What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-07 compared with 2022-02-28 · 238 added, 297 removed, 642 unchanged (45% of the section changed)

7 unchanged sentences

Consolidated Statements of Comprehensive Loss

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

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

3 unchanged sentences

Opinion on the 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”).

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

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with 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.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has limited financial resources, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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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

Ulixacaltamide Essential1 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.

The Company’s accrued costs for research and development expenses totaled $10.7 million at December 31, 2022, including accruals related to the Company’s ulixacaltamide Essential1 clinical trial.

In addition, the Company’s prepaid expenses and other current assets were $10.4 million, which included amounts that were paid in advance of services incurred pursuant to the ulixacaltamide Essential1 clinical trial.

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.

Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period for the Company’s ulixacaltamide Essential1 clinical trial.

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.

Auditing the Company’s accrued and prepaid research and development costs for the ulixacaltamide Essential1 clinical trial was complex, as accounting for the costs associated with this clinical trial 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 ulixacaltamide Essential1 clinical trial, 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 evaluate the accrued and prepaid research and development costs for the ulixacaltamide Essential1 clinical trial, 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 determine 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.

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Operating lease liabilities 1,005 810

Current portion of deferred revenue 2,818 —

Total current liabilities 34,345 38,434

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Non-current portion of operating lease liabilities 2,495 3,501

Non-current portion of deferred revenue 2,182 —

Total liabilities 39,022 41,935

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Total other income 957 271

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

Benefit from income taxes — 8

Net loss $ ( 214,029 ) $ ( 167,061 )

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

Gain on repurchase of redeemable convertible preferred stock — 493

Net loss attributable to common stockholders $ ( 167,061 ) $ ( 70,323 )

Net loss per share attributable to common stockholders, basic and diluted $ ( 4.64 ) $ ( 3.94 )

6 unchanged sentences

Net loss $ ( 214,029 ) $ ( 167,061 )

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

Change in unrealized losses on marketable securities, net of tax 3 ( 176 )

Comprehensive loss $ ( 214,026 ) $ ( 167,237 )

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PRAXIS PRECISION MEDICINES, INC.

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

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Stock-based compensation expense — — 7,886 — — 7,886

Issuance of common stock from at-the-market public offerings 70,410 — 1,368 — — 1,368

Vesting of restricted stock units 81,130 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 17,850 ) — ( 230 ) — — ( 230 )

Issuance of common stock upon exercise of stock options 72,278 — 333 — — 333

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Stock-based compensation expense — — 7,611 — — 7,611

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 under employee stock purchase plan 51,645 — 454 — — 454

Vesting of restricted stock units 6,361 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 2,225 ) — ( 17 ) — — ( 17 )

Issuance of common stock upon exercise of stock options 13,143 — 67 — — 67

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Stock-based compensation expense — — 6,730 — — 6,730

Issuance of common stock from at-the-market public offerings, net of issuance costs of $ 109

1,105,006 — 2,962 — — 2,962

Vesting of restricted stock units 5,312 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 1,638 ) — ( 6 ) — — ( 6 )

Issuance of common stock upon exercise of stock options 180,241 — 409 — — 409

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Stock-based compensation expense — — 6,366 — — 6,366

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

Issuance of common stock under employee stock purchase plan 89,739 — 163 — — 163

Issuance of common stock from at-the-market public offerings 2,419,857 — 5,231 — — 5,231

Vesting of restricted stock units 12,000 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 3,470 ) — ( 7 ) — — ( 7 )

Change in unrealized loss on marketable securities, net of tax — — — — 363 363

3 unchanged sentences

PRAXIS PRECISION MEDICINES, INC.

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Amounts in thousands, except share data)

Preferred Stock Series B

Preferred Stock Series B-1

Preferred Stock Series C

Preferred Stock Series C-1

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

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Stockholders’

Equity (Deficit)

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

Shares Amount

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

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 — — 4,666 — — 4,666

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

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

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 — — 5,400 — — 5,400

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

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

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 — — 6,521 — — 6,521

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

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

Change 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

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 — — — — —

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

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

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

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

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

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Operating lease liabilities ( 811 ) ( 763 )

Deferred revenue 5,000 —

Other 56 ( 41 )

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Maturities of marketable securities 180,355 24,700

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

Net cash provided by (used in) investing activities 96,889 ( 140,520 )

Cash flows from financing activities:

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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 )

Payment of issuance costs for at-the-market offerings and initial public offering ( 262 ) ( 575 )

Payments of tax withholdings related to vesting of restricted stock units ( 260 ) —

Proceeds from exercise of options and employee stock purchase plan contributions 1,426 2,447

Net cash provided by financing activities 10,465 107,586

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

Decrease in cash, cash equivalents and restricted cash ( 77,689 ) ( 157,488 )

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

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Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ — $ 4,068

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

Offering costs included in accrued expenses $ — $ 262

Purchases of property and equipment included in accrued expenses $ — $ 267

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

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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, 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” or the “Company”) is a clinical-stage biopharmaceutical company translating insights from genetic epilepsies 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 both rare and more prevalent neurological disorders.

The Company is applying genetic insights to the discovery and development of therapies for neurological disorders through two proprietary platforms, using its understanding of shared biological targets and circuits in the brain.

Each platform has multiple programs currently, with significant potential for additional program and indication expansion:

• Cerebrum ™, the Company's small molecule platform, utilizes deep understanding of neuronal excitability and neuronal networks and applies a series of computational and experimental tools to develop orally available precision therapies

• Solidus ™, the Company's antisense oligonucleotide, or ASO, platform, is an efficient, targeted precision medicine discovery and development engine anchored on a proprietary, computational methodology

The Company's platforms utilize a deliberate, pragmatic and patient-guided 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 diversified, multimodal CNS portfolio with four clinical-stage product candidates across movement disorders and epilepsy.

For the Company's most advanced product candidate under the Cerebrum™ platform, ulixacaltamide (formerly known as PRAX-944), it expects to announce topline results from the Phase 2b Essential1 clinical trial in essential tremor in the first quarter of 2023.

The Company also plans to initiate an ulixacaltamide Phase 2 clinical trial in Parkinson's disease in the first quarter of 2023 and expects topline results in the fourth quarter of 2023.

The Company plans to initiate its PRAX-562 Phase 2 EMBOLD study in the first quarter of 2023, with initial cohorts in SCN2A-DEE and SCN8A-DEE, and expects to announce topline results for both cohorts in the second half of 2023.

The Company also initiated a Phase 1 healthy volunteer study of PRAX-628 in the fourth quarter of 2022 and expects to report topline results in mid-2023.

For the Company's most advanced product candidate under the Solidus™ platform, PRAX-222, it expects to announce topline results from the first dose cohort of its EMBRAVE study in mid-2023.

Praxis was incorporated in 2015 and commenced operations in 2016.

1 unchanged sentence

From inception through December 31, 2022, the Company raised $ 526.0 million in aggregate cash proceeds from these transactions, net of issuance costs.

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

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 a net loss of $ 214.0 million for the year ended December 31, 2022.

1 unchanged sentence

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

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 Company expects that its cash, cash equivalents and marketable securities as of December 31, 2022, together with net proceeds raised under the Open Market Sale Agreement ("the Sales Agreement") subsequent to December 31, 2022, may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements which raises substantial doubt about the Company's ability to continue as a going concern, and the Company will need to obtain additional funding.

The Company expects to finance its operations through potential public or private equity financings, debt financings, collaboration agreements or other capital sources.

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

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There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

7 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, 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.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accrued and prepaid research and development expense, 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.

35 unchanged sentences

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

government agencies and

government agencies and 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

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.

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.

41 unchanged sentences

The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.

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

The Company did no t record any impairment losses on long-lived assets during the years ended December 31, 2022 and 2021.

The Company accounts for leases in accordance with ASC 842.

11 unchanged sentences

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

Collaboration Agreements

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Redeemable Convertible Preferred Stock

Prior to the automatic conversion of all outstanding shares of the Redeemable Convertible Preferred Stock upon the closing of the IPO, the Company recorded all Redeemable Convertible Preferred Stock upon issuance at its respective fair value or original issuance price, less issuance costs and any associated discounts.

The Company classified its Redeemable Convertible Preferred Stock outside of stockholders’ (deficit) equity as the redemption of such shares was outside the Company’s control.

The Company adjusted the carrying values of the Redeemable Convertible Preferred Stock to redemption value when the redemption value exceeded the carrying value.

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

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (" ASC 808"), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities.

To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and its collaboration partner are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers (" ASC 606").

If it is concluded that some or all aspects of the arrangement represent a transaction with a customer, the Company will account for those aspects of the arrangement within the scope of ASC 606.

ASC 808 provides guidance for the presentation and disclosure of transactions in collaborative arrangements, but it does not provide recognition or measurement guidance.

Therefore, if the Company concludes a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, the Company considers the guidance in other accounting literature as applicable or by analogy to account for such transaction.

The classification of transactions under the Company’s arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

Revenue Recognition

The Company enters into collaboration agreements which are within the scope of ASC 606 under which the Company may license or provide options to license certain development or product candidates and, in certain cases, may perform research and development services.

The terms of these agreements may include payment of non-refundable, upfront fees, option exercise fees, development and commercial milestone payments and royalties on net sales of licensed products.

Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for agreements determined to be within the scope of ASC 606, the Company performs the following five steps:

(1) identify the contract with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenue when or as the Company satisfies each performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations.

The Company then assesses whether each promised good or service is distinct.

When the Company offers options for additional goods or services, such as an option to obtain a license, it evaluates whether such options are material rights that should be treated as separate performance obligations.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract.

The consideration may include fixed consideration or variable consideration.

At the inception of each agreement that includes variable consideration, the Company evaluates the amount of potential payments and the likelihood that the payments will be received to estimate the amount expected to be received.

The amount of variable consideration included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal of the cumulative revenue recognized will not occur in a future period.

The Company recognizes as revenue the amount of the transaction price that it allocated to the respective performance obligation when or as each performance obligation is satisfied, either at a point in time or over time.

If the performance obligation is satisfied over time, the Company recognizes revenue based on the use of an output or input method.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

For example, f or research and development services that are recognized over time, the Company measures its progress using an input method.

The input methods used are based on the effort the Company expends or costs it incurs toward the satisfaction of its performance obligation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company estimates the amount of effort it expends, including the time it estimates it will take to complete the activities, or costs it incurs in a given period, relative to the estimated total effort or costs to satisfy the performance obligation.

This results in a percentage that is multiplied by the transaction price to determine the amount of revenue recognized each period.

If the estimates or judgements change over the course of the collaboration, they may affect the timing and amount of revenue that is recognized in the current and future periods.

Upfront payments are recorded as contract liabilities within deferred revenue on the consolidated balance sheets until the Company performs its obligations under these agreements.

Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

As of December 31, 2022, the Company had one collaboration, option and license agreement with UCB Biopharma SRL ("UCB"), which it entered into in December 2022.

The accounting accounting related to the collaboration agreement is outlined in Note 9, UCB Option and License Agreement.

Research and Development Costs

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For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting period.

The Company determines the fair value of restricted stock awards in reference to the fair value of its common stock less any applicable purchase price.

The Company issues stock-based awards with service-based vesting conditions and records the expense for these awards on a straight-line basis over the vesting period.

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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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s stock;

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;

(ii) the expected term of the award;

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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.

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

Foreign Currency

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Comprehensive Loss

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

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

For the years ended December 31, 2022 and 2021,comprehensive loss consists of net loss and changes in unrealized losses on marketable securities.

Net Loss per Share

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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

The Company follows the two-class method to compute net loss per share attributable to common stockholders as the Company has issued shares that meet the definition of participating securities.

The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income (losses) for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (losses) for the period had been distributed.

During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.

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 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.

Diluted 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, after giving consideration to the dilutive effect of potentially dilutive common shares.

For purposes of this calculation, outstanding options to purchase shares of common stock, unvested shares of restricted common stock and shares of redeemable convertible preferred stock are considered potentially dilutive common shares.

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.

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

Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period, after giving consideration to the dilutive effect of potentially dilutive common shares.

For purposes of this calculation, outstanding options to purchase shares of common stock, unvested restricted common stock and potential shares issuable under the employee stock purchase plan are considered potentially dilutive common shares.

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

Recent Accounting Pronouncements

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Recently Issued Accounting Pronouncements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash

As of December 31, 2022 and 2021 the Company had restricted cash of $ 0.4 million and $ 1.0 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.

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, 2022 and 2021.

The Company's Cambridge, Massachusetts sublease expired on December 31, 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.

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.

The following is a summary of the Company's investment portfolio as of December 31, 2022 and 2021 (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022

Gross Unrealized Estimated

Amortized Cost Gains Losses Fair Value

Cost Gains Losses Fair Value

Available-for-sale securities:

Corporate debt securities $ 35,042 $ — $ ( 163 ) $ 34,879

Debt securities issued by U.S.

government agencies 4,005 — ( 10 ) 3,995

Total securities with a maturity of one year or less $ 39,047 $ — $ ( 173 ) $ 38,874

Total available-for-sale securities $ 39,047 $ — $ ( 173 ) $ 38,874

As of December 31, 2021

Gross Unrealized Estimated

Cost Gains Losses Fair Value

Available-for-sale securities:

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

Commercial paper 34,993 — — 34,993

10 unchanged sentences

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.

The Company did not record any impairment related to its available-for-sale securities during the years ended December 31, 2022 and 2021.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Assets

As of December 31, 2022

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Corporate debt securities — 34,879 — 34,879

Commercial paper — 34,993 — 34,993

Debt securities issued by U.S.

government agencies 3,995 — — 3,995

Other debt securities — 6,399 — 6,399

$ 38,176 $ 34,879 $ — $ 73,055

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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

11 unchanged sentences

Property and equipment, net $ 971 $ 1,213

Depreciation expense was not significant for the years ended December 31, 2021 and 2020.

Depreciation expense was $ 0.4 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.

PRAXIS PRECISION MEDICINES, INC.

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Accrued personnel-related expenses 2,803 7,180

Accrued professional services 1,539 133

Accrued other 362 1,014

Accrued other expenses 2,313 1,901

Total accrued expenses $ 15,850 $ 26,844

Commitments and Contingencies

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.

In May 2021, the Company entered into a sublease agreement for office space located in Boston, Massachusetts.

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

3 unchanged sentences

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.

In October 2018, the Company entered into a sublease agreement for office space located in Cambridge, Massachusetts which expired on December 31, 2021.

The base rent increased by approximately 1 % annually.

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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):

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

As of December 31,

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

For the year ended

For the year ended December 31,

Operating lease cost $ 1,102 $ 1,412

2 unchanged sentences

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

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

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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.

Future lease payments under non-cancelable lease agreements as of December 31, 2022 were as follows (in thousands):

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The Company, from time to time, may be party to litigation arising in the ordinary course of business.

The Company was not subject to any legal proceedings during the years ended December 31, 2021 and 2020, and no material legal proceedings are currently pending or threatened.

The Company was not subject to any material legal proceedings during the years ended December 31, 2022 and 2021, and no material legal proceedings are currently pending or threatened.

Purchase Orders

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

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

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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, 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.

On February 19, 2020 and March 3, 2020, the investors exercised their put option in full via the execution of Stock Redemption and Release Agreements in order to effect the repurchase.

Pursuant to the Stock Redemption and Release Agreements, the Company agreed to repurchase a total of 5,825,243 shares of Series C Preferred Stock at the original issuance price of $ 5.15 per share, for an aggregate cash repurchase price of 30.0 million.

Under the terms of the Stock Redemption and Release Agreements, the investors waived their right to cumulative dividends that had accumulated from the original issuance date through the date of repurchase.

The 5,825,243 shares of Series C Preferred Stock were retired upon repurchase, and subsequently authorized for reissuance pursuant to a waiver to the Company’s Amended and Restated Certificate of Incorporation entered into by the Company and the holders of the Redeemable Convertible Preferred Stock.

The Company determined that the additional put right that was granted to the investors represented a modification of the affected shares of Series C Preferred Stock, but that it did not result in incremental value to the shareholders.

As there was no incremental value associated with the modification, there was no impact to the accounting for the Series C Preferred Stock.

The Company also determined that the put right did not require bifurcation, as it does not contain the characteristics of a derivative instrument.

Further, the Company determined that the shares of Series C Preferred Stock that were subject to repurchase did not become mandatorily redeemable until the execution of the Stock Redemption and Release Agreements because the parties did not have an unconditional legal obligation to complete the redemptions until the associated agreements were finalized.

Such determination was made in consultation with legal counsel.

Accordingly, the Company recorded each of the redemptions on the respective date of repurchase and recognized a gain on repurchase equal to the difference between the repurchase price and the carrying value of the Series C Preferred Stock on the respective date of repurchase.

The aggregate gain of $ 0.5 million was recorded upon repurchase as an adjustment to accumulated deficit in the statement of redeemable convertible preferred stock and stockholders’ deficit.

The gain relates exclusively to the dividends accrued on the repurchased shares, which were waived by the investors as part of the Stock Redemption and Release Agreements.

On April 15, 2020 and May 8, 2020, the Company completed additional closings for the sale and issuance of its Series C Preferred Stock for a total of 4,563,108 shares at $ 5.15 per share for aggregate cash proceeds of $ 23.5 million, less an immaterial amount of issuance costs.

On July 24, 2020, the Company entered into the Series C-1 Preferred Stock Purchase Agreement, which authorized the sale and issuance of up to 19,444,453 shares of its Series C-1 Preferred Stock at a purchase price of $ 5.67 per share.

During the year ended December 31, 2020, the Company issued all 19,444,453 shares of Series C-1 Preferred Stock for gross cash proceeds of $ 110.3 million, and incurred issuance costs of approximately $ 0.2 million.

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

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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.

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

Rights, Preferences and Privileges

Prior to the conversion of the Redeemable Convertible Preferred Stock into shares of common stock upon the completion of the IPO on October 20, 2020, the holders of the Redeemable Convertible Preferred Stock had the following rights, preferences and privileges:

Voting Rights

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.

The holders of the Series A Preferred Stock, exclusively and as a separate class, were entitled to elect two directors of the Company.

The holders of the Series B Preferred Stock and Series B-1 Preferred Stock, exclusively and together as a separate class, were entitled to elect two directors of the Company.

The holders of common stock and of any other class or series of voting stock (including the Redeemable Convertible Preferred Stock), exclusively and voting as a single class, were entitled to elect the balance of total number of directors of the Company.

The holders of the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock were entitled to accrue cumulative dividends at an annual rate of $ 0.08 , $ 0.24 , $ 0.30 , $ 0.412 and $ 0.4536 per share, respectively, subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Redeemable Convertible Preferred Stock.

Dividends accrued from day to day whether or not declared by the Board, and were payable only when, as, and if declared by the Board.

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

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:

(i) all accrued and unpaid dividends and (ii) in the case of a dividend being distributed to common stock or any class or series of capital stock that is convertible into common stock, the equivalent dividend on an as-converted basis or (iii) in the case of a dividend being distributed on a series or class not convertible into common stock, an additional dividend equal to a dividend rate calculated based on the respective original issue price of the Preferred Stock.

The original issue price per share was equal to $ 1.00 for the Series A Preferred Stock, $ 3.00 for the Series B Preferred Stock, $ 3.75 for the Series B-1 Preferred Stock and $ 5.15 for the Series C Preferred Stock.

The holders of the Series C Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock were entitled to receive dividends prior to any dividends on the Series A Preferred Stock.

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

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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.

After payments have been made in full to the holders of the Redeemable Convertible Preferred Stock, then, to the extent available, the remaining amounts would be distributed among the holders of the shares of common stock, pro rata based on the number of shares held by each holder.

Each share of the Redeemable Convertible Preferred Stock was convertible, at any time, at the option of the holder, and without the payment of additional consideration, into such shares of non-assessable shares of common stock as is determined by dividing the original issue price by the applicable conversion price in effect at the time of conversion.

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 initially equal to $ 2.14 , $ 6.42 , $ 8.03 , $ 11.02 and $ 12.13 , respectively, as adjusted for the Company's reverse stock split.

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.

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.

Accordingly, each share of the Redeemable Convertible Preferred Stock converted into approximately 0.4673 shares of common stock.

Each series of the Redeemable Convertible Preferred Stock was redeemable at a price equal to the applicable original issuance price per share (adjusted in the event of any stock dividend, stock split, combination or other similar activity), plus any cumulative accrued dividends, whether or not declared together with any other dividends declared but unpaid, in three annual installments commencing not more than 60 days on or after July 24, 2025 at the written election of at least a majority of the holders of the Redeemable Convertible Preferred Stock voting together as a single class and at least two out of three specific parties.

UCB Option and License Agreement

In December 2022, the Company entered into an Option and License Agreement (“the Collaboration Agreement”) with UCB for the discovery of small molecule therapeutics as potential treatments of KCNT1 related epilepsies.

Under the terms of the Collaboration Agreement, the Company has agreed to perform general biology-related research services as part of a mutually agreed upon research plan in exchange for a $ 5.0 million upfront payment.

In addition, the Company provided UCB an exclusive option to in-license global development and commercialization rights to any resulting KCNT1 small molecule development candidate identified as part of the research plan.

If UCB exercises its option to in-license global development and commercialization rights, the Collaboration Agreement stipulates that UCB will assume research, development, manufacturing and commercialization responsibilities and costs.

Under the terms of the Collaboration Agreement, the Company will be eligible to receive an option fee and future success-based development and commercialization milestone payments, totaling up to $ 98.5 million, in addition to tiered royalties on net sales of any resulting products from the Collaboration Agreement.

At the commencement of the Collaboration Agreement, the Company identified one performance obligation, which was to perform the research services for UCB.

The Company determined the transaction price to be $ 5.0 million, comprised of the upfront payment it received.

The option provided to UCB was determined not to be a material right.

The Company will recognize revenue for its research services performance obligation over time using an input method over the duration of the research services.

During the year ended December 31, 2022, the Company did not recognize any collaboration revenue related to the Collaboration Agreement as no services had been provided.

As of December 31, 2022, the $ 5.0 million upfront payment is included in deferred revenue in the consolidated balance sheet.

Common Stock and Preferred Stock

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

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.

1 unchanged sentence

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.

The Company also simultaneously entered into 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.

During the year ended December 31, 2022, the Company issued and sold 3,595,273 shares under the Sales Agreement for aggregate net proceeds of $ 9.6 million after deducting commissions and offering expenses payable by the Company.

As of December 31, 2022, the Company issued and sold a total of 3,987,270 shares under the Sales Agreement for net proceeds of $ 16.6 million after deducting commissions and offering expenses payable by the Company.

As of December 31, 2022 and 2021, 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.

In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to a pro rata distribution of the Company's net assets.

In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to a pro

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

rata distribution of the Company's net assets.

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

7 unchanged sentences

Total shares of authorized common stock reserved for future issuance 12,072,855 10,230,564

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock

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Stock-Based Compensation

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.

The 2017 Plan will continue to govern outstanding equity awards granted thereunder.

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 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.

The total number of shares of common stock authorized for issuance under the 2020 Stock Option and Incentive Plan (the "2020 Plan") as of December 31, 2022 and December 31, 2021 was 7,449,480 shares and 5,184,455 shares, respectively.

The total number of shares of common stock authorized for issuance under the 2017 Stock Inventive Plan (the "2017 Plan") as of December 31, 2022 and 2021 was 5,937,763 shares.

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.

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

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2020 Employee Stock Purchase Plan

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 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.

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.

Th e total shares authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP") as of December 31, 2022 and 2021 was 981,306 shares and 654,204 shares, respectively.

During the year ended December 31, 2022, the Company issued 141,384 shares under the 2020 ESPP.

The Company did no t issue any shares under the 2020 ESPP during the year ended December 31, 2021.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

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Issued 676,828 14.54

Vested ( 104,803 ) 44.89

Forfeited ( 268,154 ) 22.08

Unvested as of December 31, 2022 743,950 $ 23.07

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, total unrecognized compensation cost related to unvested restricted stock units was $ 12.4 million, which is expected to be recognized over a weighted-average period of 2.65 years.

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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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Valuation of Stock Options

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 and share purchases under the ESPP on the date of grant were as follows:

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

Year Ended December 31,

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As of December 31, 2022, total unrecognized compensation cost related to unvested stock options was $ 45.9 million, which is expected to be recognized over a weighted-average period of 2.17 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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

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Significant Agreements

Purdue License Agreement

On December 31, 2017, the Company entered into a License Agreement with Purdue (the “Purdue License Agreement”), pursuant to which Purdue granted the Company exclusive rights under certain Purdue know-how to research, develop and commercialize pharmaceutical products concerning a GABA A positive allosteric modulator.

The Company is obligated to make future milestone payments based on the achievement of specified development and sales milestones up to $ 33.0 million.

Furthermore, the Company is required to pay Purdue royalties of a low-single-digit percentage of annual net sales of licensed products.

The Purdue License Agreement will remain in effect until the expiration of the Company’s royalty obligation for all licensed products.

Either the Company or Purdue may terminate the agreement in the event of a material breach by the other party and fails to cure such breach within a certain period of time.

Either party may voluntarily terminate the agreement with prior notice.

If the agreement is voluntarily terminated by Purdue, the Company’s license rights will survive such termination and such rights will become fully paid, perpetual and irrevocable.

As of December 31, 2021, none of the developmental or sales milestones under the Purdue License Agreement were achieved.

RogCon and Ionis Agreements

During 2018, the Company began negotiating a license agreement with RogCon Inc.

(“RogCon”) for intellectual property related to treating SCN2A mutations in epilepsy, which is recognized as the second most common genetic cause of epilepsy.

RogCon had an existing collaboration with Ionis Pharmaceuticals, Inc.

(“Ionis”) and as a result the Company needed to negotiate an agreement with Ionis in order to complete the license agreement with RogCon.

On December 21, 2018, the Company entered into an agreement with RogCon to advance RogCon a deposit of up to $ 1.0 million on the pending license agreement while the agreement with Ionis was being negotiated.

The deposit was fully refundable to the Company.

On September 11, 2019, the Company entered into both a Cooperation and License Agreement (the “License Agreement”) with RogCon, and a Research, Collaboration, Option and License Agreement (the “Collaboration Agreement”) with Ionis.

On September 11, 2019, the Company entered into both a Cooperation and License Agreement (the “License Agreement”) with RogCon, Inc.

("RogCon"), and a Research, Collaboration, Option and License Agreement (the “Ionis Collaboration Agreement”) with Ionis Pharmaceuticals, Inc.

The agreements were entered into contemporaneously to enable the parties to advance their collective efforts related to SCN2A.

Upon execution of the License Agreement, the $ 1.0 million outstanding balance of the deposit was applied toward the purchase price of the License Agreement.

RogCon Agreement

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In addition, the Company is responsible for reimbursing RogCon for any costs associated with research and development activities RogCon performs at the request of the Company.

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.

Therefore, the aggregate acquisition cost of $ 2.2 million, consisting of the $ 2.1 million of up-front consideration and $ 0.1 million of acquisition costs, was expensed as research and development on September 11, 2019.

As part of the agreement, the Company agreed to provide up-front consideration of $ 2.1 million.

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 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.

Expenses incurred for all periods presented were no t material.

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

The $ 3.0 million milestone payment will become due when the first profit share payment has become due and certain contingent payments have become payable to Ionis under the Collaboration Agreement, which are subject to the Company exercising its option to obtain license rights to a development candidate, as well as other contingent events.

The $ 3.0 million milestone payment will become due when the first profit share payment has become due and certain contingent payments have become payable to Ionis under the Ionis Collaboration Agreement, which are subject to the Company exercising its option to obtain license rights to a development candidate, as well as other contingent events.

The profit share payments will be based on a low-double-digit percentage of net profits, depending on sales volume.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The License Agreement, unless earlier terminated, will continue until the latest of:

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Ionis Collaboration Agreement

Under the Collaboration Agreement, both parties will participate in research activities related to the downregulation of SCN2A gene products associated with the treatment of any and all forms of epilepsy and/or neurodevelopmental disorders in each case caused by any mutation of the SCN2A gene, other than one severe type of epilepsy.

Ionis will also be responsible for identifying a development candidate and conducting an IND-enabling toxicology study.

The Company will reimburse Ionis for any out-of-pocket costs incurred related to the research activities, identification of a development candidate and conducting an IND-enabling toxicology study.

Additionally, the Company agreed to reimburse $ 0.3 million of costs incurred by Ionis for the performance of research activities prior to the execution of the Collaboration Agreement, which the Company recognized as research and development expense.

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

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.

Under the Ionis Collaboration Agreement, both parties participated in research activities related to the downregulation of SCN2A gene products associated with the treatment of any and all forms of epilepsy and/or neurodevelopmental disorders in each case caused by any mutation of the SCN2A gene, other than one severe type of epilepsy.

Ionis was also responsible for identifying a development candidate and conducting an IND-enabling toxicology study.

The Company reimbursed Ionis for out-of-pocket costs incurred related to the research activities, identification of a development candidate and conducting an IND-enabling toxicology study.

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

The Company expensed a total of $ 0.7 million and $ 1.9 million, as research and development expense under the Ionis Collaboration Agreement for the years ended December 31, 2022 and 2021, respectively.

The Company exercised this exclusive option in January 2022, paid a $ 2.0 million license fee and recognized the license fee in research and development expenses in the consolidated statement of operations during the year ended December 31, 2022.

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

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.

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

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

Either party may terminate the Ionis 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

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

for convenience with prior written notice to Ionis.

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

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

Years Ended December 31,

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

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

Gain on repurchase of redeemable convertible preferred stock — 493

Net loss attributable to common stockholders $ ( 167,061 ) $ ( 70,323 )

Weighted average common shares outstanding, basic and diluted 42,454,055 8,950,152

Net loss per share attributable to common stockholders, basic and diluted $ ( 3.94 ) $ ( 7.86 )

The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have been anti-dilutive:

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net deferred tax assets due to the uncertainty of future taxable income.

The Company did not recognize an income tax benefit in the years ended December 31, 2021 or 2020 related to its U.S.

The Company did not recognize an income tax benefit in the years ended December 31,

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 or 2021 related to its U.S.

operations due to the uncertainty regarding future taxable income.

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Federal statutory income tax rate 21.0 % 21.0 %

State taxes, net of federal benefit 4.8 % 5.6 %

Federal and state research and development credits 3.7 % 3.8 %

State taxes, net of federal benefit 4.2 % 4.8 %

Non-deductible items ( 0.7 ) % ( 1.7 ) %

Stock-based compensation ( 1.0 ) % 1.6 %

Change in valuation allowance ( 27.2 ) % ( 29.4 ) %

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):

1 unchanged sentence

Net operating loss carryforwards $ 60,047 $ 56,482

Capitalized research expenditures 34,947 —

Amortization 24,262 14,295

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Stock-based compensation 6,422 3,759

Accrued expenses 1,952 1,433

Leases 898 1,132

Accrued expenses 893 1,952

Total gross deferred tax assets $ 144,674 $ 86,916

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As of December 31, 2022 and 2021, the Company had state research and development tax credit carryforwards of approximately $ 3.5 million and $ 2.5 million, respectively, available to reduce future tax liabilities which expire at various dates from 2031 through 2037.

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

The Company has

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

This study may result in an adjustment to the Company’s research and development credit carryforwards;

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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

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.

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Related Party Transactions

One of the founders of RogCon became the Company's General Counsel in June 2020.

One of the founders of RogCon is the Company's General Counsel.

During the years ended December 31, 2022 and 2021, the Company reimbursed RogCon for its out-of-pocket costs incurred for activities performed under the License Agreement (Note 12).

A former member of the Board was affiliated with Purdue through September 2020.

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 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

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code for eligible employees.

2 unchanged sentences

The Company made contributions of $ 1.5 million and $ 1.0 million during the years ended December 31, 2022 and 2021, respectively .

Restructuring

In June 2022, the Company began a strategic realignment to focus resources on its ulixacaltamide, PRAX-562, PRAX-222 and PRAX-628 product candidates, as well as its preclinical programs across our Cerebrum™ and Solidus™ platforms, which resulted in a reduction of the Company’s workforce.

The Company incurred $ 1.0 million of costs related to the realignment, of which $ 0.6 million has been recognized in research and development expenses and $ 0.4 million has been recognized in general and administrative expenses in the consolidated statement of operations during the year ended December 31, 2022.

These costs relate to employee severance, benefits and related costs.

The Company does not expect to incur any additional significant costs related to the strategic realignment.

As of December 31, 2022, all costs related to the strategic realignment have been paid.

Subsequent Events

The Company has completed an evaluation of subsequent events after the consolidated balance sheet date of December 31, 2021 through the date these consolidated financial statements were issued.

The Company has concluded that no subsequent events have occurred that require disclosure .

Subsequent to December 31, 2022, the Company issued and sold a total of 2,942,083 shares under the Sales Agreement for aggregate net proceeds of $ 11.2 million after deducting commissions and offering expenses payable by the Company.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

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