses and other current liabilities $ 7,068 $ 5,557

4 unchanged sentences

Definite-lived intangible assets

Complete technology 231,379 227,403

Completed technology

233,158 231,379

Accumulated amortization ( 84,328 ) ( 71,964 )

15 unchanged sentences

Lease Commitments

The Company’s corporate headquarters and research and development facilities are located in Emeryville, California, where it leases approximately 35,000 square feet of space under leases expiring in 2032.

The Company’s Icagen ion technology business leases approximately 31,000 square feet of research and development space in Durham, North Carolina and Tucson, Arizona, under leases that expire between 2026 and 2029.

The Company’s corporate headquarters and primary research and development facilities are located in Emeryville, California, where it leases approximately 35,000 square feet of space under leases expiring in 2032.

The Company also leases approximately 31,000 square feet of research and development space in Durham, North Carolina and Tucson, Arizona, under leases that expire between 2026 and 2029.

The Company’s lease agreements do not contain any material residual value guarantees, material restrictive covenants, or material termination options.

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Less tenant improvement allowance ( 4,937 )

Less imputed interest ( 5,915 )

Present value of lease liabilities $ 25,561

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As of December 31, 2023, no shares of preferred stock are issued or outstanding.

Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders,

including the election of directors, and do not have cumulative voting rights.

Holders of OmniAb Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights.

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our Common Stock are entitled to receive ratably those dividends, if any, as may be declared by the Board out of legally available funds.

In the event of our liquidation, dissolution or winding up, the holders of Common Stock will be entitled to share ratably in the assets legally available for distribution to stockholders after the payment of or provision for all of our debts and other liabilities, subject to the prior rights of any preferred stock then outstanding.

Holders of our Common Stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock.

All outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable.

The rights, preferences and privileges of holders of our Common Stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

In the event of our liquidation, dissolution or winding up, the holders of Common Stock will be entitled to share ratably in the assets legally available for distribution to stockholders after the payment of or provision for all of the Company’s debts and other liabilities, subject to the prior rights of any preferred stock then outstanding.

Holders of OmniAb Common Stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock.

All outstanding shares of OmniAb Common Stock are duly authorized, validly issued, fully paid and nonassessable.

The rights, preferences and privileges of holders of OmniAb Common Stock are subject to and may be adversely affected by the rights of the holders of shares of any

series of preferred stock that the Company may designate and issue in the future.

Preferred stock

Under the terms of our certificate of incorporation, our Board has the authority, without further action by our stockholders, to issue up to 100,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the dividend, voting and other rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

Our Board may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our Common Stock.

The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deterring or preventing a change in our control and may adversely affect the market price of the Common Stock and the voting and other rights of the holders of our Common Stock.

We have no current plans to issue any shares of preferred stock.

Under the terms of the Company’s certificate of incorporation, its board of directors has the authority, without further action by the Company’s stockholders, to issue up to 100,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the dividend, voting and other rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

The Company’s board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of OmniAb Common Stock.

The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deterring or preventing a change in the Company’s control and may adversely affect the market price of the Common Stock and the voting and other rights of the holders of OmniAb Common Stock.

The Company has no current plans to issue any shares of preferred stock.

Earnout Shares

OmniAb Earnout Shares and Sponsor Earnout Shares are issued and outstanding.

Earnout Shares vest based upon the achievement of certain volume-weighted average trading prices (VWAP) for shares of the Company for any 20 trading days over a consecutive 30 trading-day period during the five-year period following the Closing Date, with (i) fifty of such Earnout Shares vesting upon achievement of a VWAP of $ 12.50 per share of New OmniAb common stock or upon the occurrence of a change of control transaction that will result in the holders of New OmniAb common stock receiving a price per share in excess of $ 12.50 , and (ii) the remaining fifty percent of the Earnout Shares vesting upon achievement of a VWAP of $ 15.00 per share of New OmniAb common stock or upon the occurrence of a change of control transaction that will result in the holders of New OmniAb common stock receiving a price per share in excess of $ 15.00 .

As of December 31, 2023, OmniAb Earnout Shares of 14,999,243 and Sponsor Earnout Shares of 1,293,299 are issued and outstanding.

Earnout Shares vest based upon the achievement of certain volume-weighted average trading prices (VWAP) for shares of the Company for any 20 trading days over a consecutive 30 trading-day period during the five-year period following the Closing Date, with (i) 50 % of such Earnout Shares vesting upon achievement of a VWAP of $ 12.50 per share of OmniAb Common Stock or upon the occurrence of a change of control transaction that will result in the holders of OmniAb Common Stock receiving a price per share in excess of $ 12.50 , and (ii) the remaining 50 % percent of the Earnout Shares vesting upon achievement of a VWAP of $ 15.00 per share of OmniAb Common Stock or upon the occurrence of a change of control transaction that will result in the holders of OmniAb Common Stock receiving a price per share in excess of $ 15.00 .

The Earnout Shares are not transferable until the vesting condition for the applicable tranche of Earnout Shares has been achieved.

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2022 Incentive Award Plan

The Company’s board and stockholders adopted the 2022 Incentive Award Plan, or the 2022 Plan, which became effective upon the Closing of the Business Combination.

The Company’s board of directors and stockholders adopted the 2022 Incentive Award Plan, or the 2022 Plan, which became effective upon the Closing of the Business Combination.

Under the 2022 Plan, the Company may grant cash and equity incentive awards to eligible employees, directors and consultants.

The initial aggregate number of shares of our common stock that was available for issuance under the 2022 Plan was equal to the sum of (i) 16,409,022 shares, and (ii) any shares which, as of the effective date of the 2022 Plan, were subject to awards under the OmniAb Prior Plans which, on or following the effective date of the 2022 Plan, become available for issuance pursuant to the 2022 Plan recycling provisions.

In addition, the number of shares of our common stock available for issuance under the 2022 Plan will be annually increased on January 1 of each calendar year beginning in 2023 and ending in 2032 by an amount equal to the lesser of (i) a number equal to 5 % of the fully-diluted shares on the final day of the immediately preceding calendar year or (ii) such smaller number of shares as is determined by our Board.

As of December 31, 2023, the aggregate number of shares of common stock that may be issued under the 2022 Plan was 23,292,588 shares.

In addition, the number of shares of common stock available for issuance under the 2022 Plan will be annually increased on January 1 of each calendar year beginning in 2023 and ending in 2032 by an amount equal to the lesser of (i) a number equal to 5 % of the fully-diluted shares on the final day of the immediately preceding calendar year or (ii) such smaller number of shares as is determined by the Company’s board of directors.

The 2022 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, dividend equivalents, RSUs and other stock or cash-based awards.

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2022 OmniAb Service Provider Assumed Award Plan, collectively referred to as the OmniAb Prior Plans, which govern the OmniAb equity awards issued upon adjustment of outstanding Ligand equity awards in connection with the Distribution.

All awards under the OmniAb Prior Plans that are outstanding as of the closing of the Business Combination will continue to be governed by the terms, conditions and procedures set forth in the OmniAb Prior Plans and any applicable award agreements, as those terms may be equitably adjusted in connection with the Business Combination.

All awards under the OmniAb Prior Plans that were outstanding as of the closing of the Business Combination continued to be governed by the terms, conditions and procedures set forth in the OmniAb Prior Plans and any applicable award agreements, as those terms may be equitably adjusted in connection with the Business Combination.

The Company assumed the OmniAb Prior Plans in connection with the closing of the Business Combination, and each of the awards thereunder.

At the time of the Distribution, and after giving effect to the adjustment of the OmniAb Equity Awards to reflect the Business Combination, awards representing the right to receive an aggregate of 5,997,765 and 8,302,710 shares of our common stock were outstanding under the OmniAb, Inc.

2022 Ligand Service Provider Assumed Award Plan and the OmniAb, Inc.

2022 OmniAb Service Provider Assumed Award Plan, respectively.

No future awards will be granted under the OmniAb Prior Plans.

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In connection with the Separation on November 1, 2022, under the provisions of the existing plans, the Company adjusted its outstanding equity awards in accordance with the Merger Agreement to preserve the intrinsic value of the awards immediately before and after the Distribution.

Upon the Distribution, employees holding stock options, restricted stock units and performance restricted stock units denominated in pre-Distribution Ligand stock received a number of otherwise-similar awards either in post-Distribution Ligand stock or in a combination of post-Distribution Ligand stock and OmniAb stock based on conversion ratios outlined for each group of employees in the Merger Agreement that the Company entered into in connection with the Distribution.

connection with the Distribution.

The equity awards that were granted prior to March 2, 2022 were converted under the shareholder method, wherein employees holding outstanding equity awards received equity awards in both Ligand and OmniAb.

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Due to the modification of the equity awards as a result of the Distribution, the Company compared the fair value of the outstanding equity awards immediately before and after the Distribution.

Due to the immaterial amount of incremental expense, the Company did not recognize any incremental fair value as a result of the modification.

Due to the immaterial amount of incremental fair value, the Company did not recognize any incremental expense as a result of the modification.

The Company will not incur any future compensation cost related to equity awards held by Ligand employees and directors.

The Company will incur future compensation cost related to Ligand equity awards held by OmniAb employees.

Share-Based Compensation Expense

The Company recognized share-based compensation expense by function as follows:

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Restricted stock units 7,730 5,264

Performance restricted stock units 2,219 1,852

Employee share purchase plan 1,329 350

Performance restricted stock units 613 2,219

Total share-based compensation expense $ 24,820 $ 18,322

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Outstanding at January 1, 2023

Converted in distribution (2)

11,014,979 $ 7.51

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(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for in the money options at December 31, 2023.

(2) Excludes 5,625,551 of options issued to Ligand employees.

As of December 31, 2023, unrecognized stock-based compensation expense related to OmniAb options was $ 25.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.35 years.

As of December 31, 2023, unrecognized stock-based compensation expense related to Ligand options was $ 2.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 0.61 years.

The aggregate intrinsic value of OmniAb options exercised by OmniAb employees during the year ended December 31, 2023 was $ 0.2 million.

Cash received from OmniAb options exercised by OmniAb employees during the year ended December 31, 2023 was $ 0.6 million.

The aggregate intrinsic value of OmniAb options exercised by Ligand employees during the year ended December 31, 2023 was $ 0.1 million.

Cash received from OmniAb options exercised by Ligand employees during the year ended December 31, 2023 was $ 0.6 million.

Restricted Stock Units

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RSUs generally vest over three years .

The fair value of restricted stock is determined by the closing market price on the date of grant.

The fair value of restricted stock is determined by the closing market price on the grant date.

The following table summarizes RSU activity during the year ended December 31, 2023 under the Company’s equity awards plans:

1 unchanged sentence

Unvested balance at January 1, 2023

Converted in distribution (1)

859,229 $ 10.31

4 unchanged sentences

1,878,381 $ 5.61

_____________

(1) Excludes 464,196 unvested RSUs issued and outstanding to Ligand employees as of the Separation on November 1, 2022.

As of December 31, 2023, unrecognized stock-based compensation expense related to OmniAb RSUs was $ 6.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.30 years.

The aggregate intrinsic value of OmniAb RSUs vested during the year ended December 31, 2022 was $ 0.5 million.

As of December 31, 2023, unrecognized stock-based compensation expense related to Ligand RSUs was $ 0.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 0.31 years.

The aggregate fair value of OmniAb RSUs vested for OmniAb employees during the year ended December 31, 2023 was $ 2.9 million.

The aggregate fair value of OmniAb RSUs vested for Ligand employees during the year ended December 31, 2023 was $ 0.8 million.

Performance Restricted Stock Units

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The following table summarizes the PRSU activity during the year ended December 31, 2023, under the Company’s equity awards plans:

Shares Weighted-Average Grant Date Fair Value

Weighted-Average Grant Date Fair Value

Unvested balance at January 1, 2023

Converted in distribution (1)

94,749 $ 16.11

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The amount disclosed represents PRSU grants at target payout.

As of December 31, 2022, unrecognized stock-based compensation expense related to OmniAb PRSUs was $ 1.2 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.00 years.

As of December 31, 2023, unrecognized stock-based compensation expense related to OmniAb PRSUs was $ 0.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.00 year

Employee Stock Purchase Plan

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The purchase price for shares of common stock purchased under the ESPP is equal to 85 % of the lesser of the fair market value of the Company’s common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each six month purchase period in the applicable offering period.

The aggregate number of shares of our common stock that may be issued pursuant to rights granted under the ESPP equals 1,758,109 shares of our common stock.

In addition, on the first day of each calendar year beginning on January 1, 2023 and ending on (and including) January 1, 2032, the number of shares available for issuance under the ESPP will be increased by a number of shares equal to the lesser of (i) 1 % of the fully diluted shares outstanding on the final day of the immediately preceding calendar year, and (ii) such smaller number of shares as determined by our Board.

As of December 31, 2023, the aggregate number of shares of our common stock that may be issued pursuant to rights granted under the ESPP was 2,225,983 shares of our common stock.

Following the Separation on November 1, 2022, the fair value of ESPP shares issued to employees was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

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As of December 31, 2023, there was $ 0.4 million of unrecognized compensation expense associated with the ESPP, which is expected to be recognized over an estimated weighted-average period of 0.81 years.

During the year ended December 31, 2022, there were no shares issued pursuant to the ESPP.

The components of the income tax expense (benefit) are as follows:

During the year ended December 31, 2023, there were 684,308 shares issued pursuant to the ESPP.

Income tax expense (benefit) consists of the following:

Year Ended December 31,

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Federal $ ( 840 ) $ 3,477

State ( 62 ) 44

Total current expense (benefit):

( 902 ) 3,521

Deferred expense (benefit):

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State ( 296 ) ( 185 )

Total deferred expense (benefit):

( 12,842 ) ( 7,248 )

Total income tax expense (benefit) $ ( 13,744 ) $ ( 3,727 )

A reconciliation of income tax expense (benefit) to the amount computed by applying the statutory federal income tax rate to the net income (loss) is summarized as follows:

A reconciliation of income tax expense (benefit) at the U.S.

federal statutory rate to the provision for income taxes is as follows:

Year Ended December 31,

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State, net of federal benefit ( 531 ) 0.8 % ( 218 ) 0.8 %

Contingent liabilities — — % ( 168 ) 0.5 %

Share-based compensation 1,359 ( 2.0 ) % 2,213 ( 8.4 ) %

Executive compensation limitation

995 ( 1.5 ) % 158 ( 0.6 ) %

Foreign-derived intangible income — — % ( 55 ) 0.2 %

Research and development credits ( 1,053 ) 1.6 % ( 444 ) 1.7 %

Return to provision

( 1,748 ) 2.7 % ( 9 ) 0.0 %

Change in uncertain tax positions 99 ( 0.2 ) % 78 ( 0.3 ) %

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The Company’s evaluation of evidence resulted in management concluding that the majority of the Company’s deferred tax assets will be realized.

The Company offsets all deferred tax assets and liabilities by jurisdiction, as well as any related valuation allowance, and presents them on our consolidated balance sheet as a non-current deferred income tax asset or liability (as applicable).

The Company offsets all deferred tax assets and liabilities by jurisdiction, as well as any related valuation allowance, and presents them on its consolidated balance sheet as a non-current deferred income tax asset or liability (as applicable).

Deferred tax assets (liabilities) are comprised of the following:

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Other 731 256

Total deferred tax assets before valuation allowance

27,592 18,844

Valuation allowance for deferred tax assets ( 832 ) ( 314 )

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Identified intangibles $ ( 30,116 ) $ ( 32,890 )

Operating lease assets ( 4,713 ) ( 2,973 )

Fixed assets ( 2,212 ) —

Operating lease right-of-use assets

( 4,383 ) ( 4,713 )

Property and equipment, net

( 3,615 ) ( 2,212 )

Other — ( 56 )

Net deferred tax liabilities $ ( 39,871 ) $ ( 38,904 )

Total deferred tax liabilities

$ ( 38,114 ) $ ( 39,871 )

Deferred income taxes, net $ ( 11,354 ) $ ( 21,341 )

Prior to the Separation on November 1, 2022, OmniAb operated as part of Ligand and not as a stand-alone company.

We determined the OmniAb income tax provision as if Legacy OmniAb had filed consolidated federal income tax returns and combined state income tax returns separate from Ligand since its inception on January 8, 2016 when Ligand acquired Legacy OmniAb (originally known as Open Monoclonal Technology, Inc.

We recorded the deferred tax assets related to net operating loss and research credit carryforwards at December 31, 2022 as a stand-alone company.

We adjusted our deferred tax assets as of November 1, 2022 to reflect the actual tax attributes that the Company received when it left the consolidated group of Ligand.

As of December 31, 2022, our deferred tax assets reflect the tax attributes that are available for us to use going forward.

The Company determined the OmniAb income tax provision as if Legacy OmniAb had filed consolidated federal income tax returns and combined state income tax returns separate from Ligand since its inception on January 8, 2016 when Ligand acquired Legacy OmniAb (originally known as Open Monoclonal Technology, Inc.

The Company recorded the deferred tax assets related to net operating loss and research credit carryforwards at December 31, 2023 and 2022 as a stand-alone company.

In connection with the Separation on November 1, 2022, the Company adjusted its deferred tax and additional paid-in capital balances during the years ended December 31, 2023 and December 31, 2022 to reflect the actual tax attributes that the Company received when it left the consolidated group of Ligand.

As of December 31, 2023 and 2022, its deferred tax assets reflect the tax attributes that are available for the Company to use going forward.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize and amortize certain research and experimental expenditures over five years for domestic research and 15 years for foreign research pursuant to Section 174 of the Internal Revenue Code of 1986, as amended.

The Company recorded a net increase of $ 5.0 million to income tax payable and deferred tax assets during 2022 due to the capitalization of research and experimental expenditures under Section 174.

As of December 31, 2022, the Company had federal net operating loss carryforwards set to expire through 2037 of $ 0.4 million, and $ 3.2 million of state net operating loss carryforwards that are set to expire through 2039.

The Company also had $ 0.5 million of federal research and development credit carryforwards, which expire through 2028, and $ 1.4 million of California research and development credit carryforwards that have no expiration date.

For the years ended December 31, 2023 and 2022, the Company capitalized $ 4.1 million and $ 5.0 million of research and experimental expenditures under Section 174, respectively, as increases to its deferred tax assets.

The Company also recorded a $ 0.8 million reduction in its deferred tax assets for the year ended December 31, 2023 as a result of its return-to-provision adjustments in connection with capitalized research and experimental expenditures pursuant to Section 174 for the year ended December 31, 2022.

The following table presents the Company's U.S.

federal and state NOL and tax credit carryforwards, net of unrecognized tax benefits, which may be available to offset future income tax liabilities:

(in thousands) December 31, 2023

Expiration Date (if not utilized)

federal NOL carryforwards

$ 14,876 Indefinite

state NOL carryforwards

$ 6,262 Various dates between 2031 and 2043

federal research and development credit carryforwards

$ 1,291 Various dates between 2032 and 2043

California research and development credit carryforwards

$ 1,909 Indefinite

Pursuant to Section 382 and 383 of the Internal Revenue Code of 1986, as amended, utilization of the Company’s net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure.

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The minimum threshold is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

The Company’s remaining liabilities for uncertain tax positions are presented net of the deferred tax asset balances on the accompanying consolidated and combined balance sheets.

A reconciliation of the amount of unrecognized tax benefits at December 31, 2023 and 2022 is as follows:

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There are no positions for which it is reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months.

For the year ended December 31, 2022, the Company recorded reductions in unrecognized tax benefits of $0.4 million related to certain tax attributes utilized by Ligand in the prior years.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

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The Company files income tax returns in the United States and various state jurisdictions with varying statutes of limitations.

The federal statute of limitation remains open for the 2018 tax year to the present.

The federal statute of limitation remains open for the 2020 tax year through the present.

The state income tax returns generally remain open for the 2019 tax year through the present.

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Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period.

Diluted income (loss) per share is computed based on the sum of the weighted average number of common shares and dilutive common shares outstanding during the period.

Basic loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period.

Diluted loss per share is computed based on the sum of the weighted average number of common shares and dilutive common shares outstanding during the period.

As described in Note 2 – Summary of Significant Accounting Policies, earnout shares issued in connection with the Business Combination, as further described in Note 4 – Business Combination, are subject to vesting based on the volume-weighted average trading prices (“VWAP”) of common shares during the earnout period.

The earnout shares are excluded from the calculation of basic and diluted weighted-average number of common shares outstanding until vested.

For periods prior to the Business Combination, basic and diluted loss per share was calculated based on the 82.6 million shares issued to Ligand shareholders at the Closing Date.

As of December 31, 2022, there were 98.9 million shares issued and outstanding, excluding earnout shares.

The following table outlines the basic and diluted net loss per share for the years ended December 31, 2022 and 2021 (in thousands, except per share data):

For periods prior to the Business Combination, basic and diluted loss per share was calculated based on 82.6 million shares issued to Ligand shareholders at the Closing Date.

The following table outlines the basic and diluted net loss per share for the years ended December 31, 2023 and 2022:

Year Ended December 31,

(in thousands, except per share data)

Net loss $ ( 50,619 ) $ ( 22,334 )

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Options to purchase common stock issued and outstanding (1)

20,823,399 18,033,304

Earnout shares 16,292,542 16,292,542

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Avista public warrants 7,666,667 7,666,667

Shares expected to be purchased under employee stock purchase plan 1,983,180 —

Restricted stock units issued and outstanding (1)

2,090,145 1,308,070

Forward purchase warrants 1,666,667 1,666,667

Shares expected to be purchased under employee stock purchase plan 1,589,197 1,983,180

Backstop warrants 1,445,489 1,445,489

Restricted stock units issued and outstanding (1)

Total anti-dilutive shares 59,807,439 56,629,252

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(1) Outstanding stock options and restricted stock units include awards outstanding to employees of Ligand.

Employee Benefit Plan

The Company sponsors a qualified 401(k) defined contribution plan covering eligible employees.

Participants may contribute a portion of their annual compensation limited to a maximum annual amount allowable under federal tax regulations.

The Company, at its discretion, may make certain contributions to the 401(k) plan.

The Company’s matching contributions were $ 0.6 million for the year ended December 31, 2023 and $ 0.4 million for the year ended December 31, 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data