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Item 9A. Controls and Procedures

2023-03-28 compared with 2022-03-24 · 899 added, 503 removed, 20 unchanged (99% of the section changed)

Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted 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 in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15

under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021.

Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e)

and 15d-15(e)

under the Exchange Act) were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments.

As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S.

generally accepted accounting principles.

Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K

present fairly in all material respects our financial position, results of operations, and cash flows for the period presented.

Management has implemented remediation steps to improve our disclosure controls and procedures and our internal control over financial reporting.

Specifically, we expanded and improved our review process for complex securities and related accounting standards.

We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.

Management’s Report on Internal Controls Over Financial Reporting

This Annual Report on Form 10-K

does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f)

and 15d-15(f)

of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934) as of December 31, 2022.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective in causing material information relating to us (including our consolidated subsidiaries) to be recorded, processed, summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures with SEC disclosure obligations.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Over time, a control may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

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

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

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;

provide reasonable assurance that receipts and expenditures are being made only in accordance with management and director authorization;

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

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

Also, 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.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

Management based this assessment on criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management determined that as of December 31, 2022, we maintained effective internal control over financial reporting.

Changes to Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Website Availability of Reports and other Corporate Governance Information

The Company maintains a comprehensive corporate governance program, including Corporate Governance Guidelines for its Board of Directors, Board Guidelines for Assessing Director Independence and charters for its Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee.

The Company maintains a corporate website, www.prokidney.com, where stockholders and other interested persons may review, without charge, among other things, corporate governance materials and certain SEC filings, which are generally available on the same business day as the filing date with the SEC on the SEC’s website http://www.sec.gov.

The contents of our website are not made a part of this Annual Report.

Other Information.

Not applicable.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Not applicable.

Directors, Executive Officer and Corporate Governance.

Our current directors and executive officer are as follows:

Chamath Palihapitiya

Chief Executive Officer and Chairman of the Board of Directors

Kishan (a/k/a Kishen) Mehta

President and Director

Marc Semigran, M.D.

Uma Sinha, Ph.D.

James Ryans, Ph.D.

Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2022, the information required by this item will be contained in the Form 10-K/A.

The following is a list of our directors and executive officers as of the date of this Annual Report.

Executive Officers:

Tim Bertram, Ph.D.

Chief Executive Officer and Director

James Coulston, CPA

Chief Financial Officer

Chamath Palihapitiya

has been our Chief Executive Officer and the Chairman of our board of directors since February 2021.

Palihapitiya founded Social Capital in 2011 and has been its Managing Partner since its inception.

Palihapitiya also serves as the Chief Executive Officer and the Chairman of the board of directors of DNAA, DNAB and DNAD.

In addition, Mr.

Palihapitiya currently serves as the Chief Executive Officer and the Chairman of the board of directors of each of Social Capital Hedosophia Holdings Corp.

IV and Social Capital Hedosophia Holdings Corp.

Palihapitiya previously served as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp.

from May 2017 until the consummation of its business combination with Virgin Galactic in October 2019, and continues to serve as the Chairman of the board of directors of Virgin Galactic.

Palihapitiya also previously served as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp.

II until the consummation of its business combination with Opendoor Labs Inc.

in December 2020, as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp.

III until the consummation of its business combination with Clover Health Investments, Corp.

in January 2021 and as the Chief Executive Officer and Chairman of the board of directors of Social Capital Hedosophia Holdings Corp.

V until the consummation of its business combination with Social Finance, Inc.

Palihapitiya also served as a director of Slack Technologies Inc.

from April 2014 until October 2019.

Prior to founding Social Capital in 2011, Mr.

Palihapitiya served as Vice President of User Growth at Facebook, and is recognized as having been a major force in its launch and growth.

Palihapitiya was responsible for overseeing Monetization Products and Facebook Platform.

Prior to working for Facebook, Mr.

Palihapitiya was a principal at the Mayfield Fund, one of the United States’ oldest venture firms, before which he headed the instant messaging division at AOL.

Palihapitiya graduated from the University of Waterloo, Canada with a degree in electrical engineering.

has been our President and a member of our board of directors since February 2021.

Mehta also serves as the President and a member of the board of directors of DNAA, DNAB and DNAD.

Mehta also serves as a member of the board of directors of Biohaven Pharmaceuticals (NYSE:

Prior to joining Suvretta as Portfolio Manager for the Averill strategy, Mr.

Mehta served as a strategic advisor to Biohaven, where he advised the company on various business development, capital structure and communication strategies, including a $300 million secondary public offering and the $105 million purchase of a Priority Review Voucher from GW Pharmaceuticals plc, which included $200 million in financing from Royalty Pharma plc to fund the transaction.

Prior to his advisory role at Biohaven, Mr.

Mehta was a portfolio manager at Surveyor Capital, a Citadel LLC strategy, where he managed a portfolio focused on global small-, mid-

and large-capitalization biotechnology, pharmaceutical, specialty pharmaceutical, medical device and healthcare services.

Prior to Surveyor, Mr.

Mehta was an analyst at Adage Capital where he evaluated and participated in numerous mezzanine and pre-IPO

private healthcare investments.

Mehta held a similar role at Apothecary Capital and started his career as a mergers and acquisitions analyst at Evercore Partners, where he focused on life sciences.

Mehta graduated from New York University with a degree in finance and accounting.

Marc Semigran, M.D.

has been a member of our board of directors since June 2021.

In June 2021, Dr.

Semigran was appointed as chief medical officer of Renovacor, Inc., an early-stage biotechnology company focused on the development of therapies for cardiovascular and central nervous system diseases.

Prior to joining Renovacor, Dr.

Semigran was an Associate Professor of Medicine at Harvard Medical School, a position he held from January 2010-February 2017.

He previously served as Chief Medical Officer of MyoKardia from December 2016 until the acquisition of MyoKardia by Bristol-Myers Squibb in 2020 for approximately $13.1 billion.

Prior to MyoKardia, from April 2004 through February 2017, Dr.

Semigran served as Medical Director of the Massachusetts General Hospital Heart Failure and Cardiac Transplant Program, where he was responsible for leading the overall direction of the care of heart failure patients, including with respect to cardiac transplantation.

He is an active investigator in translational and clinical medicine as applied to heart failure and cardiomyopathy.

His research was funded by NIH and other peer-reviewed grants, and continues with industry funding.

Dr Semigran is a graduate of the Harvard/MIT Health Sciences and Technology Program and completed his internal medicine residency and cardiology fellowship training at Massachusetts General Hospital.

Semigran holds an M.D.

from Harvard Medical School and an AB/AM in chemistry from Harvard University.

Deepak Jain, Ph.D.

Chief Operating Officer

Chief Regulatory Officer, SVP, Global Regulatory, Quality Management &

Chief Legal Officer

Chief People Officer

Joseph Stavas

SVP, Global Head of Clinical Development and Interventional Procedures

SVP, Head of Global Clinical Operations

Non-Employee Directors:

Pablo Legorreta

Chairman of the Board, Director

Pereira, M.D.

Uma Sinha, Ph.D.

has been a member of our board of directors since September 2021.

In April 2016, Dr.

Sinha was appointed the Chief Scientific Officer of BridgeBio Pharma, Inc.

(“BridgeBio”) and serves as the Chief Scientific Officer of other BridgeBio subsidiaries, including Eidos Therapeutics.

Prior to that, Dr.

Sinha served as Chief Scientific Officer of Global Blood Therapeutics, Inc., a clinical stage biopharmaceutical company, from 2014 to 2015 and as Senior Vice President of research from 2013 to 2014.

She was Vice President, head of biology at Portola Pharmaceuticals, Inc., a clinical stage biotechnology company, from 2010 to 2012 and was the Vice President of translational biology from 2004 to 2010.

Previously, Dr.

Sinha held senior research positions at Millennium Pharmaceuticals, Inc., a biopharmaceutical company, and COR Therapeutics, Inc., a biopharmaceutical company.

Sinha received her Ph.D.

in biochemistry from the University of Georgia and her B.Sc.

with honors in chemistry from Presidency College.

James Ryans, Ph.D.

has been our Chief Financial Officer since February 2021.

Ryans also serves as the Chief Financial Officer of DNAA, DNAB, DNAD, IPOD and IPOF.

Ryans has been a Partner at Social Capital since March 2021 and serves as its Chief Financial Officer, and has been a professor of accounting at London Business School since 2016, teaching financial accounting at the graduate and postgraduate levels, and directs an executive education program on mergers and acquisitions.

Ryans previously served as a member of the board of directors of Social Capital Hedosophia Holdings Corp.

III from April 2020 until the consummation of its business combination with Clover Health Investments, Corp.

in January 2021, as a director and the chairman of the audit committee of Social Capital Hedosophia Holdings Corp.

from September 2017 until the consummation of its business combination with Virgin Galactic in October 2019, and as a member of Virgin Galactic’s board of directors through February 2021.

From 2003 to 2011, Mr.

Ryans oversaw investments and business development at Chelsea Rhone LLC and its affiliate HealthCap RRG, a mutual insurance company.

From 1999 until 2001, Mr.

Ryans was a consultant with Deloitte & Touche.

Ryans is a CFA charterholder and holds a Ph.D.

in business administration from the University of California Berkeley, an MBA from the University of Michigan and a BASc in electrical engineering from the University of Waterloo.

Director Independence

The Nasdaq listing rules require that a majority of our board of directors be independent within one year of our Initial Public Offering.

As a “controlled company” we are not obligated to comply with this listing requirement, but we do intend to comply with this requirement.

An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship with the company, which, in the opinion of our board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.

We expect a majority of our board of directors to be comprised of independent directors within 12 months from the date of listing to comply with the majority independent board requirement in Rule 5605(b) of the Nasdaq listing rules.

Our board has determined that each of Dr.

Semigran and Dr.

Sinha is an independent director under applicable SEC and Nasdaq rules.

Number, Terms of Office and Election of Officers and Directors

Our board of directors consists of four members.

Prior to our initial Business Combination, holders of our founder shares will have the right to appoint all of our directors and remove members of our board of directors for any reason, and holders of our public shares and private placement shares will not have the right to vote on the appointment of directors during such time.

These provisions of our amended and restated memorandum and articles of association may only be amended by a special resolution passed by the holders of at least 90% of our ordinary shares attending and voting in a general meeting.

Subject to any other special rights applicable to the shareholders, any vacancies on our board of directors may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of our board of directors or by a majority of the holders of our ordinary shares (or, prior to our initial Business Combination, holders of our founder shares).

Our officers are appointed by our board of directors and serve at the discretion of our board of directors, rather than for specific terms of office.

Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate.

Our amended and restated memorandum and articles of association provide that our officers may consist of a Chairman, a Chief Executive Officer, a President, a Chief Operating Officer, a Chief Financial Officer, a Director of Research, Vice Presidents, a Secretary, Assistant Secretaries, a Treasurer and such other offices as may be determined by our board of directors.

Committees of our Board of Directors

Our board of directors has three standing committees:

an audit committee;

a compensation committee;

and a nominating and corporate governance committee.

Subject to applicable phase-in

rules, the Nasdaq listing rules and Rule 10A-3

of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the Nasdaq listing rules require that the compensation committee and the nominating and corporate governance committee of a listed company be comprised solely of independent directors.

Each committee operates under a charter that was approved by our board of directors and has the composition and responsibilities described below.

The charter of each committee is available on our website.

Audit Committee

The members of our audit committee are Dr.

Semigran, Dr.

Sinha and Mr.

Semigran serves as chair of the audit committee.

We plan to appoint a third qualifying member to our audit committee within one year from the date of listing to comply with the audit committee requirement.

Each member of the audit committee is financially literate and our board of directors has determined that Mr.

Mehta qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

We have adopted an audit committee charter, which details the purpose and principal functions of the audit committee, including:

• assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditor’s qualifications and independence, and (4) the performance of our internal audit function and independent auditors;

• the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

• pre-approving

all audit and non-audit

services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval

policies and procedures;

• reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;

• setting clear hiring policies for employees or former employees of the independent auditors;

• setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

• obtaining and reviewing a report, at least annually, from the independent auditors describing (1) the independent auditor’s internal quality-control procedures and (2) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

• meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing our specific disclosures under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

• reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K

promulgated by the SEC prior to us entering into such transaction;

• reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

Compensation Committee

The members of our compensation committee are Dr.

Semigran, Dr.

Sinha and Mr.

Semigran serves as chair of the compensation committee.

We have adopted a compensation committee charter, which details the purpose and responsibility of the compensation committee, including:

• reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

• reviewing and making recommendations to our board of directors with respect to the compensation, and any incentive-compensation and equity-based plans that are subject to board approval of all of our other officers;

• reviewing our executive compensation policies and plans;

• implementing and administering our incentive compensation equity-based remuneration plans;

• assisting management in complying with our proxy statement and annual report disclosure requirements;

• approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

• producing a report on executive compensation to be included in our annual proxy statement;

• reviewing, evaluating and recommending changes, if appropriate, to the remuneration of our directors.

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser.

However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

Nominating and Corporate Governance Committee

The members of our nominating and corporate governance committee are Dr.

Semigran, Dr.

Sinha and Mr.

Semigran serves as chair of the nominating and corporate governance committee.

We have adopted a nominating and corporate governance committee charter, which details the purpose and responsibilities of the nominating and corporate governance committee, including:

• identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by our board of directors, and recommending to our board of directors candidates for nomination for appointment at the annual general meeting or to fill vacancies on our board of directors;

• developing and recommending to our board of directors and overseeing implementation of our corporate governance guidelines;

• coordinating and overseeing the annual self-evaluation of our board of directors, its committees, individual directors and management in the governance of the company;

• reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary.

The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and is directly responsible for approving the search firm’s fees and other retention terms.

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.

In general, in identifying and evaluating nominees for director, our board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.

Prior to our initial Business Combination, holders of our public shares and private placement shares will not have the right to recommend director candidates for nomination to our board of directors.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our ordinary shares to file reports of ownership and changes in ownership with the SEC.

Based solely upon a review of such forms, we believe that during the year ended December 31, 2021 there were no delinquent filers.

Code of Ethics

We have adopted a code of ethics and business conduct (our “Code of Ethics”) applicable to our directors, officers and employees.

We have filed a copy of our Code of Ethics as an exhibit to this Annual Report.

We have also posted a copy of our Code of Ethics and the charters of our audit committee, compensation committee and nominating and corporate governance committee on our website http://SocialCapitalSuvrettaHoldings.com/dnac under “Documents.” Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this Annual Report.

You are able to review these documents by accessing our public filings at the SEC’s website at www.sec.gov.

In addition, a copy of our Code of Ethics will be provided without charge upon request from us.

We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

Conflicts of Interest

Under Cayman Islands law, our directors and officers owe the following fiduciary duties:

• duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole;

• duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;

• duty to not improperly fetter the exercise of future discretion;

• duty to exercise powers fairly as between different sections of shareholders;

• duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests;

• duty to exercise independent judgment.

In addition to the above, directors also owe a duty of care, which is not fiduciary in nature.

This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge, skill and experience which that director has.

As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position.

However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders;

provided that there is full disclosure by the directors.

This can be done by way of permission granted in the amended and restated memorandum and articles of association or alternatively by shareholder approval at general meetings.

All of our officers and certain of our directors have fiduciary and contractual duties to either Social Capital or Suvretta and, as applicable, their underlying clients, and to certain companies in which either of them has invested or are otherwise affiliated with.

These entities, including IPOD, IPOF and the Other SCS SPACs (each of the Other SCS SPACs is focused on pursuing an initial business combination with a target operating in the biotechnology industry), may compete with us for acquisition opportunities.

If these entities decide to pursue any such opportunity, we may be precluded from pursuing such opportunities.

None of the members of our management team who are also employed by our Sponsor or its affiliates have any obligation to present us with any opportunity for a potential Business Combination of which they become aware, subject to his or her fiduciary duties under Cayman Islands law.

Our Sponsor and directors and officers are also not prohibited from sponsoring, investing or otherwise becoming involved with, any other blank check companies, including in connection with their initial Business Combinations, prior to us completing our initial Business Combination, and any such involvement may result in conflicts of interests as described herein.

Members of our management team, in their capacities as directors, officers or employees of our Sponsor or its affiliates or in their other endeavors (including other special purpose acquisition companies they are or may become involved with), may choose to present potential Business Combinations to the related entities described above, current or future entities affiliated with or managed by our Sponsor, or third parties, before they present such opportunities to us, subject to his or her fiduciary duties under Cayman Islands law and any other applicable fiduciary duties.

Our directors and officers presently have, and any or all of them in the future may have, additional, fiduciary or contractual obligations to other entities (including other special purpose acquisition companies they are or may become involved with) pursuant to which such officer or director is or will be required to present a Business Combination opportunity to such entity.

Accordingly, if any of our directors or officers becomes aware of a Business Combination opportunity that is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she may need to honor these fiduciary or contractual obligations to present such Business Combination opportunity to such entity, subject to his or her fiduciary duties under Cayman Islands law.

Our amended and restated memorandum and articles of association provide that, to the fullest extent permitted by applicable law:

(i) no individual serving as a director or an officer shall have any duty, except and to the extent expressly assumed by contract, to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us;

and (ii) we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any potential transaction or matter which may be a corporate opportunity for any director or officer, on the one hand, and us, on the other.

Our directors and officers are also not required to commit any specified amount of time to our affairs, including our management team who will be spending material business time on their other duties, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential Business Combinations and monitoring the related due diligence.

See “Item 1.A.

Risk Factors — Risks Relating To Our Management Team and Conflicts of Interest — Certain of our directors and officers are now, and expect in the future to become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.”

We do not believe, however, that the fiduciary duties or contractual obligations of our directors or officers will materially affect our ability to identify and pursue Business Combination opportunities (if we do not consummate the proposed ProKidney Business Combination) or complete our initial Business Combination, including the proposed ProKidney Business Combination.

You should not rely on the historical record of our founders’ and management’s performance as indicative of our future performance.

See “Item 1.A.

Risk Factors — General Risk Factors — Past performance by our management team and their respective affiliates may not be indicative of future performance of an investment in the company.”

In addition, we have the following potential conflicts of interest:

None of our directors or officers is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.

In the course of their other business activities, our directors and officers may become aware of investment and business opportunities that may be appropriate for presentation to us as well as the other entities with which they are affiliated, including IPOD, IPOF and the Other SCS SPACs (each of the Other SCS SPACs is focused on pursuing an initial business combination with a target operating in the biotechnology industry).

Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

For a complete description of our management’s other affiliations, see “—Directors, Director Nominee and Officers.”

Our initial shareholders, directors and officers have agreed to waive their redemption rights with respect to any founder shares, private placement shares and public shares held by them in connection with the consummation of our initial Business Combination.

Additionally, our initial shareholders have agreed to waive their redemption rights with respect to their founder shares and private placement shares if we fail to consummate our initial Business Combination within the Combination Period.

However, if our initial shareholders (or any of our directors, officers or affiliates) acquire

public shares, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if we fail to consummate our initial Business Combination within the prescribed time frame.

If we do not complete our initial Business Combination within such applicable time period, the proceeds of the sale of the private placement shares held in the Trust Account will be used to fund the redemption of our public shares, and the private placement shares will be worthless.

Pursuant to letter agreements that our initial shareholders, directors and officers have entered into with us, with certain limited exceptions, the founder shares will not be transferable, assignable or salable by our initial shareholders until the earlier of:

(1) one year after the completion of our initial Business Combination;

and (2) subsequent to our initial Business Combination (x) if the last reported sale price of our Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions,

share dividends, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading

day period commencing at least 150 days after our initial Business Combination or (y) the date on which we complete a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of our public shareholders having the right to exchange their ordinary shares for cash, securities or other property.

With certain limited exceptions, the private placement shares will not be transferable, assignable or salable by our Sponsor until 30 days after the completion of our initial Business Combination.

Since our Sponsor and directors and officers may directly or indirectly own ordinary shares, our directors and officers may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial Business Combination.

Our directors and officers may negotiate employment or consulting agreements with a target business in connection with a particular Business Combination.

These agreements may provide for them to receive compensation following our initial Business Combination and as a result, may cause them to have conflicts of interest in determining whether to proceed with a particular Business Combination.

Our directors and officers may have a conflict of interest with respect to evaluating a particular Business Combination if the retention or resignation of any such directors and officers was included by a target business as a condition to any agreement with respect to our initial Business Combination.

The conflicts described above may not be resolved in our favor.

Accordingly, as a result of multiple business affiliations, our directors and officers have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities, including IPOD, IPOF, the Other SCS SPACs and the other entities noted in their biographies above, as applicable.

Accordingly, if any of the above directors or officers become aware of a Business Combination opportunity which is suitable for any entity (including any additional special purpose acquisition companies they become involved with) to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such Business Combination opportunity to such entity, and only present it to us if such entity rejects the opportunity, subject to his or her fiduciary duties under Cayman Islands law.

Our amended and restated memorandum and articles of association provide that, to the fullest extent permitted by applicable law:

We do not believe, however, that any of the foregoing fiduciary duties or contractual obligations will materially affect our ability to identify and pursue Business Combination opportunities or complete our initial Business Combination.

We are not prohibited from pursuing an initial Business Combination with a company that is affiliated with Social Capital, Suvretta, our Sponsor, directors or officers.

In the event we seek to complete our initial Business Combination with such a company, we, or a committee of independent and disinterested directors, would obtain an opinion from an independent investment banking firm or another valuation or appraisal firm that regularly renders fairness opinions on the type of target business we are seeking to acquire that such an initial Business Combination is fair to our company from a financial point of view.

We are not required to obtain such an opinion in any other context.

In addition, our Sponsor or any of its affiliates may make additional investments in our company in connection with the initial Business Combination, although our Sponsor and its affiliates have no obligation or current intention to do so.

If our Sponsor or any of its affiliates elects to make additional investments, such proposed investments could influence our Sponsor’s motivation to complete an initial Business Combination.

In the event that we submit our initial Business Combination to our public shareholders for a vote, our initial shareholders, directors and officers have agreed, pursuant to the terms of letter agreements entered into with us, to vote any founder shares (and their permitted transferees will agree) and public shares held by them in favor of our initial Business Combination.

Item 11.Executive Compensation.

Compensation Discussion and Analysis

None of our current or former directors or officers have received any cash compensation for services rendered to us.

Commencing on the date that our securities were first listed on Nasdaq through the earlier of consummation of our initial Business Combination and our liquidation, we will pay an affiliate of our Sponsor a total of $10,000 per month for office space, administrative and support services.

Our Sponsor, directors and officers, or any of their respective affiliates, will be reimbursed for any out-of-pocket

expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations.

Our audit committee will review on a quarterly basis all payments that were made by us to our Sponsor, directors, officers or our or any of their respective affiliates.

In September 2020, pursuant to a Director Restricted Stock Unit Award Agreement, dated September 24, 2021, between the Company and Dr.

Sinha, we agreed to grant 30,000 restricted stock units (“RSUs”) to Dr.

Sinha, which grant is contingent on both the consummation of our initial Business Combination and a shareholder approved equity plan.

The RSUs will vest upon the consummation of such initial business combination (the “Vesting Date”) and represent 30,000 Class A ordinary shares (or, following a domestication by the Company as a Delaware corporation, shares of common stock) that will settle on a date determined in our sole discretion that shall occur between the Vesting Date and March 15 of the year following the year in which vesting occurs.

After the completion of our initial Business Combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation from the combined company.

All compensation will be fully disclosed to shareholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our shareholders in connection with a proposed Business Combination.

It is unlikely the amount of such compensation will be known at the time, because the directors of the post-combination business will be responsible for determining executive officer and director compensation.

Any compensation to be paid to our officers after the completion of our initial business combination will be determined by a committee comprised solely of independent directors, subject to applicable phase-in

rules, or by a majority of the independent directors on our board of directors.

We are not party to any agreements with our directors and officers that provide for benefits upon termination of employment.

The existence or terms of any such employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the consummation of our initial Business Combination should be a determining factor in our decision to proceed with any potential Business Combination.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of [•], 2022 with respect to our ordinary shares held by:

each person known by us to be the beneficial owner of more than 5% of our issued and outstanding ordinary shares;

each of our executive officers and directors;

all our executive officers and directors as a group.

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them.

Class A Ordinary Shares(1)

Class B Ordinary Shares(2)

Percentage of

Name and Address of Beneficial Owner (3)

SCS Sponsor III LLC (our Sponsor)(4)

Chamath Palihapitiya (4)

Kishan (a/k/a Kishen) Mehta (4)

Marc Semigran

Uma Sinha (5)

All directors, officers and directors as a group (5 individuals)

Adage Capital Partners, L.P.

and affiliates(6)

Integrated Core Strategies (US) LLC and affiliates(7)

Sculptor Capital LP and affiliates(8)

Less than one percent.

Includes all Class B ordinary shares convertible by such holder into Class A ordinary shares.

Class B ordinary shares will convert into Class A ordinary shares on a one-for-one

basis, subject to adjustment, as described in this Annual Report.

Unless otherwise noted, the business address of each of the following entities or individuals is c/o Social Capital Suvretta Holdings Corp.

Horizon Ridge Parkway, Suite 200, Henderson, NV 89052.

SCS Sponsor III LLC, our Sponsor, is the record holder of the Class B ordinary shares reported herein.

Palihapitiya and Mehta may be deemed to beneficially own (within the meaning of Rule 13d-3

under the Exchange Act) securities held by SCS Sponsor III LLC by virtue of their shared control over SCS Sponsor III LLC.

In September 2021, pursuant to a Director Restricted Stock Unit Award Agreement, dated September 24, 2021, between the Company and Dr.

Sinha, the Company agreed to grant 30,000 restricted stock units (“RSUs”) to Dr.

Sinha, which grant is contingent on both the consummation of the Company’s initial Business Combination and a shareholder approved equity plan.

The RSUs will vest upon the consummation of the Business Combination and represent 30,000 Class A ordinary shares that will settle on a date the Company selects determined in the sole discretion of the Company that shall occur between the vesting date and March 15 of the year following the year in which such Business Combination vesting occurs.

Based on a Schedule 13G jointly filed on July 12, 2021 by (i) Adage Capital Partners, L.P., a Delaware limited partnership (“ACP”) with respect to the Class A ordinary shares directly owned by it;

(ii) Adage Capital Partners GP, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACPGP”), as general partner of ACP with respect to the Class A Ordinary Shares directly owned by ACP;

(iii) Adage Capital Advisors, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACA”), as managing member of ACPGP, general partner of ACP, with respect to the Class A ordinary shares directly owned by ACP;

(iv) Robert Atchinson, as managing member of ACA, managing member of ACPGP, general partner of ACP with respect to the Class A ordinary shares directly owned by ACP;

and (v) Phillip Gross, as managing member of ACA, managing member of ACPGP, general partner of ACP with respect to the Class A Ordinary Shares directly owned by ACP.

ACP has the power to dispose of and the power to vote the Class A Ordinary Shares beneficially owned by it, which power may be exercised by its general partner, ACPGP.

ACA, as managing member of ACPGP, directs ACPGP’s operations.

Neither ACPGP nor ACA directly own any Class A Ordinary Shares.

By reason of the provisions of Rule 13d-3

of the Securities Exchange Act of 1934, ACPGP and ACA may be deemed to beneficially own the shares owned by ACP.

Atchinson and Gross, as managing members of ACA, have shared power to vote the Class A Ordinary Shares beneficially owned by ACP.

Atchinson nor Mr.

Gross directly own any Class A Ordinary Shares.

By reason of the provisions of Rule 13d-3

of the Securities Exchange Act of 1934, each may be deemed to beneficially own the shares beneficially owned by ACP.

The business address of each such entity or person is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116.

Based on a Schedule 13G jointly filed on February 15, 2022 by Integrated Core Strategies (US) LLC, Riverview Group LLC, ICS Opportunities, Ltd., ICS Opportunities II LLC, Integrated Assets, Ltd., Millennium International Management LP, Millennium Management LLC, Millennium Group Management LLC and Israel A.

Englander, the 1,372,653 Class A ordinary shares disclosed herein as potentially beneficially owned by Millennium Management LLC, Millennium Group Management LLC and Mr.

Englander are held by entities subject to voting control and investment discretion by Millennium Management LLC and/or other investment managers that may be controlled by Millennium Group Management LLC (the managing member of Millennium Management LLC) and Mr.

Englander (the sole voting trustee of the managing member of Millennium Group Management LLC).

The business address of Millennium International Management LP, Millennium Management LLC and Millennium Group Management LLC is 399 Park Avenue, New York, New York 10022, the business address of Integrated Core Strategies (US) LLC, Riverview Group LLC and Mr.

Englander is c/o Millennium Management LLC, 399 Park Avenue, New York, New York 10022, and the business address of ICS Opportunities, Ltd., ICS Opportunities II LLC and Integrated Assets, Ltd.

is c/o Millennium International Management LP, 399 Park Avenue, New York, New York 10022.

Based on a Schedule 13G jointly filed on December 29, 2021 by Sculptor Capital LP, Sculptor Capital II LP, Sculptor Capital Holding Corp., Sculptor Capital Holding II LLC, Sculptor Capital Management, Inc., Sculptor Master Fund, Ltd., Sculptor Special Funding, LP, Sculptor Credit Opportunities Master Fund, Ltd., Sculptor SC II LP and Sculptor Enhanced Master Fund, Ltd.

Sculptor Capital LP (“Sculptor”), a Delaware limited partnership, is the principal investment manager to a number of private funds and discretionary accounts (collectively, the “Accounts”).

Sculptor Capital II LP (“Sculptor-II”),

a Delaware limited partnership that is wholly owned by Sculptor, also serves as the investment manager to certain of the Accounts.

The 1,299,486 Class A ordinary shares are held in the Accounts managed by Sculptor and Sculptor-II.

Sculptor Capital Holding Corporation (“SCHC”), a Delaware corporation, serves as the general partner of Sculptor.

Sculptor Capital Holding II LLC (“SCHC-II”),

a Delaware limited liability company that is wholly owned by Sculptor, serves as the general partner of Sculptor-II.

Sculptor Capital Management, Inc.

(“SCU”), a Delaware limited liability company, is a holding company that is the sole shareholder of SCHC and the ultimate parent company of Sculptor and Sculptor-II.

Sculptor Master Fund, Ltd.

(“SCMF”) is a Cayman Islands company.

Sculptor is the investment adviser to SCMF.

Sculptor Special Funding, LP (“NRMD”) is a Cayman Islands exempted limited partnership that is wholly owned by SCMF.

Sculptor Credit Opportunities Master Fund, Ltd.

(“SCCO”) is a Cayman Islands company.

Sculptor is the investment adviser to SCCO.

Sculptor SC II LP (“NJGC”) is a Delaware limited partnership.

is the investment adviser to NJGC.

Sculptor Enhanced Master Fund, Ltd.

(“SCEN”) is a Cayman Islands company.

Sculptor is the investment adviser to SCEN.

Sculptor and Sculptor-II

serve as the principal investment managers to the Accounts and thus may be deemed beneficial owners of the 1,299,486 Class A ordinary shares in the Accounts managed by Sculptor and Sculptor-II.

serves as the sole general partner of Sculptor-II

and is wholly owned by Sculptor.

SCHC serves as the sole general partner of Sculptor.

As such, SCHC and SCHC-II

may be deemed to control Sculptor as well as Sculptor-II

and, therefore, may be deemed to be the beneficial owners of the 1,299,486 Class A ordinary shares.

SCU is the sole shareholder of SCHC, and may be deemed a beneficial owner of the 1,299,486 Class A ordinary shares.

The address of the principal business offices of Sculptor, Sculptor-II,

SCHC, SCHC-II,

SCU, SCMF, NRMD, SCEN, SCCO and NJGC is 9 West 57 Street, 39 Floor, New York, NY 10019.

Our initial shareholders beneficially own approximately 21.6% of the issued and outstanding ordinary shares and have the right to elect all of our directors prior to our initial Business Combination as a result of holding all of the founder shares.

Holders of our Class A ordinary shares will not have the right to appoint any directors to our board of directors prior to our initial Business Combination.

In addition, because of their ownership block, our initial shareholders may be able to effectively influence the outcome of all other matters requiring approval by our shareholders, including amendments to our amended and restated memorandum and articles of association and approval of significant corporate transactions.

Maraganore, Ph.D.

Ignacio Jimenez Santos

Executive Compensation.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2022, the information required by this item will be contained in the Form 10-K/A.

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

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2022, the information required by this item will be contained in the Form 10-K/A.

Certain Relationships and Related Transactions, and Director Independence.

Founder Shares

On March 2, 2021, the Sponsor paid $25,000 to cover certain offering and formation costs of the Company in consideration for which the Sponsor received 5,750,000 Class B ordinary shares (the “Founder Shares”).

On June 29, 2021, the Company effected a share capitalization with respect to its Class B ordinary shares of 575,000 shares thereof, resulting in the Sponsor holding an aggregate of 6,325,000 Founder Shares.

The Founder Shares included an aggregate of up to 825,000 shares that were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised.

As a result of the underwriters’ election to partially exercise their over-allotment option, a total of 750,000 Founder Shares are no longer subject to forfeiture and 75,000 Founder Shares were forfeited resulting in an aggregate of 6,250,000 Founder Shares outstanding.

In June 2021, the Sponsor transferred 30,000 Founder Shares to Dr.

Semigran, an independent director of the Company.

The Sponsor and the Company’s directors and officers have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier of:

(A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions,

share dividends, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading

day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.

Registration Rights

The holders of Founder Shares and Private Placement Shares have registration rights (in the case of the Founder Shares, only after conversion of such shares to Class A ordinary shares) pursuant to a registration rights agreement entered into by the Company, the Sponsor and the other security holders named therein on June 29, 2021.

The existing registration rights agreement also granted these holders certain demand and “piggy back” registration rights with the Company obligated to bear the expenses incurred in connection with the filing of any such registration statements.

The ProKidney Business Combination Agreement contemplates that at the Closing, the Company will enter into a registration rights agreement (the “Registration Rights Agreement”), which will replace the existing registration rights agreement.

Pursuant to the Registration Rights Agreement, the shareholders party thereto, including the Sponsor, certain of the Company’s’ directors and advisors, certain PIPE Investors, certain holders of partnership interests in ProKidney and their permitted transferees will be entitled to certain registration rights.

These holders will also have certain “piggy back” registration rights.

New ProKidney will bear the expenses incurred in connection with the filing of any such registration statements pursuant to the terms of the Registration Rights Agreement.

Subscription Agreements

Concurrently with the execution of the ProKidney Business Combination Agreement, the Company entered into subscription agreements with certain existing directors, officers and equityholders of, or investment funds managed by Suvretta Capital Management, LLC, the Company, the Sponsor, and/or their respective affiliates (the “Sponsor Related PIPE Investors”), pursuant to which the Sponsor Related PIPE Investors have subscribed for Class A ordinary shares of the Company.

The Sponsor Related PIPE Investors are expected to fund $156,400,000 of the PIPE Investment, for which they will receive 15,640,000 Class A ordinary shares of the Company.

Specifically, (i) SC Master Holdings, LLC, an entity affiliated with Chamath Palihapitiya, subscribed for 12,500,000 Class A ordinary shares of the Company and (ii) Averill Master Fund, Ltd., an entity affiliated with Kishen Mehta, subscribed for 3,140,000 Class A ordinary shares of the Company.

The PIPE Investment will be consummated substantially concurrently with the closing of the ProKidney Business Combination.

Administrative Services Agreement

The Company entered into an agreement in which it will pay an affiliate of the Sponsor $10,000 per month, commencing on June 30, 2021, for office space, administrative and support services.

Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees.

For the three months ended September 30, 2021 and for the period from February 25, 2021 (inception) through September 30, 2021, the Company incurred $30,000 in fees for these services.

As of December 31, 2021, a total of $60,000 was included in Advance from Related Party in the accompanying balance sheet.

Advance from Related Party

As of December 31, 2021, the outstanding balance under the advance amounted to $10,000.

Promissory Note—Related Party

On March 2, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Sponsor Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000.

The Sponsor Promissory Note was non-interest

bearing and payable on the earlier of December 31, 2021 and the completion of the Initial Public Offering.

The outstanding balance under the Promissory Note of $300,000 was repaid at the closing of the Initial Public Offering on July 2, 2021.

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

If the Company completes the Business Combination, it may repay such loaned amounts out of the proceeds of the Trust Account.

In the event that the Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts.

Policies and Procedures for Related Party Transactions

Prior to Company’s Initial Public Offering, it had not yet adopted a formal policy for the review, approval or ratification of related party transactions.

Accordingly, the transactions discussed above that were entered into prior to or in connection with the Initial Public Offering were not reviewed, approved or ratified in accordance with any such policy.

In connection with the Initial Public Offering, the Company adopted its Code of Ethics, which requires it to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by its board of directors (or the appropriate committee of its board of directors) or as disclosed in its public filings with the SEC.

Under the Code of Ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company.

In addition, the Company’s audit committee, pursuant to its written charter, is responsible for reviewing and approving related party transactions to the extent that the Company enters into such transactions.

An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction.

A majority of the members of the entire audit committee will constitute a quorum.

Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction.

The Company’s audit committee reviews on a quarterly basis all payments made by the Company to the Sponsor or the Company’s directors or officers, or the Company’s or any of their respective affiliates.

These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.

To further minimize conflicts of interest, the Company has also agreed not to consummate the Business Combination with an entity that is affiliated with any of the Sponsor or the Company’s directors or officers unless the Company, or a committee of independent and disinterested directors, have obtained an opinion from an independent investment banking firm or another valuation or appraisal firm that regularly renders fairness opinions on the type of target business we are seeking to acquire that the Business Combination is fair to the Company from a financial point of view.

Furthermore, there will be no finder’s fees, reimbursements or cash payments made by us to the Sponsor or the Company’s directors or officers, or the Company or any of the Company’s respective affiliates, for services rendered to the Company prior to or in connection with the completion of the Business Combination, other than the following payments, none of which will be made from the proceeds of the Initial Public Offering and the sale of the private placement shares held in the Trust Account prior to the completion of the Business Combination:

repayment of an aggregate of up to $300,000 in loans made to the Company by our Sponsor prior to the completion of the initial public offering;

payment to an affiliate of our Sponsor of a total of $10,000 per month for office space, administrative and support services;

reimbursement for any out-of-pocket

expenses related to identifying, investigating and completing a Business Combination;

repayment of loans which may be made by our Sponsor or an affiliate of our Sponsor or certain of the Company’s directors and officers to fund working capital deficiencies or finance transaction costs in connection with the Business Combination.

The above payments may be funded using funds not held in the Trust Account or, upon completion of the Business Combination, from any amounts remaining from the proceeds of the Trust Account released to the Company in connection therewith.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2022, the information required by this item will be contained in the Form 10-K/A.

Principal Accounting Fees and Services.

The following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.

During the period from February 25, 2021 (inception) through December 31, 2021, fees for our independent registered public accounting firm were approximately $51,146 for the services they performed in connection with our initial public offering and the audit of our financial statements included in this proxy statement, including interim procedures and attendance at audit committee meetings.

Audit-Related Fees.

During the period from February 25, 2021 (inception) through December 31, 2021, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of financial statements .

During period from February 25, 2021 (inception) through December 31, 2021, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax planning .

All Other Fees

During the period from February 25, 2021 (inception) through December 31, 2021, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above .

Our audit committee has determined that the services provided by Marcum are compatible with maintaining the independence of Marcum as our independent registered public accounting firm.

Under our audit committee charter, the audit committee is required to approve in advance our independent auditors’ annual engagement letter, including the proposed fees contained therein, as well as all audit and, as provided in the Sarbanes-Oxley Act of 2002 and the SEC rules and regulations promulgated thereunder, all permitted non-audit

engagements and relationships between us and such independent auditors.

Our audit committee was formed and its charter adopted in connection with the consummation of our initial public offering.

As a result, the audit committee did not pre-approve

all services provided by Marcum.

Since the formation of our audit committee, the audit committee has pre-approved

all audit services, compliance and planning services performed for us by Marcum during the period from February 25, 2021 (inception) through December 31, 2021.

Exhibits, Financial Statement Schedules.

The following documents are filed as part of this Form 10-K:

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2022, the information required by this item will be contained in the Form 10-K/A.

Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements

The following documents are included on pages F-1 through F-22 attached hereto and are filed as part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Balance Sheets

Statements of Operations

Statements of Changes in Temporary Equity and Permanent Deficit

Statements of Cash Flows

Notes to Financial Statements

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.

Description of Exhibit

Business Combination Agreement, dated as of January 18, 2022 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed on January 21, 2022).

Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Description of the Registrant’s securities.

Letter Agreement, dated as of July 29, 2021, by and among the Registrant, SCS Sponsor III LLC and the Registrant’s officers and directors (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Letter Agreement, dated September 24, 2021, between the Registrant and Dr.

Sinha (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on September 24, 2021).

Investment Management Trust Agreement, dated as of July 29, 2021, by and between the Registrant and Continental Stock Transfer & Trust Company, as trustee (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K on July 2, 2021).

Registration Rights Agreement, dated June 29, 2021, between the Registrant and Continental Stock Transfer & Trust Company, as trustee (incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Administrative Services Agreement, dated as of July 29, 2021, by and between the Registrant and Social + Capital Partnership, LLC (incorporated by reference to Exhibit 10.4 filed with the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Private Placement Shares Purchase Agreement, dated as of June 29, 2021, between the Registrant and SCS Sponsor III LLC (incorporated by reference to Exhibit 10.5 filed with the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Form of Indemnity Agreement, dated June 29, 2021, between the Registrant and each of its officers and directors (incorporated by reference to Exhibit 10.6 filed with the Registrant’s Current Report on Form 8-K, filed on July 2, 2021).

Director Restricted Stock Unit Award Agreement, dated September 24, 2021, between the Registrant and Dr.

Sinha (incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K, filed on November 15, 2021).

Sponsor Support Agreement, dated as of January 18, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on January 21, 2022).

ProKidney Unitholder Support Agreement, dated as of January 18, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on January 21, 2022).

Form of Subscription Agreement for Institutional Investors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 21, 2022).

Form of Subscription Agreement for Individual Investors (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on January 21, 2022).

Code of Ethics and Business Conduct of the Registrant.

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’

Deficit / Members’

Equity for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Cash Flows for the Years ended December 31, 2022, 2021, and 2020

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Not Applicable.

(a)(3) List of Exhibits

Business Combination Agreement, dated as of January 18, 2022, by and between ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III) and ProKidney LP.

(incorporated by reference from Exhibit 2.1 to Form 8-K filed with the SEC on January 21, 2022) (File No.

New GP Joinder, dated as of June 7, 2022 (incorporated by reference from Exhibit 2.2 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Second Amended & Restated Memorandum and Articles of Association of ProKidney Corp.

(incorporated by reference from Exhibit 3.1 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Description of registered securities

Tax Receivable Agreement, dated as of July 11, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), the TRA Party Representative (as defined therein) and the TRA Parties (as defined therein) (incorporated by reference from Exhibit 10.1 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Exchange Agreement, dated as of July 11, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), ProKidney LP, acting through its general partner ProKidney Corp.

GP Limited, and certain holders named therein (incorporated by reference from Exhibit 10.2 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Lock-up Agreement, dated as of July 11, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), SCS Sponsor III LLC, the Sponsor Key Holders (as defined therein) and the ProKidney Holders (as defined therein) (incorporated by reference from Exhibit 10.3 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Amended and Restated Registration Rights Agreement, dated as of July 11, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), SCS Sponsor III LLC, the ProKidney Holders (as defined therein), Marc Semigran, Uma Sinha, Sukumar Nagendran, David Spiegel and the Investor Stockholders (as defined therein) (incorporated by reference from Exhibit 10.4 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Second Amended and Restated Limited Partnership Agreement for a Limited Partnership Called ProKidney LP, dated as of July 11, 2022, by and among Tolerantia, LLC, Control Empresarial de Capitales, S.A.

de C.V., ProKidney Management Equity LLC, ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), ProKidney Corp.

GP Limited and ProKidney GP Limited (incorporated by reference from Exhibit 10.5 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Form of Subscription Agreement for Institutional Investors, dated as of January 18, 2022, by and between ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III) and the subscriber partiers thereto (incorporated by reference from Exhibit 10.1 to Form 8-K/A filed with the SEC on January 21, 2022) (File No.

Form of Subscription Agreement for Individual Investors, dated as of January 18, 2022, by and between ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III) and the subscriber parties thereto (incorporated by reference from Exhibit 10.2 to Form 8-K/A filed with the SEC on January 21, 2022) (File No.

Sponsor Support Agreement, dated as of January 18, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), SCS Sponsor III LLC, ProKidney LP and the directors and officers named therein (incorporated by reference from Exhibit 10.3 to Form 8-K/A filed with the SEC on January 21, 2022) (File No.

Company Unitholder Support Agreement, dated as of January 18, 2022, by and among ProKidney Corp.

(formerly known as Social Capital Suvretta Holdings Corp.

III), ProKidney LP and the persons named therein (incorporated by reference from Exhibit 10.10 to Form 8-K filed with the SEC on July 15, 2022) (File No.

ProKidney Corp.

2022 Incentive Equity Plan (incorporated by reference from Exhibit 10.11 to Form 8-K filed with the SEC on July 15, 2022) (File No.

ProKidney Corp.

Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.12 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Form of Indemnification Agreement, dated as of July 11, 2022, by and among ProKidney Corp.

and its directors and executive officers (incorporated by reference from Exhibit 10.13 to Form 8-K filed with the SEC on July 15, 2022) (File No.

Employment Agreement, dated as of December 3, 2022, by and between Dr.

Timothy Bertram and ProKidney, LLC

Employment Agreement, dated as of December 3, 2022 by and between James Coulston and ProKidney, LLC

Employment Agreement, dated as of December 2, 2022 by and between Dr.

Deepak Jain and ProKidney, LLC

Employment Agreement, dated as of December 3, 2022 by and between Dr.

Joseph Stavas and ProKidney, LLC

Form of Director Stock Option Award

Form of Employee Incentive Stock Option Award

Incentive Stock Option Award Agreement, dated as of October 20, 2022, by and between Dr.

Timothy Bertram and ProKidney Corp.

ProKidney Corp.

2022 Director Compensation Policy

Master Services Agreement, dated February 15, 2021, by and between George Clinical PTY Limited and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.13 to Form S-1 filed with the SEC on August 9, 2022) (File No.

Research, Development, Engineering Services and License Memorandum and Agreement, dated January 16, 2022, by and between ProKidney (formerly RegenMed (Cayman) Ltd.) and DEKA Products Limited Partnership (incorporated by reference from Exhibit 10.14 to Form S-1 filed with the SEC on August 9, 2022) (File No.

333-266683) .

Master Agreement for Clinical Trials Services, dated April 2, 2020, by and between ProKidney (formerly RegenMed (Cayman) Ltd.) and Frenova, LLC (incorporated by reference from Exhibit 10.16 to Form S-1 filed with the SEC on August 9, 2022) (File No.

333-266683) .

Master Services Agreement, dated May 1, 2019, by and between PPD Development, LP and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.17 to Form S-1 filed with the SEC on August 9, 2022) (File No.

333-266683) .

Master Services Agreement, dated August 14, 2015, by and between CTI Clinical Trial Services Inc.

and RegenMedTX, LLC (incorporated by reference from Exhibit 10.18 to Form S-1 filed with the SEC on August 9, 2022) (File No.

Laboratory Service Agreement, dated August 16, 2016, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.19 to Form S-1 filed with the SEC on August 9, 2022) (File No.

Laboratory Service Agreement, dated August 1, 2017, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.20 to Form S-1 filed with the SEC on August 9, 2022) (File No.

Laboratory Service Agreement, dated June 21, 2019, by and among Covance Central Laboratory Services LP, Covance Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.21 to Form S-1 filed with the SEC on August 26, 2022) (File No.

Laboratory Service Agreement, dated September 16, 2021, by and among Labcorp Central Laboratory Services LP, Labcorp Central Laboratory Services SA` RL and ProKidney (formerly RegenMed (Cayman) Ltd.) (incorporated by reference from Exhibit 10.22 to Form S-1 filed with the SEC on August 26, 2022) (File No.

Consulting Services Agreement, dated as of January 1, 2020 between ProKidney (formerly known as RegenMed (Cayman) Ltd.

(d/b/a inRegen)) and Nefro Health.

Consulting Services Agreement, dated as of January 1, 2020 between ProKidney, LLC (formerly known as Twin City Bio LLC) and Nefro Health.

Subsidiaries of the Registrant

Consent of Ernst & Young LLP

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Executive Officer Pursuant to 18 U.S.C.

2 unchanged sentences

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

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File—The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K

Item 601(b)(2).

The registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SOCIAL CAPITAL SUVRETTA HOLDINGS CORP.

The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language):

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders’

Deficit, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

The cover page from this Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL.

Management contract or compensatory plan or arrangement

* Filed herewith.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

PROKIDNEY CORP.

March 28, 2023

/s/ Chamath Palihapitiya

Chamath Palihapitiya

Chief Executive Officer and

Chairman of the Board of Directors

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.

/s/ Chamath Palihapitiya

Chamath Palihapitiya

Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

/s/ Tim Bertram, Ph.D.

Tim Bertram, Ph.D.

Chief Executive Officer

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

/s/ Tim Bertram, Ph.D.

Chief Executive Officer and Director

March 28, 2023

/s/ Kishan Mehta

President and Director

Tim Bertram, Ph.D.

(Principal Executive Officer)

/s/ James Coulston

Chief Financial Officer

March 28, 2023

/s/ James Ryans

Chief Financial Officer (Principal Financial and Accounting Officer)

James Coulston

(Principal Financial and Accounting Officer)

/s/ Pablo Legorreta

March 28, 2023

/s/ Marc Semigran

Marc Semigran

Pablo Legorreta

/s/ William F.

March 28, 2023

/s/ Uma Sinha

/s/ Jennifer Fox

March 28, 2023

/s/ José

Ignacio Jimenez Santos

March 28, 2023

Ignacio Jimenez Santos

March 28, 2023

Maraganore, Ph.D.

March 28, 2023

Maraganore, Ph.D.

/s/ Brian J.G.

Pereira, M.D.

March 28, 2023

Pereira, M.D.

/s/ Uma Sinha, Ph.D.

March 28, 2023

Uma Sinha, Ph.D.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID:42)

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’

Deficit / Members’

Equity for the years ended December 31, 2022, 2021, and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020

Notes to Consolidated Financial Statements

Rep ort of Independent Registered Public Accounting Firm

To the Shareholders and the Board of ProKidney Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ProKidney Corp.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in redeemable noncontrolling interest and stockholders’

deficit / members’

equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

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

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

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

We conducted our audits in accordance with the standards of the PCAOB.

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

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

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

Accordingly, we express no such opinion.

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

Raleigh, North Carolina

March 28, 2023

ProKidney Corp.

Consolidated Balance Sheets

(in thousands, except share data)

December 31, 2022

December 31, 2021

Cash and cash equivalents

Prepaid assets

Prepaid clinical

Other current assets

Total current assets

Fixed assets, net

Right of use assets, net

Intangible assets, net

Liabilities and Shareholders' Deficit/Members' Equity

Accounts payable

Lease liabilities

Accrued expenses and other

Total current liabilities

Income tax payable, net of current portion

Lease liabilities, net of current portion

Total liabilities

Commitments and contingencies

Redeemable noncontrolling interest

Shareholders’

deficit / members' equity:

Class A units ( 186,500,000 issued and outstanding at December 31, 2021)

Class B units ( 7,767,122 issued and outstanding at December 31, 2021)

Class A ordinary shares, $ 0.0001 par value;

500,000,000 shares

61,540,231 issued and outstanding as of December

Class B ordinary shares, $ 0.0001 par value;

500,000,000 shares

171,578,320 issued and outstanding as of December

Additional paid-in capital

Accumulated deficit

Total shareholders' deficit / members’

Total liabilities and shareholders' deficit/members' equity

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

ProKidney Corp.

Consolidated Statements of Operations and Comprehensive Loss

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

Operating expenses

Research and development

General and administrative

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Net loss before income taxes

Income tax expense (benefit)

Net and comprehensive loss before noncontrolling

Net loss and comprehensive loss attributable to

noncontrolling interest

Net loss and comprehensive loss available to Class A

ordinary shareholders

Weighted average Class A ordinary shares outstanding:

Basic and diluted

Net loss per share attributable to Class A ordinary shares:

Basic and diluted

(1) For the year ended December 31, 2022, net loss per Class A ordinary share and weighted average Class A ordinary shares outstanding reflects the period from July 11, 2022 through December 31, 2022, the period following the Business Combination, as defined in Note 1.

For more information refer to Note 8.

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

ProKidney Corp.

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’

Deficit / Members’

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

Class A Units

Class B Units

Class A Ordinary Shares

Class B Ordinary Shares

Redeemable Noncontrolling Interest

Profits Interests

Additional Paid-in Capital

Accumulated Deficit

Total Shareholders' Deficit / Members' Equity

Balance as of December 31, 2019

Capital contribution

Equity-based compensation

Balance as of December 31, 2020

Capital contribution

Equity-based compensation

Balance as of December 31, 2021

Capital contribution

Equity-based compensation / payments prior to Business Combination

Net loss prior to the Business Combination

Effect of the Business Combination, including net proceeds of shares sold

through the PIPE transaction

( 186,500,000

Equity-based compensation after the Business Combination

Vesting of Class B restricted stock rights

Impact of equity transactions on redeemable noncontrolling interest

Net loss after the Business Combination

Balance as of December 31, 2022

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

ProKidney Corp.

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

Cash flows from operating activities

Net loss before noncontrolling interest

Adjustments to reconcile net loss before noncontrolling interest to net cash flows used

in operating activities:

Depreciation and amortization

Equity-based compensation

Changes in operating assets and liabilities

Prepaid and other assets

Accounts payable and accrued expenses

Income taxes payable

Net cash flows used in operating activities

Cash flows used in investing activities

Proceeds from sale of equipment

Net cash from SCS

Purchase of equipment and facility expansion

Net cash flows used in investing activities

Cash flows from financing activities

Payments on finance leases

Proceeds from Business Combination, including PIPE financing, net of associated costs

Borrowings under related party notes payable

Repayment of related party notes payable

Net cash contribution

Net cash flows provided by financing activities

Net change in cash and cash equivalents

Cash, beginning of period

Cash, end of period

Supplemental cash flow information:

Cash paid during the period for income taxes, net of refunds

Supplemental disclosure of non-cash investing activities:

Right of use assets obtained in exchange for lease obligations

Impact of equity transactions and compensation on redeemable noncontrolling interest

Equipment and facility expansion included in accounts payable and

accrued expenses

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

ProKidney Corp.

Notes to Consolidated Financial Statements

Description of Business and Basis of Presentation

Description of Business

ProKidney Corp.

(the “Company”

or “ProKidney”) was originally incorporated as Social Capital Suvretta Holdings Corp.

III (“SCS”).

SCS was a blank check company incorporated as a Cayman Islands exempted company on February 25, 2021 .

SCS was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

On January 18, 2022, SCS executed a definitive business combination agreement (the “Business Combination Agreement”), with ProKidney LP (“PKLP”), a limited partnership under the laws and regulations of Ireland.

Pursuant to the terms of the Business Combination Agreement, PKLP became a subsidiary of SCS and was organized in an umbrella partnership corporation (“Up-C”) structure, which would provide potential future tax benefits for SCS when the equity holders ultimately exchanged their pass-through interests for Class A ordinary shares.

The transaction closed (the “Closing”) on July 11, 2022 (the “Closing Date”).

Upon consummation of the transaction, SCS changed its name to ProKidney Corp.

The business combination between SCS and PKLP (the “Business Combination”) resulted in gross proceeds of approximately $ 596,537,000 .

This amount reflected a contribution of $ 21,737,000 of cash held in SCS’

trust account, net of redemptions, and a $ 574,800,000 concurrent private placement of Class A ordinary shares of the combined company, priced at $ 10.00 per share (the “PIPE Placement”).

Upon close, these proceeds were used to repay the outstanding balance of $ 35,000,000 under PKLP’s two promissory note agreements with certain holders of its Class A Units (the “Promissory Notes”) and related accrued interest.

Additionally, the proceeds were used to pay those expenses previously incurred by SCS related to the Business Combination of approximately $ 21,029,000 as well as advisory and placement fees of approximately $ 29,389,000 incurred in connection with the PIPE Placement.

The Business Combination was accounted for as a reverse recapitalization transaction between entities under common control, through which PKLP was considered the accounting acquiror and predecessor entity.

The Business Combination was reflected as the equivalent of PKLP issuing stock for the net assets of SCS accompanied by a recapitalization with no goodwill or intangible assets recognized.

ProKidney Corp., through its operating subsidiaries, ProKidney, which is incorporated under the Cayman Islands Companies Act (as amended) as an exempted company (“ProKidney-KY”) and ProKidney LLC, a limited liability company under the laws of Delaware (“ProKidney-US”) is focused on the development of its Renal Autologous Cell Therapy, which has the potential to preserve kidney function in patients with chronic kidney disease or delay or eliminate the need for dialysis and organ transplantation.

Principles of Consolidation

ProKidney is a holding company, and its principal asset is a controlling equity interest in PKLP and its wholly-owned operating subsidiaries ProKidney-KY and ProKidney-US.

The Company has determined that PKLP is a variable-interest entity for accounting purposes and that ProKidney is the primary beneficiary of PKLP because (through its managing member interest in PKLP and the fact that the senior management of ProKidney is also the senior management of PKLP) it has the power and benefits to direct all of the activities of PKLP, which include those that most significantly impact PKLP’s economic performance.

The Company has therefore consolidated PKLP’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation”

in its Consolidated Financial Statements.

As of December 31, 2022 , various holders own non-voting interests in PKLP, representing a 73.6 % economic interest in PKLP, effectively restricting ProKidney’s interest to 26.4 % of PKLP’s economic results, subject to increase in the future, should ProKidney purchase additional non-voting common units (“PKLP Units”) of PKLP, or should the holders of PKLP Units decide to exchange such units (together with shares of Class B ordinary shares) for Class A ordinary shares (or cash) pursuant to the Exchange Agreement (as defined in Note 5).

The Company will not be required to provide financial or other support for PKLP.

However, ProKidney will control its business and other activities through its ownership of 100 % of the shares in ProKidney Corp.

GP Limited (“New GP”), which is the managing member of PKLP.

Nevertheless, because ProKidney will have no material assets other than its interests in PKLP and its subsidiaries, any financial difficulties at PKLP could result in ProKidney recognizing a loss.

All intercompany transactions and balances have been eliminated.

Reclassifications

To facilitate comparison of information across periods, certain reclassifications have been made to prior period amounts to conform to the current period’s presentation.

Going Concern

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

The Company performed an analysis of its ability to continue as a going concern.

As of December 31, 2022, the Company had an accumulated deficit of $ 1,104,116,000 .

The Company has generated losses from operations for each year since its inception.

The Company intends to continue to conduct significant additional research, development, and clinical study activities which, together with expenses incurred for general and administrative purposes, are expected to result in continuing operating losses for the foreseeable future.

The amount of future losses and when, if ever, the Company will achieve profitability are uncertain.

The Company’s ability to achieve profitability will depend, among other things, on successfully completing clinical studies, obtaining requisite regulatory approvals, establishing appropriate pricing for its product with payers, and raising sufficient funds to finance the Company’s activities.

No assurance can be given that the Company’s clinical development efforts will be successful, that regulatory approvals will be obtained, or that the Company will be able to achieve appropriate pricing and market access or that profitability, if achieved, can be sustained.

The Closing provided additional liquidity to the Company totaling approximately $ 511,912,000 .

The Company’s primary source of liquidity is its cash and cash equivalents, which as of December 31, 2022, was $ 490,252,000 .

This liquidity is considered sufficient to satisfy the Company’s operating liabilities for a period greater than 12 months following the issuance date of these financial statements.

As such, management considers that there is not substantial doubt about the Company’s ability to continue as a going concern.

Significant Accounting Policies

Use of Estimates

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

Certain estimates in these consolidated financial statements have been made in connection with the calculation of research and development expenses, equity-based compensation expense and the provision for or benefit from income taxes.

The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, which management believes to be reasonable under the circumstances.

Actual results could differ from those estimates.

Changes in estimates are reflected in reported results in the period in which they become known.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less on the date of purchase to be cash equivalents.

The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these items.

Concentrations of Credit Risk

Cash and equivalents are the primary financial instruments held by the Company that are potentially subject to concentrations of credit risk.

The Company’s cash and equivalents are deposited in accounts at large financial institutions, and such amounts may exceed federally insured limits.

Accrued Expenses

Accrued expenses as presented in the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021 consisted of the following (in thousands):

December 31, 2022

December 31, 2021

Clinical study related costs

Accrued legal costs

Manufacturing improvement costs

Accrued consulting and professional fees

Other accrued expenses

Total accrued expenses and other

Research and Development Costs

Research and development costs are expensed as incurred.

Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries, benefits, third party license fees, and external costs of outside vendors engaged to conduct manufacturing and preclinical development activities and clinical trials.

The Company records accruals based on estimates of services received, efforts expended, and amounts owed pursuant to contracts with numerous contract research organizations.

In the normal course of business, the Company contracts with third parties to perform various clinical study activities in the ongoing development of potential products.

The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows.

Payments under the contracts depend on factors such as the achievement of certain events and the completion of portions of the clinical study or similar conditions.

The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended.

As such, expense accruals related to clinical studies are recognized based on the company’s estimate of the degree of completion of the event or events specified in the specific clinical study.

The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses.

Prepaid expenses are recognized as expense in the Consolidated Statement of Operations and Comprehensive Loss as the Company receives the related goods or services

Costs incurred in obtaining technology licenses are charged to research and development expense as purchased in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.

Fixed assets are stated at cost, less accumulated depreciation.

Generally, expenditures for maintenance and repairs are charged to expense and major improvements or replacements are capitalized.

The Company computes depreciation and amortization using the straight-line method over the estimated useful life of the asset.

Leasehold improvements are amortized over the lesser of, the life of the lease or the estimated useful life of the leasehold improvement.

The estimated useful lives are as follows:

Computer equipment and software

Furniture and equipment

Leasehold improvements

remainder of lease term

Fixed assets consisted of the following (in thousands):

December 31, 2022

December 31, 2021

Furniture and equipment

Computer equipment and software

Leasehold improvements

Construction in progress

accumulated depreciation

Total fixed assets, net

Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $ 2,448,000 , $ 1,452,000 , and $ 606,000 , respectively.

Intangible Assets

Intangible assets are comprised of acquired assembled workforce, which are accounted for in accordance with ASC 350 - Intangibles - Goodwill and Other.

The acquired assembled workforce is amortized on a straight-line basis over the useful life of five years.

The following table summarizes information related to the Company’s assembled workforce intangible asset (in thousands):

December 31, 2022

December 31, 2021

Gross carrying amount

Accumulated amortization

Net carrying amount

Estimated amortization expense for the years ended December 31, 2023 and 2024 is $ 208,000 and $ 5,000 , respectively.

Amortization expense relating to the assembled workforce intangible asset was $ 215,000 , $ 214,000 and $ 215,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

Impairment of Long-Lived Assets

Long-lived assets such as fixed assets and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

No impairment charges have been recorded for the years ended December 31, 2022, 2021 and 2020 .

The Company uses the liability method in accounting for income taxes as required by ASC Topic 740 —

Income Taxes, under which deferred tax assets and liabilities are recorded for the future tax consequences attributable to the differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.

A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment.

Accordingly, the Company has provided a full valuation allowance to offset the net deferred tax assets at December 31, 2022 and December 31, 2021.

Interest and penalties related to income taxes are included in the benefit (expense) for income taxes in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

The Company has not incurred any significant interest or penalties related to income taxes in any of the periods presented.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

A three‑level fair value hierarchy that prioritizes the inputs used to measure fair value is described below.

This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

Level 1 –

Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 –

Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable through correlation with market data

Level 3 –

Unobservable inputs that are supported by little or no market data, which require the reporting entity to develop its own assumptions

The carrying values of cash equivalents, accounts payable, and accrued liabilities approximate fair value due to the short‑term nature of these instruments.

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

Balances recognized related to the Company’s operating and finance leases are included in right-of-use assets, net and lease liabilities in the Consolidated Balance Sheets.

Right of use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

Variable payments directly related to the use of the assets and future adjustments of payments based on indices are recognized in the period of incurrence or change and are not included in the lease payments at the initial measurement date.

Lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise the option.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The right of use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

The Company has elected a practical expedient to not separate its lease and non-lease components and instead account for them as a single lease component.

Leases with a term of 12 months or less are not recorded on the balance sheet.

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

Lease payments for short-term leases are recorded to operating expense on a straight-line basis and variable lease payments are recorded in the period in which the obligation for those payments is incurred.

Contingent Liabilities

The Company records reserves for contingent liabilities when it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated.

Equity-Based Compensation

Compensation expense for share-based compensation awards issued is based on the fair value of the award at the date of grant.

The Company records forfeitures of share-based compensation awards as they occur.

The Company’s share based compensation program grants awards that have included the following:

1) profits interests in ProKidney LP which, at close of the Business Combination, were converted into paired interests consisting of (i) Class B ordinary shares or Class B restricted stock rights and (ii) Common Units or Restricted Common Units of ProKidney LP (collectively referred to as “Legacy Profits Interests”);

2) restricted stock units issued by SCS (“Legacy SCS Awards”);

3) time-vested stock options issued by ProKidney Corp.;

and 4) market-vested stock options issued by ProKidney Corp.

The grant date fair value of time-vested stock option awards is estimated using the Black-Scholes option pricing formula.

The grant date fair values of the Legacy Profits Interests and Legacy SCS Awards are based on the market value of the issuer’s shares or member units, as applicable, on the date of grant.

Compensation expense related to time-vested stock options, Legacy Profits Interests and Legacy SCS Awards are recognized on a straight-line basis over the applicable service period.

The grant date fair value of market-vested stock option awards is estimated using the Geometric Brownian Motion/Monte Carlo model.

Share-based compensation expense related to these awards is recognized ratably for each vesting tranche over the derived service period regardless of whether the award achieves the market condition and will only be adjusted to the extent the service condition is not met.

Due to the lack of sufficient historical trading information with respect to its own shares, the Company estimates expected volatility based on a portfolio of selected stocks of companies believed to have market and economic characteristics similar to its own.

The risk-free rate is based on the U.S.

Treasury yield curve in effect at the time of grant.

Due to a lack of historical exercise data, the Company estimates the expected life of its outstanding stock options using the simplified method specified under Staff Accounting Bulletin Topic 14.D.2 for awards without market conditions.

Defi ned Contribution Plan

The Company sponsors a 401(k) plan for its ProKidney-US employees and a defined contribution plan for its ProKidney-KY employees.

Full-time employees are eligible to participate in these plans.

The Company matches 50% of participating ProKidney-US employees’

contributions up to 8% of salary and contributes 7% of ProKidney-KY employee salaries to the respective plans.

The Company’s cost related to these defined contribution plans were $ 267,000 , $ 169,000 and $ 139,000 for the years ended December 31, 2022, 2021 and 2020 , respectively .

The Company operates in only one segment.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and a liability on the balance sheet for all leases, with the exception of short-term leases.

The lease liability will be equal to the present value of lease payments, and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs.

Leases will continue to be classified as either operating or finance leases in the income statement.

The Company early adopted ASU No.

2016-02, Leases (Topic 842), as of January 1, 2021.

For additional detail, see Note 4, Leases.

ProKidney is considered to be an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.

The Company’s subsidiary, PKLP, is organized as a limited partnership and is classified as a partnership for U.S.

income tax purposes, and as such, only records a provision for federal and state income taxes on its subsidiaries organized as C corporations or which have elected to be treated as corporations for U.S.

federal income tax purposes.

The Company’s subsidiary, ProKidney-US, is treated as a C corporation, and therefore a provision for federal and state taxes has been recorded.

The Company’s subsidiary, ProKidney-KY, has been granted, by the Government in Council of the Cayman Islands, tax concessions under an undertaking certificate exempting it from any tax levied on profits, income, gains or appreciations in relation to its operations or in the nature of estate duty or inheritance tax for a period of twenty years from January 20, 2016.

ProKidney-KY elected to be treated as an entity disregarded from its owner for U.S.

tax purposes, and as a result, it has not recorded an income tax provision.

The provision for income tax expense consisted of the following for the years ended December 31, 2022, 2021 and 2020 (in thousands):

December 31, 2022

December 31, 2021

December 31, 2020

Total current income tax expense (benefit)

Total deferred income tax expense (benefit)

Income tax expense (benefit)

The difference between the statutory rate for U.S statutory rate of 21 % and the effective income tax rate was as follows:

December 31, 2022

December 31, 2021

December 31, 2020

Income taxes at statutory rate

State taxes, net of federal benefit

Non-taxed income

Federal Credits

Share-based compensation

Provision to return adjustment

Change in valuation allowance

Effective income tax rate

Components of the Company’s deferred tax assets and liabilities included in the consolidated balance sheet consisted of the following (in thousands):

December 31, 2022

December 31, 2021

Deferred tax assets:

Accrued compensation

Federal credit carryforwards

Share-based compensation

Research and experimental costs capitalized

Start-up costs

Deferred tax assets before valuation allowance

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Intangible assets

Prepaid expenses

Total deferred income tax liabilities

Net deferred tax asset

For tax years beginning after December 31, 2021, the Tax Cut and Jobs Act of 2017 (the “TCJA”) requires specified research and development expenses to be capitalized and amortized ratably over a five-year period.

The increase in the valuation allowance related to this capitalized expense is the primary driver of income tax expense recognized during the year ended December 31, 2022.

As discussed in Note 5, the Company is party to a tax receivable agreement with a related party which provides for the payment by the Company to holders of PKLP prior to the Closing (“Closing ProKidney Unitholders”) of 85% of the amount of cash savings, if any, in U.S.

federal, state and local income tax or franchise tax that the Company actually realizes (or, in some circumstances, the Company is deemed to realize) as a result of certain transactions.

As no transactions have occurred which would trigger a liability under this agreement, the Company has not recognized any liability related to this agreement as of December 31, 2022.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Accordingly, management has concluded that it is not more likely than not that it will recognize the deferred tax assets, and the Company has provided a valuation allowance of $ 3,332,000 and $ 1,237,000 , respectively for December 31, 2022 and 2021, to offset the net deferred tax assets.

The Company has $ 174,000 in Research Credit Carryforwards that begin to expire in 2042.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):

December 31, 2022

December 31, 2021

Unrecognized tax benefits (gross):

Benefits at the beginning of the year

Increase related to prior year tax positions

Decrease related to prior year tax positions

Increase related to current year tax positions

Benefits at the end of the year

There were no net unrecognized tax benefits as of December 31, 2022 which, if recognized, would affect our effective tax rate.

We expect none of the gross unrecognized tax benefits will decrease within the next year.

In March 2020, the World Health Organization declared coronavirus (COVID-19) a global pandemic.

This contagious disease outbreak, which continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally.

As a result, governments around the world have enacted legislation to provide aid and stimulate economies.

In the U.S., The Coronavirus, Aid, Relief and Economics Security Act (“CARES Act”), was enacted on March 27, 2020, The Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, and the American Rescue Plan Act of 2021 was enacted on March 11, 2021.

All of these acts included both income tax and non-income tax provisions to assist companies.

No provisions in these acts had a material impact on the income tax provision or any other area of the Company’s financial statements.

Tax years 2019 through 2022 remain subject to examination by federal and state authorities.

In February 2016, the FASB issued ASU 2016-02:

Leases (Topic 842).

This ASU requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for most operating leases.

ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements, which provides companies with an additional optional transition method to apply the new standard to leases in effect at the adoption date through a cumulative effect adjustment.

The Company adopted the new lease standard as of January 1, 2021 using the modified retrospective transition method.

The Company elected the package of practical expedients referenced in ASU 2016-02, which permits companies to retain original lease identification and classification without reassessing initial direct costs for existing leases.

The Company also elected the practical expedient that exempts leases with an initial lease term of twelve months or less, as well as the practical expedient that allows companies to select, by class of underlying asset, not to separate lease and non-lease components.

Adoption of this standard resulted in the recognition of a right-of-use asset and a lease liability on the Company’s January 1, 2021 Consolidated Balance Sheet of $ 1,560,000 and $ 1,559,000 , respectively.

There was no material impact on the Company’s Consolidated Statement of Operations and Comprehensive Loss.

The Company has operating leases for real estate (primarily office space) and certain equipment with various expiration dates.

The Company also has finance leases for certain equipment.

For the years ended December 31, 2022, 2021 and 2020, the Company’s operating lease cost was $ 551,000 , $ 434,000 , and $ 314,000 , respectively.

During the year ended December 31, 2022, cash paid for operating leases was $ 514,000 .

The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021 (in thousands):

December 31, 2022

December 31, 2021

Operating leases:

Right of use assets

Operating lease liabilities, current

Operating lease liabilities, noncurrent

Total operating lease liabilities

Finance leases:

Right of use assets

Finance lease liabilities, current

Finance lease liabilities, noncurrent

Total finance lease liabilities

Maturities of lease liabilities for the Company’s operating and finance leases are as follows as of December 31, 2022 (in thousands):

Operating Leases

Finance Leases

Total lease payments

imputed interest

Present value of lease liabilities

The weighted average remaining lease term for operating leases is 4.2 years, and 2.3 years for the finance lease.

The weighted average discount rate is 8.9 % and 8.5 % for operating and finance leases, respectively.

Related Party Transactions

Exchange Agreement

On the Closing Date, the Company entered into an exchange agreement with PKLP and certain Closing ProKidney Unitholders (the “Exchange Agreement”) pursuant to which, subject to the procedures and restrictions therein, from and after the waiver or expiration of any contractual lock-up period (including pursuant to the Lock-Up Agreement (as defined below)) the holders of Post-Combination ProKidney Common Units as defined in the Exchange Agreement (or certain permitted transferees thereof) would have the right from time to time at and after 180 days following the Closing to exchange their Post-Combination ProKidney Common Units and an equal number of Class B ordinary shares of the Company on a one-for-one basis for Class A ordinary shares of the Company (the “Exchange”);

provided, that, subject to certain exceptions, the Company, at its sole election, subject to certain restrictions, may, other than in the case of certain secondary offerings, instead settle all or a portion of the Exchange in cash based on a volume weighted average price (“VWAP”) of a Class A ordinary share.

The Exchange Agreement provides that, as a general matter, a holder of Post-Combination ProKidney Common Units will not have the right to exchange Post-Combination ProKidney Common Units if the Company determines that such exchange would be prohibited by law or regulation or would violate other agreements with the Company and its subsidiaries to which the holder of Post-Combination ProKidney Common Units may be subject, including the Second Amended and Restated ProKidney Limited Partnership Agreement and the Exchange Agreement.

Lock-Up Agreement

On the Closing Date, the Company, SCS Sponsor III LLC and certain Closing ProKidney Unitholders entered into a lock-up agreement (the “Lock-Up Agreement”).

The Lock-Up Agreement contains certain restrictions on transfer with respect to the SCS Sponsor III LLC and the Closing ProKidney Unitholders party thereto.

Such restrictions began at the Closing and would end on the earlier of (i) the date that is 180 days after the Closing and (ii)(a) for 33% of the Lock-Up Shares (other than the Earnout Shares and the Private Placement Shares), the date on which the last reported sale price of a Class A ordinary share of the Company equals or exceeds $12.50 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing and (b) for an additional 50% of the Lock-Up Shares (other than the Earnout Shares and the Private Placement Shares (as each such term is defined in the Lock-Up Agreement)), the date on which the last reported sale price of a Class A ordinary share of the Company equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing.

Notwithstanding the above, (i) the lock-up period for any Earnout Shares will expire not earlier than 180 days after such Earnout Shares are issued ;

(ii) 50% of the Lock-Up Shares held by certain Closing ProKidney Unitholders and their affiliates will remain locked up until the earlier of four years following the Closing and the date that PKLP receives notice of any regulatory market authorization, including full or conditional authorization, to market its lead product candidate, Renal Autologous Cell Therapy (but, in any event, not earlier than 180 days following the Closing or (in the case of Earnout Shares) the date of issuance);

and (iii) the lock-up period for the Private Placement Shares expired 30 days after the Closing.

The restrictions on transfer set forth in the Lockup Agreement are subject to customary exceptions.

During January 2023, the lock-up period for 50 % of the shares held by the Closing ProKidney Unitholders (other than the Earnout Shares) expired.

Tax Receivable Agreement

On the Closing Date, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with the Closing ProKidney Unitholders.

Pursuant to the Tax Receivable Agreement, among other things, the Company will be required to pay the Closing ProKidney Unitholders party thereto 85 % of certain tax savings recognized by the Company, if any, as a result of the increases in tax basis attributable to exchanges by the Closing ProKidney Unitholders of Post-Combination ProKidney Common Units for Class A ordinary shares of the Company or, subject to certain restrictions, cash, pursuant to the Exchange Agreement and certain other tax attributes of PKLP and tax benefits related to entering into the Tax Receivable Agreement.

Earnout Rights

At the Closing, certain shareholders were issued an aggregate of 17,500,000 Earnout Restricted Common Units and 17,500,000 Earnout Restricted Stock Rights (collectively, the “Earnout Rights”).

The Earnout Rights vest in three equal tranches if, during the five-year period after Closing, the VWAP of a Class A ordinary share reaches $ 15.00 per share, $ 20.00 per share and $ 25.00 per share.

Likewise, the Earnout Rights will vest upon a change of control with a per share price exceeding those same VWAP thresholds within a five-year period immediately following the Closing.

Upon vesting, the Earnout Rights will automatically convert into Post Combination ProKidney Common Units and Class B ordinary shares.

Related Party Debt

On January 18, 2022, in connection with the execution of the Business Combination Agreement, the Company entered into the Promissory Notes.

Through such promissory notes, the holders could fund up to $ 100,000,000 to support the operational financing needs of the Company prior to the Closing.

These notes bore interest at a rate of 3 % per annum and were due upon the earliest of either (i) the date on which the Business Combination closed or (ii) January 17, 2023.

Drawdowns on the Promissory Notes could be made in multiples of $ 10,000 unless otherwise agreed upon.

Once an amount was drawn down under the Promissory Notes, it was no longer available for future drawdown requests even if prepaid.

During the year ended December 31, 2022 , the Company borrowed $ 35,000,000 under the Promissory Notes.

During the year ended December 31, 2022 , the Company recognized interest expense of $ 207,000 , respectively related to the Promissory Notes.

The amounts due under the Promissory Notes were paid, and the Promissory Notes were effectively terminated upon Closing as described in Note 1.

Consulting Services Agreement between ProKidney-KY and Nefro Health

On January 1, 2020, ProKidney-KY (formerly known as inRegen) entered into a consulting services agreement with Nefro Health (“Nefro”), an Irish partnership controlled and majority-owned by Mr.

Pablo Legorreta, a director of the Company, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of ProKidney’s product candidates as well as pre-commercialization activities, which are primarily performed by Mr.

Under the agreement, Nefro receives $ 25,000 per quarter and is reimbursed for any out-of-pocket expenses incurred in connection with activities Nefro conducted under the agreement.

ProKidney-KY has paid Nefro an aggregate of $ 100,000 for each of the years ended December 31, 2022, 2021 and 2020.

The initial term of the consulting services agreement continued through December 31, 2020 and was renewed pursuant to the provision allowing for automatic renewals for additional periods of one year each unless terminated by either party by providing written notice to the other party at least ninety (90) days prior to the scheduled termination date.

Either party may terminate this agreement upon the occurrence of a material breach by the other party in the performance of its obligations under the agreement or in respect of any provision, representation, warranty or covenant if such breach has not been cured within thirty (30) days after receiving written notice from the non-breaching party.

Additionally, either of the parties may terminate the consulting services agreement for any reason upon giving thirty (30) days’

advance notice of such termination to the other party.

In the event of such termination, ProKidney-KY will be obligated to pay Nefro any earned but unpaid consulting fee as of the termination date.

Consulting Services Agreement between ProKidney-US and Nefro Health

On January 1, 2020, ProKidney-US (formerly known as Twin City Bio, LLC) entered into a consulting services agreement with Nefro, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of the Company’s product candidates as well as pre-commercialization activities, which are primarily performed by Mr.

Pablo Legorreta.

Under the agreement, Nefro receives $ 25,000 per quarter and is reimbursed for any out-of-pocket expenses incurred in connection with activities Nefro conducted under the agreement.

ProKidney-US has paid Nefro an aggregate of $ 100,000 for each of the years ended December 31, 2022, 2021 and 2020 .

Additionally, either of the parties may terminate the consulting services agreement for any reason upon giving thirty (30) days’

advance notice of such termination to the other party.

In the event of such termination, ProKidney-US will be obligated to pay Nefro any earned but unpaid consulting fee as of the termination date.

Redeemable Noncontrolling Interest

The Company is subject to the Exchange Agreement with respect to the Post-Combination ProKidney Common Units representing the outstanding 73.6 % noncontrolling interest in PKLP (see Note 1).

The Exchange Agreement requires the surrender of an equal number of Post-Combination ProKidney Common Units and Class B ordinary shares for (i) Class A ordinary shares on a one-for-one basis or (ii) cash (based on the fair market value of the Class A ordinary shares as determined pursuant to the Exchange Agreement), at the Company’s option (as the managing member of PKLP), subject to customary conversion rate adjustments for share splits, share dividends and reclassifications.

The exchange value is determined based on a five-day VWAP of the Class A ordinary shares as defined in the Exchange Agreement, subject to customary conversion rate adjustments for share splits, share dividends and reclassifications.

The redeemable noncontrolling interest is recognized at the higher of (1) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (2) the redemption value as of the balance sheet date.

At December 31, 2022 , the redeemable noncontrolling interest was recorded based on its initial fair value plus accumulated losses associated with the noncontrolling interest as this amount was higher than the redemption value as of the balance sheet date which was approximately $ 1,116,011,000 .

Changes in the Company’s ownership interest in PKLP while the Company retains its controlling interest in PKLP are accounted for as equity transactions, and the Company is required to adjust noncontrolling interest and equity for such changes.

The following is a summary of net income attributable to the Company and transfers to noncontrolling interest:

For the Period from July 11, 2022 through December 31, 2022

Net loss available to Class A ordinary shareholders

(Increase)/Decrease in ProKidney Corp.

accumulated deficit for impact of

subsidiary equity-based compensation

(Increase)/Decrease in ProKidney Corp.

additional paid-in capital for vesting of

Restricted Common Units in ProKidney LP

Change from net loss available to Class A ordinary shareholders and change

in ownership interest in ProKidney LP

Shareholders’

In conjunction with the Business Combination, 186,500,000 Class A Units and 27,100,937 Class B and B-1 Units of PKLP were converted into an aggregate of 170,723,961 Class B ordinary shares of the Company and 9,276,039 Restricted Stock Rights in the Company (the “Restricted Stock Rights”).

Subsequent to the Business Combination, the Company’s authorized share capital consists of 1,005,000,000 shares including (i) 500,000,000 Class A ordinary shares, par value $ 0.0001 per share, (ii) 500,000,000 Class B ordinary shares, par value $ 0.0001 per share and (iii) 5,000,000 preference shares, par value $ 0.0001 per share.

Rights of Class A Ordinary Shares

Each holder of Class A ordinary shares is entitled to one vote for each Class A ordinary share held of record by such holder on all matters on which shareholders generally are entitled to vote.

Subject to preferences that may be applicable to any outstanding preference shares, the holders of Class A ordinary shares are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available therefor.

All dividends are subject to certain restrictions under Cayman Islands law, namely that we may only pay dividends out of profits or share premium account, and provided always that, in no circumstances may a dividend be paid if this would result in us being unable to pay our debts as they fall due in the ordinary course of business.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of the Company’s Class A ordinary shares are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preference shares or any class or series of shares having a preference over the Company’s Class A ordinary shares, then outstanding, if any.

Rights of Class B Ordinary Shares

Each holder of the Company’s Class B ordinary shares is entitled to one vote for each Class B ordinary share held of record by such holder on all matters on which shareholders generally are entitled to vote.

The holders of the Company’s Class B ordinary shares will not participate in any dividends declared by our board of directors.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our Class B ordinary shares are entitled to a ratable amount equal to the capital paid up on such Class B ordinary shares of all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preference shares or any class or series of shares having a preference over the Company’s Class B ordinary shares, then outstanding, if any.

The Company’s Class B ordinary shares shall not carry any other right to participate in our profits or assets.

Earnout Rights

At the closing of the Business Combination, certain shareholders were issued an aggregate of 17,500,000 Earnout Rights.

The Earnout Rights vest in three equal tranches if, during the five-year period after Closing, the VWAP of a Class A ordinary share reaches $ 15.00 per share, $ 20.00 per share and $ 25.00 per share.

Likewise, the Earnout Rights will vest upon a change of control with a per share price exceeding those same VWAP thresholds within a five-year period immediately following the Closing.

Upon vesting, the Earnout Rights will automatically convert into Post-Combination ProKidney Common Units and Class B ordinary shares.

The issuance of the Earnout Rights was accounted for as an equity transaction.

Since the Earnout Rights were issued to Closing ProKidney Unitholders (i.e., the accounting acquirer in the business combination), the accounting for the Earnout Rights arrangement does not fall under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations nor Topic 718, Stock Compensation.

The accounting for the Earnout Rights was also evaluated under ASC Topic 480, Distinguishing Liabilities from Equity, to determine if the arrangement should be classified as a liability.

Based on that analysis, it was determined that the Earnout Rights did not meet the criteria to be accounted for as a liability.

Additionally, the Earnout Rights were evaluated under ASC Topic 815, Derivatives.

As part of that analysis, it was determined that the Earnout Rights met the definition of a derivative;

however, they meet the scope exception criteria as they were clearly and closely related to the entity’s own stock, and met the criteria for equity treatment.

Net Loss per Share

Basic net loss per share is calculated by dividing net loss attributable to Class A ordinary shareholders by the weighted-average shares of Class A ordinary shares outstanding without the consideration for potential dilutive securities.

Diluted net loss per share represents basic net loss per share adjusted to include the effects of all potentially dilutive shares.

Diluted net loss per share is the same as basic loss per share for all periods as the inclusion of potentially issuable shares would be antidilutive.

The Company analyzed the calculation of net loss per share for periods prior to the Business Combination on July 11, 2022 and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements, as the capital structure completely changed as a result of the Business Combination.

Therefore, net loss per share information has not been presented for periods prior to the Business Combination.

The basic and diluted net loss per share attributable to Class A ordinary shareholders for the year ended December 31, 2022, as presented on the consolidated statements of operations, represents only the period after the Business Combination to December 31, 2022.

The following table sets forth the computation of basic and diluted net loss per share for the period from July 11, 2022 through December 31, 2022 (in thousands, except share and per share amounts):

Net loss for the period from July 11, 2022 through December 31, 2022

Net loss attributable to noncontrolling interests for the period from

July 11, 2022 through December 31, 2022

Net loss available to Class A ordinary shareholders of ProKidney Corp.

period from July 11, 2022 through December 31, 2022, basic and diluted

Weighted average Class A ordinary shares or ProKidney Corp.

basic and diluted

Net loss per Class A Unit

Net loss per Class A ordinary share of ProKidney Corp., basic and diluted

Antidilutive securities

ProKidney Corp.

Class B ordinary shares

Unvested Restricted Stock Rights

Earnout Rights

Legacy SCS Restricted Share Units

Stock options granted under the 2022 Equity Incentive Plan

Equity Based Compensation

2022 Incentive Equity Plan

On July 11, 2022, the shareholders of the Company approved the ProKidney Corp.

2022 Incentive Equity Plan (the “2022 Plan”) which provides for the issuance of equity based awards to the Company’s employees, non-employee directors, individual consultants, advisors and other service providers.

Upon adoption of the plan, there were 24,154,023 Class A Ordinary Shares reserved for issuance.

The 2022 Plan provides for the issuance of equity awards in the form of incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock options, which are not intended to meet those requirements, stock appreciation rights, restricted stock, restricted stock units, performance awards or other

cash or stock-based awards as determined appropriate by the plan administrator.

In settlement of its obligations under this plan, the Company will issue new Class A ordinary shares.

The Company has issued incentive and non-qualified stock option awards under the 2022 Plan to certain employees and non-employee directors of the Company.

Given that the Company has established a full valuation allowance against its deferred tax assets, the Company has recognized no tax benefit related to these awards.

Time-Vested Awards

The Company uses the Black-Scholes option pricing model to calculate the fair value of time-vested stock options granted.

These awards generally vest ratably over a three or four-year period and the option awards expire after a term of ten years from the date of grant.

The fair value of stock options granted was estimated using the following assumptions during the year ended December 31, 2022:

Expected volatility

82.0 % - 85.0 %

Expected life of options, in years

Risk-free interest rate

3.7 % - 4.4 %

Expected dividend yield

The following table summarizes the activity related to the Company’s time-vested stock option awards granted under the 2022 Plan for the year ended December 31, 2022:

Number of Shares

Weighted Average Exercise Price

Time-vested options outstanding at January 1, 2022

Time-vested options outstanding at December 31, 2022

Time-vested options exercisable at December 31, 2022

Weighted average remaining contractual life

Time-vested options vested and expected to vest at December 31, 2022

Weighted average remaining contractual life

For the year ended December 31, 2022 , the Company recognized $ 2,309,000 of compensation expense related to time-vested awards under the 2022 Plan.

As of December 31, 2022 , the Company had total unrecognized stock-based compensation expense of approximately $ 41,551,000 related to the time-vested grants under the 2022 Plan, which is expected to be recognized on a straight-line basis over a weighted average period of 3.8 years.

The weighted average grant date fair value for the option grants during the year ended December 31, 2022 was $ 7.48 .

The aggregate intrinsic value of the in-the-money time-vested awards outstanding as well as those exercisable as of December 31, 2022 , was $ 0 .

Subsequent to December 31, 2022, the Company has issued 5,329,700 stock option awards to certain of its employees under the 2022 Equity Incentive Plan.

These awards either vest on a monthly basis over a four year period or with 25 % vesting upon the first anniversary of the employee’s hire date and on a monthly basis for the three years thereafter.

Market-Vested Awards

During the year ended December 31, 2022, the Company also granted to its Chief Executive Officer 3,639,607 options with an exercise price of $ 10.33 .

This grant contains both time and market based vesting conditions.

The market conditions become satisfied in equal one-third tranches upon the Company's Class A ordinary shares exceeding a volume weighted average price hurdle of $ 15.00 , $ 20.00 and $ 25.00 , respectively, for 20 trading days within any 30 consecutive trading day period occurring prior to July 11, 2027.

Once the market condition for a tranche is satisfied, such tranche will continue to be subject to time-vesting conditions and will vest ratably on each of the first, second and third anniversaries of the date that such tranche satisfied the performance vesting condition described above.

Due to the market condition included in this grant, the Company used the Geometric Brownian Motion/Monte Carlo model to value these awards.

The model used the following inputs:

Expected volatility

Suboptimal exercise multiple

Risk-free interest rate

Expected dividend yield

For the year ended December 31, 2022 , the Company recognized $ 2,242,000 of compensation expense related to market-vested awards under the 2022 Plan.

As of December 31, 2022 , the Company had total unrecognized stock-based compensation expense of approximately $ 25,957,000 related to the market-vested awards outstanding under the 2022 Plan.

The weighted average grant date fair value for the option grants during the year ended December 31, 2022 was $ 7.75 .

The aggregate intrinsic value of the in-the-money market based awards outstanding as well as those exercisable as of December 31, 2022 , was $ 0 .

Legacy Profits Interests

The Deed for the Establishment of a Limited Partnership of ProKidney LP, dated as of August 5, 2021 (the “Limited Partnership Agreement”) which replaced the Amended and Restated Limited Liability Company Agreement of ProKidney LLC as the governing document of the parent entity in the Company, allowed for the issuance of Profits Interests (as defined in the Limited Partnership Agreement) to employees, directors, other service providers of the Company and others denominated in the form of one or more Class B Units of PKLP (as defined in the Limited Partnership Agreement).

Under the Limited Partnership Agreement, ProKidney GP Limited, the former general partner of PKLP (“Legacy GP”), determined the terms and conditions of the Profits Interests issued.

The threshold value assigned to each grant was not to be less than the fair market value of PKLP on the date of grant.

Profits Interests awards would vest at a rate of 25% on the latter of the first anniversary of employment and the first anniversary of the Acquisition Date with the remaining 75% to vest in increments of 25% on each anniversary following the first anniversary date, ratably over a three or four-year period from the date of grant, in annual installments of 33.3% over the three-year period from the date of grant, in increments of 6.25% each calendar quarter following the first anniversary date, or were fully vested upon issuance.

On January 17, 2022, PKLP amended and restated its Limited Partnership Agreement (the “Amended and Restated Limited Partnership Agreement”) which provided that certain qualified distribution events would result in holders of Profits Interests receiving disproportionate distributions from PKLP until each such holder’s valuation threshold had been reduced to zero in order to “catch up”

such holder’s distributions to its pro rata share of aggregate cumulative distributions, and once sufficient distributions to a holder of Profits Interests had been made in accordance with the foregoing, the associated Class B Units of PKLP would automatically be converted into Class A Units of PKLP.

Upon consummation of the Business Combination discussed in Note 1, PKLP’s existing Class B and B-1 Units were “caught up”

and were converted into Class A Units of PKLP.

The resulting vested and unvested Class A Units of PKLP were then recapitalized into Post-Combination ProKidney Common Units or Restricted Common Units of the Company, respectively.

This recapitalization resulted in a decrease in the number of awards held by each participant.

As such, the number of Profits Interests and related per unit values within these financial statements have been adjusted to reflect this recapitalization.

Upon recapitalization, the Restricted Common Units maintained the vesting schedules associated with the original Profits Interest awards.

The following table summarizes the activity related to the Company’s Profits Interest awards for the year ended December 31, 2022:

Number of Shares

Weighted Average Grant Date Fair Value

Unvested awards outstanding at January 1, 2022

Awards outstanding at December 31, 2022

As of December 31, 2022 , the unrecognized compensation expense related to these awards was $ 45,243,000 .

The current weighted average remaining period over which the unrecognized compensation expense is expected to be recognized is 3.0 years.

The weighted average grant date fair value of the Profits Interests granted during the year ended December 31, 2022 , was $ 7.43 per Class B-1 unit, as adjusted for the effects of the recapitalization.

There were no Profits Interests granted during the year ended December 31, 2021.

The aggregate intrinsic value of the unvested profits interests outstanding at December 31, 2022 was $ 57,417,000 .

Modification to Profits Interest Awards

On January 17, 2022, the Limited Partnership Agreement was amended and restated to provide that certain qualified distribution events would result in the holders of Profits Interests receiving disproportionate distributions from PKLP until each such holder’s threshold value was reduced to zero in order to “catch up”

such holder’s distributions to its pro rata share of aggregate cumulative distributions, and once sufficient distributions to a holder of Profits Interests had been made in accordance with the foregoing, the associated Class B Units would automatically be converted into Class A Units.

This amendment constituted a modification to the Class B-1 Units in PKLP outstanding as of the date of the modification under the provisions of ASC Topic 718.

In connection with the modification of its outstanding share-based compensation awards, the Company will recognize total additional compensation expense of $ 5,437,000 related to awards granted to its employees.

The portion of this additional compensation expense attributable to vested awards of $ 3,715,000 was recognized immediately upon modification during the year ended December 31, 2022.

Issuance of Profits Interests to Service Provider

During the year ended December 31, 2022 , the Company issued 2,253,033 fully vested Class B-1 Units in PKLP to a third-party service provider as payment for research and development services provided in prior periods.

The Company had previously recognized expense of $ 2,502,000 for these services based on the liability related to the services incurred.

As the fair value of shares issued to satisfy that obligation was higher than the amount previously expensed, the Company recognized additional research and development expense of $ 14,080,000 during the year ended December 31, 2022 .

Purchase of Class B-1 Units in PKLP

As discussed further in Note 6, certain of the Company’s employees, board members and service providers purchased 6,648,353 of Class B-1 Units in PKLP for total cash proceeds of $ 6,050,000 , respectively, during the year ended December 31, 2022 .

Since these Class B-1 Units in PKLP were fully vested upon purchase and contained no service requirements, the Company immediately recognized the difference between the purchase price and the estimated fair value for these Class B-1 Units in PKLP of $ 34,254,000 as equity-based compensation expense during the year ended December 31, 2022, respectively.

No such sales occurred during the year ended December 31, 2021.

Fair Value Estimate for Profits Interest

Prior to the Business Combination, PKLP was privately held with no active public market for its equity instruments.

Therefore, for financial reporting purposes, management determined the estimated per share fair value of PKLP’s equity shares (including Profits Interests) using contemporaneous valuations.

These contemporaneous valuations were done using methodologies consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , also known as the Practice Aid.

For the Profits Interest Awards granted during the year ended December 31, 2022, the valuation approach utilized a hybrid method which consists of a combination of an Option Pricing Method (“OPM”) and a Probability Weighted Expected Return Method (”PWERM”) approach.

Weighting allocations were assigned to the OPM and PWERM methods based upon the expected likelihood of possible future liquidity events, including the Business Combination.

Under the OPM approach, the fair value of the total equity of PKLP within each scenario was first estimated using a back-solve method wherein the equity value is derived from a recent transaction in PKLP’s own securities, and then the total equity value is allocated to the various components of the capital structure, including the Profits Interests, using an OPM or a waterfall approach based on the specific rights of each of the equity classes.

The OPM used the fair value of the total equity of PKLP within a scenario as a starting point and incorporates assumptions made regarding the expected returns and volatilities that are consistent with the expectations of market participants, and distribution of equity values is produced which cover the range of events that an informed market participant might expect.

This process creates a range of equity values both between and within scenarios.

The fair value measurement is sensitive to changes in the unobservable inputs.

Changes in those inputs might result in a higher or lower fair value measurement.

The PWERM approach is a scenario-based analysis that estimates the value per share of ordinary shares based on the probability-weighted present value of expected future equity values for the ordinary shares, under various possible future liquidity event scenarios, including the proposed Business Combination, in light of the rights and preferences of each class and series of stock, including the Profits Interests, discounted for a lack of marketability.

In performing these valuations, management considered all objective and subjective factors that they believed to be relevant, including management’s best estimate of PKLP’s business condition, prospects, and operating performance at each valuation date.

Within the valuations performed, a range of factors, assumptions, and methodologies were used.

The significant factors included trends within the industry, the prices at which PKLP sold its Class A Units, the rights and preferences of the Class A Units relative to the Class B Units at the time of each measurement date, the results of operations, financial position, status of research and development efforts, stage of development and business strategy, the lack of an active public market for the units, and the likelihood of achieving an exit event in light of prevailing market conditions.

The following reflects the key assumptions used in each of the valuation scenarios:

Total equity value (in thousands)

$ 234,551 - $ 280,400

Expected volatility of total equity

Discount for lack of market

Expected time to exit event

3.4 years - 3.7 years

0.1 years - 0.5 years

Legacy SCS Awards

In 2021, SCS had agreed to grant 50,000 restricted stock units (“RSUs”) to certain of its board members and other advisors which were contingent upon the consummation of a Business Combination and a shareholder approved equity plan.

The RSUs were to vest upon the consummation of such Business Combination and represent 50,000 Class A ordinary shares of the Company that will settle on a date determined in the sole discretion of the Company that shall occur between the vesting date and March 15th of the year following the year in which vesting occurs.

The RSUs granted by the Company are in the scope of ASC 718.

Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date.

The RSUs granted were subject to a performance condition (i.e., the occurrence of a Business Combination).

Compensation expense related to the RSUs is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance.

Upon Closing, the performance conditions for these awards were met as both a Business Combination had occurred and the shareholders approved a qualifying equity plan.

As such, the entire amount of share-based compensation expense related to these awards of $ 396,000 was recognized during the year ended December 31, 2022.

The weighted average grant date fair value per share of these RSUs was $ 7.92 .

Compensation Expense

Compensation expense related to share-based awards is included in research and development and general and administrative expense as follows (in thousands):

Years Ended December 31,

Research and development

General and administrative

Total equity-based compensation expense

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