What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-05 compared with 2023-02-07 · 247 added, 179 removed, 701 unchanged (38% of the section changed)

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generally accepted accounting principles.

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

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

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

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

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

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

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

Accordingly, we express no such opinion.

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

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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.

Ulixacaltamide Essential1 Accrued and Prepaid Research and Development Costs

Cerebrum Platform Accrued and Prepaid Research and Development Costs

Description of the Matter

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.

The Company’s accrued costs for research and development expenses totaled $3.0 million at December 31, 2023, including accruals related to the Company’s Cerebrum Platform research and development costs.

In addition, the Company’s prepaid expenses and other current assets were $3.6 million which included amounts that were paid in advance of services incurred pursuant to the Cerebrum Platform research and development costs.

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 ulixacaltamide Essential1 clinical trial.

Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period for the Company’s Cerebrum Platform research and development costs.

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 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.

Auditing the Company’s accrued and prepaid research and development costs for the Cerebrum Platform 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 Cerebrum Platform research and development activities, 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

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.

To evaluate the accrued and prepaid research and development costs for the Cerebrum Platform, 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 discussed the progress of research and development activities 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 pending change orders to assess the impact on amounts recorded.

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

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Boston, Massachusetts

February 7, 2023

March 5, 2024

PRAXIS PRECISION MEDICINES, INC.

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Total liabilities and stockholders’ equity $ 87,948 $ 115,128

1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023.

See Note 2 for details.

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

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Year Ended December 31,

Collaboration revenue $ 2,447 $ —

Operating expenses:

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Net loss per share attributable to common stockholders, basic and diluted 1

$ ( 18.69 ) $ ( 69.65 )

Weighted average common shares outstanding, basic and diluted 1

6,594,316 3,073,100

1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023.

See Note 2 for details.

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

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(Amounts in thousands, except share data)

Common Stock Additional

Common Stock 1

Capital Accumulated

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Stock-based compensation expense — — 7,593 — — 7,593

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

Issuance of common stock from at-the-market public offerings, net of issuance costs 560,253 1 18,095 — — 18,096

Vesting of restricted stock units 11,516 — — — — —

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Stock-based compensation expense — — 5,775 — — 5,775

Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs of $ 4,484

4,296,646 6 63,433 — — 63,439

Issuance of common stock from at-the-market public offerings, net of issuance costs 392,541 1 6,031 — — 6,032

Issuance of common stock under employee stock purchase plan 15,663 — 208 — — 208

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Shares withheld for taxes for vesting of restricted stock units ( 249 ) — ( 4 ) — — ( 4 )

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

Change in unrealized loss on marketable securities, net of tax — — — — 19 19

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Stock-based compensation expense — — 5,763 — — 5,763

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 233 — — — — —

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Issuance of common stock upon exercise of stock options 311 — 1 — — 1

Change in unrealized loss on marketable securities, net of tax — — — — 144 144

Net loss — — — ( 24,632 ) — ( 24,632 )

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Issuance of common stock under employee stock purchase plan 9,027 — 106 — — 106

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

Issuance of common stock from at-the-market public offerings, net of issuance costs of $ 123

212,453 — 3,964 — — 3,964

Vesting of restricted stock units 824 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 249 ) — ( 5 ) — — ( 5 )

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

Net loss — — — ( 26,878 ) — ( 26,878 )

Balance at December 31, 2023 8,791,877 $ 13 $ 723,577 $ ( 653,921 ) $ — $ 69,669

1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023.

See Note 2 for details.

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

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(Amounts in thousands, except share data)

Common Stock Additional

Common Stock 1

Capital Accumulated

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

Issuance of common stock from at-the-market public offerings 4,694 — 1,368 — — 1,368

Vesting of restricted stock units 5,408 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 1,190 ) — ( 230 ) — — ( 230 )

Issuance of common stock upon exercise of stock options 4,818 — 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 3,443 — 454 — — 454

Vesting of restricted stock units 424 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 148 ) — ( 17 ) — — ( 17 )

Issuance of common stock upon exercise of stock options 876 — 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

73,667 — 2,962 — — 2,962

Vesting of restricted stock units 354 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 109 ) — ( 6 ) — — ( 6 )

Issuance of common stock upon exercise of stock options 12,016 — 409 — — 409

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

Change in unrealized loss on marketable securities, net of tax — — — — 144 144

Net loss — — — ( 43,945 ) — ( 43,945 )

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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 under employee stock purchase plan 5,982 — 163 — — 163

Issuance of common stock from at-the-market public offerings 161,323 — 5,231 — — 5,231

Vesting of restricted stock units 800 — — — — —

Shares withheld for taxes for vesting of restricted stock units ( 229 ) — ( 7 ) — — ( 7 )

Issuance of common stock upon exercise of stock options — — — — — —

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Balance at December 31, 2022 3,292,163 $ 5 $ 606,918 $ ( 530,644 ) $ ( 173 ) $ 76,106

1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023.

See Note 2 for details.

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

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Deferred revenue ( 2,447 ) 5,000

Other 56 ( 41 )

Net cash used in operating activities ( 111,136 ) ( 185,043 )

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Maturities of marketable securities 39,000 180,355

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

Net cash provided by investing activities 38,950 96,889

Cash flows from financing activities:

Proceeds from at-the-market offerings, net of issuance costs 28,153 9,561

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

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

Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs 63,439 —

Payment of issuance costs for at-the-market offerings — ( 262 )

Payments of tax withholdings related to vesting of restricted stock units ( 137 ) ( 260 )

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

Proceeds from exercise of options and employee stock purchase plan purchases 416 1,426

Net cash provided by financing activities 91,871 10,465

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

Increase (decrease) in cash, cash equivalents and restricted cash 19,685 ( 77,689 )

Cash, cash equivalents and restricted cash, beginning of period 62,031 139,720

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Supplemental disclosures of non-cash activities:

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

Offering costs included in accrued expenses $ — $ 262

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

Offering costs from follow-on public offering included in accounts payable $ 184 $ —

Issuance costs from at-the-market offerings included in accrued expenses $ 63 $ —

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 insights from genetic epilepsies into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance.

(“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for central nervous system ("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.

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• 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

• Solidus ™, the Company's antisense oligonucleotide ("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.

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 3 Essential3 clinical trial in essential tremor in the second half of 2024.

Within the Company's PRAX-628 program, it initiated a Phase 2a Photo-Paroxysmal Response ("PPR") study in 2023 and expects to report topline results in the first quarter of 2024.

The Company also plans to initiate a Phase 2 study of PRAX-628 in focal epilepsy in the second half of 2024.

The Company's PRAX-562 Phase 2 EMBOLD study was initiated in the first quarter of 2023, with initial cohorts in SCN2A-DEE and SCN8A-DEE, and it expects to announce topline results for both cohorts in mid- 2024.

For the Company's most advanced product candidate under the Solidus™ platform, PRAX-222, it initiated the EMBRAVE study in the second quarter of 2023, which completed in the fourth quarter of 2023.

Praxis was incorporated in 2015 and commenced operations in 2016.

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

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

From inception through December 31, 2023, the Company raised $ 617.5 million in aggregate cash proceeds from these transactions, net of issuance costs.

In January 2024, the Company raised net proceeds of $ 161.7 million from a follow-on public offering and $ 5.3 million from at-the-market offerings.

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

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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, 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 Company expects that its cash and cash equivalents as of December 31, 2023 of $ 81.3 million, together with cash inflows from its financing activities in January 2024, will be sufficient to fund its operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these consolidated financial statements.

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

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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

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Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASUs of the FASB.

On November 28, 2023, the Company filed a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of its common stock (the "Reverse Stock Split").

The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on November 28, 2023.

As a result of the Reverse Stock Split, every 15 shares of the Company's issued and outstanding common stock were automatically reclassified into one validly issued, fully-paid and non-assessable share of common stock.

Any fractional post-split shares as a result of the Reverse Stock Split were rounded down to the nearest whole post-split share.

The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock.

All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the Reverse Stock Split on a retroactive basis in all periods presented.

Principles of Consolidation

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The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents.

Cash and cash equivalents include cash held in banks and amounts held in interest-bearing money market funds.

Cash and cash equivalents include cash held in banks and amounts held in interest-bearing insured liquid deposit funds.

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

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Marketable Securities

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

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

Treasury, financial institutions, corporations and U.S.

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

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

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

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

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

The Company did not hold any marketable securities as of December 31, 2023, and held $ 38.9 million of marketable securities as of December 31, 2022.

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

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

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

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

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

The Company investments are limited to investment-grade securities with

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

accredited financial institutions in excess of federally insured limits.

strong credit ratings with the objective of maintaining safety and liquidity.

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

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

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Certain assets and liabilities of the Company are carried at fair value under GAAP.

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

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

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

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

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

The carrying amounts reflected in the consolidated balance sheets for cash, prepaid expenses and

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Property and Equipment

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The Company’s operating leases are reflected in operating lease right-of-use assets and in current operating lease liabilities and long-term operating lease liabilities in its consolidated balance sheets.

The Company’s operating lease right-of-use asset as of December 31, 2022 and 2021 did not include any lease incentives.

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

Collaboration Agreements

The Company’s operating

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

lease right-of-use asset as of December 31, 2023 and 2022 did not include any lease incentives.

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

Collaboration Agreements

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.

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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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

PRAXIS PRECISION MEDICINES, INC.

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.

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As of December 31, 2023, 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.

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

Research and Development Costs

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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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

To date, the Company has not issued any stock-based awards with performance or market-based vesting conditions.

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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.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

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The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive Loss

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For the years ended December 31, 2023 and 2022, comprehensive loss consists of net loss and changes in unrealized losses on marketable securities.

Common Stock Warrants

The Company accounts for warrants to purchase shares of its common stock in accordance with the guidance in FASB ASC No.

480, Distinguishing Liabilities from Equity (ASC 480) and ASC No.

815, Derivatives and Hedging (ASC 815).

The Company classifies warrants issued for the purchase of shares of its common stock as either equity or liability instruments based on an assessment of the specific terms and conditions of each respective contract.

Such assessment includes determining whether the warrants are freestanding financial instruments or embedded in a host instrument, whether the warrants are liabilities within the scope of ASC 480, whether the warrants meet the definition of a derivative in ASC 815 and whether the warrants meet the requirements for equity classification pursuant to the indexation and equity classification criteria in ASC 815.

The Company determines the classification for its warrants at the time of issuance and updates its assessment, as necessary.

Warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital.

Equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

Net Loss per Share

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.

The calculation of weighted average number of common shares outstanding excludes shares of restricted common stock that are not vested but includes shares of common stock underlying pre-funded warrants.

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.

For purposes of this calculation, outstanding options to purchase shares of common stock, unvested shares of restricted common stock and potential shares issuable under the 2020 ESPP 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.

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Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

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

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

the methodology for calculating income taxes in an interim period;

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

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

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No.

2018-19, ASU No.

2019-04, ASU No.

2019-05, ASU No.

2019-10, ASU No.

2019-11 and ASU No.

2020-03 (“ASU 2016-13”).

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

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

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

On August 5, 2020, the FASB issued ASU No.

2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06).

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

ASU 2020-06 eliminates the separation models for convertible debt with cash conversion features and convertible instruments with beneficial conversion features and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

Additionally, ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The new standard also introduces additional disclosures for convertible instruments.

ASU 2020-06 was effective for public companies that are not smaller reporting companies for fiscal years beginning after December 15, 2021.

For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

ASU 2020-06 is required to be adopted as of the beginning of a fiscal year.

ASU 2020-06 may be applied using either a full or modified retrospective method of transition.

The Company adopted ASU 2020-06 effective as of January 1, 2023.

The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

On November 27, 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures .

2023-07 improves reportable segment disclosure requirements,

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primarily through enhanced disclosures about significant segment expenses.

The amendments included in this ASU apply to all public entities that are required to report segment information in accordance with Topic 280, including those with a single reportable segment.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and should be applied retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expenses categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company only has one reportable segment and this ASU impacts disclosures only.

The Company has determined that the effects of adopting the amendments in ASU 2023-07 will only impact its disclosures and not have a material impact on its consolidated financial position and the results of its operations when such amendment is adopted.

On December 14, 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures .

2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and incomes taxes paid information.

For public companies, the amendments are effective for annual periods beginning after December 15, 2024 and should be applied prospectively.

The Company has determined that the effects of adopting the amendments in ASU 2023-09 will only impact its disclosures and not have a material impact on its consolidated financial position and the results of its operations when such amendment is adopted.

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.

As of December 31, 2023 and 2022, the Company had restricted cash of $ 0.4 million and $ 0.4 million, respectively, held as letters of credit for the benefit of its current landlord.

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, 2023 and 2022.

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

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As of December 31, 2022

Gross Unrealized Estimated

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

The Company did not hold any marketable securities as of December 31, 2023.

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

As of December 31, 2022

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

Commercial paper 34,993 — — 34,993

Debt securities issued by U.S.

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

Other debt securities 6,398 1 — 6,399

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

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

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

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

As of December 31, 2022, the Company had 7 securities with a total fair market value of $ 38.9 million in an unrealized loss position.

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

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

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

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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):

The Company did not hold any financial assets measured at fair value on a recurring basis as of December 31, 2023.

The following table presents 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 (in thousands):

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$ 38,176 $ 34,879 $ — $ 73,055

As of December 31, 2021

Level 1 Level 2 Level 3 Total

Cash equivalents:

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

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

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Depreciation expense was $ 0.4 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively.

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Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Accrued external research and development expenses $ 10,734 $ 17,763

Accrued personnel-related expenses $ 3,716 $ 2,803

Accrued external research and development expenses 2,957 10,734

Accrued other expenses 743 2,313

Total accrued expenses $ 7,416 $ 15,850

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Commitments and Contingencies

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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 31, 2021.

The base rent increased by approximately 1 % annually.

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

This lease qualified as an operating lease.

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

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

As of December 31,

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

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Future lease payments under non-cancelable lease agreements as of December 31, 2023 were as follows (in thousands):

3 unchanged sentences

Present value of operating lease liabilities $ 2,495

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The weighted average remaining lease term and weighted average incremental borrowing rate of the Company’s operating lease were as follows:

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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.

In December 2022, the Company entered into an Option and License Agreement (“the Collaboration Agreement”) with UCB Biopharma SRL (“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.

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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.

The Company concluded that UCB is a customer, and as such, the arrangement falls within the scope of Topic 606.

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

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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.

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

During the year ended December 31, 2023, the Company recognized $ 2.4 million in collaboration revenue related to the Collaboration Agreement in the consolidated statement of operations.

As of December 31, 2023, $ 2.6 million was included in deferred revenue in the consolidated balance sheet, of which $ 1.4 million was classified as current.

Common Stock and Preferred Stock

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

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

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

The Company also simultaneously entered into 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.

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

Reverse Stock Split

The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on November 28, 2023.

Any fractional post-split shares as a result of the Reverse Stock Split were rounded down to the nearest whole post-split share.

The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock.

All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the Reverse Stock Split on a retroactive basis in all periods presented.

In November 2021, the Company entered into an Open Market Sale Agreement, as amended ("2021 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 its shelf registration and subject to the limitations thereof.

The Company terminated the 2021 Sales Agreement in June 2023.

During the year ended December 31, 2023, the Company issued and sold an aggregate of 952,794 shares under the 2021 Sales Agreement for aggregate net proceeds of $ 24.1 million, after deducting commissions and offering expenses payable by the Company.

During the year ended December 31, 2022, the Company issued and sold an aggregate of 239,684 shares under the 2021 Sales Agreement for aggregate net proceeds of $ 9.6 million, after deducting commissions and offering expenses payable by the Company.

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rata distribution of the Company's net assets.

In December 2023, the Company entered into an Open Market Sale Agreement (the "2023 Sales Agreement"), with Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $ 75.0 million of common stock from time to time in at-the-market offerings.

The 2023 Sales Agreement was terminated in January 2024.

During the year ended December 31, 2023, the Company issued and sold an aggregate of 212,453 shares under the 2023 Sales Agreement for aggregate net proceeds of $ 4.0 million, after deducting commissions and offering expenses payable by the Company.

As of December 31, 2023 and 2022, 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.

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

A s of December 31, 2023, the Company did no t hold any treasury shares.

June 2023 Public Offering

On June 21, 2023, the Company completed a public offering of:

(i) an aggregate of 4,296,646 shares of its common stock at a public offering price of $ 14.25 per share, including the underwriters’ full exercise of their option to purchase 619,979 additional shares of common stock, and (ii) pre-funded warrants to purchase 470,000 shares of common stock at a public offering price of $ 14.2485 per share of common stock underlying the warrants.

The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $ 0.0015 per share exercise price for each underlying share.

Total net proceeds generated from the offering were approximately $ 63.4 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company.

The pre-funded warrants are exercisable at any time on or after the date of issuance at the option of the holder, subject to a beneficial ownership blocker that may limit exercisability.

No holder may exercise any portion of the warrants that would cause either the aggregate number of shares of common stock beneficially owned by such holder, together with its affiliates, to exceed 9.99 %, or the combined voting power of the securities beneficially owned by such holder, together with its affiliates, to exceed 9.99 %.

A holder of a pre-funded warrant may increase or decrease this percentage up to 19.99 % by providing at least 61 days’ prior notice to the Company.

The pre-funded warrants do not expire.

The pre-funded warrants may be settled through either physical or net share settlement.

Following the occurrence of certain fundamental transactions, the holders of the pre-funded warrants have the right to receive upon exercise of the warrants the same amount and kind of securities, cash, or property as they would have been entitled to receive if they had been holders of the common shares issuable under the warrants immediately prior to such transaction.

In the event of certain fundamental transactions where the consideration payable to the holders of shares of common stock consists solely of cash and/or marketable securities, the pre-funded warrants will automatically be deemed to be exercised in full pursuant to a cashless exercise effective immediately prior to and contingent upon the consummation of such transaction.

As of December 31, 2023, none of the pre-funded warrants had been exercised and all remain outstanding.

The Company determined that the pre-funded warrants are freestanding financial instruments because they are both legally detachable and separately exercisable from the common stock sold in the offering.

As such, the Company evaluated the pre-funded warrants to determine whether they represent instruments that require liability classification pursuant to the guidance in ASC 480.

However, the Company concluded that the pre-funded warrants are not a liability within the scope of ASC 480 due to their characteristics.

Further, the Company determined that the pre-funded warrants do not meet the definition of a derivative under ASC 815 because they do not meet the criteria regarding no or little initial net investment.

Accordingly, the Company assessed the pre-funded warrants relative to the guidance in ASC No.

815-40, Contracts in Entity’s Own Equity , to determine the appropriate treatment.

The Company concluded that the pre-funded warrants are both indexed to its own stock and meet all other conditions for equity classification.

Accordingly, the Company has classified the pre-funded warrants as permanent equity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shares Reserved for Future Issuance

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Shares reserved for exercise of outstanding stock options 666,163 588,919

Shares reserved for exercise of pre-funded warrants 470,000 —

Shares reserved for future awards under the 2020 Stock Option and Incentive Plan 148,264 110,063

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Stock-Based Compensation

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.

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, 2023 and December 31, 2022 wa s 661,240 sh ares and 496,632 shares, respectively.

The total number of shares of common stock authorized for issuance under the 2017 Stock Incentive Plan (the "2017 Plan") as of December 31, 2023 and 2022 was 395,850 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.

4 unchanged sentences

2020 Employee Stock Purchase Plan

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Th e total s hares authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP") as of December 31, 2023 and 2022 was 87,227 shares and 65,420 shares, respectively.

During the years ended December 31, 2023 and 2022, the Company issued 24,690 and 9,425 shares, respectively, under the 2020 ESPP.

Restricted Stock Units

6 unchanged sentences

Unvested as of December 31, 2023 47,145 $ 202.27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, total unrecognized compensation cost related to unvested restricted stock units was $ 6.2 million, which is expected to be recognized over a weighted-average period of 1.81 years.

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Vested and expected to vest as of December 31, 2023 666,163 $ 160.19 7.79 $ 254

The aggregate intrinsic value of stock options exercised for the year ended December 31, 2021 was $ 19.7 million.

The aggregate intrinsic value of stock options exercised for the years ended December 31, 2023 and 2022 was $ 0.1 million and $ 0.2 million, respectively.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested and expected to vest is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at December 31, 2023.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Valuation of Stock Options

9 unchanged sentences

Stock-based compensation expense was allocated as follows (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

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

Expenses incurred for all periods presented were no t material.

Expenses incurred for all periods presented were not material.

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

1 unchanged sentence

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

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

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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 expensed a total of $ 0.7 million as research and development expense under the Ionis Collaboration

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Agreement for the year ended December 31, 2022.

Expense for the year ended December 31, 2023 was immaterial .

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 investigational new drug application-enabling toxicology study.

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

Additionally, in July 2023, the Company paid a milestone payment of $ 6.9 million to Ionis, which was earned in the second quarter of 2023 upon initiation of the Company's PRAX-222 EMBRAVE study, and was recognized in research and development expenses in the consolidated statement of operations during the year ended December 31, 2023.

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

11 unchanged sentences

738,280 657,408

Common shares issuable upon exercise of the pre-funded warrants that were sold in connection with the June 2023 underwritten public offering are included in the calculation of weighted average number of common shares outstanding for the year ended December 31, 2023.

Consistent with the guidance in ASC 260-10-45-13, the underlying common shares are issuable for little to no consideration and there are no vesting conditions or contingencies associated with the warrants.

Accordingly, the aggregate number of common shares underlying the pre-funded warrants have been considered outstanding for purposes of the calculation of net loss per share from the date of issuance.

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

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,

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2022 or 2021 related to its U.S.

The Company did not recognize an income tax benefit in the years ended December 31, 2023 or 2022 related to its U.S.

operations due to the uncertainty regarding future taxable income.

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The income tax benefit (provision) recognized for the years ended December 31, 2023 and 2022 was not material.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation of the U.S.

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State taxes, net of federal benefit 4.3 % 4.2 %

Changes in tax rates 2.9 % — %

Non-deductible items ( 1.4 ) % ( 0.7 ) %

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Stock-based compensation 7,697 6,422

Leases 898 1,132

Accrued expenses 1,147 893

Deferred revenue 692 —

Leases 676 898

Total gross deferred tax assets $ 181,074 $ 144,674

11 unchanged sentences

As of December 31, 2023 and 2022, the Company had state research and development tax credit carryforwards of approximately $ 3.8 million and $ 3.5 million, respectively, available to reduce future tax liabilities which expire at various dates from 2031 through 2038.

The Company has

The Company has 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;

however, until a study is

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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;

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

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

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

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Employee Benefit Plan

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

The plan covers substantially all employees who meet a minimum age requirement and allows participants to defer a portion of their annual compensation on a pre-tax basis.

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

Under the plan, the Company is not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

obligated to match any participant contributions.

The Company made contributions of $ 1.0 million and $ 1.5 million during the years ended December 31, 2023 and 2022, 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.

In June 2022, the Company began a strategic realignment across the 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 was recognized in research and development expenses and $ 0.4 million was recognized in general and administrative expenses in the consolidated statement of operations during the year ended December 31, 2022.

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

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

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure.

The Company has concluded that no subsequent events have occurred that require disclosure other than those noted below.

Collaboration and License Agreement with Tenacia Biotechnology

On January 4, 2024, the Company entered into an exclusive collaboration and license agreement (the "Collaboration Agreement") with Tenacia Biotechnology (Shanghai) Company, Ltd.

("Tenacia"), a China-based portfolio company of Bain Capital focused on central nervous system drug development and commercialization.

Under the Collaboration Agreement, Tenacia will develop and commercialize ulixacaltamide for the treatment of essential tremor in Greater China.

As part of the consideration for the Collaboration Agreement, the Company entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with BCPE Tenet Holdings Cayman, Ltd.

("BCPE") pursuant to which the Company issued and sold 443,253 shares of the Company's common stock, par value $ 0.0001 per share (the "Shares"), to BCPE at a price per share of $ 22.5605 for an aggregate purchase price of approximately $ 10.0 million.

The per share price was based on a 20 % premium over the 30-day volume-weighted average price.

Additionally, the Company received an upfront payment of $ 5.0 million in cash, and is eligible for an additional $ 264.0 million in development, regulatory and commercialization milestone payments as well as tiered royalties on net sales.

January 2024 Financing

On January 12, 2024, the Company completed a public offering of:

(i) an aggregate of 3,802,025 shares of its common stock at a public offering price of $ 35.50 per share, including the underwriters' full exercise of their option to purchase 633,750 additional shares of common stock, and (ii) pre-funded warrants to purchase 1,056,725 shares of common stock at a public offering price of $ 35.4999 per share of common stock underlying the warrants.

The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $ 0.0001 per share exercise price of each underlying share.

Total net proceeds generated from the offering were approximately $ 161.7 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company.

At-the-Market Offerings

Subsequent to December 31, 2023, the Company issued and sold a total of 192,190 shares under the 2023 Sales Agreement for aggregate net proceeds of $ 5.3 million after deducting commissions and offering expenses payable by the Company.

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What changed 10-K

Item 8. Financial Statements and Supplementary Data