What changed in this filing

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Item 9A. Controls and Procedures

2024-03-22 compared with 2023-03-28 · 277 added, 251 removed, 668 unchanged (44% of the section changed)

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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.

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Based on this assessment, management determined that as of December 31, 2023, we maintained effective internal control over financial reporting.

Changes to Internal Control over Financial Reporting

Changes in 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.

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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.

The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Management and Corporate Governance,” “Delinquent Section 16(a) Reports,” and “Code of Ethics and Business Conduct” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, 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

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.

Maraganore, Ph.D.

Ignacio Jimenez Santos

Executive Compensation.

The information required by this item is incorporated by reference from the discussion responsive thereto under the heading “Executive Officer and Director Compensation” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, 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.

The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference from the discussion responsive thereto under the headings “Certain Relationships and Related Party Transactions” and “Management and Corporate Governance” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A.

Principal Accounting Fees and Services.

The information required by this item is incorporated by reference from the discussion responsive thereto under the heading “Ratification of Selection of Independent Registered Public Accounting Firm” in our Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

If the Proxy Statement is not filed within 120 days after the end of our fiscal year ended December 31, 2023, the information required by this item will be contained in the Form 10-K/A.

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Consolidated Balance Sheets as of December 31, 2023 and 2022

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 Operations for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit / Members’ Equity for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Cash Flows for the Years ended December 31, 2023, 2022, and 2021

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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.

Second Amended and Restated Limited Partnership Agreement for a Limited Partnership Called ProKidney LP, dated as of July 11, 2022, as amended as of November 14, 2023, by and among Tolerantia, LLC, Control Empresarial de Capitales, S.A.

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

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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.

GP Limited and ProKidney GP Limited.

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

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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.

Employment Agreement, dated as of December 3, 2022 by and between James Coulston and ProKidney, LLC (incorporated by reference from Exhibit 10.14 to Form 10-K filed with the SEC on March 28, 2023) (File No.

Form of Director Stock Option Award (incorporated by reference from Exhibit 10.17 to Form 10-K filed with the SEC on March 28, 2023) (File No.

Form of Employee Incentive Stock Option Award (incorporated by reference from Exhibit 10.18 to Form 10-K filed with the SEC on March 28, 2023) (File No.

ProKidney Corp.

2022 Director Compensation Policy

2022 Director Compensation Policy (incorporated by reference from Exhibit 10.20 to Form 10-K filed with the SEC on March 28, 2023) (File No.

ProKidney Short Term Incentive Performance Plan (incorporated by reference from Exhibit 10.1 to Form 8-K filed with the SEC on January 19, 2023) (File No.

Employment Agreement, dated December 3, 2023, by and between ProKidney, LLC and Bruce Culleton.

(incorporated by reference from Exhibit 10.1 to Form 8-K/A filed with the SEC on December 5, 2023) (File No.

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.

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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.

(d/b/a inRegen)) and Nefro Health (incorporated by reference from Exhibit 10.30 to Form 10-K filed with the SEC on March 28, 2023) (File No.

Consulting Services Agreement, dated as of January 1, 2020 between ProKidney, LLC (formerly known as Twin City Bio LLC) and Nefro Health (incorporated by reference from Exhibit 10.31 to Form 10-K filed with the SEC on March 28, 2023) (File No.

Purchase Agreement, as amended, dated March 29, 2023, by and among ProKidney Corp.

and 73 BCI 2 LLC.

(incorporated by reference from Exhibit 10.1 to Form 10-Q filed with the SEC on August 10, 2023) (File No.

Assignment and Assumption of Purchase and Sale Agreement, dated July 17, 2023, by and among ProKidney Corp.

and ProKidney Acquisition Company, LLC.

(incorporated by reference from Exhibit 10.2 to Form 10-Q filed with the SEC on August 10, 2023) (File No.

Open Market Sale Agreement SM, dated January 19, 2024, by and between ProKidney Corp.

and Jefferies LLC (incorporated by reference from Exhibit 1.1 to Form 8-K filed with the SEC on January 19, 2024) (File No.

Subsidiaries of the Registrant

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

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.

ProKidney Corp.

Clawback Policy

The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2023, formatted in Inline XBRL.

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March 21, 2024

/s/ Tim Bertram, Ph.D.

Tim Bertram, Ph.D.

/s/ Bruce Culleton

Bruce Culleton

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.

/s/ Bruce Culleton

Chief Executive Officer and Director

March 21, 2024

Tim Bertram, Ph.D.

Bruce Culleton

(Principal Executive Officer)

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March 21, 2024

/s/ José

Ignacio Jimenez Santos

/s/ José Ignacio Jimenez Santos

March 21, 2024

Ignacio Jimenez Santos

José Ignacio Jimenez Santos

March 21, 2024

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Consolidated Balance Sheets as of December 31, 2023 and 2022

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 Operations for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit / Members’ Equity for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021

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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.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in redeemable noncontrolling interest and shareholders’ deficit / members’ equity and cash flows for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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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.

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/s/ Ernst & Young LLP

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

Raleigh, North Carolina

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Cash and cash equivalents

Marketable securities

Interest receivable

Prepaid assets

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Accrued expenses and other

Income taxes payable

Total current liabilities

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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)

Shareholders’ deficit / members' equity:

Class A ordinary shares, $ 0.0001 par value;

500,000,000 shares

61,540,231 issued and outstanding as of December

59,880,347 and 61,540,231 issued and outstanding as

of December 31, 2023 and December 31, 2022, respectively

Class B ordinary shares, $ 0.0001 par value;

500,000,000 shares

171,578,320 issued and outstanding as of December

168,297,916 and 171,578,320 issued and outstanding as

of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total shareholders' deficit / members’

Total shareholders' deficit / members’ equity

Total liabilities and shareholders' deficit/members' equity

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ProKidney Corp.

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations

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

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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

Income tax expense

Net loss before noncontrolling interest

Net loss attributable to noncontrolling interest

Net loss available to Class A ordinary shareholders

Weighted average Class A ordinary shares outstanding:

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ProKidney Corp.

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’

Deficit / Members’

Consolidated Statements of Comprehensive Loss

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

Years Ended December 31,

Net loss including noncontrolling interest

Other comprehensive income:

Unrealized gain on marketable securities

Other comprehensive income

Total comprehensive loss including noncontrolling interest

Total comprehensive loss attributable to noncontrolling interest

Total comprehensive loss attributable to Class A ordinary shareholders

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’ Equity

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

For the Years Ended December 31, 2023

Class A Units

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Additional Paid-in Capital

Accumulated Other Comprehensive Loss

Accumulated Deficit

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Capital contribution

Equity-based compensation

Balance as of December 31, 2021

Capital contribution

Equity-based compensation / payments prior to Business Combination

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Balance as of December 31, 2022

Equity-based compensation

Issuance of Class A ordinary shares

Vesting of Class B restricted stock rights

Exchange of Class B ordinary shares for Class A ordinary shares

Repurchase of Class A ordinary shares

Impact of equity transactions on redeemable noncontrolling interest

Unrealized loss on marketable securities

Change in redemption value of noncontrolling interest

Balance as of December 31, 2023

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

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Equity-based compensation

Gain on marketable securities, net

Loss on disposal of equipment

Changes in operating assets and liabilities

Interest receivable

Prepaid and other assets

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Net cash from SCS

Purchases of marketable securities

Sales of marketable securities

Purchase of equipment and facility expansion

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Borrowings under related party notes payable

Repurchase of Class A ordinary shares

Repayment of related party notes payable

Net cash contribution

Net cash flows provided by financing activities

Net cash flows (used in) provided by financing activities

Net change in cash and cash equivalents

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

Supplemental disclosure of non-cash investing activities:

Supplemental disclosure of non-cash investing and financing activities:

Right of use assets obtained in exchange for lease obligations

Exchange of Class B ordinary shares

Impact of equity transactions and compensation on redeemable noncontrolling interest

Change in redemption value of noncontrolling interest

Equipment and facility expansion included in accounts payable and

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ProKidney Corp.

(the “Company”

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

III (“SCS”).

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

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.

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”).

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.

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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.

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 (rilparencel), 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).

ProKidney Corp.

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 therefore consolidated PKLP’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation” in its Consolidated Financial Statements.

As of December 31, 2023 , various holders own non-voting interests in PKLP, representing a 73.8 % economic interest in PKLP, effectively restricting ProKidney’s interest to 26.2 % 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 6).

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.

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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.

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

Significant Accounting Policies

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

Cash and Cash Equivalents

Cash Equivalents and Marketable Securities

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.

The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale.

The Company classifies its marketable debt securities as short-term due to its availability for use in its current operations.

The cost of securities sold is determined using the specific identification method.

The Company considers all available evidence to evaluate if a credit loss exists, and if so, recognizes an allowance for credit loss.

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

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Clinical study related costs

Facility related costs

Accrued legal costs

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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.

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.

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The estimated useful lives are as follows:

25 - 30 years

Computer equipment and software

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December 31, 2022

Leasehold improvements

Furniture and equipment

Computer equipment and software

Leasehold improvements

Construction in progress

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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, 2023

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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 $ 213,000 , $ 215,000 and $ 214,000 for the years ended December 31, 2023, 2022 and 2021 , respectively.

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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.

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, 2023, 2022 and 2021 .

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.

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.

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Accordingly, the Company has provided a full valuation allowance to offset the net deferred tax assets at December 31, 2023 and December 31, 2022.

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.

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

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

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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.

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

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.

• 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

For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy.

Fair value measurements for assets and liabilities where there exists limited or no observable market data are based primarily upon estimates and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors.

Therefore, fair value measurements cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fair values.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

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.

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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.

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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”);

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

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

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

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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.

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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.

Due to the lack of sufficient historical trading information with respect to its own shares, the Company estimates expected volatility based on the historical volatility of 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.

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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 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 $ 503,000 , $ 267,000 and $ 169,000 for the years ended December 31, 2023, 2022 and 2021 , 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.

Cash equivalents and marketable securities are measured at fair value and within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.

The following tables summarize our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2023 (in thousands):

Fair Value Hierarchy

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash Equivalents

Marketable Securities

Money market funds

Time deposits

Commercial paper

Government bonds

Corporate debt securities

The following table shows the fair value of the Company’s cash equivalents and marketable securities, by contractual maturity, as of December 31, 2023 (in thousands):

December 31, 2023

Due in 1 year or less

Due in 1 year through 5 years

The following table shows fair values and gross unrealized losses recorded to accumulated other comprehensive loss, aggregated by category and the length of time that individual securities have been in a continuous loss position as of December 31, 2023 (in thousands):

Less than 12 months

12 Months or Greater

Unrealized Loss

Time deposits

Commercial paper

Government bonds

Corporate debt securities

The Company holds debt securities of companies with high credit quality and has determined that there was no material change in the credit risk of its debt securities during the year ended December 31, 2023 .

As such, the Company has no t recognized an allowance for credit losses related to marketable debt securities during the years ended December 31, 2023, 2022 and 2021 .

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.

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

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

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December 31, 2021

Total current income tax expense (benefit)

Total current income tax expense

Total deferred income tax expense (benefit)

Income tax expense (benefit)

Income tax expense

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

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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, 2023

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Research and experimental costs capitalized

Net operating loss carryforwards

Start-up costs

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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.

As discussed in Note 6, 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.

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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.

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, 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 $ 12,888,000 and $ 3,332,000 , respectively for December 31, 2023 and 2022, to offset the net deferred tax assets.

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

The Company has net operating loss carryforwards of $ 1,278,000 that for federal purposes have an indefinite life and for state income tax purposes begin to expire in 2038.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2023 and 2022 consisted of the following (in thousands):

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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 2020 through 2023 remain subject to examination by federal and state authorities.

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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.

The Company also has finance leases for certain equipment which are not considered material.

For the years ended December 31, 2023, 2022 and 2021, the Company’s operating lease cost was $ 1,062,000 , $ 551,000 , and $ 434,000 , respectively.

During the year ended December 31, 2023 , cash paid for operating leases was $ 774,000 .

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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):

Maturities of lease liabilities for the Company’s operating and finance leases are as follows as of December 31, 2023 (in thousands):

Operating Leases

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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.

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.

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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.

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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.

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.

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, 2023, 2022 and 2021.

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.

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.

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.

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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.

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.

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The Company is subject to the Exchange Agreement with respect to the Post-Combination ProKidney Common Units representing the outstanding 73.8 % 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.

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At December 31, 2023 , 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 $ 336,145,000 .

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 Year Ended

December 31, 2023

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

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(Increase)/Decrease in ProKidney Corp.

additional paid-in capital for exchange

of Common Units in ProKidney LP for Class A ordinary shares

(Increase)/Decrease in ProKidney Corp.

additional paid-in capital for vesting of

2 unchanged sentences

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.

Shareholders’ Equity

Rights of Class A Ordinary Shares

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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.

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

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

Earnout Rights

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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.

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.

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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

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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

The following table sets forth the computation of basic and diluted net loss per share for the year ended December 31, 2023 and the period from July 11, 2022 through December 31, 2022 (in thousands, except share and per share amounts):

Year Ended December 31,

Period from July 11, 2022 through December 31,

Net loss attributable to noncontrolling interests

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

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

basic and diluted

Weighted average Class A ordinary shares or ProKidney Corp.

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

As of December 31,

Antidilutive securities

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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.

As of December 31, 2023, there were 35,809,951 Class A Ordinary Shares reserved for issuance.

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

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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:

The fair value of stock options granted was estimated using the following assumptions during the years ended December 31, 2023 and 2022:

Years Ended December 31,

Expected volatility

81.5 % - 84.0 %

82.0 % - 85.0 %

Expected life of options, in years

1 unchanged sentence

3.5 % - 4.7 %

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:

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, 2023:

Number of Shares

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The weighted average grant date fair value for the option grants during the year ended December 31, 2023 was $ 5.14 .

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.

The aggregate intrinsic value of the in-the-money time-vested awards outstanding as of December 31, 2023 was $ 640,000 .

The aggregate intrinsic value of the in-the-money time-vested awards exercisable as of December 31, 2023 was a de minimis amount.

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 .

During the year ended December 31, 2022, the Company also granted to its prior 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.

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.

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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.

Upon the termination of employment of the prior Chief Executive Officer in 2023, the compensation cost that had previously been recognized related to these awards was reversed.

This resulted in the reversal of approximately $ 2,172,000 of total cost during the year ended December 31, 2023.

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 .

No such awards were granted during the year ended December 31, 2023.

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.

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.

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.

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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:

The following table summarizes the activity related to the Company’s Profits Interest awards for the year ended December 31, 2023:

Number of Shares

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Unvested awards outstanding at January 1, 2023

Awards outstanding at December 31, 2022

Unvested awards outstanding at December 31, 2023

As of December 31, 2023 , the unrecognized compensation expense related to these awards was $ 32,193,000 .

The current weighted average remaining period over which the unrecognized compensation expense is expected to be recognized is 1.9 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.

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, 2023.

The aggregate intrinsic value of the unvested profits interests outstanding at December 31, 2023 was $ 6,347,000 .

The aggregate intrinsic value of profits interests vested during December 31, 2023 was $ 20,749,000 .

The aggregate intrinsic value of profits interests vested during the period from July 11, 2022 and December 31, 2022 was $ 6,984,000 .

Modification to Profits Interest Awards

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.

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.

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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.

During the year ended December 31, 2023, the Company also modified the vesting terms of outstanding time-based stock options issued to certain personnel upon their separation.

This amendment constituted a modification of the awards under the provisions of ASC Topic 718 and resulted in the recognition of an additional $ 3,011,000 of compensation expense during the year ended December 31, 2023.

Issuance of Profits Interests to Service Provider

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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.

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.

No such sales occurred during the years ended December 31, 2023 or 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.

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.

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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.

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Total equity-based compensation expense

Subsequent Events

In January 2024, the Company entered into an Open Market Sale Agreement SM (“Sales Agreement”) with Jefferies LLC as the sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its Class A ordinary shares, par value $ 0.0001 per share, having an aggregate offering price of up to $ 100.0 million by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act (the “ATM Offering”).

The shares are offered and sold pursuant to the Company’s shelf registration statement on Form S-3.

In February 2024, the Company issued 1,740,983 Class A ordinary shares in exchange for 1,740,983 Class B ordinary shares and an equal number of Post-Combination ProKidney Common Units.

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