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Item 9A. Controls and Procedures

2024-03-01 compared with 2023-03-09 · 418 added, 832 removed, 594 unchanged (68% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures.

Based on that evaluation of our disclosure controls and procedures as of December 31, 2022, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level.

Management’s Annual Report on Internal Controls Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies.

Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act, and our unaffiliated market capitalization exceeds $700 million.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States GAAP.

Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect our transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control – Integrated Framework.

Based on our assessment, our management has concluded that, as of December 31, 2023, our internal control over financial reporting is effective based on those criteria.

Attestation Report of the Registered Public Accounting Firm

This Annual Report does not include an attestation report of out registered public accounting firm due to an exemption provided by the JOBS Act for “emerging growth companies.”

Changes in Internal Control over Financial Reporting

This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We continuously seek to improve the efficiency and effectiveness of our internal controls, which may result in changes to our systems and refinements to our processes.

However, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

As of the date of this Annual Report on Form 10-K, we intend to hold our 2023 Annual meeting of Stockholders (the "2023 Annual Meeting") on or about June 14, 2023 at 11:30 a.m.

local time virtually.

We are providing the following disclosure in accordance with our Amended and Restated Bylaws (the "Bylaws") and Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Bylaws Advance Notice Deadline for Submission of Stockholder Proposals and Director Nominations

Pursuant to our Bylaws, since the 2023 Annual Meeting is the first Annual Meeting following our initial public offering, for notice of stockholder proposals submitted outside of Rule 14a-8 of the Exchange Act and director nominations to be timely, they must be so received not later than the later of (i) the close of business on the 90th day before the 2023 Annual Meeting;

or (ii) the close of business on the 10th day following the day on which public announcement of the date of the 2023 Annual Meeting is first made by us.

As this is our first public disclosure of the date of the 2023 Annual Meeting, to be considered timely, stockholder proposals submitted outside of Rule 14a-8 of the Exchange Act and director nominations, in each case intended to be brought before the 2023 Annual Meeting, must be received no later than the close of business on March 16, 2023.

Any such stockholder proposals and director nominations must be directed to our Corporate Secretary at our corporate offices at Prime Medicine, Inc., 21 Erie Street, Cambridge, MA 02139.

Such stockholder proposals and director nominations must also comply with the advance notice provisions contained in Section 2 of our Bylaws.

Rule 14a-8 Deadline for the Submission of Stockholder Proposals

As we did not hold an annual meeting in 2022, pursuant to Rule 14a-8(e)(2) under the Exchange Act, the deadline for the receipt of any stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act for inclusion in the Company’s proxy materials for the 2023 Annual Meeting would be a reasonable time before the company begins to print and send its proxy materials.

We have determined that March 16, 2023 is a reasonable time before we expect to begin to print and distribute its proxy materials for the 2023 Annual Meeting, and that any stockholder proposals must be received on or before the close of business on that day.

Such proposals must be directed to our Corporate Secretary at our corporate offices at Prime Medicine, Inc., 21 Erie Street, Cambridge, MA 02139.

Such proposals must also comply with Rule 14a-8 of the Exchange Act.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Executive Compensation

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2022.

The information required under this item (excluding the information under the subheading “Pay Versus Performance”) is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2023.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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(1) Financial Statements

The following documents are included on pages F-1 through F-44 attached hereto and are filed as part of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

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

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

(2) Financial Statement Schedules

Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein.

The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K.

The Exhibit Index is incorporated herein by reference.

Exhibit number Exhibit table

Exhibit number Description of exhibit

3.1 Third Amended and Restated Certificate of Incorporation of Prime Medicine, Inc.

6 unchanged sentences

333-267579) filed on October 17, 2022)

4.3* Description of Securities

4.3* Description of Securities (in corporated by reference t o Ex hibit 4.3 of the Registrant ’ s 2022 Annual Report on Form 10-K , filed with the SEC on March 9, 2023)

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on February 16, 2024)

10.1# 2019 Stock Option and Grant Plan, as amended, and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1/A (File No.

18 unchanged sentences

333-267579) filed on October 17, 2022)

Exhibit number Description of exhibit

10.11# Amended and Restated Employment Agreement, dated July 7, 2022, between the Registrant and Carman Alenson (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1/A (File No.

2 unchanged sentences

333-267579) filed on October 17, 2022)

Employment Agreement, effective as of January 17, 2024 , betwee n the Registrant and Allan Reine (i ncorporated by referen ce to Ex hibit 10.1 of the Registra nt ’ s Cur rent Report on Form 8-K f iled with the SEC on January 5, 202 4 )

Collaboration and License Agreement, dated September 26, 2019, between Beam Therapeutics Inc.

14 unchanged sentences

3 to License Agreement, dated December 22, 2022, between The Broad Institute, Inc.

and the Registrant

and the Registrant (incorporated by reference to Exhibit 10 .

17 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 9, 2023)

License Agreement, dated December 22, 2022, between The Broad Institute, Inc.

and the Registrant

and the Registrant (incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 9, 2023)

Pledge from Prime Medicine, amended and restated August 2022, between The Broad Institute, Inc.

3 unchanged sentences

333-267579) filed on October 17, 2022)

Amendment No.

12 to License Agreement, dated October 2, 2023, between MIL 21E, LLC and the Registrant

Consulting Agreement between the Registrant and David Liu, dated September 13, 2019 (incorporated by reference to Exhibit 10.19 of the Registrant’s Registration Statement on Form S-1/A (File No.

9 unchanged sentences

333-267579) filed on October 17, 2022

Amendment No.

1 to Amended and Restated Employment Agreement, dated July 6, 2023, between Registrant and Keith Gottesdiener (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 3, 2023).

Lease Agreement, dated as of November 22, 2021, between NW Cambridge Property Owner, LLC and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2023)

Exhibit number Description of exhibit

21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Registration Statement on Form S-1/A (File No.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Prime Medicine, Inc.

Compensation Recovery Policy, dated September 15, 2023

101.INS* Inline XBRL Instance Document

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POWER OF ATTORNEY AND SIGNATURES

Each person whose individual signature appears below hereby authorizes and appoints Keith Gottesdiener and Carman Alenson, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Each person whose individual signature appears below hereby authorizes and appoints Keith Gottesdiener, Allan Reine, and Carman Alenson, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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Keith Gottesdiener

/s/ Carman Alenson Interim Chief Financial Officer and Chief Accounting Officer

(Principal Financial Officer and Principal Accounting Officer) March 9, 2023

/s/ Allan Reine

Chief Financial Officer

(Principal Financial Officer)

March 1, 2024

/s/ Carman Alenson Chief Accounting Officer

(Principal Accounting Officer)

March 1, 2024

Carman Alenson

/s/ Robert Nelsen Director March 9, 2023

Robert Nelsen

/s/ David Schenkein

Director March 9, 2023

David Schenkein

/s/ Thomas Cahill Director March 1, 2024

Thomas Cahill

/s/ Wendy Chung Director March 1, 2024

/s/ Kaye Foster Director March 1, 2024

/s/ Michael Kelly

1 unchanged sentence

Michael Kelly

/s/ Wendy Chung Director March 9, 2023

/s/ Kaye Foster Director March 9, 2023

/s/ Jeff Marrazzo

Director March 1, 2024

Jeff Marrazzo

/s/ Robert Nelsen Director March 1, 2024

Robert Nelsen

/s/ David Schenkein

Director March 1, 2024

David Schenkein

PRIME MEDICINE, INC.

10 unchanged sentences

We have audited the accompanying consolidated balance sheets of Prime Medicine, Inc.

and its subsidiary (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible and convertible preferred stock and stockholders' equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2022, including 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 as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2021.

and its subsidiary (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible and convertible preferred stock and stockholders' equity (deficit) and of cash flows for the years then ended, including 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 as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

2 unchanged sentences

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

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations.

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

/s/ PricewaterhouseCoopers LLP

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CONSOLIDATED BALANCE SHEETS

(In thousands) December 31:

(in thousands, except share and per share amounts) 2023 2022

Current assets:

1 unchanged sentence

Short-term investments 74,639 98,467

Related party short-term investment 7,834 15,962

Prepaid expenses and other current assets 2,697 959

Short-term investment — related party 5,452 7,834

Prepaid expenses 19,057 2,451

Other current assets 2,254 246

Total current assets 142,976 296,618

Property and equipment, net 22,659 19,009

Operating lease right-of-use lease assets 29,545 10,746

Operating lease right-of-use assets 13,941 29,545

Restricted cash 13,496 13,496

1 unchanged sentence

Total assets $ 193,851 $ 360,314

Liabilities, Redeemable Convertible and Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Deficit

Current liabilities:

2 unchanged sentences

14,110 10,688

Related party forward contract liability (2)

Accrued settlement payment — related party 13,500 —

Operating lease liability 9,276 11,694

4 unchanged sentences

Commitments and contingencies (Note 12)

Series A redeemable convertible preferred stock, $ 0.00001 par value;

0 shares authorized, issued and outstanding at December 31, 2022;

115,761,842 shares authorized, issued and outstanding at December 31, 2021;

liquidation preference of $ 125,000 at December 31, 2021

Series B convertible preferred stock, $ 0.00001 par value;

0 shares authorized, issued and outstanding at December 31, 2022;

45,658,957 shares authorized, issued and outstanding at December 31, 2021;

liquidation preference of $ 210,814 at December 31, 2021

Stockholders’ equity (deficit):

Common stock, $ 0.00001 par value;

775,000,000 , and 293,258,790 shares authorized at December 31, 2022 and December 31, 2021, respectively;

97,209,213 and 32,413,860 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Stockholders’ equity

Common stock, par value of $ 0.00001 per share;

775,000,000 shares authorized;

97,377,121 and 97,209,213 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital 624,414 609,849

1 unchanged sentence

Accumulated deficit ( 491,330 ) ( 293,197 )

Total stockholders’ equity (deficit) 316,270 ( 156,240 )

Total liabilities, redeemable convertible and convertible preferred stock and stockholders’ equity (deficit) $ 360,314 $ 301,856

Total stockholders’ equity 133,071 316,270

Total liabilities and stockholders’ equity $ 193,851 $ 360,314

_____________________

(1) Includes related party amount of $ 0.3 million as of December 31, 2022.

Includes related party amount of $ 30.0 million as of December 31, 2021.

(see Note 14).

(2) Includes related party amount of $ 12.0 million as of December 31, 2021 (see Note 14).

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data) Years Ended December 31:

2022 2021 2020

Related party collaboration revenue $ — $ — $ 5,210

Year Ended December 31,

(in thousands, except share and per share amounts) 2023 2022

Operating expenses:

1 unchanged sentence

$ 147,905 $ 86,725

Settlement payment — related party 13,500 —

General and administrative 43,387 29,819

2 unchanged sentences

Other income (expense):

Change in fair value of preferred stock tranche right liability — ( 74,319 ) ( 10,904 )

Change in fair value of anti-dilution obligation — ( 6,681 ) ( 700 )

Change in fair value of related party short-term investment ( 8,128 ) ( 391 ) 10,867

Other income (expense), net (2)

Total other expense, net ( 6,225 ) ( 81,379 ) ( 611 )

Change in fair value of short-term investment — related party ( 2,382 ) ( 8,128 )

Other income, net 8,762 1,903

Total other income (expense), net 6,380 ( 6,225 )

Net loss before income taxes ( 198,412 ) ( 122,769 )

Provision for (benefit from) income taxes ( 948 ) ( 486 ) 1,867

Benefit from income taxes 279 948

Net loss $ ( 198,133 ) $ ( 121,821 )

Accretion of preferred stock to redemption value — ( 1,468 ) ( 1,645 )

Cumulative dividend on preferred stock — ( 20,193 )

4 unchanged sentences

Net loss $ ( 198,133 ) $ ( 121,821 )

Change in unrealized losses on investments, net of tax ( 357 ) ( 27 ) —

Total other comprehensive loss ( 357 ) ( 27 ) —

Change in unrealized loss on investments, net of tax 369 ( 357 )

Comprehensive loss $ ( 197,764 ) $ ( 122,178 )

__________________

(1) Includes related party amounts of $ 150 and $ 42,170 for the years ended December 31, 2020 and 2021, respectively (see Note 14).

(2) Includes related party amount of $ 126 for the year ended December 31, 2020 (see Note 14).

(1) Includes related party amounts of $ 0.6 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively.

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

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

Redeemable Convertible

Preferred Stock Convertible

Preferred Stock Common Stock Additional

Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total

Stockholders' Equity

Redeemable Convertible Preferred Stock Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity (Deficit)

(in thousands, except share amounts) Shares Amount Shares Amount Shares Amount

Balances at December 31, 2021 115,761,842 $ 196,157 45,658,957 $ 199,643 32,413,860 $ — $ 15,163 $ ( 27 ) $ ( 171,376 ) $ ( 156,240 )

Issuance of Series A redeemable convertible preferred stock for the settlement of the second tranche right liability, net of issuance costs of $ 46

34,999,999 25,504 — — — — 9,450 — — 9,450

Accretion of redeemable convertible preferred stock to redemption value — 1,645 — — — — ( 1,645 ) — — ( 1,645 )

Issuance of common stock as consideration for related party collaboration agreement — — — — 1,608,337 — 150 — — 150

Issuance of restricted common stock — — — — 5,422,456 — — — — —

Stock-based compensation expense — — — — — — 391 — — 391

Net loss — — — — — — — — ( 3,410 ) ( 3,410 )

Balances at December 31, 2020 45,000,000 $ 31,136 — $ — 28,489,599 $ — $ 8,347 $ — $ ( 6,009 ) $ 2,338

Issuance of Series A redeemable convertible preferred stock, including the settlement of the third and fourth tranche right liability, net of issuance costs of $ 41

70,761,842 71,719 — — — — ( 998 ) — — ( 998 )

Reclassification of preferred stock tranche liability upon settlement — 91,834 — — — — — — — —

Accretion of redeemable convertible preferred stock to redemption value — 1,468 — — — — ( 1,468 ) — — ( 1,468 )

Issuance of Series B convertible preferred stock, net of issuance costs of $ 356

— — 45,658,957 199,643 — — — — — —

Issuance of restricted common stock — — — — 1,443,638 — — — — —

Issuance of common stock and settlement of the anti-dilution obligation — — — — 2,498,850 — — — — —

Reclassification of the anti-dilution obligation upon settlement — — — — — — 7,536 — — 7,536

Repurchase of unvested restricted common stock — — — — ( 18,227 ) — — — — —

Stock-based compensation expense — — — — — — 1,746 — — 1,746

Net loss — — — — — — — — ( 165,367 ) ( 165,367 )

Change in unrealized loss on investments, net of tax — — — — — — — ( 27 ) — ( 27 )

Balances at December 31, 2021 115,761,842 $ 196,157 45,658,957 $ 199,643 32,413,860 $ — $ 15,163 $ ( 27 ) $ ( 171,376 ) $ ( 156,240 )

Issuance of common stock upon exercise of stock options — — — — 59,774 — 219 — — 219

Reclassification of related party forward contract — — — — 1,101,525 — 12,020 — — 12,020

Reclassification of forward contract — related party — — — — 1,101,525 — 12,020 — — 12,020

Conversion of convertible preferred stock to common stock upon closing of initial public offering ( 115,761,842 ) ( 196,157 ) ( 45,658,957 ) ( 199,643 ) 51,923,758 1 395,800 — — 395,801

3 unchanged sentences

Stock-based compensation expense — — — — — — 6,459 — — 6,459

Change in unrealized loss on investments, net of tax — — — — — — — ( 357 ) — ( 357 )

Net loss — — — — — — — — ( 121,821 ) ( 121,821 )

Balances at December 31, 2022 — $ — — $ — 97,209,213 $ 2 $ 609,849 $ ( 384 ) $ ( 293,197 ) $ 316,270

Issuance of common stock upon exercise of stock options — — — — 167,908 — 655 — — 655

Stock-based compensation expense — — — — — — 13,910 — — 13,910

Change in unrealized loss on investments, net of tax — — — — — — — 369 — 369

Net loss — — — — — — — — ( 198,133 ) ( 198,133 )

Balances at December 31, 2023 — $ — — $ — 97,377,121 $ 2 $ 624,414 $ ( 15 ) $ ( 491,330 ) $ 133,071

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) Years Ended December 31:

2022 2021 2020

Cash flows from operating activities:

Year Ended December 31,

(in thousands) 2023 2022

Cash flows used in operating activities:

Net loss $ ( 198,133 ) $ ( 121,821 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense 2,224 568 43

Amortization of premiums and discount on short-term investments ( 250 ) 715 —

Stock-based compensation expense 13,910 6,459

Non cash research and development expense for licenses — 12,020 —

Non cash consideration received under related party collaboration arrangement — — ( 5,360 )

Non cash payment to Beam — — 150

Non cash lease expense 12,788 9,790

Loss on fixed asset disposal 8 — —

Depreciation expense 4,653 2,224

Change in fair value of short-term investment — related party 2,382 8,128

Loss on disposal of property and equipment 28 8

Amortization of premiums and discount on short-term investments ( 3,408 ) ( 250 )

Deferred income taxes ( 279 ) ( 964 )

Change in fair value of preferred stock tranche right liability — 74,319 10,904

Change in fair value of anti-dilution obligation — 6,681 700

Change in fair value of related party short-term investment 8,128 391 ( 10,867 )

Non cash other income (expense) — — ( 126 )

Changes in operating assets and liabilities:

2 unchanged sentences

Accrued expenses and other current liabilities 1,758 ( 25,873 )

Lease liabilities ( 10,248 ) ( 4,330 ) —

Accrued settlement payment — related party 13,500 —

Lease liability ( 12,296 ) ( 10,248 )

Net cash used in operating activities ( 165,412 ) ( 131,827 )

Cash flows from investing activities:

Cash flows provided by (used in) investing activities:

Maturities of investments 132,556 93,000

Purchases of investments ( 104,951 ) ( 123,336 )

Purchases of property and equipment ( 8,724 ) ( 16,095 )

Purchase of short-term investments ( 123,336 ) ( 81,980 ) —

Matured short-term investments 93,000 13,000 —

Payments of security deposits ( 170 ) ( 665 )

Net cash used in investing activities ( 47,096 ) ( 73,626 ) ( 1,062 )

Cash flows from financing activities:

Proceeds from the issuance of convertible preferred stock series A, net of issuance costs paid — 70,721 34,954

Proceeds from the issuance of convertible preferred stock series B, net of issuance costs paid — 199,643 —

Cash received in advance from issuance of convertible preferred stock series A —

Payments of deferred offering costs ( 4,042 ) ( 1,086 ) ( 20 )

Proceeds from initial public offering, net of underwrites discounts and commissions and deferred offering costs 185,317 — —

Net cash provided by (used in) investing activities 18,711 ( 47,096 )

Cash flows provided by financing activities:

Net proceeds from stock option exercises 655 219

Proceeds from initial public offering, net of underwrites discounts and commissions and deferred offering costs — 185,317

Payments of deferred offering costs — ( 4,042 )

Net cash provided by financing activities 655 181,494

Net increase (decrease) in cash, cash equivalents and restricted cash 2,571 161,570 28,328

Cash and cash equivalents and restricted cash at beginning of period 198,545 36,975 8,647

Cash and cash equivalents and restricted cash at end of period $ 201,116 $ 198,545 $ 36,975

Net change in cash, cash equivalents, and restricted cash ( 146,046 ) 2,571

Cash, cash equivalents, and restricted cash at beginning of period 201,116 198,545

Cash, cash equivalents, and restricted cash at end of period $ 55,070 $ 201,116

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents, and restricted cash at end of period $ 55,070 $ 201,116

Restricted cash 13,496 13,496

Total cash, and cash equivalents $ 41,574 $ 187,620

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

PRIME MEDICINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(in thousands) 2023 2022

Supplemental cash flow information:

Decrease in right-of-use assets due to lease termination $ 6,081 $ —

Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,265 $ 28,590

Supplemental disclosure of non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable and accrued expenses $ 575 $ 969

Conversion of convertible preferred stock to common stock upon closing of initial public offering $ — $ 395,800

Settlement of Series A preferred stock tranche obligation $ — $ 91,834 $ —

Issuance of Series A preferred stock at a price below fair value $ — $ 998 $ —

PRIME MEDICINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) Years Ended December 31:

2022 2021 2020

Settlement of anti-dilution obligation $ — $ 7,536 $ —

Settlement of related party forward contract $ — $ 12,020

Cash taxes paid $ — $ 141

Deferred offering costs included in accounts payable and accrued expenses at period end $ — $ 410 $ —

Purchases of property and equipment included in accounts payable and accrued expenses at period end $ 969 $ 754 $ —

Accretion of preferred stock to redemption value $ — $ 1,468 $ 1,645

Short-term investment in connection with related party collaboration arrangement $ — $ — $ 5,486

Unrealized loss on short-term investments $ 357 $ 27 $ —

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 187,620 $ 185,420 $ 36,975

Restricted cash 13,496 13,125 —

Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 201,116 $ 198,545 $ 36,975

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

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Nature of the Business and Basis of Presentation

Prime Medicine, Inc., together with its consolidated subsidiary (the “Company”) is a biotechnology company committed to deliver genetic therapies to address diseases by deploying gene editing technology, Prime Editing.

The company is deploying Prime Editing technology, a versatile, precise, efficient and broad gene editing technology, which is designed to make only the right edit at the right position within a gene.

With the theoretical potential to repair approximately 90 percent of known disease-causing genetic mutations across many organs and cell types, medicines based on Prime Editing, if approved, could offer a one-time curative genetic therapeutic option to a broad set of patients.

Prime Medicine, Inc., together with its consolidated subsidiary (the “Company”) is a biotechnology company committed to delivering a new class of differentiated one-time curative genetic therapies to address the widest spectrum of diseases.

The Company is deploying Prime Editing technology, which it believe is a versatile, precise, and efficient gene editing technology.

The Company was incorporated in the State of Delaware in September 2019.

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Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all of our resources to building our Prime Editing platform and advancing development of our portfolio of programs, establishing and protecting our intellectual property, conducting research and development activities, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel and infrastructure.

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

In October 2022, the Company completed its IPO of its common stock.

In connection with its IPO, the Company issued and sold 11,721,456 shares of its common stock, including 1,427,338 shares pursuant to the exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 17.00 per share.

As a result of the IPO, the Company received $ 180.2 million in net proceeds, after deducting underwriting discounts, commissions and offering costs of $ 19.1 million.

In connection with the IPO, all outstanding shares of redeemable convertible preferred stock converted into 51,923,758 shares of the Company’s common stock.

The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry, including, but not limited to, completing preclinical studies and clinical trials, obtaining regulatory approval for product candidates, market acceptance of products, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations, the impact of the COVID-19 pandemic, and the ability to raise additional capital to fund operations.

The Company’s product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.

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

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

Since its inception, the Company has incurred substantial losses and as of December 31, 2022, the Company had an accumulated deficit of $ 293.2 million.

The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents, short-term investments, and related party short-term investments as of December 31, 2022 of $ 293.9 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements.

Since its inception, the Company has devoted substantially all of its resources to building its Prime editing platform and advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the company, business planning, raising capital and providing general and administrative support for these operations.

To date, the Company has funded its operations primarily with proceeds from sales of preferred stock and from public offerings of its common stock.

In February 2024, the Company issued and sold 22,560,001 shares of its common stock, including 3,360,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 6.25 per share.

Further, in lieu of common stock to certain investors, the Company sold pre-funded warrants to purchase 3,200,005 shares of common stock at a public offering price of $ 6.24999 per pre-funded warrant, which represents the per share public offering price of each share of common stock less the $ 0.00001 per share exercise price for each pre-funded warrant.

As a result of the offering, the Company received approximately $ 150.9 million in net proceeds, after deducting underwriting discounts, commissions and estimated offering costs of $ 10.1 million.

Since its inception, the Company has incurred substantial losses.

As of December 31, 2023, the Company had an accumulated deficit of $ 491.3 million and expects to generate operating losses and negative operating cash flows for the foreseeable future.

As of December 31, 2023, the Company maintains cash, cash equivalents, short-term investments, and related party short-term investments of $ 121.7 million and expects that this, together with the net proceeds from the February equity offering of approximately $ 150.9 million, will be sufficient to fund operations for at least the next twelve months from the date of issuance of this Annual Report on Form 10-K.

The Company will need additional financing to support its continuing operations and pursue its growth strategy.

Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

terms or at all.

The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all.

The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy.

The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Reverse Stock Split

On October 12, 2022, in connection with the Company’s initial public offering (“IPO”), the Company effected a 1-3.10880 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios of each series of the Company’s preferred stock (see Note 6).

Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the preferred stock conversion ratios.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry, including, but not limited to, completing preclinical studies and clinical trials, obtaining regulatory approval for product candidates, market acceptance of products, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations, and the ability to raise additional capital to fund operations.

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

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

Basis of Presentation

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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 Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Impact of the COVID-19 Pandemic

The Company is subject to a number of risks associated with the COVID-19 global pandemic, including potential delays associated with the Company’s ongoing preclinical studies and anticipated clinical trials.

COVID-19 may have an adverse impact on the Company’s operations, supply chains and distribution systems or those of its third-party vendors and collaborators, and increase expenses, including as a result of impacts associated with preventive and precautionary measures that are being taken, such as restrictions on travel and border crossings, quarantine policies and social distancing.

The Company and its third-party vendors and collaborators may experience disruptions in supply of items that are essential for its research and development activities.

The Company cannot predict the scope and severity of any economic recovery after the COVID-19 pandemic abates, including following any additional “waves” or other intensifying of the pandemic will have on its financial condition, operations, and business plans.

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of Prime Medicine, Inc.

and its wholly owned subsidiary Prime Medicine Massachusetts Securities Corp., a Massachusetts securities corporation.

All significant intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

Summary of Significant Accounting Policies

Use of Estimates

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

Significant estimates and assumptions reflected within these consolidated financial statements include, but are not limited to, revenue recognition, the valuation of the Company’s common stock and stock-based awards, the valuation of preferred stock tranche right liability, the valuation of the anti-dilution obligation and the valuation of the related party forward contract liability.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

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Actual results may differ materially from those estimates or assumptions.

Significant estimates, as determined by the Company, are discussed in greater detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments.

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

The Company invests in U.S.

Treasury securities and maintains its cash and cash equivalents at high-quality and accredited financial institutions in amounts that could exceed federally

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

insured limits.

Treasury securities and maintains its cash and cash equivalents at high-quality and accredited financial institutions in amounts that could exceed federally insured limits.

Cash equivalents are invested in money market funds.

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The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents.

As of December 31, 2022 and 2021, the amount of cash equivalents included in cash and cash equivalents totaled $ 120.5 million and $ 49.5 million, respectively.

Restricted Cash

Restricted cash consisted of letters of credit totaling $ 13.5 million and $ 13.1 million as of December 31, 2022, and 2021, respectively, that are required to be maintained in connection with the Company’s lease arrangements.

Both letters of credit are in the name of the Company’s landlords and are required to fulfill lease requirements in the event the Company should default on its lease obligations.

As of both December 31, 2022 and 2021, the Company classified its restricted cash as non-current on the consolidated balance sheets based on the release dates of the restrictions.

Restricted cash consists of letters of credit that are required to be maintained in connection with the Company’s lease arrangements.

The Company classifies its restricted cash as current or non-current on the consolidated balance sheets based on the expected release dates of the restrictions.

Short-term Investments and Related Party Short-Term Investment

The Company’s short-term investments consist of investments in debt, including U.S.

The Company’s short-term investments consist of investments in U.S.

Treasury securities with remaining maturities beyond three months at the date of purchase and one year or less from the balance sheet date.

As of both December 31, 2022 and 2021, all of the Company’s debt securities were classified as available-for-sale and were carried at fair market value (see Note 3).

The Company classifies its investments as available-for-sale and carries them at fair market value.

The unrealized losses on the Company’s available-for-sale debt securities are recorded in other comprehensive loss in the consolidated statements of operations and comprehensive loss.

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Once a decline in fair value is determined to be other-than-temporary, an impairment charge will be recorded to other income (expense), net, in the consolidated statements of operations and comprehensive loss.

The Company’s related party short-term equity investment was obtained from the collaboration agreement with Beam Therapeutics Inc.

(“Beam”), which is a public company trading on the Nasdaq Exchange.

At each reporting date, the Company will mark-to-market the Beam common stock to the fair value of the related party short-term investment.

The Company's equity securities with readily determinable fair values are recorded at fair value based upon the market prices of the securities at each reporting date.

The Company’s short-term investment — related party was obtained from the collaboration agreement with Beam, which is a public company trading on the Nasdaq Exchange.

At each reporting date, the Company recognizes the fair value of the short-term investment — related party on the consolidated balance sheets.

Unrealized and realized gains and losses on the Company’s equity investment is included as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

The costs of debt and equity securities for purposes of computing realized and unrealized gains and losses is based on the specific identification method.

Deferred Offering Costs

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

After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction of the carrying value of the preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

Should the in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss .

As of December 31, 2022, there were no deferred offering costs capitalized.

As of December 31, 2021, there were $ 1.5 million of deferred offering costs capitalized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

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

The Company’s cash equivalents, short-term investments, preferred stock tranche right liability, anti-dilution obligation and related party forward contract liability are carried at fair value, determined according to the fair value hierarchy described above (see Note 3).

The Company’s cash equivalents and short-term investments are carried at fair value, determined according to the fair value hierarchy described above.

The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

Property and equipment are stated at cost less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

Estimated Useful Life

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Furniture and fixtures 5 years

Computer hardware and software

Leasehold improvements Shorter of remaining lease term or useful life

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If such asset group is considered to be impaired, the impairment loss to be recognized is measured based on the excess of the carrying value of the impaired asset group over its fair value.

For both the years ended December 31, 2022 and 2021, the Company did not recognize any impairment losses on long-lived assets.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prior to January 1, 2021, the Company accounted for leases in accordance with Accounting Standards Codification (“ASC”) ASC 840, Leases .

At lease inception, the Company determined if an arrangement was an operating or capital lease.

For operating leases, the Company recognized rent expense, inclusive of rent escalation, on a straight-line basis over the lease term.

Effective on January 1, 2021, the Company accounts for leases in accordance with ASC 842, Leases.

In accordance with ASC 842, Leases, the Company determines if an arrangement is or contains a lease at inception.

The Company accounts for leases in accordance with ASC 842, Leases .

In accordance with ASC 842, the Company determines if an arrangement is or contains a lease at inception.

A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

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Operating lease payments are expensed using the straight-line method as an operating expense over the lease term.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Finance lease assets are amortized to depreciation expense using the straight-line method over the shorter of the useful life of the related asset or the lease term.

Finance lease payments are bifurcated into (i) a portion that is recorded as imputed interest expense and (ii) a portion that reduces the finance liability associated with the lease.

Certain of the Company’s leases include options to extend or terminate the lease.

The amounts determined for the Company’s right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised, unless it is reasonably certain that the Company will exercise such options.

In addition, the Company examines other contracts with suppliers, vendors and outside parties to identify whether such contracts contain an embedded lease and, as applicable, records such embedded leases in accordance with ASC 842.

If initially determined that it is not reasonably certain but subsequently the Company

determines that it is reasonably certain to exercise its renewal options or early-termination provisions, the Company would reassess the lease classification, remeasure the lease liability, and adjust the right-of-use asset.

In addition to evaluating arrangement that are leases, the Company examines other contracts with suppliers, vendors and outside parties to identify whether such contracts contain an embedded lease and, as applicable, records such embedded leases in accordance with ASC 842.

Segment Information

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All of the Company’s long-lived assets are located in the United States and all of the Company’s revenue was derived in the United States.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Classification and Accretion of Redeemable Convertible Preferred Stock

The Company has classified the convertible preferred stock outside of stockholders’ equity (deficit) on the Company’s consolidated balance sheets because the holders of such stock have redemption features and certain liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company and would require the redemption of the then-outstanding convertible preferred stock.

The Company's Series A redeemable convertible preferred stock (“Series A Preferred Stock”) was redeemable in an amount equal to the original issue price per share plus all declared but unpaid dividends thereon.

The Company recorded periodic accretion to the values of its outstanding Series A Preferred Stock such that the carrying value of the Series A Preferred Stock would be equal to the redemption value at the earliest redemption date.

Adjustments to the carrying value of the Series A Preferred Stock at each reporting date resulted in an increase to net loss attributable to common stockholders.

In April 2021, the redemption rights for Series A Preferred Stock were removed and such shares of preferred stock were no longer redeemable.

After the removal of the redemption rights, the Company did not record any further accretion to the carrying value of Series A Preferred Stock (see Note 6).

In connection with the IPO, all outstanding shares of Series A convertible preferred stock converted into 37,236,772 shares of the Company’s common stock.

The Company’s Series B convertible preferred stock is not redeemable, except in the event of a deemed liquidation (see Note 6).

Because the occurrence of a deemed liquidation event is not currently probable, the carrying values of the Series B convertible preferred stock are not being accreted to their redemption values.

Subsequent adjustments to the carrying values of the convertible preferred stock would be made only when a deemed liquidation event becomes probable.

In connection with the IPO, all outstanding shares of Series B redeemable convertible preferred stock converted into 14,686,986 shares of the Company’s common stock.

Revenue Recognition

The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers ( Topic 606 ) and its related amendments, or, collectively, ASC 606.

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

In order to achieve this core principle, the Company applies the following five steps when recording revenue:

(1) identify the contract, or contracts, with the 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, performance obligations are satisfied.

At contract inception, the Company assesses the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations.

In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own and whether the required expertise is readily available.

In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its arrangements, the Company performs the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the assessment of the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

As part of the accounting for arrangements under ASC 606, the Company must use significant judgment to determine:

a) the performance obligations based on the determination under step (ii) above;

b) the transaction price under step (iii) above;

and c) the standalone selling price for each performance obligation identified in the contract for the allocation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of transaction price in step (iv) above.

The Company also uses judgment to determine whether milestones or other variable consideration, except for royalties and sales-based milestones where such payments principally relate to a license of intellectual property, should be included in the transaction price as described below.

At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

The transaction price is allocated to each performance obligation based on the relative standalone selling price of each performance obligation in the contract, and the Company recognizes revenue based on those amounts when, or as, the performance obligations under the contract are satisfied.

The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction, probabilities of technical and regulatory success and the estimated costs.

Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation.

Research and Development Expenses

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Milestone payments made upon regulatory approval are capitalized and amortized over the remaining useful life of the related product.

Acquired IPR&D for the year ended December 31, 2022 consisted of the upfront cash consideration for a license arrangement of $ 0.2 million for the 2022 Broad License Agreement (see Note 11).

Acquired IPR&D for the year ended December 31, 2021, consisted of (i) the related party forward contract liability for the issuance of 1,101,525 shares of common stock initially valued at $ 12.0 million and (ii) upfront cash consideration for a license arrangement of $ 30.0 million (see Note 11).

In January 2022, the Company made the upfront payment of $ 30.0 million and issued 1,101,525 shares of its common stock, with a fair value of $ 12.0 million, to Myeloid pursuant to the terms of the Myeloid Collaboration Agreement (see Note 11 and 14).

There was no acquired IPR&D recognized for the year ended December 31, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company expenses as incurred all patent-related costs incurred in connection with filing and prosecuting patent applications due to the uncertainty about the recovery of the expenditure.

The Company expenses all patent-related costs incurred in connection with filing and prosecuting patent applications in the period incurred due to the uncertainty about the recovery of the expenditure.

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

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If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the consolidated balance sheets.

The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable;

Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable;

however, it discloses the range of reasonably possible losses.

As of December 31, 2022 and 2021, no liabilities were recorded for loss contingencies (see Note 12).

Stock-Based Compensation

The Company measures all stock-based awards granted to employees, directors and non-employees based on the fair value of the awards on the date of grant using the Black-Scholes option-pricing model.

The Company measures restricted common stock awards using the difference, if any, between the purchase price per share of the award and the fair value of the Company’s common stock at the date of grant.

The Company grants stock options and restricted stock awards that are subject to either service or performance-based vesting conditions.

Compensation expense for awards to employees and directors with service-based vesting conditions is recognized using the straight-line method over the requisite service period, which is generally the vesting period of the respective award.

Compensation expense for awards to non-employees with service-based vesting conditions is recognized in the same manner as if the Company had paid cash in exchange for the goods or services, which is generally over the vesting period of the award.

Forfeitures are accounted for as they occur.

Compensation expense for awards to employees and non-employees with performance-based vesting conditions is recognized based on the grant-date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.

As of each reporting date, the Company estimates the probability that specified performance criteria will be met and does not recognize compensation expense until it is probable that the performance-based vesting condition will be achieved.

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

Preferred Stock Tranche Right Liability

Each preferred stock tranche right liability was recorded at fair value upon the date of issuance of each preferred stock tranche right and was subsequently remeasured to fair value at each reporting date.

Changes in the fair value of the preferred stock tranche right liability are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.

Changes in the fair value of the preferred stock tranche right liability were recognized until the preferred stock tranche right was settled in full upon the satisfaction of certain conditions in April 2021.

The Company measures stock-based awards granted to employees, directors and non-employees based on the fair value of the awards on the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes option pricing model estimates the fair value of the equity award using the expected term, expected volatility, risk-free interest rate, dividend rate, and the fair value of the common stock underlying the stock-based award.

The Company estimates the expected life stock options using the “simplified” method, whereby, the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

Due to the lack of sufficient company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus.

The risk-free interest rates for periods within the expected life of the option were based on the U.S.

Treasury yield curve in effect during the period the options were granted.

The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

The Company recognizes forfeitures as they occur.

Prior to the IPO, the fair value of common stock underlying stock-based awards was based on an estimate at each grant date by the Company’s board of directors.

The Company determined the estimated per share fair value of its common stock at various dates considering contemporaneous and retrospective valuations in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

Each of these inputs is subjective and generally requires judgment and estimation by management.

Subsequent to the IPO, the fair value of the common stock underlying shared based awards is the quoted market price of the Company’s common stock on the date of the grant.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the awards for service-based awards, which is generally the vesting period.

Stock-based compensation expense is classified in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders.

For the year ended December 31, 2020 there was no difference between net loss and comprehensive loss .

For the years ended December 31, 2022 and 2021, comprehensive loss includes net loss and unrealized gains (losses) on investments.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

The Company’s only element of other comprehensive loss is unrealized gains and losses on marketable securities.

Net Loss per Share Attributable to Common Stockholders

The Company applies the two-class method when computing net income (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 (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the undistributed earnings as if all income (loss) for the period had been distributed.

The Company considers its convertible preferred stock to be participating securities as, in the event a dividend is paid on common stock, the holders of convertible preferred stock would be entitled to receive dividends on a basis consistent with the common stockholders.

The Company applies the two-class method when computing 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 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 loss available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the undistributed earnings as if all loss for the period had been distributed.

There is no allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding potentially dilutive common shares and of unvested restricted common stock.

Diluted net income (loss) per share attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares.

For purposes of this calculation, the Company’s outstanding stock options and convertible preferred stock are considered potential dilutive common shares.

The Company reported net loss and net loss attributable to common stockholders for the years ended December 31, 2022, 2021, and 2020.

The Company has no participating securities outstanding.

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, excluding potentially dilutive common shares and of unvested restricted common stock.

Diluted net loss per share attributable

to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

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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.

The Company had accrued no amounts for interest or penalties related to uncertain tax positions as of December 31, 2022, 2021, and 2020.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), as subsequently amended, which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors), and replaces the existing guidance in ASC 840, Leases.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine the recognition pattern of lease expense over the term of the lease.

In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense in its consolidated statement of operations and comprehensive loss for operating leases and amortization and interest expense in its consolidated statement of operations and comprehensive loss for financing leases.

Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases under ASC 840.

In July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842), which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented.

This guidance is effective for the Company for annual periods beginning after December 15, 2021, including interim periods within that fiscal year.

Early adoption is permitted.

The Company adopted the new leasing standard effective January 1, 2021, using the modified retrospective transition approach which uses the effective date, or January 1, 2021, as the date of initial application.

As a result, prior periods are presented in accordance with the previous guidance in ASC 840.

The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases.

Upon its adoption of ASC 842, the Company recorded lease liabilities and their corresponding right-of-use assets based on the present value of lease payments over the remaining lease term.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $ 2.7 million and right-of-use assets of $ 2.8 million and the derecognition of prepaid rent balances recorded in other assets of $ 0.1 million on the Company’s balance sheet as of January 1, 2021.

The adoption impact relates to the Company’s existing operating lease for office and laboratory space.

The adoption of ASU 2016-02 did not have a material impact on the Company’s statements of operations and comprehensive loss or statements of cash flows.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.

It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions.

In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share (“EPS”) computation.

Additionally, the amended guidance requires the application of the if-converted method for calculating diluted EPS and the treasury stock method will no longer be available.

For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company adopted ASU 2020-06 on January 1, 2022.

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, there are no new accounting pronouncements that are expected to have a material impact on the Company’s financial statements.

Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):

Fair Value Measurements at December 31, 2022

Level 1 Level 2 Level 3 Total

The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair value:

December 31, 2023

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents:

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Short-term investment:

Treasury Bonds — 98,467 — 98,467

Treasury and government securities — 74,639 — 74,639

Related party short-term investment:

Beam equity securities 5,452 — — 5,452

$ 7,834 $ 218,978 $ — $ 226,812

Fair Value Measurements at December 31, 2021

Level 1 Level 2 Level 3 Total

Total cash equivalents and investments $ 5,452 $ 98,848 $ — $ 104,300

December 31, 2022

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents:

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Short-term investment:

Treasury bills and government securities — 68,238 — 68,238

Treasury and government securities — 98,467 — 98,467

Related party short-term investment:

Beam equity securities 7,834 — — 7,834

$ 15,962 $ 117,688 $ — $ 133,650

Related party forward contract liability — — 12,020 12,020

$ — $ — $ 12,020 $ 12,020

Total cash equivalents and investments $ 7,834 $ 218,978 $ — $ 226,812

Money market funds were valued by the Company based on observable inputs, which represent a Level 2 measurement within the fair value hierarchy.

For the years ended December 31, 2022 and 2021, there were no transfers between Level 1, Level 2 and Level 3.

The Company classifies its U.S.

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The fair value of the Company’s U.S.

Treasury securities and money market funds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency and U.S.

Treasury and government securities are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency and U.S.

Treasury securities.

The underlying securities held in the money market funds held by the Company are all government backed securities.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Short-term investments consisted of the following (in thousands):

Investments in Debt Securities

Unrealized gains and losses of investments in debt securities consisted of the following:

December 31, 2023

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Short-term investments:

Treasury Bonds $ 98,851 $ — $ ( 384 ) $ 98,467

Related party short-term investment:

Beam equity securities 5,486 2,348 — 7,834

$ 104,337 $ 2,348 $ ( 384 ) $ 106,301

(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Short-term investments in debt securities:

Treasury and government securities $ 74,654 $ 7 $ ( 22 ) $ 74,639

Total short-term investments in debt securities $ 74,654 $ 7 $ ( 22 ) $ 74,639

December 31, 2022

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Short-term investments:

Treasury bills and government securities $ 68,265 $ — $ ( 27 ) $ 68,238

Related party short-term investment:

Beam equity securities $ 5,486 $ 10,476 $ — $ 15,962

(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Short-term investments in debt securities:

Treasury and government securities $ 98,851 $ — $ ( 384 ) $ 98,467

Total short-term investments in debt securities:

$ 98,851 $ — $ ( 384 ) $ 98,467

The contractual maturities of the Company’s short-term investments in available-for-sale debt securities held were as follows (in thousands):

The contractual maturities of the Company’s investments in debt securities held were as follows:

2023 December 31,

Due within one year $ 74,639 $ 98,467

$ 98,467 $ 68,238

Valuation of the Related Party Forward Contract Liability

The Company measured its related party forward contract liability, which was established in connection with its obligation to issue shares of its common stock to Myeloid Therapeutics, Inc.

(“Myeloid”) under a stock subscription agreement (see Note 11), at fair value based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The initial fair value of the related party forward contract liability was determined based on the number of shares to be issued by the Company and the then per share fair value of the Company’s common stock, which was determined based, in part, on a third-party valuation that utilized methodologies and assumptions consistent with the Company’s most recent common stock valuations, including on a minority, nonmarketable interest basis.

Changes in the fair value of the related party forward contract liability will be recognized as other income (expense), net in the consolidated statements of operations through the settlement date.

There was no change in the fair value of the Co mpany’s common stock from the initial date of the related party forward contract liability and December 31, 2021 and the settlement which occurred in January 2022.

Upon settlement, the fair value of the related party forward contract liability was reclassified to equity upon issuance of the common stock to Myeloid.

A reconciliation of the related party forward contract liability measured and recorded at fair value on a recurring basis is as follows (in thousands):

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Forward Contract

Balance at December 31, 2020 $ —

Initial fair value of related party forward contract liability $ 12,020

Balance at December 31, 2021 $ 12,020

Reclassification of related party forward contract liability upon settlement $ ( 12,020 )

Balance at December 31, 2022 $ —

Valuation of Preferred Stock Tranche Right Liability

The preferred stock tranche right liability was composed of the fair value of rights to purchase Series A Preferred Stock (see Note 6).

The fair value of the preferred stock tranche right liability was determined based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The fair value of the preferred stock tranche right liability, which considered as inputs the estimated fair value of the preferred stock as of each valuation date, the risk-free interest rate, volatility and estimated time to each tranche closing.

The most significant assumption in the Black-Scholes option pricing model impacting the fair value of the preferred stock tranche right liability is the fair value of the Company’s convertible preferred stock as of each measurement date.

The Company determines the fair value per share of the underlying convertible preferred stock by taking into consideration the most recent sales of its convertible preferred stock, results obtained from third-party valuations and additional factors the Company deems relevant.

In November 2020, the second tranche of the Series A Preferred Stock closed.

The fair value of each Series A Preferred Stock was $ 0.73 per share upon the closing of the second tranche.

As of December 31, 2020, the fair value of Series A Preferred Stock was $ 0.76 per share.

In April 2021, the third and fourth tranches of the Series A Preferred Stock closed.

Upon satisfaction of certain conditions and the closing date of the third and fourth tranches, the associated Series A preferred stock tranche right liability was settled.

The fair value of Series A Preferred Stock was $ 2.31 per share upon the closing of the third and fourth tranches.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve for time periods approximately equal to the remaining estimated time to each tranche closing.

The volatility is based on the historical volatility of publicly traded peer companies.

Changes in the estimated fair value of the Company’s convertible preferred stock can have a significant impact on the fair value of the preferred stock tranche right liability.

In April 2021, the third and fourth tranches of the Series A Preferred Stock closed and the preferred stock tranche right liability was settled.

During the year ended December 31, 2021, we recognized $ 74.3 million as a component of other income (expense), net related to the change in fair value of the preferred stock tranche right liability.

During the year ended December 31, 2020, we recognized $ 10.9 million as a component of other income (expense), net related to the change in fair value of the preferred stock tranche right liability.

Valuation of Anti-dilution Obligation

The fair value of the anti-dilution obligation recognized in connection with the anti-dilution provisions set forth in the Company's license agreement with Broad Institute (see Note 11) was determined based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The fair value of the anti-dilution obligation was estimated using a probability-weighted scenario which considered as inputs the probability of occurrence of events that would trigger the issuance of shares, including (i) the closing of Series A Preferred Stock, (ii) the Company’s initial public offering, and (iii) no future sale of equity securities.

The weighted-average fair value of all scenarios was calculated utilizing the fair value per share of the underlying common stock.

Changes in the estimated fair value of common stock and the probability of achieving different financing scenarios can have a significant impact on the fair value of the anti-dilution obligation.

The most significant assumption impacting the fair value of the anti-dilution obligation was the fair value of the Company’s common stock as of each measurement date.

The Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of its convertible preferred stock, results obtained from third-party valuations and additional factors the Company deems relevant.

The per share fair value of the

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s common stock was $ 0.35 as of December 31, 2020.

Immediately prior to the settlement of the anti-dilution obligation, the fair value of the Company’s common stock was $ 3.02 per share.

The anti-dilution obligation was initially recorded at fair value upon entering into the license agreement with Broad Institute and was subsequently remeasured to fair value at each reporting date.

Changes in fair value of the anti-dilution obligation were recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

Changes in the fair value of the anti-dilution obligation were recognized until achievement of $ 100.0 million in cumulative equity financing is raised by the Company, which was achieved in connection with the fourth Series A Preferred Stock closing in April 2021, resulting in the issuance of 2,498,850 shares of common stock to Broad Institute with a fair value of $ 7.5 million.

During the year ended December 31, 2021, we recognized $ 6.7 million as a component of other income (expense), net related to the change in fair value of the anti-dilution obligation.

During the year ended December 31, 2020, we recognized $ 0.7 million as a component of other income (expense), net related to the change in fair value of the anti-dilution obligation.

Marketable securities in unrealized loss positions consisted of the following:

December 31, 2023

(in thousands, except number of securities) Number of Securities Fair Value Gross Unrealized Losses

Investments in continuous loss position for less than 12 months:

Treasury and government securities 11 $ 28,348 $ ( 22 )

Property and Equipment, Net

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

Property and equipment, net consisted of the following:

(in thousands) 2023 2022

Property and equipment:

Laboratory equipment $ 23,873 $ 19,422

3 unchanged sentences

Construction in progress 5,402 1,608

Accumulated depreciation and amortization ( 2,831 ) ( 611 )

$ 19,009 $ 4,932

Depreciation and amortization expense of property and equipment for the years ended December 31, 2022, 2021, and 2020 was $ 2.2 million, $ 0.6 million, and $ 43.0 thousand, respectively.

Total property and equipment 30,143 21,840

Accumulated depreciation ( 7,484 ) ( 2,831 )

Total property and equipment, net $ 22,659 $ 19,009

Depreciation expense related to property and equipment is as follows:

Year ended December 31,

(in thousands) 2023 2022

Depreciation expense $ 4,653 $ 2,224

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued Myeloid license fee–related party

Accrued expenses and other current liabilities consisted of the following:

(in thousands) 2023 2022

Accrued expenses and other current liabilities

Accrued employee compensation and benefits

$ 8,270 $ 6,529

Accrued professional fees 2,273 2,162

Lab-related supplies and services 1,962 1,219

Accrued research and development expense – related party

Other 1,605 449

$ 10,688 $ 37,192

Convertible Preferred Stock

The Company has issued Series A Preferred Stock and Series B convertible preferred stock (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Preferred Stock”).

The Series A preferred stock and Series B preferred stock, described in more detail below, converted into 37,236,772 shares and 14,686,986 shares of common stock, respectively, in October 2022 as part of the Company’s IPO.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2019, the Company completed its first closing of its Series A Preferred Stock and issued and sold 10,000,001 shares of Series A Preferred Stock at a price of $ 1.00 per share for gross proceeds of $ 10.0 million (the “2019 Preferred Stock Financing”).

The Company incurred issuance costs of $ 20,000 in connection with this transaction.

The purchase agreement for the Series A Preferred Stock obligated the investors of the 2019 Preferred Stock Financing to purchase an additional 104,999,997 Series A Preferred Stock at a price of $ 1.00 per share in the subsequent closings upon certain conditions (“Series A Subsequent Closings”).

The investors’ obligation to purchase shares in the subsequent closing terminates upon occurrence of a Deemed Liquidation Event, the Company’s initial public offering, or bankruptcy by the Company.

If an investor did not participate in the subsequent closing when obligated to do so, then any existing Series A Preferred Stock held by that investor would be converted into common shares of the Company on a ten-for-one basis.

The Company concluded that these obligations of investors to participate in the subsequent closing of Series A Preferred Stock met the definition of a freestanding financial instrument that was required to be recorded as a liability at fair value as (i) the instruments are legally detachable and separately exercisable from the Series A Preferred Stock and (ii) the rights will require the Company to transfer assets upon future closings of the Series A Preferred Stock.

Upon the first closing of the Series A Preferred Stock in September 2019, the Company recorded a preferred stock tranche right liability of $ 6.3 million and a corresponding reduction to the carrying value of the Series A Preferred Stock (see Note 3).

In November 2020, the Company completed the second closing of its Series A Preferred Stock, in which the Company issued and sold 34,999,999 shares of Series A Preferred Stock, at a price of $ 1.00 per share, for gross proceeds of $ 35.0 million and incurred $ 46,000 of issuance costs.

As the fair value of the Series A Preferred Stock was $ 0.73 at the time of the second closing, the Company recorded a capital contribution of $ 9.5 million for the difference between the fair value per share and the $ 1.00 per share paid by the holders of the Series A Preferred Stock participating in the second closing, which included members of the Company’s board of directors.

In April 2021, the Company completed the third and fourth closings of its Series A Preferred Stock, in which the Company issued and sold an aggregate of 70,761,842 shares of Series A Preferred Stock, at a price of $ 1.00 per share, for gross proceeds of $ 70.8 million and incurred $ 41,000 of issuance costs.

As a result of this issuance, the Series A preferred stock tranche right liability with a then fair value of $ 91.8 million, based on a fair value of $ 2.31 per share of Series A Preferred Stock immediately prior to the closings, was settled in full and reclassified as an increase to the carrying value of Series A Preferred Stock.

In April 2021, the Company issued and sold 45,658,957 shares of Series B Preferred Stock, at a price of $ 4.3803 per share, for gross proceeds of $ 200.0 million and incurred $ 0.4 million of issuance costs.

Upon issuance of each series of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features.

The Company also concluded that no beneficial conversion feature existed on the issuance date of each series of Preferred Stock.

On October 12, 2022, in connection with the Company’s IPO, the Company effected a 1-for-3.10880 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios of each series of the Company’s preferred stock.

Total accrued expenses and other current liabilities $ 14,110 $ 10,688

Stockholder’s Equity

Reverse Stock Split

As described in Note 1, Nature of the Business and Basis of Presentation , in connection with the Company’s IPO in October 2022, the Company effected a 1-for-3.10880 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios of each series of the Company’s preferred stock.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, the Preferred Stock consisted of the following (in thousands, except share amounts):

December 31, 2021

Preferred Stock Authorized Preferred Stock Issued and Outstanding Carrying Value Liquidation Preference Conversion price per share Common Stock Issuable Upon Conversion

Series A Preferred Stock 115,761,842 115,761,842 $ 196,157 $ 125,000 $ 3.1088 37,236,776

Series B Preferred Stock 45,658,957 45,658,957 $ 199,643 $ 210,814 $ 13.6175 14,686,988

161,420,799 161,420,799 $ 395,800 $ 335,814 51,923,764

During the year ended December 31, 2022, until the conversion of the all preferred stock upon the Company’s IPO, and as of December 31, 2021 and 2020, the Conversion Price was $ 3.1088 per share for Series A Preferred Stock and $ 13.6175 per share for Series B Preferred Stock, each subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization with respect to the Preferred Stock.

Through December 31, 2022, 2021, and 2020 no cash dividends have been declared or paid.

As of December 31, 2020, at the written election of at least 65 percent of the holders of the outstanding shares of Series A Preferred Stock, voting together as a single class and on an as-converted to common stock basis, the shares of Series A Preferred Stock outstanding were redeemable, at any time on or after the fifth anniversary of issuance, in three equal annual installments commencing 60 days after receipt of the required vote.

Shares of Series A Preferred Stock were redeemable in an amount equal to the Original Issue Price per share plus any accruing dividends accrued but unpaid thereon, whether or not declared.

In April 2021, in connection with the Series B Preferred Stock closing, the Company adopted an amended and restated certificate of incorporation, which removed the redemptions rights of the holders of Series A Preferred Stock.

As a result of this amendment, Series A Preferred Stock was no longer redeemable at the option of the holders.

The Company determined that the changes to the rights underlying the Series A Preferred Stock was not substantive and did not materially modify the rights and preferences of the holders of Series A Preferred Stock.

Prior to the amendment, the Company recognized changes in the redemption values of its Series A Preferred Stock over the period from the date of issuance to the earliest redemption date and adjusted the carrying value of the instrument to equal the redemption value at the redemption date.

During years ended December 31, 2022, 2021, and 2020, the Company recorded adjustments to increase the carrying values of the Series A Preferred Stock by an aggregate of zero , $ 1.5 million, and $ 1.6 million, respectively, which resulted in an increase in redeemable convertible preferred stock by those amounts, offset by charges against additional paid-in-capital, if any, and then in the absence of additional paid-in capital the accretion is charged to the accumulated deficit.

Each share of common stock entitles the holder to one vote on all matters submitted to the stockholders for a vote.

Under the Third Amended and Restated of Certificate of Incorporation, the Company’s common stock had a par value of $ 0.0001 and each share of common stock entitles the holder to one vote on all matters submitted to the stockholders for a vote.

The holders of common stock are entitled to receive dividends, if any, as declared by the Company’s board of directors.

As of December 31, 2022, the Company had reserved 7,622,758 shares of common stock for the exercise of outstanding stock options for common stock, and the issuance of common stock options and restricted stock awards remaining available for grant under the 2022 Equity Incentive Plan.

As of December 31, 2021, the Company had reserved 58,433,916 shares, of common stock for the conversion of shares of Preferred Stock into common stock, the exercise of outstanding stock options for common stock, and the issuance of common stock options and restricted stock awards remaining available for grant under the 2019 Equity Incentive Plan.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At-The-Market Equity Program

In November 2023, the Company entered into Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, acting as the Company’s agent and/or principal (the “Sales Agent”), with respect to an “at the market offering” program under which the Company may, from time to time, at its sole discretion, issue and sell shares of its common stock having an aggregate offering price of up to $ 300.0 million through the Sales Agent.

As of December 31, 2023, there have been no sales of common stock pursuant to the Sales Agreement.

Stock-Based Compensation

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The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated.

The total number of shares of common stock issuable under the 2019 Plan was 6,171,635 .

In April 2021, the Company’s board of directors further increased the number of shares of common stock reserved for issuance under the plan from 6,171,635 shares to 11,561,815 shares.

As of December 31, 2022 and 2021, there were no shares, and 2,405,824 shares, respectively, remaining available for future grants under the 2019 Plan.

Shares of unused common stock underlying any Awards that are forfeited, canceled or reacquired by the Company prior to vesting will again be available for the grant of awards under the 2019 Plan.

The exercise price for stock options granted may not be less than the fair market value of the Company’s common stock on the date of grant, as determined by the board of directors, or at least 110 percent of the fair market value of the Company’s common stock on the date of grant in the case of an ISO granted to an employee who owns stock representing more than 10 percent of the voting power of all classes of stock (“10% Owner”) as determined by the board of directors as of the date of grant.

The Company’s board of directors determines the fair market value of the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant.

Unless otherwise provided, at the time of grant, the options granted pursuant to the 2019 Plan expire ten years from the date of grant, or five years from the date of grant in the case of an ISO that is granted to a 10 % Owner.

Awards typically vest over four years , with the first 25 percent vesting on the first anniversary of the vesting commencement date and the remainder vesting in 36 equal monthly installments thereafter, contingent on the recipient’s continued employment, service or relationship with the Company.

In October 2022, the Company completed its IPO, and in connection with the closing the Board determined that no further awards would be granted under the 2019 Plan.

In October 2022, the Company completed its IPO, and in connection with the closing, the board of directors determined that no further awards would be granted under the 2019 Plan.

Upon effectiveness of the 2022 Stock Option and Incentive Plan (the “2022 Plan”), shares remaining available for grant under the 2019 Plan were included in the 2022 Plan.

Additionally, shares of unused common stock underlying any Awards that are forfeited, canceled or reacquired by the Company prior to vesting will again be available for the grant of awards under the 2022 Plan.

2022 Stock Option and Incentive Plan

On February 9, 2022, the Company’s board of directors adopted, and on October 10, 2022 its stockholders approved, the 2022 Stock Option and Incentive Plan (the “2022 Plan”), which became effective immediately preceding the date on which the registration statement for the Company’s IPO was declared effective by the SEC.

On February 9, 2022, the Company’s board of directors adopted, and on October 10, 2022 its stockholders approved, the 2022 Plan, which became effective immediately preceding the date on which the registration statement for the Company’s IPO was declared effective by the SEC.

The 2022 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors, and consultants.

The 2022 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted common stock awards, restricted stock units and other stock-based awards.

The number of shares initially reserved for issuance under the 2022 Plan is 8,041,688 shares, which includes the number of shares remaining available for grant under the 2019 Plan, as of the effective date, for the issuance of awards under the 2022 Plan.

In addition, the number of shares reserved and available for issuance under the 2022 Plan will automatically increase on January 1, 2023 and each January 1 thereafter, by five percent of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the compensation committee.

The shares of common stock underlying any awards under the 2022 Plan and the 2019 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire, or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2022 Plan.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, options to purchase 435,334 shares of common stock were issued and outstanding under the 2022 Plan.

The 2022 Plan provides for an automatic increase in the number of shares reserved and available for issuance on January 1, 2023 and each January 1 thereafter, by five percent of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the compensation committee.

On January 1, 2024, the annual increase for the 2022 Plan resulted in an additional 4,868,856 shares authorized for issuance being added to the 2022 Plan.

As of December 31, 2023, the Company had 16,681,302 shares reserved under the 2022 Plan and the 2019 Plan, and 8,627,709 shares available for issuance under the 2022 Plan.

2022 Employee Stock Purchase Plan

On February 9, 2022, the Company’s board of directors adopted, and on October 10, 2022 its stockholders approved, the 2022 Employee Stock Purchase Plan (the “2022 ESPP”), which became effective immediately preceding the date on which the registration statement for the Company’s IPO was declared effective by the SEC.

A total of 971,350 shares of common stock were initially reserved for issuance under this plan.

The number of shares of common stock that may be issued under the 2022 ESPP shall cumulatively increase beginning on January 1, 2023 and each January 1 thereafter through January 1, 2032, by the least of (i) 971,350 shares of common stock, (ii) one percent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such number of shares of common stock as determined by the administrator of the 2022 ESPP.

No shares of the Company’s common stock were issued and no stock-based compensation expense was recognized during the year ended December 31, 2022 related to the 2022 ESPP.

The 2022 ESPP provides for an annual increase beginning on January 1, 2023 and each January 1 thereafter through January 1, 2032, by the least of (i) 971,350 shares of common stock, (ii) one percent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such number of shares of common stock as determined by the administrator of the 2022 ESPP.

There was no annual increase for the 2022 ESPP on January 1, 2024.

As of December 31, 2023, the Company had 1,942,700 shares available for issuance under the 2022 ESPP.

No shares of the Company’s common stock were issued during the years ended December 31, 2023 and 2022 under the 2022 ESPP.

Stock Option Valuation

The fair value of each stock option grant is estimated on the grant date using the Black-Scholes option-pricing model.

The Company historically had been a private company and lacks company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

For options with service-based vesting conditions, the expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

No stock options were granted during the year ended December 31, 2020.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted:

December 31, 2022 December 31, 2021

Fair value per share of underlying common stock $ 7.34 $ 7.54

Year ended December 31,

Risk-free interest rate 3.7 % 3.0 %

2 unchanged sentences

Expected dividend yield — % — %

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Time-Based Stock Options

The following table summarizes the Company’s time-based stock option activity for the year ended December 31, 2023:

Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2022 3,954,265 $ 6.43 9.02 $ 48,030

5 unchanged sentences

Vested and expected to vest at December 31, 2023 7,641,863 $ 9.79 8.68 $ 12,014

The weighted-average grant-date fair value of stock options granted was $ 7.40 and $ 1.89 per share for the years ended December 31, 2022 and 2021, respectively.

Other information related to the time-based stock option activity of the Company was as follows:

Year ended December 31,

Weighted-average fair value of options granted $ 8.96 $ 7.40

Intrinsic value of options exercised (in thousands) $ 1,368 $ 681

As of December 31, 2023 there was $ 40.9 million of total unrecognized compensation cost related to time-based unvested stock options, and the Company expects to recognize such amount over a remaining weighted-average period of 2.7 years.

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

Performance-Based Stock Options

The Company has granted stock options to certain employees to purchase shares of common stock that contain certain performance-based vesting criteria, primarily related to the achievement of certain development milestones related to IND acceptance, and the consummation of the Company’s IPO.

The Company has granted stock options to certain employees to purchase shares of common stock that contain certain performance-based vesting criteria related to corporate milestones.

The performance-based stock options were granted “at-the-money” and have a term of 10 years.

The fair value of each option grant under the performance share option plan was estimated on the date of grant using the same option valuation model used for time-based stock options above.

The fair value of each option grant under the performance share option plan was estimated on the date of grant.

Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s performance-based stock option activity for the year ended December 31, 2023:

Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2022 411,730 $ 6.65 9.17 $ 4,912

Granted 170,482 $ 10.86

Exercised — —

Forfeited — —

Outstanding at December 31, 2023 411,730 $ 6.65 8.15 $ 1,362

Vested and exercisable at December 31, 2023 121,160 $ 5.11 8.06 $ 454

Vested and expected to vest at December 31, 2022 411,730 $ 6.65 9.17 $ 4,912

Through December 31, 2022, the Company concluded that the achievement of the performance conditions for such awards, proof of concept and consummation of IPO were achieved, and compensation expense related to these awards were recognized.

The Company concluded that the achievement of the remaining performance condition for such awards was not probable.

The weighted average grant date fair value of the performance stock options awarded during the year ended December 31, 2022 was $ 9.55 .

As of December 31, 2022 there was $ 2.3 million of total unrecognized compensation cost related to performance-based stock options.

Other information related to the performance-based stock option activity of the Company was as follows:

Year ended December 31,

Weighted-average fair value of options granted $ — $ 9.55

As of December 31, 2023 there was $ 2.3 million of total unrecognized compensation cost related to performance-based stock options.

2 unchanged sentences

The fair value of each share of restricted common stock is based on the market price of the Company's common stock on the date of grant.

The vesting of these restricted stock awards are time-based or performance-based.

For a period of up to six months from a grantee’s termination, the Company has the right and option to repurchase unvested restricted common stock at the lower of (i) the original purchase price per share ($ 0.00004 ) or (ii) the fair market value per share as of the date of the Company elects to exercise its repurchase right.

In May 2022, the Company repurchased 3,116 unvested shares of the restricted common stock at a price of $ 0.00004 per share, the original sale price, and the repurchased common shares were restored to the amount of unissued, authorized shares of common stock as of December 31, 2022.

During the years ended December 31, 2022 and 2021, the Com pany issued time-based restricted common stock and performance-based restricted common stock with vesting subject to certain performance conditions.

Shares of restricted common stock granted to employees and directors are not deemed, for accounting purposes, to be outstanding until those shares have vested.

Each award type is discussed below.

Time-Based Restricted Common Stocks

Time-Based Restricted Common Stocks Awards

The majority of the restricted common stock have time-based vesting conditions and vest over a four-year period, subject to the employee’s continued employment with, or service to, the Company on such vesting date.

Compensation expense is recognized on a straight-line basis over the vesting period.

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Time-Based Restricted Common Stock Awards

The following table summarizes the Company’s time-based restricted common stock activity for the year ended December 31, 2022:

The following table summarizes the Company’s time-based restricted common stock award activity for the year ended December 31, 2023:

Number of Shares Weighted-Average Grant-Date Fair Value

3 unchanged sentences

Unvested restricted common stock at December 31, 2023 903,227 $ 0.17

The aggregate fair value of restricted common stock that vested during the period for the years ended December 31, 2022, 2021, and 2020 was $ 0.5 million, $ 0.6 million, and $ 0.1 million, respectively.

As of December 31, 2022 , there was $ 0.3 million of total unrecognized compensation cost related to unvested ti me-based restricted common stock which the Company expects to recognize over a weighted-average period of 1.1 years.

As of December 31, 2023 , there was $ 0.2 million of total unrecognized compensation cost related to unvested time-based restricted common stock which the Company expects to recognize over a weighted-average period of 0.7 years.

Performance-Based Restricted Common Stock Awards

The Company has also granted performance‑based restricted common stock to certain executive officers and key persons of the Company with terms that allow the grantees to vest in a specific number of shares based upon the achievement of performance‑based milestones, primarily related to the dosing of a first patient in a Phase II or later-stage clinical trial or FDA approval of compound, proof of concept in a lead indication, IND acceptance and consummation of the Company’s IPO.

Share‑based compensation expense associated with the performance-based restricted common stock is recognized if the performance condition is considered probable of achievement using the Company’s best estimates of the time to vesting for the achievement of the performance‑based milestones.

Performance‑based restricted common stock awards vest upon the achievement of performance‑based milestones related to corporate milestones.

Stock-based compensation expense associated with the performance-based restricted common stock is recognized if the performance condition is considered probable of achievement using the Company’s best estimates of the time to vesting for the achievement of the performance‑based milestones.

Each reporting period, the Company updates its assessment of the probability that the performance-based milestones will be achieved.

The fair value of the restricted common stock was based on the fair market value of the Company’s common stock on the date of grant.

As of December 31, 2022, the Company has concluded that the proof of concept and the consummation of the IPO performance obligations were achieved, and compensation expense related to the performance-based restricted common stock has been recorded.

The Company concluded it was not probable that the remaining performance condition would be achieved and no compensation expense was recorded for this performance obligation.

As of December 31, 2021 and 2020, the Company has concluded it was not probable that these performance conditions related to performance-based restricted common stock would be achieved, and as a result no compensation expense related to the performance-based restricted common stock has been recorded.

The following table summarizes the Company’s performance-based restricted common stock activity for the year ended December 31, 2022:

The following table summarizes the Company’s performance-based restricted common stock award activity for the year ended December 31, 2023:

Number of Shares Weighted-Average Grant-Date Fair Value

Unvested restricted common stock at December 31, 2022 3,832,769 $ 0.07

4,553,223 $ 0.10

Vested ( 720,454 ) $ 0.18

Repurchased — —

Unvested restricted common stock at December 31, 2023 3,832,769 $ 0.07

(1) Includes 3,472,545 shares granted to a co-founder in September 2019

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 , there was $ 0.3 million of total unrecognized compensation cost related to unvested performance-based restricted common stock.

Stock-Based Compensation

The following table below summarizes the classification of the Company’s stock-based compensation expense related to stock options and restricted common stock awards in the consolidated statements of operations and comprehensive loss (in thousands):

Year ended December 31,

2022 2021 2020

General and administrative $ 2,019 $ 459 $ 40

(in thousands) 2023 2022

Stock-based compensation expense:

Research and development $ 7,950 $ 4,440

$ 6,459 $ 1,746 $ 391

For the years ended December 31, 2022, 2021, and 2020, the Company recorded a tax provision (benefit) of $( 0.9 ) million, $( 0.5 ) million, and $ 1.9 million respectively.

The deferred provision for the year ended December 31, 2022 was attributable to the change in deferred tax liability associated with the unrealized gains on investments.

The deferred provision for the year ended December 31, 2021 was attributable to the Company recording a valuation allowance on its deferred tax assets and liabilities due to the Company being in a net deferred tax asset position.

The components of income tax provision are as follows (in thousands):

General and administrative 5,960 2,019

Total stock-based compensation expense $ 13,910 $ 6,459

Income tax (benefit) expense consists of the following:

Year Ended December 31,

2022 2021 2020

Components of income tax provision

(in thousands) 2023 2022

Current provision:

Federal $ — $ —

State 16 138 —

Total current provision — 16

Deferred income tax provision (benefit):

Deferred income tax benefit:

Federal 279 314

State ( 650 ) 304 535

Total deferred income tax provision (benefit) ( 964 ) ( 624 ) 1,867

Total provision for (benefit from) income taxes $ ( 948 ) $ ( 486 ) $ 1,867

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total deferred income tax benefit 279 964

Total benefit from income taxes $ 279 $ 948

A reconciliation of the U.S.

1 unchanged sentence

Year Ended December 31,

2022 2021 2020

Rate Reconciliation

Federal income tax expense at statutory rate 21.0 % 21.0 %

State income taxes, net of federal benefit 7.3 % 7.7 %

Permanent differences ( 0.9 ) % (1)

( 9.6 ) % (1)

( 148.5 ) % (1)

Tax credits 2.0 % 2.9 %

Permanent differences ( 0.9 ) % ( 0.9 ) %

Other ( 0.4 ) % — %

1 unchanged sentence

Effective income tax rate 0.1 % 0.7 %

________________

(1) Permanent differences for the years ended December 31, 2022, 2021 and 2020 related to the change in fair value of Series A Preferred Stock tranche rights

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

As of December 31,

Deferred Tax Summary

Net deferred tax assets (liabilities) consisted of the following:

(in thousands) 2023 2022

Deferred tax assets:

Capitalized research and development costs $ 49,990 $ 19,974

and state net operating loss carryforwards 35,977 20,427

Tax credits 7,268 1,547

Depreciation and amortization 13,204 13,307

Tax credits 12,863 7,268

Accrual 5,817 1,649

Lease Liability 3,711 7,853

Capitalized research and development costs 19,974 —

Stock Compensation 1,473 122

1 unchanged sentence

Deferred tax liabilities:

Stock compensation $ — $ ( 136 )

Mark to market adjustments ( 34 ) ( 34 )

Unrealized gain/loss ( 641 ) ( 2,862 )

Right of Use Asset ( 3,794 ) ( 8,072 )

Other — ( 675 )

Total deferred tax liabilities ( 3,794 ) ( 8,747 )

1 unchanged sentence

Net deferred tax assets (liabilities) $ — $ ( 279 )

As of December 31, 2022, the Company had U.S.

federal net operating loss carryforwards of $ 75.2 million, which may be available to reduce future taxable income, which do not expire.

In addition, as of December 31, 2022, the Company had state net operating loss carryforwards of $ 73.3 million, which may be available to reduce future taxable income and expire at various times beginning in 2039.

As of December 31, 2022, the Company also had federal and state research and development tax credit carryforwards of $ 4.9 million and $ 3.0 million, respectively, which may be available to reduce future tax liabilities and begin to expire in 2040 and 2036, respectively.

The following is a summary of the Company’s net operating loss and tax credit carryforwards, both of which may be available to reduce future tax liabilities:

(in thousands) 2023 2022

federal net operating loss - do not expire $ 131,608 $ 75,202

State net operating loss - expire at various dates beginning in 2039

132,009 73,339

Federal research and development tax credits - expire at various dates beginning in 2040

State research and development tax credits - expire at various dates beginning in 2036

Utilization of the U.S.

federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to certain ownership changes that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

can be utilized annually to offset future taxable income and tax liabilities.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income and tax liabilities.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percent over a three-year period.

3 unchanged sentences

Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company during the year and resulted in the capitalization of R&D costs of $ 80.7 million.

The Tax Cuts and Jobs Act requires taxpayers to capitalize and amortize research and development expenditures under section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company for the year ended December 31, 2022.

For the years ended December 31, 2023 and 2022, the Company capitalized R&D costs of $ 137.2 million and $ 80.7 million, respectively.

The Company will amortize these costs for tax purposes over 5 years if the R&D was performed in the U.S.

2 unchanged sentences

Management has considered the Company’s history of cumulative net losses incurred since inception, expectation of future losses and lack of other positive evidence.

As of December 31, 2020, the Company was in a deferred tax liability position due to the unrealized gain and therefore had released the valuation allowance and recorded an ending deferred tax liability balance.

For the year ended December 31, 2021, the Company was in a net deferred tax asset position and therefore recorded a valuation allowance against the portion of its deferred tax assets that cannot be fully supported by the future reversal of existing deferred tax liabilities.

For the year ended December 31, 2022, the Company was in a net deferred tax asset position and therefore recorded a valuation allowance against the portion of its deferred tax assets that cannot be fully supported by the future reversal of existing deferred tax liabilities.

The Company has determined that the indefinite nature of the deferred tax liability related to its unrealized gain on its related party short-term investment can only support 80 percent of the federal deferred tax assets and none of the state deferred tax assets, resulting in a net deferred tax liability position at December 31, 2022 of $ 0.3 million.

For the years ended December 31, 2023 and 2022, the Company was in a net deferred tax asset position and therefore recorded a valuation allowance against the portion of its deferred tax assets that cannot be fully supported by the future reversal of existing deferred tax liabilities.

The Company has determined that the indefinite nature of the deferred tax liability related to its unrealized gain on its short-term investment — related party can only support 80 percent of the federal deferred tax assets and none of the state deferred tax assets.

The Company reevaluates the positive and negative evidence at each reporting period.

For the year ended December 31, 2023, the valuation allowance increased primarily due to the increases in net operating loss carryforwards, capitalized research and development costs, and research and development tax credit carryforwards.

The changes in the valuation allowance were as follows (in thousands):

The changes in the valuation allowance were as follows:

Year Ended December 31,

2022 2021 2020

(in thousands) 2023 2022

Valuation allowance at beginning of year $ 62,132 $ 25,253

6 unchanged sentences

In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable.

Since the Company is in a loss carryforward position, the Company is generally subject to examination

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S.

federal, state and local income tax authorities for all years in which a loss carryforward is available.

3 unchanged sentences

In March 2020, the Company entered into an operating lease to sublease office and laboratory space located at 21 Erie Street, Cambridge, Massachusetts.

The lease commenced in March 2020 and was set to expire i n March 2022.

The lease agreement provides for escalating monthly rental payments with fixed costs for expenses and property taxes included in each payment.

Upon the execution of the lease agreement the Company paid $ 0.1 million for the rental fee for the last month of the term and $ 0.1 million as a security deposit on the space, which is classified as other assets on the consolidated balance sheet as of December 31, 2020.

Effective August 2020, the Company amended the sublease for additional office and laboratory space (the “1 st Amendment”) with the lease commencement date in February 2021, and to extend the maturity of the sublease through June 2023.

Upon the execution of the 1 st Amendment, the Company paid a rental fee of $ 0.3 million to lease additional office space in addition to the last month’s rent of the lease and $ 0.3 million security deposit, which is classified as other assets on the consolidated balance sheet as of December 31, 2020.

The lease was subsequently amended in October 2020 (the “2 nd Amendment”) to shorten the maturity of the sublease through March 2023.

In May 2021, the Company amended (the “3 rd Amendment”) the sublease for additional office and laboratory space (“Expanded Premises”).

The lease commenced in December 2021 and expires in March 2023.

Upon the execution of the 3 rd Amendment the Company paid $ 0.2 million for the rental fee for the last month of the term and $ 0.2 million as a security deposit on the space, which is classified as other assets on the consolidated balance sheet as of December 31, 2021.

In July 2021, the Company amended (the “4 th Amendment”) the sublease for additional laboratory space (“Lab Space”) with a term of less than one year .

The Lab Space lease is classified as a short-term lease and the Company will recognize lease payments as an expense on a straight-line basis over the term.

In April 2022, the Company executed an extension (the “6 th Amendment”) which extends the expiration date of the lease for a period of two years , from March 2023 to March 2025.

This lease was subject to various amendments with the last material amendment entered into in April 2023 for additional office and laboratory space and to extended the term of the sublease through March 2025.

The amended lease agreement provides for escalating monthly rental payments with fixed costs for expenses and property taxes included in each payment.

Under the terms of the amended lease, the security deposit was increased to $ 0.7 million, which is classified as other assets on the consolidated balance sheet as of December 31, 2023.

In November 2023, the Company exercised its option to terminate this lease with a seven-month notice.

This termination was deemed reasonably certain during the year ended December 31,2023, and the Company reassessed the lease and recorded a $ 6.1 million reduction to the Company’s operating lease liability and its operating lease right-of-use asset on the condensed consolidated balance sheet.

38 Sidney Street, Cambridge, Massachusetts Lease

7 unchanged sentences

In July 2021, the Company entered into a non-cancelable operating lease to sublease office space located at 64 Sidney Street, Cambridge, Massachusetts .

The lease commenced on April 15, 2022 and will expire on April 15, 2025.

The lease commenced in April 2022 and will expire in April 2025.

The Company has a right to extend the lease for one additional six-month period at a market rate as determined by the sublandlord and agreed to by the Company.

2 unchanged sentences

60 First Street, Cambridge, Massachusetts Lease

In November 2021, the Company entered into a lease for office and laboratory space in Cambridge, Massachusetts.

The Landlord is required to perform certain base building work prior to turning over the space to the Company to perform certain additional improvements, which is currently expected in 2023.

The lease will then commence when the Company obtains control over the space with rental payments commencing 11 months later.

The initial non-

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cancelable term of the lease is ten years , and the Company has an option to extend the lease for an additional period of ten years with the rent during the option period being the then fair market rent.

The Company secured the lease with a $ 13.1 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2022 and December 31, 2021.

In November 2021, the Company entered into a lease for office and laboratory space in Cambridge, Massachusetts, with rent commencing in March 2024, subject to any credits pursuant to the terms of the lease.

Also subject to any credits pursuant to the terms of the lease, the Company expects to pay up to approximately $ 208.7 million over the initial non-cancelable term of the lease of ten years , and the Company has an option to extend the lease for an additional period of ten years with the rent during the option period being the then fair market rent.

secured the lease with a $ 13.1 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2023 and December 31, 2022.

Under ASC 842, the Company expects that the lease will commence in March 2024.

480 Arsenal Street, Watertown, Massachusetts Lease

In May 2022, the Company entered into a non-cancelable operating lease to sublease office space located at 480 Arsenal Street, Watertown, Massachusetts.

The lease commenced on May 13, 2022 and will expire on April 30, 2027.

The lease commenced in May 2022 and will expire in April 2027.

The lease requires the Company to share in prorated expenses and property taxes based on actual amounts incurred;

those amounts are not fixed for future periods and, therefore, these amounts will not be included in the measurement of the lease.

The Company secured the lease with a $ 0.4 million security deposit, which was recorded as restricted cash on the consolidated balance sheet as of December 31, 2022.

The Company secured the lease with a $ 0.4 million security deposit, which was recorded as restricted cash on the consolidated balance sheet as of December 31, 2023 and December 31, 2022.

In conjunction with the lease, the Company entered into a sublease agreement to sublet a portion of the office space at 480 Arsenal Street Watertown, Massachusetts (the “Arsenal Street Sublease”).

The Arsenal Street Sublease commenced in May, 2022 and will expire on April 30, 2025.

Summary of lease costs recognized under ASC 842

The Arsenal Street Sublease commenced in May 2022 and will expire in April 2025.

The Company was not relieved of its primary obligation under the operating lease as a result of the sublease.

Summary of lease costs recognized

The following tables contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2023 and December 31, 2022 .

The components of lease cost under ASC 842 were as follows (in thousands):

The components of lease cost were as follows:

Year Ended December 31,

(in thousands) 2023 2022

Operating lease cost $ 13,664 $ 10,999

1 unchanged sentence

Short-term lease cost 2,816 1,401

Sublease income ( 168 ) ( 294 )

Total lease cost $ 18,457 $ 13,217

In connection with the Arsenal Street Sublease, the Company recorded operating sublease income of $ 0.3 million for the year ended December 31, 2022 in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company was not relieved of its primary obligation under the operating lease as a result of the sublease.

The weighted-average remaining lease term and discount rate were as follows:

Year Ended December 31,

Weighted average remaining lease term (in years) 1.9 years 2.7 years

Weighted average discount rate 6.92 % 4.92 %

Future annual lease payments under non-cancelable operating leases as of December 31, 2022 w ere as follows (in thousands):

2023 $ 11,963

Total future minimum lease payments $ 30,757

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Future annual lease payments under non-cancelable operating leases as of December 31, 2023 w ere as follows:

(in thousands) Undiscounted

Undiscounted lease payments:

Total undiscounted lease payments 14,575

imputed interest ( 942 )

The lease for office space at 60 First Street, Cambridge , Massachusetts has not yet commenced and the expected date for which the Company obtains control of the space is currently uncertain but not expected to occur until the first half of 2023.

The Company currently expects rent to commence 11 months after taking possession of the space, with full occupancy expected in 2024, for which the Company will pay approximately $ 208.7 million over the ten-year lease term.

As the lease has not commenced as of December 31, 2022 , the operating lease liabilities on the consolidated balance sheet through December 31, 2022 and the table above excludes any amounts related to this lease.

Disclosures under ASC 840

Prior to the adoption of ASC 842 on January 1, 2021, the Company recognized rent expense on a straight-line basis over the respective lease period.

During the year ended December 31, 2020, rent expense was $ 1.0 million.

Total operating lease liability $ 13,633

As the lease for the office and laboratory space at 60 First Street, Cambridge , Massachusetts had not commenced as of December 31, 2023 , the table above excludes any amounts related to this lease.

Subject to any credits pursuant to the terms of the lease, the Company expects to pay up to approximately $ 208.7 million over the initial non-cancelable term of the lease of ten years .

License and Collaboration Agreements

For a more detailed discussion of our license and collaboration agreements, please refer to Item 1, Business — Our License and Collaboration Agreements , of this Annual Report on Form 10-K.

License Agreements with Broad Institute

2019 License Agreement with Broad Institute

In September 2019, the Company entered into a license agreement with Broad Institute, Inc.

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Under the Broad License Agreement, the Company also has the right to grant sublicenses to its affiliates and third parties, subject to certain requirements.

The Company is obligated to use commercially reasonable efforts to develop, seek marketing approval for, and commercialize licensed products in the field.

As partial consideration for the license, the Company made a upfront payment of $ 0.5 million to Broad Institute.

Concurrently with the Broad License Agreement, the Company entered into a subscription agreement with Broad Institute (the “Broad Subscription Agreement”).

Under the Broad Subscription Agreement, as additional consideration for the license, the Company issued 623,529 shares of common stock, with a fair value of $ 39,000 , to Broad Institute, representing 5.0 percent of its then outstanding capital stock on a fully-diluted basis.

The Broad Subscription Agreement also obligated the Company to issue additional shares of common stock to Broad Institute without additional consideration to maintain Broad Institute’s ownership of the Company at 5.0 percent on a fully-diluted basis, if at any time prior to the achievement of an equity financing up to $ 100.0 million, the Company issues additional securities that would cause Broad Institute shares of common stock to be less than 5.0 percent of the Company's outstanding capital stock on a fully-diluted basis (the “Anti-Dilution Obligation”).

In connection with the fourth Series A Preferred Stock closing, the Anti-Dilution Obligation was settled in full (see Note 3).

The Company also granted certain preemptive rights to Broad Institute, under which if after the Company has reached the financing threshold of $ 100.0 million, the Company proposes to offer or sell any new securities, then Broad Institute shall have the right to purchase from the Company the portion of such new securities that would allow Broad Institute to maintain its 5.0 percent ownership in the Company.

The Company determined that the Anti-

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Dilution Obligation was required to be recorded as a liability because it was a freestanding instrument that would require the Company to transfer assets to settle the obligation and it is indexed to an obligation to contingently redeem the Company’s equity shares.

Accordingly, the Company recorded a liability of $ 0.2 million equal to the Anti-Dilution Obligation fair value upon entering into the Broad Subscription Agreement.

In April 2021, the Company exceeded the financing threshold with the fourth issuance of the Series A Preferred Stock (Note 6).

In connection with the fourth closing of Series A Preferred Stock, Broad Institute purchased an additional 761,844 shares of Series A preferred stock, at a price of $ 1.00 per share for gross proceeds of $ 0.8 million, to maintain its 5.0 percent ownership in the Company.

At the time of purchase, the Company’s Series A Preferred Stock had a fair value of $ 2.31 per share.

Therefore, the Company recorded the difference between the purchase price and the fair value per share as additional paid-in capital as it represented a transaction with a stockholder due to Broad Institute’s existing ownership of the Company’s common stock.

Under the Broad License Agreement, the Company is also required to use commercially reasonable efforts to develop licensed products in the Prime Broad Field in accordance with a development plan that the Company prepared and submitted to Broad Institute.

The Company is also obligated to pay Broad Institute an annual license maintenance fee ranging from the low to mid five-figures dollar amount through the end of 2020 to a low six-figures dollar amount beginning in 2021.

In addition, the Company is obligated to reimburse Broad Institute for its documented, out-of-pocket costs incurred while prosecuting and maintaining its licensed patent rights.

Broad Institute is also entitled to receive clinical and regulatory milestone payments up to a total of $ 20.0 million per licensed product, depending on the patient population to be treated by the licensed product achieving the applicable milestone.

If the Company undergoes a change of control at any time during the term of the Broad License Agreement, certain of the clinical and regulatory milestone payments will increase by a specified percentage.

Broad Institute is also entitled to sales-based milestone payments up to a total of $ 54.0 million per licensed product, depending on the patient population to be treated by the licensed product achieving the applicable milestone.

Broad Institute is entitled to lower payments to the extent the clinical and regulatory milestones or sales-based milestones are achieved by enabled products, rather than licensed products.

Broad Institute is entitled to receive mid-single digit percentage royalties on net sales of licensed products, and low single-digit percentage royalties of enabled products.

Royalties payable to Broad Institute are subject to customary offsets and reductions with respect to a product in a given country, to a floor.

Royalties are due on a country-by-country and product-by-product basis beginning upon the first commercial sale of each product and ending on the latest of (i) the expiration of the last valid claim of a patent covering such product in such country, (ii) the period of regulatory exclusivity associated with such product in such country or (iii) 10 years after the first commercial sale of such product in such.

Concurrently with the Broad License Agreement, the Company entered into a subscription agreement with Broad Institute (the “Broad Subscription Agreement”), under which the Company issued 623,529 shares of common stock, with a fair value of $ 39,000 .

In April 2021, Broad Institute purchased an additional 761,844 shares of Series A preferred stock, at a price of $ 1.00 per share for gross proceeds of $ 0.8 million.

Under the Broad License Agreement, the Company is obligated to pay Broad Institute an annual license maintenance fee of low six-figures dollar amount beginning in 2022.

Broad Institute is also entitled to receive clinical and regulatory milestone payments up to a total of $ 20.0 million and sales-based milestone payments up to a total of $ 54.0 million per licensed product.

Further, the Broad Institute is entitled to receive mid-single digit percentage royalties, subject to customary offsets and reductions, on net sales of licensed products, and low single-digit percentage royalties of enabled products.

Unless earlier terminated, the Broad License Agreement will remain in effect until the later of (i) the last to expire valid claim of an issued patent or pending patent application within the licensed patent rights covering the Company’s licensed products or (ii) the expiration of the last royalty term for a licensed product in a country.

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Broad Institute may also immediately terminate the Broad License Agreement (i) to the extent the Company (or its affiliates or sublicensees) challenges a licensed patent right, (ii) upon the Company’s bankruptcy or insolvency or (iii) if the Company fails to procure and maintain insurance.

The Company determined that the Broad License Agreement represented an asset acquisition of IPR&D assets with no alternative future use and recognized the aggregate acquisition cost as acquired IPR&D within research and development expense in the consolidated statement of operations and comprehensive loss.

The acquisition did not qualify as a business combination as the acquisition did not include both an input and substantive processes, including an assembled workforce, that together contribute to the ability to create outputs.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 0.1 million, $ 0.3 million, and $ 0.1 million, respectively, of research and development expense related to annual license maintenance fees.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 1.4 million, $ 1.3 million, and $ 0.6 million, respect ively, of general and administrative expenses related to its payment obligation with respect to out-of-pocket patent costs incurred by Broad Institute under the Broad License Agreement.

As of December 31, 2022, 2021 and

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2020, no milestone payments or royalties under the agreement had been paid or were due, and no specified milestones were deemed to be probable of achievement.

In May 2020, February 2021 and December 2022, the Company amended the Broad License Agreement, in each case, to update or include additional licensed patent rights.

Under the February 2021 amendment, as partial consideration for the addition of licensed patent rights relating to Prime Editing improvements, the Company paid Broad Institute an amendment fee of $ 0.1 million.

Under the December 2022 amendment, as partial consideration for the addition of licensed patent rights relating to prime editing improvements, the Company recognized an amendment fee of $ 0.1 million as research and development expense.

Option Agreement with Broad Institute

In May 2021, the Company entered into an exclusive option agreement with Broad Institute (the “Broad Option Agreement), pursuant to which, Broad Institute granted to the Company an exclusive option to negotiate an amendment to the Broad License Agreement to include certain additional patent rights relating to Prime Editing improvements to the Company’s license thereunder (subject to certain specific limitations and exclusions with respect to certain applications) (the “Exclusive Option”).

The Company paid an upfront fee of $ 0.1 million to Broad Institute under the agreement upon execution of the agreement, recognized as research and development expense for the year ended December 31, 2021.

In December 2022, the Company exercised its option under the Broad Option Agreement to all of the patent rights covered by the Broad Option Agreement and in December 2022 executed the 2022 Broad License Agreement, as defined below, pursuant to which the Company was granted certain exclusive licenses and rights to such patent rights.

2022 License Agreement with Broad Institute

In December 2022, the Company entered into a second license agreement with Broad Institute, Inc.

(“Broad Institute”), (the “2022 Broad License Agreement”).

In December 2022, the Company entered into a second license agreement with Broad Institute, (the “2022 Broad License Agreement”).

Under the 2022 Broad License Agreement, Broad Institute grants to us certain rights and licenses under the patent rights it owns or controls related to MMR inhibition and prime editing improvements and specifically, (i) an exclusive, worldwide license under the licensed patent rights solely to offer for sale, sell, have sold and import products covered by such licensed patent rights, or licensed products, solely for use within the Prime Broad Field (subject to certain specified limitations and exclusions with respect to certain applications), (ii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold, and import licensed products solely for use in the Prime Broad Field, (iii) a non-exclusive, worldwide license under the licensed patent rights solely to make, have made, offer for sale, sell, have sold and import other products that are enabled by (a) the licensed patent rights or (b) the use of certain materials transferred to us by Broad Institute, solely for the prevention or treatment of human diseases and (iv) a non-exclusive, worldwide license solely for internal research.

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Under the Broad License Agreement, the Company also has the right to grant sublicenses to its affiliates and third parties, subject to certain requirements.

The Company is obligated to use commercially reasonable efforts to develop, seek marketing approval for, and commercialize licensed products in the field.

Under the 2022 Broad License Agreement, we are required to use commercially reasonable efforts to develop licensed products in the Prime Broad Field in accordance with a development plan that we prepared and submitted to Broad Institute.

The Company is also obligated to pay Broad Institute an annual license maintenance fee mid five-figures for the term of the Agreement.

In addition, the Company is obligated to reimburse Broad Institute for its documented, out-of-pocket costs incurred while prosecuting and maintaining its licensed patent rights.

Broad Institute is entitled to receive clinical and regulatory milestone payments for a limited category of licensed products or enabled products, which category we refer to as royalty-bearing products, up to a total of $ 2.0 million per royalty-bearing product depending on the patient population to be treated by the royalty bearing product achieving the applicable milestone.

If the Company undergoes a change of control at any time during the term of the

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2022 Broad License Agreement, certain of the clinical and regulatory milestone payments will increase by a specified percentage.

Broad Institute is also entitled to sales-based milestone payments up to a total of $ 3.0 million royalty bearing product, depending on the patient population to be treated by the royalty bearing product achieving the applicable milestone.

Broad Institute is entitled to lower payments to the extent the clinical and regulatory milestones or sales-based milestones are achieved by royalty-bearing products that are enabled products, rather than royalty-bearing products that are licensed products.

Broad Institute is entitled to receive royalties of less than 0.2 % on net sales of royalty bearing products, which shall be decreased for royalty bearing products that are enabled products.

Royalties payable to Broad Institute are subject to limited customary offsets and reductions.

On a country-by-country and product-by-product basis, the royalty term for a royalty bearing product in a country will terminate on the latest of:

(i) the expiration of the last to expire valid claim of an issued patent or pending patent application within the licensed patent rights covering such product in such country, (ii) the period of regulatory exclusivity for such product in such country or (iii) ten (10) years after the first commercial sale of such royalty bearing product in such country.

The Company is also obligated to pay Broad Institute an annual license maintenance fee of mid five-figures for the term of the Agreement.

Broad Institute is also entitled to receive clinical and regulatory milestone payments for a limited category of royalty-bearing products, up to a total of $ 2.0 million and sales-based milestone payments up to a total of $ 3.0 million.

Further, Broad Institute is entitled to receive royalties of less than 0.2 % on net sales of royalty bearing products.

Unless earlier terminated, the 2022 Broad License Agreement will remain in effect until the later of (i) the last to expire valid claim of an issued patent or pending patent application within the licensed patent rights covering our licensed products or (ii) the expiration of the last royalty term for a royalty bearing product in a country.

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Broad Institute may also immediately terminate the 2022 Broad License Agreement (i) to the extent we (or our affiliates or sublicensees) challenge a licensed patent right, (ii) upon our bankruptcy or insolvency or (iii) if we fail to procure and maintain insurance.

The Company determined that the 2022 Broad License Agreement represented an asset acquisition of IPR&D assets with no alternative future use and will recognize the aggregate acquisition cost as acquired IPR&D within research and development expense in the consolidated statement of operations and comprehensive loss.

No amounts were recorded for the year ended December 31, 2022.

The Company recognized $ 0.2 million of research and development expense related to the acquired IPR&D from Broad Institute.

As of December 31, 2022, no milestone payments or royalties under the agreement had been paid or were due, and no specified milestones were deemed to be probable of achievement.

In February 2021, the Company committed to donate $ 5.0 million to Broad Institute and Harvard University annually for 14 years, commencing in 2022 (the “Pledge”).

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For both the years ended December 31, 2023 and 2022, the Company recognized $ 5.0 million of research and development expense in connection with the Pledge.

Related Party Beam Collaboration Agreement

In September 2019, the Company entered into a collaboration agreement with Beam (the “Beam Collaboration Agreement”) to collaborate on the research, development, manufacture and commercialization of certain Prime Editing products within a specified field and provide each other with access and licenses to certain proprietary

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technology to advance the other’s progress.

Under the Beam Collaboration Agreement, each party agreed to provide each other with access to, and licenses under, certain technology, know-how and patent rights controlled by each party for a limited number of years after the effective date, known as the initial term, and certain improvements thereto.

Under the Beam Collaboration Agreement, the Company granted Beam an exclusive (even as to the Company and its affiliates), worldwide license under (i) certain Prime Editing technology, know-how and patent rights that the Company controls during the initial term, and improvements thereto that the Company controls for a specified number of years following the initial term, and (ii) the Company’s interest in certain jointly-owned collaboration technology, in each case, solely to develop, make, have made, use, offer for sale, sell, import and commercialize licensed products only in the Beam field.

Beam also granted to the Company certain non-exclusive, worldwide licenses under certain technology, know-how and patent rights, including under certain CRISPR or delivery-related technology, know-how and patent rights, that it controls during the initial term, and improvements thereto that Beam controls for a specified number of years following the initial term, solely to develop, make, have made, use, offer for sale, sell, import and commercialize products only in the Company’s field.

As partial consideration for the Beam Collaboration Agreement, Beam agreed to pay the Company, upon its election to continue its collaboration with the Company on the first anniversary of the Beam Collaboration Agreement, $ 5.0 million worth of its own shares of common stock.

Before and within a short period of time after the filing of an IND for a development candidate being developed under the Beam Collaboration Agreement, Beam has the option to designate up to a mid-single digit number of licensed products for which the Company is not permitted to exercise the profit share right (described below) (the “Beam Option”).

Under the Beam Collaboration Agreement, a licensed product for which the Company has not exercised its profit share option or for which Beam has exercised the Beam Option is collectively referred to as “protected product.” Beam must exercise its option within 30 days following the filing of an IND for such product.

Unless the Company exercises its profit sharing option for a licensed product, Beam is solely responsible for the development and commercialization of licensed products in the Beam field under the Beam Collaboration Agreement.

Beam Collaboration Agreement — Related Party

Under the Beam Collaboration Agreement, the Company granted Beam an exclusive (even as to the Company and its affiliates), worldwide license under (i) certain Prime Editing

technology, know-how and patent rights that the Company controls during the initial term, and improvements thereto that the Company controls for a specified number of years following the initial term, and (ii) the Company’s interest in certain jointly-owned collaboration technology, in each case, solely to develop, make, have made, use, offer for sale, sell, import and commercialize licensed products only in the Beam field.

Beam granted to the Company certain non-exclusive, worldwide licenses under certain technology, know-how and patent rights, including under certain CRISPR or delivery-related technology, know-how and patent rights, that it controls during the initial term, and improvements thereto that Beam controls for a specified number of years following the initial term, solely to develop, make, have made, use, offer for sale, sell, import and commercialize products only in the Company’s field.

Subject to certain provisions, on a licensed product-by-licensed product basis, we have the right to elect to share equally with Beam in the profits and losses in the United States for Beam’s licensed products.

We may exercise such right for each licensed product within a specified period of time.

Any such licensed product for which we exercise such right we refer to as a collaboration product.

Before and within 30 days after the filing of an IND for a development candidate being developed under the Beam Collaboration Agreement, Beam has the option to designate up to a mid-single digit number of licensed products for which the Company is not permitted to exercise the profit share right (the “Beam Option”).

Under the Beam Collaboration Agreement, a licensed product for which the Company has not exercised its profit share option or for which Beam has exercised the Beam Option is collectively referred to as “protected product.” Unless the Company exercises its profit sharing option for a licensed product, Beam is solely responsible for the development and commercialization of licensed products in the Beam field under the Beam Collaboration Agreement.

If Beam exercises its option for a protected product, Beam will owe Prime a payment of $ 5.0 million if the product is developed for non-sickle cell disease or $ 10.0 million if the product is developed for sickle cell disease.

On a licensed product-by-licensed product basis, the Company has the right to elect to share equally with Beam in the profits and losses in the United States for Beam’s licensed products.

The Company may exercise such right for each licensed product within a specified period of time.

Any such licensed product for which the Company exercises its right is referred to as a collaboration product.

If the Company exercises such right, the Company agrees to share equally in the costs, profits and losses of each such collaboration product in the United States, rather than receiving milestones and royalties based on development and sales thereof by Beam in the United States.

For clarity, the Company is still entitled to receive milestones and royalties on the development and sale of each such collaboration product outside the United States.

The Company also has the right to elect, within a specified time period, at least one year prior to the expected filing of an NDA, to co-promote with Beam each collaboration product in the United States, in addition to sharing in the profits and losses.

To the extent the Company exercises its co-promote option with respect to a given collaboration product, the Company and Beam must use commercially reasonable efforts to commercialize such collaboration product, in each case, in the Beam field in the major markets in which marketing authorization has been obtained.

After the Company has exercised its right to profit share on a collaboration product, the Company is able to, at any time during the term of the Beam Collaboration Agreement, on a collaboration product-by-collaboration product basis, opt-out of the profit and loss share and co-promotion activities with respect to any collaboration product with prior written notice to Beam within a certain time period.

The Company is entitled to receive development milestone payments from Beam on Beam’s development of protected products (which, for clarity, includes any licensed product for which the Company has not exercised its profit share option) and collaboration products.

For protected products, the Company is entitled to receive up to a total of $ 35.5 million on a protected product-by-protected product basis based on Beam’s development of such protected product and, for collaboration products, up to a total of $ 17.8 million on a collaboration product-by-collaboration product basis based on Beam’s development of such collaboration product outside of the United States, in each case, with such amounts lowered if such licensed product achieves a given milestone for use in treating an orphan disease.

The Company is also entitled to receive sales-based milestone payments from Beam based on net sales of licensed products.

For protected products, the Company is entitled to receive up to a total of

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$ 84.5 million on a protected product-by-protected product basis based on net sales of such protected product worldwide, and, for collaboration products, up to a total of $ 42.3 million on a collaboration product-by-collaboration product basis based on net sales of collaboration products outside of the United States.

The sickle cell disease product partnered with Beam is a licensed product under the Beam Collaboration Agreement.

Beam has not designated this product as a protected product and the Company has not received any development or sales-based milestones with respect to Beam’s exploitation thereof.

Beam is obligated to pay the Company tiered royalties ranging from a high-single digit percentage to a low double-digit percentage, but less than teens on net sales of protected products worldwide on a protected product-by-protected product basis and net sales of collaboration products outside of the United States on a collaboration product-by-collaboration product basis.

The Company’s royalties are subject to customary offsets and reductions, to a floor that takes into account any royalties the Company is obligated to pay to its third-party licensors, including Broad Institute.

In addition, certain of the rights licensed under the Beam Collaboration Agreement are sublicensed from third parties, and Beam agrees to reimburse the Company for certain payments the Company is required to make to its third-party licensors attributable to Beam’s exercise of any sublicense the Company grants to Beam, including payments it makes to Broad Institute under the Broad License Agreement.

Under the terms of the Beam Collaboration Agreement, the Company is entitled to following milestones:

Development milestones

Protected product

Up to $ 35.5 million

Collaboration product

Up to $ 17.8 million

Sales milestones

Protected product

Up to $ 84.5 million

Collaboration product

Up to $ 42.3 million

For eligible products, Beam is obligated to pay the Company tiered royalties, subject to customary offsets and reductions, ranging from a high-single digit percentage to a low double-digit percentage, but less than teens on net sales of protected products worldwide and net sales of collaboration products outside of the United States.

In addition, Beam must reimburse the Company for certain payments the Company is required to make to its third-party licensors attributable to Beam’s exercise of any sublicense the Company grants to Beam, including payments it makes to Broad Institute under the Broad License Agreement.

If the Company develops a product that is covered by the technology, know-how or patent rights that Beam licenses to the Company under the Beam Collaboration Agreement, which it refers to as a Prime product, the Company is obligated to pay to Beam a low single digit royalty on its worldwide net sales of such any product on a Prime product-by-Prime product and country-by-country basis, subject to certain customary reductions, to a floor.

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After expiration of the initial term, Beam can terminate the Beam Collaboration Agreement for convenience in its entirety, or on a licensed product-by-licensed product or subfield-by-subfield basis, with prior written notice to the Company.

Each party may terminate the Beam Collaboration Agreement for (a) the other party’s uncured material breach, (b) upon the insolvency or bankruptcy of the other party or (c) immediately to the extent the other party (or its affiliates or sublicensees) challenges a patent right licensed to such party.

In connection with the Beam Collaboration Agreement, concurrently in September 2019, Beam and the Company also entered into a mutual subscription agreement (“Beam Mutual Subscription Agreement”).

Under the Beam Mutual Subscription Agreement, if Beam elected to continue its collaboration with the Company, on the first anniversary of the agreement the Company was obligated to grant Beam 1,608,337 shares of the Company’s common stock which represented 5.0 percent of the 100 million shares of Series A Preferred Stock that the Company had issued or committed to issue as of the effective date of the Beam Mutual Subscription Agreement.

In September 2020, Beam elected to continue its collaboration with the Company and, in October 2020, as required by the terms under the Beam Mutual Subscription Agreement, the Company issued 1,608,337 shares of the Company’s common stock to Beam with a fair value of $ 0.2 million.

For the year ended December 31, 2020, the Company recognized $ 5.2 million of collaboration revenue, which represents the net of the fair value of Beam’s common stock of $ 5.4 million as of the first anniversary of the Beam Collaboration Agreement, which was when the Company was entitled to the Beam shares, offset by the fair value of $ 0.2 million related to the 1,608,337 shares of the Company’s common stock required to be issued to Beam, which reflect a payment to the Company’s customer.

Each party may terminate the Beam Collaboration Agreement for (a) the other party’s uncured material

breach, (b) upon the insolvency or bankruptcy of the other party or (c) immediately to the extent the other party (or its affiliates or sublicensees) challenges a patent right licensed to such party.

On the first anniversary of the Beam Collaboration Agreement, the Company received 200,307 shares of Beam common stock, with a fair value of $ 5.5 million and, in return, the Company issued to Beam 1,608,337 shares of the Company’s common stock, with a fair value of $ 0.2 million.

Accounting Considerations

The Company concluded that the Beam Collaboration Agreement and the Beam Mutual Subscription Agreement should be combined and treated as a single arrangement for accounting purposes as the agreements were entered into contemporaneously and in contemplation of one another.

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(i) exclusive, worldwide license to certain Prime patents, (ii) non-exclusive, worldwide licenses to CRISPR technology and (iii) joint research committee participation.

The Company also evaluated whether the Beam Option and the Company’s right to elect collaboration products in the Beam Collaboration Agreement represented material rights that would give rise to a performance obligation and concluded that neither the Beam Option nor the Company’s right to elect collaboration products convey a material right to Beam and therefore are not considered

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separate performance obligations within the Beam Collaboration Agreement.

There have been no protected product or collaboration products to date.

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The shares Prime issued to Beam represents a payment to a customer and is therefore a reduction of the transaction price.

The Company recognizes revenue for the license performance obligations at a point in time, that is upon the first anniversary of the effective date when Beam elected to continue its collaboration with the Company.

As control of these licenses was transferred on this date, Beam could begin to use and benefit from the licenses, the Company recognized $ 5.2 million of license revenue during the year ended December 31, 2020 under the Beam Collaboration Agreement.

The Company recognizes revenue for the license performance obligations at a point in time, as control of these licenses are transferred upon issuance and Beam could begin to use and benefit from the licenses.

There was no revenue recognized during the years ended December 31, 2023 or 2022.

In September 2020, on the first anniversary of the Beam Collaboration Agreement, the Company was entitled to receive 200,307 shares of Beam common stock, which had a fair value of $ 5.4 million and which was recorded as related party collaboration revenue in the consolidated statements of operations and comprehensive loss at that time.

In October 2020, Beam issued the shares of common stock to the Company at which time the common shares had a fair value of $ 5.5 million and which the Company recorded as related party short-term investments on the consolidated balance sheet.

For the year ended December 31, 2020, the Company recognized a net gain of $ 0.1 million for the change in fair value of the Beam shares the Company was entitled to receive, which was recorded to other income (expense), net in the consolidated statements of operations and comprehensive loss.

There was no change in fair value of $ 0.2 million related to the 1,608,337 shares of common stock issued by the Company to Beam, between the first anniversary date of the Beam Collaboration Agreement, in September 2020 and the issuance date of the shares of common stock in October 2020.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized an unrealized gain (loss) of $( 8.1 ) million , $( 0.4 ) million, and $ 10.9 million, respectively, for the change in fair value of the related party short-term investment consisting of Beam shares, which was recorded to other income (expense), net in the consolidated statements of operations and comprehensive loss.

Additionally, in September 2019, in connection with the Beam Collaboration Agreement, the Company executed a letter agreement, as amended, to receive certain interim management and startup services from Beam through March 2021.

The Company is obligated to reimburse Beam for out-of-pocket costs incurred in connection with performing the services.

The Company concluded this does not represent a payment to a customer because it is a distinct service at standalone selling price.

For the years ended December 31, 2021 and 2020, the Company paid $ 0.1 million and $ 0.1 million, respectively, for such services.

As of December 31, 2020, there was $ 30,000 included within accounts payable and no amounts as of December 31, 2021.

The agreement ended on March 31, 2021.

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Beam Sub-license Agreement

On January 25, 2021, the Company entered into a sub-license agreement with Beam (the “Beam Sub-license Agreement”), under which Beam granted to the Company a non-exclusive, non-transferable, fully paid-up and royalty-free license to certain intellectual property that Beam has licensed from the Ohio State Innovation Foundation (the "OSIF") for internal research purposes only.

The patent rights and other proprietary rights in or related to the patent rights are and will remain the exclusive property of the OSIF.

There was no accounting impact of this amendment.

Research Collaboration, Option and License Agreement with Myeloid

In December 2021, the Company entered into a research collaboration and exclusive option agreement with Myeloid (the “Myeloid Agreement”).

Under the Myeloid Agreement, the Company collaborates with Myeloid, a related party, on the research and development of LINE-1 retrotransposon technology.

In connection with the Myeloid Agreement, the Company also entered into a subscription agreement with Myeloid under which the Company was obligated to issue an aggregate of 1,101,525 shares of its common stock as additional consideration for the license.

Myeloid grants to the Company an exclusive option, exercisable during the research term and for 60 days thereafter, to obtain ownership of certain patent rights and know-how owned by Myeloid that relate to LINE-1 retrotransposon technology.

If the Company exercises its option, in addition to assigning the Company o wnership of the applicable patent rights and know-how, Myeloid also agrees to grant the Company certain exclusive and non-exclusive licenses, including to certain improvements and other enabling technology.

Fol lowing the exercise of the Company’s option, the Company agrees to grant Myeloid, in addition to certain other licenses, an exclusive, worldwide license under the assigned patent rights and know-how to develop and commercialize products in the field of myeloid cells and myeloid cell engineering, or the Myeloid Field.

As of December 31, 2022 and 2021, the Company has not exercised its option.

The change fair value of the related party short-term investment consisting of Beam shares are recognized as unrealized gain (loss) i n the consolidated statements of operations and comprehensive loss.

Research Collaboration, Option and License Agreement with Myeloid — Related Party

In December 2021, the Company and Myeloid, a related party, entered into the Myeloid Agreement.

Upon entering into the Myeloid Agreement, Myeloid was entitled to receive an upfront payment of $ 30.0 million in cash and an aggregate of 1,101,525 shares of the Company’s com mon stock, with a then fair value of $ 12.0 million, both of which Myeloid received in January 2022.

If the research agreement meets its goals, then (i) during the research term, Myeloid is entitled to cash payments of up to $ 35.0 million in the aggregate upon the achievement of certain milestones reflecting the technology’s development;

and (ii) if the Company exercises its option, the Company agrees to pay to Myeloid an option exercise fee of $ 80.0 million in cash, and shares of the Company’s common stock with a then fair value of $ 30.0 million.

Additionally, if the research collaboration meets its goal and the Company exercises its option, and the Company is able to proceed with the development and commercialization of a product that is covered by (a) the patent rights or know-how subject to the Company’s option or (b) the patent rights or know-how developed by one or both of the parties during the research term related to LINE-1 retrotransposon technology, or, collectively, a Prime Product, Myeloid would be eligible to receive, for the first five Prime Products, development and regulatory milestone payments of up to $ 120.0 million on a Prime Product-by-Prime Product basis and sales-based milestone payments of up to $ 210.0 million on a Prime Product-by-Prime Product basis.

Myeloid is also eligible to receive tiered low to mid single-digit percentage royalties on the Company’s annual aggregate global net sales of Prime Products on a Prime Product-by-Prime Product and country-by-country basis, subject to customary offsets and reductions to a floor.

On a country-by-country and Prime Product-by-Prime Product basis, the period during which royalties will be paid will continue until the latest of (i) the expiration date of the last to expire valid claim of an issued patent or pending patent application within the patent rights subject to the Company’s option or the patent rights developed by one or both of the parties during the research term related to LINE-1 retrotransposon technology, in each case, covering the applicable Prime Product, (ii) loss of regulatory exclusivity for such Prime Product in such country, or (iii) ten (10) years after the first commercial sale of such Prime Product in such country.

Following the exercise of the Company’s option and for a period of two years thereafter, Myeloid will have the right to select up to three targets, subject to certain exclusions, for the development and commercialization of products directed at such targets in all fields and the Company will be eligible to receive the development, regulatory and

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

sales-based milestone payments and royalty payments as set forth above from Myeloid with respect to such products.

Unless earlier terminated based on customary termination rights, the Myeloid Agreement will continue on a Prime Product-by-Prime Product and country-by-country basis until the expiration of the royalty term for such Prime Product in such country.

If the Company exercises its option, neither party will have the right to terminate the Myeloid Agreement for any reason.

The Company determined that the Myeloid Collaboration Agreement represented an asset acquisition of IPR&D assets with no alternative future use and recognized the aggregate acquisition cost as acquired IPR&D within research and development expense in the consolidated statement of operations and comprehensive loss.

For the year ended December 31, 2021, the Company recorded $ 42.0 million of research and development expense related to the acquired IPR&D from Myeloid, which consisted of the initial upfront payment of $ 30.0 million and the $ 12.0 million fair value of common stock to be issued to Myeloid.

In connection with the Company’s obligation to issue Myeloid shares of its common stock, the Company determined the fair value of the common stock to be issued based, in part, on the results obtained from a third-party valuation of the Company’s equity securities prepared as of December 24, 2021.

As the Company had not issued the shares to Myeloid as of December 31, 2021, the Company recorded a $ 12.0 million related party forward contract liability based on the common stock fair value as of the date of the Myeloid Subscription Agreement.

Further, there was no change in fair value of the shares from the date of the Myeloid Subscription Agreement to December 31, 2021.

As such, the Company will recognize any future changes in fair value of the shares as other income (expense) through the date such shares are issued to Myeloid.

In addition, as the upfront payment was not made as of December 31, 2021, the Company recorded the $ 30.0 million payment obligation within accrued expenses and other current liabilities on its consolidated balance sheets as of December 31, 2021.

In January 2022, the Company made the $ 30.0 million payment and also issued the shares of its common stock to Myeloid.

As of December 31, 2022 and 2021, no milestone payments under the agreement had been paid or were due, and no specified milestones were deemed to be probable of achievement.

During the second quarter of 2023, the Company provided notice to Myeloid of its intent to terminate the Myeloid Agreement, which became effective during the third quarter of 2023.

In September 2023, Myeloid filed an arbitration claim with the American Arbitration Association alleging that the Company breached its obligations under the Myeloid Agreement by failing to pay a $ 17.5 million milestone payment and seeking, among other things, damages in the amount of $ 17.5 million.

In October 2023, the Company filed an arbitration claim with the American Arbitration Association alleging that Myeloid breached numerous obligations under the Agreement and seeking, among other things, a declaration that Myeloid breached the Agreement, rescission of the Agreement and damages in the amount of $ 43.5 million.

In January 2024, the Company and Myeloid entered into a settlement agreement resolving the two arbitration proceedings.

Under the terms of the settlement agreement, the parties agreed to resolve and settle all disputes between the parties and release all claims between them relating to the License Agreement and the arbitrations in exchange for the Company's payment to Myeloid of $ 13.5 million, certain mutual covenants, and other consideration.

Accordingly, for the year ended December 31, 2023, the Company recorded a charge of $ 13.5 million within its consolidated balance sheets and consolidated statement of operations.

Commitments and Contingencies

The Company’s commitments under its operating leases are described in Note 10.

The Company’s commitments under its operating leases are described in Note 9, Leases .

License and Collaboration Agreements

The Company entered into various license and collaboration agreements under which it is obligated to make fixed and contingent payments (see Note 11).

The Company maintains a defined-contribution plan under Section 401(k) of the Internal Revenue Code of 1986 (the “401(k) Plan”).

The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

The Company will make matching contributions equal to 50 % of the employee’s contributions, subject to a maximum of 6 % of eligible compensation.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with all board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

their status or service as directors.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not aware of any indemnification arrangements that could have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2022 and 2021.

The Company entered into various license and collaboration agreements under which it is obligated to make fixed and contingent payments as described in Note 10, License and Collaboration Agreements .

Legal Proceedings

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Legal fees and other costs associated with such proceedings are expensed as incurred.

As of December 31, 2022 and 2021, the Company was not a party to any material legal proceedings or claims.

Net Loss per Share

The Company calculated basic and diluted net loss per share attributable to common stockholders using the two-class method required for companies with participating securities.

The Company considers Series A Preferred Stock and Series B Preferred Stock to be participating securities as the holders are entitled to receive cumulative dividends as well as residuals in liquidation.

Under the two-class method, basic net loss per share available to common shareholders was calculated by dividing the net loss available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.

The net loss available to common shareholders was not allocated to the Series A Preferred Stock and Series B Preferred Stock as the holders of preferred stock did not have a contractual obligation to share in losses.

Diluted net loss per share available to common shareholders was computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period.

For purposes of this calculation, preferred stock, unvested restricted stock and stock options to purchase common stock were considered common stock equivalents but had been excluded from the calculation of diluted net loss per share available to common shareholders as their effect was anti-dilutive.

In periods in which the Company reports a net loss available to common shareholders, diluted net loss per share available to common shareholders is the same as basic net loss per share available to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

As discussed in Note 10, License and Collaboration Agreements , for the year ended December 31, 2023 the Company recognized $ 13.5 million under its settlement agreement with Myeloid.

As of December 31, 2022, the Company was not a party to any material legal proceedings or claims.

Net Loss per Share

As described in Note 2, Summary of Significant Accounting Policies , for periods in which the Company reports a net loss, potentially dilutive securities have been excluded from the computation of diluted net loss per share as their effects would be anti-dilutive.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potential common shares presented based on amounts outstanding at period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Year Ended December 31,

2022 2021 2020

Anti-dilutive common stock equivalents:

Stock options to purchase common stock 7,763,023 4,365,995

Unvested restricted common stock awards 4,735,996 8,847,803

Total anti-dilutive common stock equivalents 12,499,019 13,213,798

Basic and diluted loss per share is computed by dividing net loss by the weighted-average common shares outstanding:

Year Ended December 31,

(in thousands, except share and per share data) 2023 2022

Net loss $ ( 198,133 ) $ ( 121,821 )

Accretion of preferred stock to redemption value — ( 1,468 ) ( 1,645 )

Cumulative dividend on preferred stock — ( 20,193 )

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Net loss per share attributable to common stockholders, basic and diluted $ ( 2.18 ) $ ( 4.19 )

For accounting purposes, the computation of basic net loss per share attributable to common stockholders, the amount of weighted-average common shares outstanding as of December 31, 2021, includes the impact of the

PRIME MEDICINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1,101,525 shares the Company was obligated to issue to Myeloid as of December 24, 2021 (see Note 11) and excludes all shares of unvested restricted common stock as such shares are not considered outstanding (see Note 8).

Year Ended December 31,

2022 2021 2020

Convertible preferred stock (as converted to common stock) — 51,923,764 14,475,018

Stock Options to purchase common stock 4,365,995 3,002,803 —

Unvested restricted common stock awards 8,847,803 15,354,584 23,238,119

13,213,798 70,281,151 37,713,137

Related Party Transactions

Founder Consulting Services

For the years ended December 31, 2022, 2021, and 2020 the Company made payments of $ 0.2 million, $ 0.2 million and $ 0.2 million, respectively, to one of the Co-founder shareholders for scientific consulting and other expenses.

As of December 31, 2022 and 2021 , there were no amounts included within accounts payable.

Beam Therapeutics

The Company and Beam are parties to the Beam Collaboration Agreement and the Beam Mutual Subscription Agreement and have a common founder and one common board member (see Note 11).

For the year ended December 31, 2020, the Company recognized a net gain of $ 0.1 million, related to change in the fair value of the Beam shares the Company was entitled to receive for the period from the first anniversary date of the Beam Collaboration agreement through the date on which the Beam shares were received in October 2020.

Such unrealized gain (loss) was recorded as other income (expense), net within the consolidated statements of operations and comprehensive loss.

For the years ended December 31, 2021 and 2020, the Company made payments of $ 0.1 million and $ 0.1 million, respectively, to Beam for general and administrative service s pursuant to an agreement to receive certain interim management and startup services (see Note 11).

The agreement ended on March 31, 2021 and for the year ended December 31, 2021, the Company made no payments for such services.

For the years ended December 31, 2023, and 2022 the Company made payments of $ 0.2 million in each period to one of the co-founder shareholders for scientific consulting and other expenses.

As of December 31, 2023 and 2022 , there were no amounts included within accounts payable.

Newpath Partners

In connection with the Series A and B Preferred Stock closings (see Note 6), the Company issued and sold 9,999,999 and 5,250,781 shares of Series A and B Preferred Stock, respectively, to Newpath Partners L.P.

(“Newpath”), which is an affiliate to one of the Company’s board members, for an aggregate purchase price of $ 10.0 million and $ 23.0 million, respectively.

These shares converted to 4,905,679 common shares in connection with the IPO.

Myeloid Therapeutics

In December 2021, the Company and Myeloid entered into the Myeloid Collaboration Agreement and Myeloid Subscription Agreement (see Note 11 and 15).

The Company and Myeloid have one common board member, who is also an affiliate of Newpath, one of the Company’s holders of common Stock.

For the year ended December 31, 2021, we recorded $ 42.0 million of research and development expense related to the acquired IPR&D from Myeloid, which consisted of the accrued initial upfront payment of $ 30.0 million and the $ 12.0 million fair value of common stock to be issued to Myeloid.

For the year ended December 31, 2022, we paid $ 0.7 million to reimburse Myeloid for research and development expenses, and as of December 31, 2022, there was $ 0.3 million included within accrued expenses.

In December 2021, the Company and Myeloid entered into the Myeloid Collaboration Agreement and Myeloid Subscription Agreement during which time the Company and Myeloid had one common board member, who is also an affiliate of Newpath, one of the Company’s holders of common stock.

In 2023, the Company terminated the Myeloid Collaboration Agreement.

In January 2024, the Company and Myeloid entered into a settlement agreement resolving two arbitration proceedings, which are described in Note 10, Licenses and Collaboration Agreements .

The Company recognized the following amounts related to Myeloid:

(in thousands) 2023 2022

Expense incurred

Settlement $ 13,500 $ —

Research and development 560 688

Amounts accrued

Settlement 13,500 —

Research and development — 329

Subsequent Events

Cystic Fibrosis Foundation

In January 2024, the Company entered into an agreement with the Cystic Fibrosis Foundation to develop therapies for the treatment of Cystic Fibrosis.

Under the term of the agreement, the Company is entitled to received up to $ 15 million.

Funding from the Cystic Fibrosis Foundation will allow Prime Medicine to progress two distinct strategies for applying Prime Editing to treat Cystic Fibrosis.

If successful, Cystic Fibrosis Foundation is entitled to receive royalties on net sales.

Public Offering

As a result of the offering, the Company received approximately $ 150.9 million in net proceeds, after deducting underwriting discounts, commissions and estimated offering costs of $ 10.1 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures