What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-03-17 · 354 added, 357 removed, 585 unchanged (55% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K.

An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

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

Consolidated Statements of Cash Flows

3 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Praxis Precision Medicines, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

W e have audited the accompanying consolidated balance sheets of Praxis Precision Medicines, Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) , and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

1 unchanged sentence

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

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

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

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

1 unchanged sentence

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

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

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

Accordingly, we express no such opinion.

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

2 unchanged sentences

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

PRAX-114 Accrued and Prepaid Research and Development Costs

Description of the Matter

The Company’s accrued costs for research and development expenses totaled $17.8 million at December 31, 2021, including accruals related to the Company’s PRAX-114 Aria and Acapella clinical trials.

In addition, the Company’s prepaid expenses and other current assets were $11.5 million, which included amounts that were paid in advance of services incurred pursuant to PRAX-114 Aria and Acapella clinical trials.

As discussed in Note 2 to the consolidated financial statements, the Company analyzes the progress of the clinical trials, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period for the Company’s PRAX-114 Aria and Acapella clinical trials.

The Company is required to estimate such accruals and prepaids using judgment based on certain information, including actual costs incurred or level of effort expended, as provided by its vendors.

Payments for such activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheet within accrued or prepaid expenses and other current assets.

Auditing the Company’s accrued and prepaid research and development costs for PRAX-114 Aria and Acapella clinical trials was complex, as accounting for the costs associated with these clinical trials required subjective estimates of the level of services performed and the associated costs incurred by service providers.

Furthermore, due to the duration of the Company’s PRAX-114 Aria and Acapella clinical trials, and the timing of information received from third parties, the actual amounts incurred are not typically known at the time the consolidated financial statements are issued.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over accrued and prepaid research and development costs, including assessing management’s controls over the significant judgments and estimates regarding costs incurred or level of effort expended by service providers.

To evaluate the accrued and prepaid research and development costs for PRAX-114 Aria and Acapella clinical trials, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating the significant judgments and estimates made by management to estimate the recorded accruals and prepayments.

To test the significant judgments and estimates, we corroborated the progress of research and development activities through discussion with the Company’s research and development personnel that oversee the research and development projects and inspected the Company’s contracts with third parties and any pending change orders to assess the impact on amounts recorded.

In addition, we reviewed estimates of costs incurred to date provided to the Company from third parties.

We also analyzed fluctuations in accruals by vendor and by trial throughout the period subject to audit, evaluated the costs incurred per trial, site and/or patient for reasonableness and tested subsequent invoices received from third parties.

/s/ Ernst & Young LLP

1 unchanged sentence

Boston, Massachusetts

March 17, 2021

February 28, 2022

PRAXIS PRECISION MEDICINES, INC.

3 unchanged sentences

Cash and cash equivalents $ 138,704 $ 296,608

Marketable securities 137,207 —

Prepaid expenses and other current assets 11,498 5,718

4 unchanged sentences

Total assets $ 292,747 $ 303,177

Liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity

Liabilities and stockholders’ equity

Current liabilities:

7 unchanged sentences

Commitments and contingencies (Note 8)

Series A redeemable convertible preferred stock, $ 0.0001 par value;

8,075,799 shares authorized and 8,075,799 shares issued and outstanding as of December 31, 2019;

liquidation value of $ 9,932 as of December 31, 2019

Series B redeemable convertible preferred stock, $ 0.0001 par value;

14,913,704 shares authorized and 14,913,704 shares issued and outstanding as of December 31, 2019;

liquidation value of $ 49,969 as of December 31, 2019

Series B-1 redeemable convertible preferred stock, $ 0.0001 par value;

2,666,666 shares authorized and 2,666,666 shares issued and outstanding as of December 31, 2019;

liquidation value of $ 10,431 as of December 31, 2019

Series C redeemable convertible preferred stock, $ 0.0001 par value;

11,067,963 shares authorized and 9,805,827 shares issued and outstanding as of December 31, 2019;

liquidation value of $ 50,789 as of December 31, 2019

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized and no shares issued or outstanding as of December 31, 2020

10,000,000 shares authorized and no shares issued or outstanding as of December 31, 2021 and December 31, 2020

Common stock, $ 0.0001 par value;

150,000,000 shares and 46,000,000 shares authorized as of December 31, 2020 and 2019, respectively;

38,268,543 shares issued and outstanding as of December 31, 2020, and 1,670,070 shares issued and 1,621,880 shares outstanding as of December 31, 2019

150,000,000 shares authorized;

45,300,514 shares issued and outstanding as of December 31, 2021, and 38,268,543 shares issued and outstanding as of December 31, 2020

Additional paid-in capital 567,598 437,007

Accumulated other comprehensive loss ( 176 ) —

Accumulated deficit ( 316,615 ) ( 149,554 )

Total stockholders’ equity (deficit) 287,457 ( 81,008 )

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 303,177 $ 47,694

Total stockholders’ equity 250,812 287,457

Total liabilities and stockholders’ equity $ 292,747 $ 303,177

The accompanying notes are an integral part of these consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

5 unchanged sentences

Loss from operations ( 167,332 ) ( 61,968 )

Total other income:

Interest income 140 193

Other income:

Other income, net 271 140

Total other income 271 140

Loss before benefit from income taxes ( 61,828 ) ( 35,596 )

Loss before income taxes ( 167,061 ) ( 61,828 )

Benefit from income taxes — 8

Net loss and comprehensive loss $ ( 61,820 ) $ ( 35,512 )

Net loss $ ( 167,061 ) $ ( 61,820 )

Accretion and cumulative dividends on redeemable convertible preferred stock — ( 8,996 )

5 unchanged sentences

PRAXIS PRECISION MEDICINES, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share data)

Year Ended December 31,

Net loss $ ( 167,061 ) $ ( 61,820 )

Net unrealized losses on marketable securities, net of tax ( 176 ) —

Comprehensive loss $ ( 167,237 ) $ ( 61,820 )

The accompanying notes are an integral part of these consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Amounts in thousands, except share data)

Common Stock Additional

Capital Accumulated

Deficit Accumulated Other

Comprehensive Loss Total

Stockholders’

Shares Amount

Balance at December 31, 2020 38,268,543 $ 4 $ 437,007 $ ( 149,554 ) $ — $ 287,457

Stock-based compensation expense — — 4,666 — — 4,666

Issuance of common stock upon exercise of stock options 352,506 — 851 — — 851

Change in unrealized loss on marketable securities, net of tax — — — — ( 86 ) ( 86 )

Net loss — — — ( 27,373 ) — ( 27,373 )

Balance at March 31, 2021 38,621,049 $ 4 $ 442,524 $ ( 176,927 ) $ ( 86 ) $ 265,515

Stock-based compensation expense — — 5,400 — — 5,400

Issuance of common stock from follow-on public offering, net of offering costs of $ 229

5,750,000 1 98,412 — — 98,413

Issuance of common stock upon exercise of stock options 322,113 — 809 — — 809

Change in unrealized loss on marketable securities, net of tax — — — — 36 36

Net loss — — — ( 36,401 ) — ( 36,401 )

Balance at June 30, 2021 44,693,162 $ 5 $ 547,145 $ ( 213,328 ) $ ( 50 ) $ 333,772

Stock-based compensation expense — — 6,521 — — 6,521

Issuance of common stock upon exercise of stock options 90,909 — 309 — — 309

Change in unrealized loss on marketable securities, net of tax — — — — 25 25

Net loss — — — ( 44,705 ) — ( 44,705 )

Balance at September 30, 2021 44,784,071 $ 5 $ 553,975 $ ( 258,033 ) $ ( 25 ) $ 295,922

Stock-based compensation expense — — 6,106 — — 6,106

Issuance of common stock from at-the-market public offerings, net of offering costs of $ 598

391,997 — 7,039 — — 7,039

Issuance of common stock upon exercise of stock options 124,446 — 478 — — 478

Change in unrealized loss on marketable securities, net of tax — — — — ( 151 ) ( 151 )

Net loss — — — ( 58,582 ) — ( 58,582 )

Balance at December 31, 2021 45,300,514 $ 5 $ 567,598 $ ( 316,615 ) $ ( 176 ) $ 250,812

The accompanying notes are an integral part of these consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Amounts in thousands, except share data)

Preferred Stock Series B

4 unchanged sentences

Capital Accumulated

Deficit Total

Deficit Accumulated Other

Comprehensive Loss Total

Stockholders’

Equity (Deficit)

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2019 8,075,799 $ 9,932 14,913,704 $ 49,969 2,666,666 $ 10,431 9,805,827 $ 50,789 — $ — 1,621,880 $ 1 $ — $ ( 81,009 ) $ — $ ( 81,008 )

Issuance of Series B-1 redeemable convertible preferred stock, net of issuance costs of $ 61

— — — — 2,666,666 9,939 — — — — — — — — —

Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $ 165

— — — — — — 9,805,827 50,336 — — — — — — —

Repurchase of Series C redeemable convertible preferred stock — — — — — — ( 5,825,243 ) ( 30,493 ) — — — — — 493 — 493

Series C redeemable convertible preferred stock issuance costs — — — — — — — ( 37 ) — — — $ — — — — —

Vesting of restricted common stock awards — — — — — — — — — — 13,143 — — — — —

Stock-based compensation expense — — — — — — — — — — — — 147 — — 147

Accretion of redeemable convertible preferred stock to redemption value — 160 — 890 — 199 — 815 — — — — ( 147 ) ( 1,917 ) — ( 2,064 )

Vesting of restricted stock awards — — — — — — — — — — 213,203 — — — —

Net loss — — — — — — — — — — — — — ( 8,330 ) — ( 8,330 )

Balance at December 31, 2019 8,075,799 $ 9,932 14,913,704 $ 49,969 2,666,666 $ 10,431 9,805,827 $ 50,789 $ — — 1,621,880 $ 1 $ — $ ( 81,009 ) $ ( 81,008 )

Repurchase of Series C redeemable convertible preferred stock — — — — — ( 5,825,243 ) ( 30,493 ) — — — — — 493 493

Balance at March 31, 2020 8,075,799 $ 10,092 14,913,704 $ 50,859 2,666,666 $ 10,630 3,980,584 $ 21,074 — $ — 1,635,023 $ 1 $ — $ ( 90,763 ) $ — $ ( 90,762 )

Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $ 4

— — — — — — 4,563,108 23,496 — — — — — — — —

Vesting of restricted common stock awards — — — — — — — — — — 13,142 — — — — —

Stock-based compensation expense — — — — — — — — — — — — 285 — — 285

Accretion of redeemable convertible preferred stock to redemption value — 162 — 890 — 198 — 789 — — — — ( 285 ) ( 1,754 ) — ( 2,039 )

Net loss — — — — — — — — — — — — — ( 11,568 ) — ( 11,568 )

Balance at June 30, 2020 8,075,799 $ 10,254 14,913,704 $ 51,749 2,666,666 $ 10,828 8,543,692 $ 45,359 — $ — 1,648,165 $ 1 $ — $ ( 104,085 ) $ — $ ( 104,084 )

Issuance of Series C-1 redeemable convertible preferred stock, net of issuance costs of $ 154

— — — — — — — — 19,444,453 110,096 — — — — — —

Vesting of restricted common stock awards — — — — — — — — — — 13,142 — — — — —

Stock-based compensation expense — — — — — — — — — — — — 953 — — 953

Issuance of common stock upon exercise of stock options — — — — — — — — — — 11,628 — 27 — — 27

Accretion of redeemable convertible preferred stock to redemption value — 162 — 899 — 201 — 885 — 1,796 — — ( 980 ) ( 2,963 ) — ( 3,943 )

Conversion of redeemable convertible preferred stock to common stock ( 8,075,799 ) ( 10,451 ) ( 14,913,704 ) ( 52,844 ) ( 2,666,666 ) ( 11,073 ) ( 8,543,692 ) ( 46,437 ) ( 19,444,453 ) ( 112,374 ) 25,067,977 2 233,176 — 233,178

Issuance of common stock upon initial public offering, net of underwriting discounts, commissions and offering costs — — — — — — — — — 11,500,000 1 200,310 — 200,311

Net Loss — — — — — — — — — — — — — ( 16,216 ) — ( 16,216 )

Balance at September 30, 2020 8,075,799 $ 10,416 14,913,704 $ 52,648 2,666,666 $ 11,029 8,543,692 $ 46,244 19,444,453 $ 111,892 1,672,935 $ 1 $ — $ ( 123,264 ) $ — $ ( 123,263 )

Issuance of common stock upon initial public offering, net of issuance costs of $ 2,864

11,500,000 1 200,310 — — 200,311

Vesting of restricted common stock awards — — — — — — — — — — 8,763 — — — — —

Exercise of stock options — — — — — — — — — 30,496 — 88 — 88

Stock-based compensation expense — — — — — — — — — — — — 3,826 — — 3,826

Issuance of common stock upon exercise of stock options — — — — — — — — — — 18,868 — 61 — — 61

Accretion of redeemable convertible preferred stock to redemption value — 35 — 196 — 44 — 193 — 482 — — ( 366 ) ( 584 ) — ( 950 )

Net Loss — — — — — — — — — — — — — ( 25,706 ) — ( 25,706 )

11 unchanged sentences

Non-cash operating lease expense 1,412 696

Amortization of premiums and discounts on marketable securities, net 2,087 —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets ( 5,780 ) ( 4,437 )

Other non-current assets 5 —

Accounts payable 7,267 960

5 unchanged sentences

Purchases of property and equipment ( 1,050 ) —

Purchases of marketable securities ( 164,170 ) —

Maturities of marketable securities 24,700 —

Net cash used in investing activities ( 140,520 ) —

Cash flows from financing activities:

Proceeds from at-the-market offerings, net of issuance costs 7,301 —

Proceeds from follow-on public offering, net of issuance costs 98,413 —

Proceeds from initial public offering of common stock, net of issuance costs — 200,886

Payment of issuance costs for initial public offering ( 575 ) —

Proceeds from exercise of options to purchase common stock 2,447 88

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs — 133,442

Repurchase of Series C redeemable convertible preferred stock — ( 30,000 )

Proceeds from exercise of options to purchase common stock 88 —

Net cash provided by financing activities 107,586 304,416

Increase in cash, cash equivalents and restricted cash 251,793 26,865

Increase (decrease) in cash, cash equivalents and restricted cash ( 157,488 ) 251,793

Cash, cash equivalents and restricted cash, beginning of period 297,208 45,415

Cash, cash equivalents and restricted cash, end of period $ 139,720 $ 297,208

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents 138,704 296,608

Restricted cash 1,016 600

Total cash, cash equivalents and restricted cash $ 139,720 $ 297,208

Supplemental disclosures of non-cash activities:

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 4,086 $ —

Offering costs included in accounts payable and accrued expenses $ 262 $ 575

Purchases of property and equipment included in accounts payable and accrued expenses $ 267 $ 4

Accretion of redeemable convertible preferred stock to redemption value $ — $ 8,996

Operating lease liabilities recorded upon adoption of ASC 842 $ — $ 2,092

Purchases of property and equipment included in accounts payable $ 4 $ —

Deferred offering costs included in accounts payable and accrued expenses $ 575 $ —

Redeemable convertible preferred stock issuance costs included in accounts payable $ — $ 113

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

Praxis Precision Medicines, Inc.

(“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system (“CNS”) disorders characterized by neuronal imbalance.

The Company has established a broad portfolio, including multiple disclosed programs across CNS disorders, including depression, epilepsy, movement disorders and pain syndromes, with three clinical-stage product candidates.

We intend to develop differentiated therapies that can deliver long-term benefits to human health by meaningfully impacting patients and society.

The Company’s most advanced programs, PRAX-114 and PRAX-944, are currently in Phase 2 development.

PRAX-114 is being developed for the treatment of major depressive disorder and perimenopausal depression, and PRAX-944 is a selective small molecule inhibitor of T-type calcium channels for the treatment of essential tremor.

(“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance.

Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, can lead to abnormal function and disease.

The Company is applying insights from genetic epilepsies to both rare and more prevalent neurological and psychiatric disorders, using its understanding of shared biological targets and circuits in the brain.

The Company applies a deliberate and pragmatic precision approach, leveraging a suite of translational tools including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients.

Through this approach, the Company has established a broad CNS portfolio with multiple programs, including product candidates across psychiatric disorders, movement disorders, epilepsy and other exploratory CNS indications, with three clinical-stage product candidates.

Each of the Company's clinical-stage product candidates is advancing in more than one indication and the Company anticipates expansion into additional indications.

The Company expects multiple topline readouts from its clinical-stage programs and anticipates the launch of a fourth clinical development program in 2022.

In addition, the Company has established a robust pipeline of preclinical stage programs through internal research and in-licensing.

The Company's broad portfolio of CNS programs is currently structured by therapeutic focus in three primary franchises – Psychiatry, Movement Disorders and Epilepsy.

In addition, the Company is pursuing development in other exploratory CNS indications such as rare adult cephalgias.

Within the Psychiatry franchise, the Company's most advanced clinical candidate, PRAX-114, is being developed for the treatment of a broad range of patients suffering from major depressive disorder and post-traumatic stress disorder, or PTSD.

In addition, the Company has initiated a Phase 2, placebo-controlled study evaluating PRAX-114 for the treatment of PTSD.

Within the Movement Disorders franchise, the Company's second clinical candidate, PRAX-944, is being developed for the treatment of Essential Tremor, or ET, and Parkinson's Disease, or PD.

The Company has initiated a Phase 2b placebo-controlled dose-range finding trial, the Essential1 Study, to evaluate the tolerability, safety and efficacy of PRAX-944 in adults with ET.

The Company also expects to initiate a Phase 2, placebo-controlled, crossover study to evaluate the safety, pharmacokinetics, or PK, and efficacy of daytime dosing of PRAX-114 for the treatment of ET in the first quarter of 2022.

The Company expects to initiate a Phase 2, placebo-controlled trial to evaluate the safety, PK and efficacy of PRAX-944 as a non-dopaminergic treatment for the motor symptoms of PD in the second quarter of 2022.

Within the Epilepsy franchise, the Company expects to initiate a Phase 2 study with its third clinical-stage candidate, PRAX-562, in the second quarter of 2022 in patients with rare pediatric Developmental and Epileptic Encephalopathies.

The Company's most advanced preclinical stage product candidate within its Epilepsy franchise, PRAX-222, is an antisense oligonucleotide, or ASO, designed to decrease the expression levels of the protein encoded by the gene SCN2A in patients with gain-of-function SCN2A mutations.

The Company expects to initiate a seamless study of PRAX-222 in the second quarter of 2022, which would be its fourth program to reach clinical stage.

The Company also expects to initiate a Phase 2 proof-of-concept clinical trial evaluating PRAX-562 in patients with rare adult cephalgias in the first quarter of 2022.

In addition, the Company's preclinical pipeline consists of a discovery program in development for KCNT1 related epilepsy, PRAX-628, a product candidate nominated in the fourth quarter of 2021 for focal epilepsy, three ASOs targeting SCN2A in patients with loss-of-function mutations, PCDH19 and SYNGAP1, respectively, and three additional discovery programs for undisclosed targets in psychiatry, movement disorders and epilepsy.

Praxis was incorporated in 2015 and commenced operations in 2016.

The Company has funded its operations primarily with proceeds from the issuance of convertible debt, Series A redeemable convertible preferred stock (the “Series A Preferred Stock”), Series B redeemable convertible preferred stock (the “Series B Preferred Stock”), Series B-1 redeemable convertible preferred stock (the “Series B-1 Preferred Stock”), Series C redeemable convertible preferred stock (the “Series C Preferred Stock”) and Series C-1 redeemable convertible preferred stock (the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock are collectively referred to as the “Redeemable Convertible Preferred Stock”), and from proceeds from its initial public offering ("IPO").

The Company has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock, and from the sale of common stock through an initial public offering ("IPO"), a follow-on public offering and at-the-market offerings under its shelf registration statement.

From inception through December 31, 2021, the Company raised $ 516.4 million in aggregate cash proceeds from these transactions, net of issuance costs.

On October 8, 2020, the board of directors and the Company’s stockholders approved a one-for-2.14 reverse stock split.

Effective on October 8, 2020, the reverse stock split impacted the Company’s issued and outstanding shares of common stock.

Stockholders entitled to fractional shares as a result of the reverse stock split are entitled to receive a cash payment in lieu of receiving fractional shares.

All shares of common stock, per share amounts, aggregate par value and additional paid-in capital amounts for all periods presented in the accompanying consolidated financial statements and related notes have been retroactively adjusted, where applicable, to reflect the reverse stock split.

Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices were proportionately increased, as applicable, in accordance with the terms of the agreements governing such securities.

The respective conversion prices of the Redeemable Convertible Preferred Stock were proportionately increased.

The number of shares of common stock authorized for issuance and the per share par value of common stock were not adjusted as a result of the reverse stock split.

On October 20, 2020, the Company completed its IPO, in which the Company issued and sold 11,500,000 shares of its common stock at a public offering price of $ 19.00 per share, including 1,500,000 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock, for aggregate gross proceeds of $ 218.5 million.

The Company raised approximately $ 200.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Upon the closing of the IPO, all of the outstanding shares of the Company’s Redeemable Convertible Preferred Stock automatically converted into 25,067,977 shares of common stock.

On October 20, 2020, in connection with the closing of the IPO, the Company filed its Amended and Restated Certificate of Incorporation which provides that the authorized capital stock of the Company consists of 150,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock, both with a par value of $ 0.0001 per share.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization.

These efforts require significant amounts of additional capital, adequate

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

personnel and infrastructure and extensive compliance-reporting capabilities.

the ability to secure additional capital to fund operations.

These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The Company has incurred recurring losses since its inception, including net losses of $ 61.8 million and $ 35.5 million for the years ended December 31, 2020 and 2019, respectively.

The Company has incurred recurring losses since its inception, including a net loss of $ 167.1 million for the year ended December 31, 2021.

In addition, as of December 31, 2021, the Company had an accumulated deficit of $ 316.6 million.

The Company expects to continue to generate operating losses for the foreseeable future.

As a result of proceeds raised from its IPO and issuance of its Series C Preferred Stock and Series C-1 Preferred Stock, the Company expects that its cash and cash equivalents as of December 31, 2020 of $ 296.6 million will be sufficient to fund the operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these consolidated financial statements.

The future viability of the Company beyond one year from the date of issuance of these consolidated financial statements is dependent on its ability to raise additional capital to finance its operations.

The Company expects that its cash, cash equivalents and marketable securities as of December 31, 2021 of $ 275.9 million will be sufficient to fund the operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these consolidated financial statements.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

The Company's inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

9 unchanged sentences

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, stock-based compensation expense, the valuation of equity awards and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accrued and prepaid research and development expenses, stock-based compensation expense and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

10 unchanged sentences

Cash equivalents are carried at cost, which approximates their fair market value.

Restricted cash comprises a letter of credit for the benefit of the landlord in connection with the Company’s lease facility.

Restricted cash comprises letters of credit for the benefit of the landlord in connection with the Company’s lease facilities.

Restricted cash is classified as either current or non-current based on the terms of the underlying lease arrangement.

The following table presents cash, cash equivalents and restricted cash as reported on the consolidated balance sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):

The following table presents cash and cash equivalents and restricted cash as reported on the consolidated balance sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):

Cash and cash equivalents $ 138,704 $ 296,608

1 unchanged sentence

Total cash, cash equivalents and restricted cash as shown on the consolidated statements of cash flows $ 139,720 $ 297,208

Marketable Securities

The Company invests its excess cash in money market funds and debt instruments of the U.S.

Treasury, financial institutions, corporations and U.S.

government agencies with strong credit ratings and an investment grade rating at or above A-1 or P-1 by two of the three nationally recognized statistical rating organizations.

The Company does not believe that it is exposed to more than a nominal amount of credit risk in its marketable securities.

The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity, and periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The Company classifies its investments in debt instruments as available-for-sale.

Available-for-sale investments are reported at fair value at each balance sheet date, and include any unrealized holding gains and losses in accumulated other comprehensive loss, a component of stockholders’ equity.

Realized gains and losses are included in the Company's consolidated statements of operations.

All of the Company's available-for-sale securities are available for use in its current operations.

As a result, the Company has categorized all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The Company evaluates securities for impairment at the end of each reporting period.

Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation.

Factors considered include whether a decline in fair value below the amortized cost basis is due to credit-related factors or non-credit-related factors, the financial condition and near-term prospects of the Company, and the Company's intent and ability to hold the investment to allow for an anticipated recovery in fair value.

A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings.

Any impairment that is not credit-related is recognized in other comprehensive loss, net of applicable taxes unless deemed other than temporary.

Concentrations of Credit Risk and Significant Suppliers and License Agreements

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash.

The Company maintains deposits in accredited financial institutions in excess of federally insured limits.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities.

The Company's investment portfolio comprises money market funds, marketable debt securities, including debt securities issued by U.S.

government agencies and

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

corporations, and commercial paper.

The Company investments are limited to investment-grade securities with strong credit ratings with the objective of maintaining safety and liquidity.

The Company also maintains deposits in accredited financial institutions in excess of federally insured limits.

Bank accounts in the United States are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to $250,000.

11 unchanged sentences

The fair values of the Company’s financial assets and liabilities reflects the Company’s estimate of the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

unobservable inputs.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Quoted prices in active markets for identical assets or liabilities.

Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

3 unchanged sentences

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

The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Items measured at fair value on a recurring basis include cash equivalents and marketable securities (Note 4 and Note 5).

The carrying amounts reflected in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

15 unchanged sentences

The Company did not record any impairment losses on long-lived assets in either year ended December 31, 2021 or December 31, 2020.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) .

This standard established a right-of-use model that requires all lessees to recognize right-of-use assets and lease liabilities on their balance sheet that arise from leases as well as provide disclosures with respect to certain qualitative and quantitative information related to a company’s leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date:

2018-01, Leases (Topic 842):

Land Easement Practical Expedient for Transition to Topic 842 , ASU No.

2018-10, Codification Improvements to Topic 842, Leases , ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements , ASU No.

2018-20, Narrow-Scope Improvement for Lessors , and ASU No.

2019-01, Leases (Topic 842):

Codification Improvements .

The Company adopted these amendments with ASU 2016-02 (collectively, the “new leasing standards”), effective January 1, 2019.

The Company adopted the new leasing standards using the modified retrospective transition approach, with no restatement of prior periods and there was no cumulative adjustment to retained earnings.

Upon adoption, the Company elected the package of transition practical expedients, which allowed the Company to not reassess the following:

(i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) the treatment of initial direct costs for existing leases.

The Company made an accounting policy election to not recognize short-term leases with an initial term of twelve months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of operations and comprehensive loss over the lease term.

Upon adopting the new leasing standards, the Company recognized an operating lease right-of-use asset of $ 2.1 million and a corresponding operating lease liability of $ 2.1 million, which are included in its consolidated balance sheets.

The adoption of the new leasing standards did not have a material impact on the Company’s consolidated statements of operations and comprehensive loss.

The Company accounts for leases in accordance with ASC 842.

The Company determines if an arrangement is a lease at contract inception.

10 unchanged sentences

Lease expense for future lease payments is recognized on a straight-line basis over the lease term.

There were no new leases entered into during the year ended December 31, 2020.

Deferred Offering Costs

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

After the consummation of the equity financing, these costs are recorded in stockholders’ (deficit) equity as a reduction of additional paid-in capital or the associated preferred stock account, as applicable.

In the event the offering is

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

terminated, all capitalized deferred offering costs are expensed.

Upon the closing of the IPO on October 20, 2020, deferred offering costs of $ 2.9 million were recognized through additional paid-in capital as a reduction of the gross proceeds received from the offering.

No deferred offering costs were capitalized as of December 31, 2020 or December 31, 2019.

Redeemable Convertible Preferred Stock

11 unchanged sentences

These agreements are cancellable, and related fees are recorded as research and development expenses as incurred.

The Company records accrued liabilities for estimated ongoing research costs.

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

The Company records accrued liabilities and prepaid expenses for estimated ongoing research costs.

When evaluating the adequacy of the accrued liabilities and prepaid expenses, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period.

Actual results could differ from the Company’s estimates.

The Company’s historical accrual estimates have not been materially different from the actual costs.

The Company’s historical estimates have not been materially different from the actual costs.

Patent-Related Costs

Patent-related costs incurred in connection with patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

Amounts incurred are classified as general and administrative expenses in the accompanying consolidated statement of operations and comprehensive loss.

Amounts incurred are classified as general and administrative expenses in the accompanying consolidated statement of operations.

Stock-Based Compensation

7 unchanged sentences

The Company accounts for forfeitures as they occur.

The Company classifies stock-based compensation expense in its consolidated statement of operations in the same manner in which the award recipient’s salary or service payments are classified.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including:

(i) the expected volatility of the

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company classifies stock-based compensation expense in its consolidated statement of operations and comprehensive loss in the same manner in which the award recipient’s salary or service payments are classified.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including:

(i) the expected volatility of the Company’s stock;

Company’s stock;

(ii) the expected term of the award;

12 unchanged sentences

The expected dividend yield is assumed to be zero as the Company has never paid dividends, and does not have current plans to pay any dividends on its common stock.

For periods prior to the IPO, the fair value of shares of common stock underlying the Company's stock-based awards was determined on each grant date due to the absence of an active market for the Company's common stock.

The Company determined the estimated fair value of its equity instruments based on a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector.

The Company utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , to estimate the fair value of its common stock.

Each valuation methodology included estimates and assumptions that required the Company’s judgment.

These estimates and assumptions included a number of objective and subjective factors in determining the value of the Company’s common stock at each grant date, such as the following:

(i) prices paid for the Company’s redeemable convertible preferred stock, and the rights, preferences, and privileges of the Company’s redeemable convertible preferred stock and common stock;

(ii) the Company’s stage of development;

(iii) the fact that the grants of stock-based awards related to illiquid securities in a private company;

and (iv) the likelihood of achieving a liquidity event for the common stock underlying the stock-based awards, such as an IPO or sale of the Company, given prevailing market conditions.

Prior to the IPO, the methodologies utilized to estimate the fair value of the Company’s common stock were the option-pricing method (“OPM”) and, beginning in the year ended December 31, 2020, the hybrid probability-weighted expected return method ("PWERM").

The OPM was used to back-solve the estimated value of the Company’s equity and corresponding value of the Company’s common stock.

The hybrid PWERM determined the fair value of the Company's common stock using a probability-weighted present value of expected future investment returns considering various outcomes, as well as the rights of each class of stock, with one of the outcomes calculated using an OPM.

The hybrid PWERM considered three scenarios:

an "early" IPO completed in 2020, a "late" IPO completed in 2021, and a "remain private" scenario in which value was allocated using the OPM.

An incremental discount for lack of marketability ("DLOM") was applied to the values of the common stock.

The DLOM was estimated using a put option model which considered the expected time to liquidity and the volatility of the common shares.

The hybrid PWERM used a risk-adjusted discount rate.

The fair value of the Company's common stock was calibrated to contemporaneous transactions in the Series C Preferred Stock and Series C-1 Preferred Stock.

Subsequent to the IPO, the fair value of the common stock underlying the Company's stock-based awards is the closing price of the Company's common stock on the date of grant.

Historically, for periods prior to the IPO, the fair value of the shares of common stock underlying the Company's stock-based compensation awards was determined on each grant date by its Board based on valuation estimates from management considering its most recently available independent third-party valuation of the Company's common stock.

The Board also assessed and considered, with input from management, additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the grant date.

The grant date fair value of RSUs is estimated based on the fair value of the Company's underlying common stock on the date of grant.

Foreign Currency

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The functional currency of the Company’s wholly owned foreign subsidiary in Australia is the U.S.

9 unchanged sentences

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ (deficit) equity that are excluded from net loss.

The Company’s comprehensive loss was equal to net loss for the years ended December 31, 2020 and 2019.

Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss.

For the year ended December 31, 2021, comprehensive loss consists of net loss and changes in

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

unrealized gains and losses on marketable securities.

Comprehensive loss was equal to net loss for the year ended December 31, 2020.

Net Loss per Share

4 unchanged sentences

Net loss attributable to common stockholders is equal to the net loss for the period, as adjusted for:

(i) cumulative dividends accrued for redeemable convertible preferred stock, whether or not declared, (ii) increases in carrying value recorded for redeemable convertible preferred stock, including accretion on redeemable convertible preferred stock to redemption value for amounts other than cumulative dividends and (iii) gains on the redemptions of redeemable convertible preferred stock.

(i) cumulative dividends accrued for redeemable convertible preferred stock, whether or not declared, (ii) increases in carrying value recorded for redeemable convertible preferred stock, including accretion of redeemable convertible preferred stock to redemption value for amounts other than cumulative dividends and (iii) gains on the redemptions of redeemable convertible preferred stock.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, which excludes shares of restricted common stock that are not vested.

2 unchanged sentences

The Company has generated a net loss in all periods presented so the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Emerging Growth Company Status

The Company is an “emerging growth company” (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs.

The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.

The Company has elected to avail itself of the extended transition period and, therefore, while the Company is an EGC it will not be subject to new or revised accounting standards the same time that they become applicable to other public companies that are not EGCs, unless it chooses to early adopt a new or revised accounting standard.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU No.

2016-01 , Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities, which has been subsequently amended by ASU No.

2018-03, ASU No.

2019-04, ASU No.

2020-01 and ASU No.

2020-03 (“ASU 2016-01”).

The provisions of ASU 2016-01 make targeted improvements to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information, including certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.

The Company early adopted ASU 2016-01 effective January 1, 2019.

The implementation of this standard had no impact on the Company’s financial position or results of operations.

In February 2016, the FASB issued the new leasing standards to increase transparency and comparability among organizations related to their leasing activities.

The Company early adopted the new leasing standards effective January 1, 2019.

For additional information on the adoption of the new leasing standards, please read the Company’s policy above entitled Leases, and Note 7, Commitments and Contingencies, to these consolidated financial statements.

In July 2017, the FASB issued ASU No.

2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I.

Accounting for Certain Financial Instruments with Down Round Features II .

Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”).

Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features.

Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments.

The Company early adopted ASU 2017-11 effective January 1, 2019.

The adoption of ASU 2017-11 had no impact on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes ("ASU 2019-12").

The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity;

the methodology for calculating income taxes in an interim period;

and the recognition of deferred tax liabilities for outside basis differences.

On January 1, 2021, the Company early adopted ASU 2019-12 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No.

7 unchanged sentences

The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted.

The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations, as well as the timing of its adoption of this standard.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its initiative to reduce complexity in the accounting standards.

The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax

On October 1, 2021, the Company early adopted ASU 2016-13 and its related amendments using a modified retrospective approach.

Given the composition of the Company's investment portfolio, there was no material impact on the Company's consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes.

ASU 2019-12 is effective for the Company on January 1, 2022, with early adoption permitted.

The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations, as well as the timing of its adoption of this standard.

Restricted Cash

As of December 31, 2020 and 2019, the Company had restricted cash of $ 0.6 million, held as a letter of credit for the benefit of the landlord in connection with the Company’s lease in Cambridge, Massachusetts.

The lease term expires on December 30, 2021.

Restricted cash was classified within prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2020 as the lease term expires less than twelve months from the consolidated balance sheet date.

Restricted cash was classified within other non-current assets on the consolidated balance sheet as of December 31, 2019 .

Fair Value of Financial Assets and Liabilities

As of December 31, 2021 and 2020 the Company had restricted cash of $1.0 million and $ 0.6 million, respectively, held as letters of credit for the benefit of its current and former landlords.

The Company's Boston, Massachusetts sublease expires on January 31, 2026, and the related letter of credit of $0.4 million was classified within other non-current assets on the consolidated balance sheet as of December 31, 2021.

The Company's Cambridge, Massachusetts sublease expired on December 30, 2021,and the related letter of credit of $ 0.6 million was classified within prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2021 and 2020.

Marketable Securities

The following is a summary of the Company's investment portfolio at December 31, 2021 (in thousands).

The Company did not have any marketable securities as of December 31, 2020.

Gross Unrealized Estimated

Amortized Cost Gains Losses Fair Value

Available-for-sale securities:

Corporate debt securities $ 52,214 $ — $ ( 31 ) $ 52,183

Commercial paper 34,993 — — 34,993

Debt securities issued by U.S.

government agencies 12,111 — ( 8 ) 12,103

Other debt securities 6,398 1 — 6,399

Total securities with a maturity of one year or less $ 105,716 $ 1 $ ( 39 ) $ 105,678

Corporate debt securities 31,667 — ( 138 ) 31,529

Total securities with a maturity of one to two years $ 31,667 $ — $ ( 138 ) $ 31,529

Total available-for-sale securities $ 137,383 $ 1 $ ( 177 ) $ 137,207

As of December 31, 2021, the Company had 14 securities with a total fair market value of $ 95.8 million in an unrealized loss position.

The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and is primarily related to the change in market interest rates since purchase, and believes that it is more likely than not that it will be able to hold its debt securities to maturity.

Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and an allowance for credit losses was not recognized.

Securities are evaluated for impairment at the end of each reporting period.

The Company did not record any impairment related to its available-for-sale securities during the year ended December 31, 2021.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Assets

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

3 unchanged sentences

Money market funds $ 131,372 $ — $ — $ 131,372

Marketable securities:

Corporate debt securities — 83,712 — 83,712

Commercial paper — 34,993 — 34,993

Debt securities issued by U.S.

government agencies 12,103 — — 12,103

Other debt securities — 6,399 — 6,399

$ 143,475 $ 125,104 $ — $ 268,579

4 unchanged sentences

$ 290,931 $ — $ — $ 290,931

The Company estimates the fair value of its marketable securities classified as Level 2 by taking into consideration valuations obtained from third-party pricing sources.

These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs.

The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Computer equipment $ 579 $ 9

Office furniture and equipment 545 113

Laboratory equipment 242 48

Computer equipment 9 5

Total property and equipment 1,366 170

6 unchanged sentences

Accrued expenses consisted of the following (in thousands):

Accrued personnel-related expenses $ 5,516 $ 1,059

Accrued external research and development expenses $ 17,763 $ 4,206

Accrued license fees — 363

Accrued personnel-related expenses 7,180 5,516

Accrued professional services 1,539 133

Accrued other 362 1,014

1 unchanged sentence

Commitments and Contingencies

In October 2018, the Company entered into a sublease agreement for office space located in Cambridge, Massachusetts which expires on December 30, 2021, with no option to renew or terminate early.

In May 2021, the Company entered into a sublease agreement for office space located in Boston, Massachusetts, which became the Company's corporate headquarters beginning on October 1, 2021.

The sublease expires on January 31, 2026, with no option to renew or terminate early.

The base rent increases by approximately 2 % annually.

1 unchanged sentence

This lease qualifies as an operating lease.

In January 2019, the Company entered into an arrangement with a third party to sublease a portion of its Cambridge, Massachusetts office space.

This sublease was terminated in November 2019.

At inception, the Company recorded an operating lease right-of-use asset and operating lease liability of $ 4.1 million.

In October 2018, the Company entered into a sublease agreement for office space located in Cambridge, Massachusetts which expired on December 30, 2021, with no option to renew or terminate early.

The base rent increased by approximately 1 % annually.

The Company issued a letter of credit to the landlord related to the security deposit, secured by restricted cash (Note 3).

This lease qualified as an operating lease.

The following table summarizes the presentation of the operating lease in the Company’s consolidated balance sheets (in thousands):

4 unchanged sentences

Total lease liabilities $ 4,311 $ 763

The following table summarizes total lease costs recognized in the Company’s consolidated statements of operations and comprehensive loss (in thousands):

The following table summarizes total lease costs recognized in the Company’s consolidated statements of operations (in thousands):

For the year ended

1 unchanged sentence

Variable lease costs 34 14

Sublease income — ( 31 )

Total lease costs $ 1,446 $ 796

Variable lease costs were primarily related to operating expenses, taxes and insurance associated with the operating leases, which were assessed based on the Company’s proportionate share of such costs for the leased premises.

As these costs are generally variable in nature, they were not included in the measurement of the

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Variable lease costs were primarily related to operating expenses, taxes and insurance associated with the operating lease, which were assessed based on the Company’s proportionate share of such costs for the leased premises.

As these costs are generally variable in nature, they are not included in the measurement of the operating lease right-of-use asset and related lease liability.

operating lease right-of-use asset and related lease liability.

Total lease costs are included as operating expenses in the Company’s consolidated statements of operations and comprehensive loss.

23 unchanged sentences

The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

Redeemable Convertible Preferred Stock

The Company has entered into multiple agreements with third parties under which it may be obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

specified product candidates.

Payments under these agreements generally become due and payable upon achievement of such milestones and sales.

When the achievement of these milestones or sales have not occurred, such contingencies are not recorded in the Company's financial statements.

Redeemable Convertible Preferred Stock

On October, 20 2020, upon the closing of the IPO, all 53,644,314 outstanding shares of the Redeemable Convertible Preferred Stock were converted into 25,067,977 shares of common stock.

Pursuant to the terms of the Company's Amended and Restated Certificate of Incorporation, all series of the Redeemable Convertible Preferred Stock outstanding automatically converted into shares of common stock based on each series' respective then-current conversion ratio.

As of December 31, 2020, the Company did not have any shares of redeemable convertible preferred stock authorized, issued or outstanding.

The redeemable convertible preferred stock on December 31, 2019 consisted of the following (in thousands, except share amounts):

As of December 31, 2019

Authorized Preferred

Outstanding Carrying

Value Liquidation

Preference Redemption

Series A Preferred Stock 8,075,799 8,075,799 $ 9,932 $ 9,932 $ 9,932 3,773,820

Series B Preferred Stock 14,913,704 14,913,704 49,969 49,969 49,969 6,969,173

Series B-1 Preferred Stock 2,666,666 2,666,666 10,431 10,431 10,431 1,246,133

Series C Preferred Stock 11,067,963 9,805,827 50,789 50,789 50,789 4,582,257

36,724,132 35,461,996 $ 121,121 $ 121,121 $ 121,121 16,571,383

Common stock issuable upon conversion in the table above represents shares of common stock issuable upon an automatic conversion in the event of a qualified public offering, pursuant to the Company’s then-current Amended and Restated Certificate of Incorporation, effective prior to the completion of the IPO.

On June 18, 2019, the Company entered into the Series B-1 Preferred Stock Purchase Agreement which authorized the sale and issuance of up to 2,666,666 shares of its Series B-1 Preferred Stock at a purchase price of $ 3.75 per share.

During the year ended December 31, 2019, the Company issued all 2,666,666 shares of Series B-1 Preferred Stock for gross cash proceeds of $ 10.0 million, and incurred an immaterial amount of issuance costs.

The issuance of the Series B-1 Preferred Stock resulted in changes to certain rights, preferences and privileges of the Series A Preferred Stock and the Series B Preferred Stock.

The Company concluded that such changes were not significant and resulted in a modification, rather than an extinguishment, of the Series A Preferred Stock and the Series B Preferred Stock.

The changes to the terms of the Series A Preferred Stock and the Series B Preferred Stock did not result in incremental value to the shareholders, and therefore there was no impact to the accounting for the Series A Preferred Stock and the Series B Preferred Stock.

On November 18, 2019, the Company entered into the Series C Preferred Stock Purchase Agreement which authorized the sale and issuance of up to 5,825,243 shares at $ 5.15 per share.

On December 10, 2019, the Company executed Amendment No.

1 and Joinder to the Series C Preferred Stock Purchase Agreement which authorized the sale and issuance of an additional 5,242,720 shares at $ 5.15 per share.

During the year ended December 31, 2019, the Company issued 9,805,827 shares of Series C Preferred Stock for gross cash proceeds of $ 50.5 million, and incurred issuance costs of $ 0.2 million.

Although there were multiple closings of the Series C Preferred Stock, there was no obligation under the initial closing for investors to purchase, or for the Company to sell to such investors, additional shares of Series C Preferred Stock.

The issuance of the Series C Preferred Stock resulted in changes to certain rights, preferences and privileges of the Series A Preferred Stock, the Series B Preferred Stock and the Series B-1 Preferred Stock.

The Company concluded that such changes were not significant and resulted in a modification, rather than an extinguishment, of the Series A Preferred Stock, the Series B Preferred Stock and the Series B-1 Preferred Stock.

The changes to the terms of the Series A Preferred Stock, the Series B Preferred Stock and the Series B-1 Preferred Stock did not result in incremental value to the shareholders, and therefore there was no impact to the accounting for the Series A Preferred Stock, the Series B Preferred Stock and the Series B-1 Preferred Stock.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, the Company did not have any shares of redeemable convertible preferred stock authorized, issued or outstanding.

On January 20, 2020, the Company granted two investors holding 5,825,243 shares of Series C Preferred Stock that were purchased in December 2019 the option to put their shares back to the Company at the original issuance price.

15 unchanged sentences

Although there were multiple closings of the Series C-1 Preferred Stock, there was no obligation under the initial closing for investors to purchase, or for the Company to sell to such investors, additional shares of Series C-1 Preferred Stock.

The issuance of the Series C-1 Preferred Stock resulted in changes to certain rights, preferences and privileges of the Series A Preferred Stock, the Series B Preferred Stock, the Series B-1 Preferred Stock and the Series C Preferred Stock.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock and the Series C Preferred Stock.

The Company concluded that such changes were not significant and resulted in a modification, rather than an extinguishment, of the previously outstanding Redeemable Convertible Preferred Stock.

3 unchanged sentences

Voting Rights

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to the number of votes equal to the number of whole shares of common stock into which such holders of the Redeemable Convertible Preferred Stock could convert on the record date for determining stockholders entitled to vote.

The holders of outstanding shares of the Redeemable Convertible Preferred Stock were entitled to vote, together with the holders of common stock, on all matters submitted to the stockholders for a vote, and were entitled to the number of votes equal to the number of whole shares of common stock into which such holders of the Redeemable Convertible Preferred Stock could convert on the record date for determining stockholders entitled to vote.

Except for the actions requiring the approval or consent of the majority of the holders of the Redeemable Convertible Preferred Stock, the holders of the Redeemable Convertible Preferred Stock would vote together with the holders of common stock and vote as a single class.

5 unchanged sentences

No dividends were declared or paid by the Company on the Redeemable Convertible Preferred Stock.

The Company’s cumulative dividends on its Redeemable Convertible Preferred Stock as of December 31, 2019 were as follows (in thousands):

Series A Preferred Stock $ 1,857

Series B Preferred Stock 5,228

Series B-1 Preferred Stock 431

Series C Preferred Stock 289

No dividends could be declared, paid or set aside to any other class or series of capital stock (other than dividends on shares of common stock payable in common stock) unless, in addition to obtaining any consents otherwise required in the Company’s Amended and Restated Certificate of Incorporation, the holders of the Redeemable Convertible Preferred Stock first received a dividend on each outstanding share in an amount at least equal to the greater of:

3 unchanged sentences

Liquidation Rights

In the event of any voluntary or involuntary liquidation event, dissolution, winding up of the Company or upon the occurrence of certain events designated by a majority of the holders of the Redeemable Convertible Preferred Stock, and at least two out of three specific holders, to be a deemed liquidation event, each holder of the then outstanding Series C-1 Preferred Stock, Series C Preferred Stock, Series B-1 Preferred Stock and Series B Preferred Stock was entitled to receive, prior and in preference to any distributions to the holders of Series A Preferred Stock and common stock, an amount equal to the greater of (i) original issuance price (adjusted in the event of any stock dividend, stock split, combination or other similar activity) plus any cumulative accrued dividends, whether or not declared, with any other dividends declared but unpaid thereon, or (ii) the amount such holder would have received if such holder had converted its shares into common stock immediately prior to such liquidation event.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock and common stock, an amount equal to the greater of (i) original issuance price (adjusted in the event of any stock dividend, stock split, combination or other similar activity) plus any cumulative accrued dividends, whether or not declared, with any other dividends declared but unpaid thereon, or (ii) the amount such holder would have received if such holder had converted its shares into common stock immediately prior to such liquidation event.

After the payment of all preferential amounts to the holders of the Series C-1 Preferred Stock, Series C Preferred Stock, Series B-1 Preferred Stock and Series B Preferred Stock, each holder of the then outstanding Series A Preferred Stock was entitled to receive, prior and in preference to any distributions to the holders of common stock, an amount equal to the greater of (i) original issuance price (adjusted in the event of any stock dividend, stock split, combination or other similar activity) plus any cumulative accrued dividends, whether or not declared, with any other dividends declared but unpaid thereon, or (ii) the amount such holder would have received if such holder had converted its shares into common stock immediately prior to such liquidation event.

3 unchanged sentences

Each share of the Redeemable Convertible Preferred Stock would automatically convert into common stock at the applicable conversion ratio then in effect for each series of the Redeemable Convertible Preferred Stock upon either (i) the closing of the sale of shares of common stock at a price of at least $ 10.30 per share in a firm-commitment underwritten public offering pursuant to an effective registration statement resulting in at least $ 75.0 million of gross proceeds and the listing of the Company’s common stock on the New York Stock Exchange, The Nasdaq Global Select Market, or The Nasdaq Global Market or (ii) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the outstanding Redeemable Convertible Preferred Stock, voting together as a single class and at least two of three specific holders.

As of December 31, 2019, each share of the Redeemable Convertible Preferred Stock was convertible into 0.4673 shares of common stock, as adjusted for the Company's reverse stock split.

Upon conversion pursuant to the completion of the IPO, the applicable conversion price for the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock was equal to $ 2.14 , $ 6.42 , $ 8.03 , $ 11.02 and $ 12.13 , respectively, as adjusted for the Company’s reverse stock split.

2 unchanged sentences

Common Stock and Preferred Stock

On October 20, 2020, the Company completed its IPO, pursuant to which it issued and sold 11,500,000 shares of its common stock at a public offering price of $ 19.00 per share, including 1,500,000 shares of common stock issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

The IPO resulted in net proceeds of $ 200.3 million, after deducting underwriting discounts and commissions and other offering expenses.

Upon the closing of the IPO, all 53,644,314 outstanding shares of the Redeemable Convertible Preferred Stock automatically converted into 25,067,977 shares of common stock pursuant to the terms of the Company's Amended and Restated Certificate of Incorporation at the then-current conversion ratio for each series, as adjusted for the Company's reverse stock split.

On October 8, 2020, the Board and the Company’s stockholders approved a one-for-2.14 reverse stock split of its issued and outstanding shares of common stock.

Accordingly, all shares of common stock, per share amounts, aggregate par value and additional paid-in capital amounts for all periods presented in the accompanying consolidated financial statements and related notes have been retroactively adjusted, where applicable, to reflect the reverse stock split.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, the authorized capital stock of the Company included 150,000,000 shares of common stock, $ 0.0001 par value, pursuant to the Amended and Restated Certificate of Incorporation effective upon the completion of the IPO.

On October 20, 2020, the Company completed its IPO in which the Company issued and sold 11,500,000 shares of its common stock at a public offering price of $ 19.00 per share, including 1,500,000 shares of common stock issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

The Company raised approximately $ 200.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Upon the closing of the IPO, all 53,644,314 outstanding shares of the Company’s Redeemable Convertible Preferred Stock automatically converted into 25,067,977 shares of common stock pursuant to the terms of the Company's Amended and Restated Certificate of Incorporation filed on October 20, 2020 at the then-current conversion ratio for each series, as adjusted for the Company's reverse stock split.

On May 18, 2021, the Company completed a follow-on public offering in which the Company issued and sold 5,750,000 shares of its common stock at a public offering price of $ 18.25 per share, including 750,000 shares of common stock issued and sold pursuant to the underwriters' exercise, in full, of their option to purchase additional shares of common stock, for aggregate gross proceeds of $ 104.9 million.

The Company received approximately $ 98.4 million in net proceeds after deducting discounts, commissions and offering expenses payable by the Company.

On November 3, 2021, the Company filed an automatic shelf registration with the Securities and Exchange Commission , which was automatically declared effective on November 3, 2021 in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof.

The Company also simultaneously entered into an Open Market Sales Agreement ("the sales agreement"), with Jefferies LLC ("Jefferies"), to provide for the offering, issuance and sale of up to an aggregate amount of $ 125.0 million of common stock from time to time in at-the-market offerings under the shelf registration and subject to the limitations thereof.

Jefferies is entitled to compensation at a commission rate of 3 % of the gross sales price of common stock sold under the sales agreement.

As of December 31, 2021, the Company had issued 391,997 shares under the sales agreement for aggregate gross proceeds of $ 7.6 million.

The Company received approximately $ 7.0 million of net proceeds after deducting discounts, commissions and offering expenses payable by the Company.

As of December 31, 2021 and 2020, the authorized capital stock of the Company included 150,000,000 shares of common stock, $ 0.0001 par value, pursuant to the Amended and Restated Certificate of Incorporation effective upon the completion of the IPO.

Holders of such shares of common stock have the exclusive right to vote for the election of the Company's directors and are entitled to one vote per share.

1 unchanged sentence

Dividends may be declared and paid to such holders only when, as, and if declared by the Board or an authorized committee thereof.

As of December 31, 2019, the authorized capital stock of the Company included 46,000,000 shares of common stock, $ 0.0001 par value.

Such holders had rights, preferences and privileges subject to and qualified by the rights, preferences and privileges of the Redeemable Convertible Preferred Stock.

Such holders of common stock were entitled to one vote per share, together with the holders of the Redeemable Convertible Preferred Stock, on all matters submitted to the stockholders for a vote, and were not entitled to receive dividends.

In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment of preferential amounts required to be paid to the holders of the Redeemable Convertible Preferred Stock, the holders of common stock were entitled to a pro rata distribution of the Company's remaining assets based on the number of shares held by each such holder.

As of December 31, 2020, the Company did no t hold any treasury shares.

A s of December 31, 2021, the Company did no t hold any treasury shares.

Shares Reserved for Future Issuance

3 unchanged sentences

Shares reserved for future awards under the 2020 Employee Stock Purchase Plan 654,204 327,102

Shares reserved for future awards under the 2017 Stock Incentive Plan — 617,101

Series A Preferred Stock — 3,773,820

Series B Preferred Stock — 6,969,173

Series B-1 Preferred Stock — 1,246,133

Series C Preferred Stock — 4,582,257

Shares reserved for vesting of restricted stock — 48,190

Shares reserved for vesting of restricted stock units 440,079 —

Total shares of authorized common stock reserved for future issuance 10,230,564 9,308,424

Preferred Stock

As of December 31, 2020, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, $ 0.0001 par value, in one or more series, and is authorized to fix the powers, designations, preferences and relative participating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company's shareholders.

The Company was not authorized to issue any such shares as of December 31, 2019.

As of December 31, 2020, the Company had no shares of undesignated preferred stock issued or outstanding.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock

As of December 31, 2021 and 2020, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, $ 0.0001 par value, in one or more series, and is authorized to fix the powers, designations, preferences and relative participating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company's shareholders.

As of December 31, 2021 and 2020, the Company had no shares of undesignated preferred stock issued or outstanding.

Stock-Based Compensation

2020 Stock Option and Incentive Plan

On September 9, 2020, the Board approved the 2020 Stock Option and Incentive Plan (the "2020 Plan"), which was subsequently approved by its stockholders and became effective on October 15, 2020.

On September 9, 2020, the Board approved the 2020 Stock Option and Incentive Plan (the "2020 Plan"), which was subsequently approved by its stockholders and became effective upon the Company's IPO on October 15, 2020.

The 2020 Plan replaced the 2017 Stock Incentive Plan (the "2017 Plan") and no additional awards will be granted under the 2017 Plan following the closing of the IPO.

1 unchanged sentence

The 2020 Plan allows the Company to grant stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors and consultants.

The 2020 Plan is administered by the Compensation Committee of the Board, which has the authority to grant awards, to accelerate at any time the exercisability or vesting of any award and to determine the specific terms and conditions of each award, subject to the provisions of the 2020 Plan.

The total number of shares of common stock authorized for issuance under the 2020 Plan as of December 31, 2020 was 3,271,028 shares.

There were no shares of common stock authorized for issuance under the 2020 Plan as of December 31, 2019.

As of December 31, 2020, the Company had issued only stock options under the 2020 Plan.

Stock options issued comprise service-based awards granted to employees.

Stock options issued under the 2020 Plan typically have vesting conditions in which 25 % vests upon the first anniversary of a specified vesting commencement date, and the remaining 75 % vests in 36 monthly installments over the remaining three years .

Vesting of stock options is subject to the recipient’s continued employment or service.

Stock options issued under the 2020 Plan expire 10 years from the date of grant.

Shares that expire, are terminated, surrendered or canceled under the 2020 Plan without having been fully exercised will be available for future awards.

In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future awards.

Upon stock option exercise, the Company issues new shares and delivers them to the participant.

2017 Stock Incentive Plan

On May 9, 2017, the Board adopted the 2017 Plan.

The 2017 Plan allows the Company to grant stock options, restricted stock, restricted stock units and other stock-based awards to employees, officers, directors, consultants and advisors of the Company.

The 2017 Plan is administered by the Board, which has the authority to grant awards and determine the terms of awards under the 2017 Plan, provided that generally the exercise price per share of stock options granted may not be less than 100% of the fair market value of a share of the Company’s common stock on the date of grant, and the term of stock options granted may not exceed ten years .

The total number of shares of common stock authorized for issuance under the 2020 Plan as of December 31, 2021 and 2020 was 5,184,455 shares and 3,271,028 shares, respectively.

Any authorization to issue new options under the 2017 Plan was cancelled upon the effectiveness of the 2020 Plan and no further awards will be granted under the 2017 Plan.

As of December 31, 2020 and 2019, the Company had issued only stock options and restricted stock under the 2017 Plan.

Stock options issued comprise service-based awards granted to employees, directors and non-employee consultants.

Stock options and restricted stock issued under the 2017 Plan typically have vesting conditions in which 25 % vests upon the first anniversary of a specified vesting commencement date, and the remaining 75 % vests in 36 monthly installments over the remaining three years .

Vesting of stock options is subject to the recipient’s continued employment or service.

The Company has the right to repurchase any unvested shares of restricted stock held by a recipient during the vesting period if the relationship between the recipient and the Company has terminated.

Stock options issued under the 2017 Plan expire ten years from the date of grant.

Shares that expire, are terminated, surrendered or canceled under the 2017 Plan without having been fully exercised will be available for future awards under the 2020 Plan.

In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

available for future awards.

Stock options issued under the 2020 Plan and 2017 Plan expire ten years from the date of grant.

Shares that expire, are terminated, surrendered or canceled under the 2020 Plan and 2017 Plan without having been fully exercised will be available for future awards.

In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future awards.

Upon stock option exercise, the Company issues new shares and delivers them to the participant.

1 unchanged sentence

On September 9, 2020, the Board approved the 2020 Employee Stock Purchase Plan (the "2020 ESPP"), which was subsequently approved by its stockholders and became effective on October 15, 2020.

The 2020 ESPP permits employees whose customary employment is for more than 20 hours per week to purchase common stock through payroll deductions (which cannot exceed 15 percent of each employee's compensation) at the lower of 85 percent of fair market value at the beginning of the purchase period or the end of each purchase period.

The Company may make one or more offerings each year to its employees to purchase shares under the 2020 ESPP.

Offerings will usually begin on or around each May 1 and November 1 and will continue for six-month periods, referred to as offering periods.

During the year ended December 31, 2020, there were no shares purchased under the 2020 ESPP as the first offering period had not opened as of December 31, 2020.

The total shares authorized for issuance under the 2020 ESPP were 327,102 shares as of December 31, 2020.

There were no shares authorized for issuance under the 2020 ESPP as of December 31, 2019.

The first offering under the 2020 ESPP opened on November 15, 2021.

During the years ended December 31, 2021 and 2020, there were no shares issued under the 2020 ESPP.

Th e total shares authorized for issuance under the 2020 ESPP as of December 31, 2021 and 2020 was 654,204 shares and 327,102 shares, respectively .

Restricted Common Stock

Prior to the adoption of the 2017 Plan, the Company granted restricted common stock in 2016 with time-based vesting conditions to certain employees and non-employee founders of the Company pursuant to individual award agreements.

The restricted common stock granted pursuant to these agreements vests either:

(i) 25 % upon vesting commencement or the first anniversary of a specified vesting commencement date, and the remaining 75 % monthly over 36 months thereafter, (ii) monthly over 48 months after a specified vesting commencement date, or (iii) monthly over 12 months from a specified vesting commencement date.

The Company had the right to repurchase the unvested shares held by a recipient during the vesting period if the relationship between the recipient and the Company has terminated.

Shares of restricted common stock are not accounted for as outstanding common stock until they have vested.

Unvested shares of restricted common stock may not be sold or transferred by the holder.

All granted restricted common stock had vested as of December 31, 2020.

The total fair value of restricted common stock that vested during the year ended December 31, 2020 was $ 0.5 million.

The Company did not grant any restricted common stock during the years ended December 31, 2021 and 2020.

The following table summarizes all of the Company’s restricted common stock activity, including restricted common stock issued under the 2017 Plan and under individual award agreements prior to the adoption of the 2017 Plan:

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity:

Shares Weighted

Unvested as of December 31, 2020 — $ —

Vested ( 48,190 ) 0.06

Repurchased — —

Issued 496,113 41.57

Forfeited ( 56,034 ) 39.25

Unvested as of December 31, 2021 440,079 $ 41.86

The total fair value of restricted common stock that vested during the years ended December 31, 2020 and 2019 was $ 0.5 million and $ 0.6 million, respectively.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, total unrecognized compensation cost related to unvested restricted stock units was $ 14.5 million, which is expected to be recognized over a weighted-average period of 3.23 years.

Stock Options

13 unchanged sentences

Vested and expected to vest as of December 31, 2021 6,468,501 $ 16.92 8.62 $ 57,146

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at December 31, 2020.

Stock Option Valuation

The weighted-average assumptions that the Company used in the Black-Scholes option pricing model to determine the grant-date fair value of stock options granted to employees, members of the Board and non-employees on the date of grant were as follows:

The aggregate intrinsic value of stock options exercised for the year ended December 31, 2020 was $ 0.7 million.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested and expected to vest is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at December 31, 2021.

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

Valuation of Stock Options

Year Ended December 31,

3 unchanged sentences

Expected dividend yield — % — %

The weighted-average grant-date fair value of the Company’s stock options granted during the years ended December 31, 2020 and 2019 was $ 6.51 and $ 2.25 , respectively.

Weighted average grant-date fair value per share $ 27.58 $ 6.51

As of December 31, 2021, total unrecognized compensation cost related to unvested stock options was $ 57.0 million, which is expected to be recognized over a weighted-average period of 2.72 years.

In December 2020, the Company recognized approximately $ 2.1 million of stock-based compensation expense, recorded within general and administrative expense, related to the modification of option awards granted to former employee in conjunction with their termination of employment.

The former employee will continue to vest in 53,319 option awards through September 2021.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

4 unchanged sentences

Total stock-based compensation expense $ 22,693 $ 5,211

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, total unrecognized compensation cost related to unvested stock-based awards was $ 26.7 million, which is expected to be recognized over a weighted-average period of 3.58 years.

Significant Agreements

23 unchanged sentences

As part of the agreement, the Company agreed to provide up-front consideration of $ 2.1 million, consisting of the $ 1.0 million deposit, $ 0.7 million in cash reimbursements for certain historical costs previously incurred by RogCon, and $ 0.4 million for the retirement of existing loan balances as of September 11, 2019.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company concluded that the License Agreement represented the acquisition of in-process research and development assets with no alternative future use.

1 unchanged sentence

Subsequent to September 11, 2019, the Company will reimburse RogCon for its out-of-pocket costs incurred for activities performed under the License Agreement.

The Company expenses these costs as incurred as research

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and development.

The Company expenses these costs as incurred as research and development.

The Company expensed $ 0.1 million and $ 0.2 million for the reimbursement of RogCon’s out-of-pocket costs in the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the Company had accrued expenses of $ 0.3 million due to RogCon under the License Agreement.

Additionally, the Company may pay RogCon a milestone payment of $ 3.0 million and profit share payments.

12 unchanged sentences

The reimbursement of out-of-pocket costs is recognized as research and development expense as incurred.

The Company expensed a total of $ 1.7 million and $ 0.6 million, inclusive of the upfront payment of $ 0.3 million, as research and development expense under the Collaboration Agreement for the years ended December 31, 2020 and 2019, respectively.

Ionis granted the Company an exclusive option to obtain the rights and license related to the development candidate, which the Company may exercise following completion of the IND-enabling toxicology study.

Upon option exercise, the Company will pay Ionis a $ 2.0 million license fee.

The Company expensed a total of $ 1.9 million and $ 1.7 million, as research and development expense under the Collaboration Agreement for the years ended December 31, 2021 and 2020, respectively.

Ionis granted the Company an exclusive option to obtain the rights and license to further develop and commercialize a development candidate in the field of epilepsy and neurodevelopmental disorders, other than Dravet Syndrome, following the results of the IND-enabling toxicology study.

The Company exercised this exclusive option in January 2022 and paid a $ 2.0 million license fee.The Company concluded that there was no accounting recognition for the exclusive option until such option was exercised because it was a unilateral right of the Company that was priced at an amount that approximated fair value.

The Company recognized the license fee in January 2022.

After option exercise, the Company is responsible for clinical development and commercialization of the development candidate.

If the option is not exercised, the Collaboration Agreement will expire, and the Company will have no further rights to the development candidate.

Additionally, if the option is not exercised, at the request of Ionis, the Company will assign the RogCon License Agreement to Ionis.

The Company concluded that there is no accounting recognition for the exclusive option unless and until such option is exercised because it is a unilateral right of the Company that is priced at an amount that approximates fair value.

If the Company exercises its exclusive option, Ionis may be entitled to development milestone payments, additional milestone payments, and sales royalties or sublicense fees.

Ionis may be entitled to development milestone payments, additional milestone payments, and sales royalties or sublicense fees.

The Collaboration Agreement will continue until the expiration of all payment obligations to Ionis, unless earlier terminated.

Either party may terminate the Collaboration Agreement upon material breach or insolvency of the other party or if Ionis is unable to identify a development candidate.

Either party may terminate the Collaboration Agreement upon material breach or insolvency of the other party.

Ionis may terminate if the Company fails to achieve a performance milestone.

The Company may terminate for convenience with prior written notice to Ionis.

Upon termination by the Company for convenience, the Company will stop selling all products, subject to certain wind-down provisions, and all products will revert back to Ionis.

Net Loss per Share

The Company may terminate

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

for convenience with prior written notice to Ionis.

Upon termination by the Company for convenience, the Company will stop selling all products, subject to certain wind-down provisions, and all products will revert back to Ionis.

Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

9 unchanged sentences

Outstanding stock options 6,468,501 5,944,546

Series A Preferred Stock — 3,773,820

Series B Preferred Stock — 6,969,173

Series B-1 Preferred Stock — 1,246,133

Series C Preferred Stock — 4,582,257

Unvested restricted common stock — 48,190

Unvested restricted stock units 440,079 —

Potential shares issuable under the ESPP 33,425 —

6,942,005 5,944,546

The shares of common stock issuable upon conversion of the Redeemable Convertible Preferred Stock for the year ended December 31, 2019 assumed automatic conversion in the event of a qualified public offering.

The Company maintains a full valuation allowance on its U.S.

4 unchanged sentences

and the Company’s effective tax rate was due primarily to the valuation allowance recorded to offset any potential tax benefit.

The income tax benefit recognized for the years ended December 31, 2020 and 2019 related to income tax associated with the Company’s operations in Australia.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax benefit (provision) recognized for the years ended December 31, 2021 and 2020 was not material.

The reconciliation of the U.S.

5 unchanged sentences

Non-deductible items ( 0.5 ) % ( 1.8 ) %

Foreign 0.2 % 0.2 %

Change in valuation allowance ( 29.4 ) % ( 27.9 ) %

1 unchanged sentence

Effective income tax rate — % — %

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net deferred tax assets consisted of the following (in thousands):

3 unchanged sentences

Research and development credits 9,296 3,053

Stock-based compensation 3,759 170

Accrued expenses 1,952 1,433

Leases 1,132 207

Stock-based compensation 170 60

Total gross deferred tax assets $ 86,916 $ 37,078

3 unchanged sentences

Operating lease right-of-use asset ( 959 ) ( 205 )

( 205 ) ( 393 )

Total gross deferred tax liabilities ( 959 ) ( 205 )

2 unchanged sentences

federal net operating loss carryforwards which may be able to offset future income tax liabilities of approximately $ 212.3 million and $ 97.1 million, respectively.

Federal net operating loss carryforwards of $ 7.7 million will expire at various dates through 2037 and approximately $ 89.4 million may be carried forward indefinitely.

As of December 31, 2020 and 2019, the Company also had state net operating loss carryforwards of approximately $ 94.5 million and $ 52.0 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2040.

As of December 31, 2020 and 2019, the Company had federal research and development tax credit carryforwards of approximately $ 2.4 million and $ 0.9 million, respectively, available to reduce future tax liabilities which expire at various dates through 2040.

As of December 31, 2020 and 2019, the Company had state research and development tax credit carryforwards of approximately $ 0.9 million and $ 0.4 million, respectively, available to reduce future tax liabilities which expire at various dates through 2035.

Federal net operating loss carryforwards of $ 7.7 million will expire at various dates from 2035 through 2037 and approximately $ 204.6 million may be carried forward indefinitely.

As of December 31, 2021 and 2020, the Company also had state net operating loss carryforwards of approximately $ 187.6 million and $ 94.5 million, respectively, which may be available to offset future income tax liabilities and expire at various dates from 2036 through 2041.

As of December 31, 2021 and 2020, the Company had federal research and development tax credit carryforwards of approximately $ 7.3 million and $ 2.4 million, respectively, available to reduce future tax liabilities which expire at various dates from 2039 through 2041.

As of December 31, 2021 and 2020, the Company had state research and development tax credit carryforwards of approximately $ 2.5 million and $ 0.9 million, respectively, available to reduce future tax liabilities which expire at various dates from 2031 through 2036.

The Company has generated research credits but has not conducted a study to document the qualified activity.

1 unchanged sentence

however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position.

A full valuation allowance has

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

4 unchanged sentences

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

7 unchanged sentences

The Company’s policy is to record interest and penalties related to uncertain tax positions as part of its income tax provision.

As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions and no such amounts have been recognized in the Company’s consolidated statement of operations and comprehensive loss for either year ended December 31, 2020 or 2019.

As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no such amounts have been recognized in the Company’s consolidated statement of operations for either year ended December 31, 2021 or 2020.

The statute of limitations for federal and state tax authorities is open for tax years ended December 31, 2018 through December 31, 2021.

6 unchanged sentences

During the years ended December 31, 2021 and 2020, the Company performed certain research and development activities pursuant to the Purdue License Agreement (Note 12).

During the years ended December 31, 2020 and 2019, related parties participated in each of the

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s offerings of the Redeemable Convertible Preferred Stock (Note 8).

During the year ended December 31, 2019, the Company reimbursed $ 0.2 million of third-party recruiting costs incurred by a significant shareholder on behalf of the Company.

These amounts were recorded in general and administrative expenses during the year ended December 31, 2019 and were within accrued expenses as of December 31, 2019.

During the year ended December 31, 2020, related parties participated in each of the Company’s offerings of the Redeemable Convertible Preferred Stock (Note 9).

Employee Benefit Plan

2 unchanged sentences

Under the plan, the Company is not obligated to match any participant contributions.

The Company made contributions of $ 0.5 million during the year ended December 31, 2020 and did no t make any contributions to the plan during the year ended December 31, 2019.

The Company made contributions of $ 1.0 million and $ 0.5 million during the years ended December 31, 2021 and 2020, respectively .

Subsequent Events

3 unchanged sentences

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