ROCKET PHARMACEUTICALS, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties such as our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Annual Report. Unless otherwise indicated, references to the terms the “combined company,” “Rocket,” the “Company,” “we,” “our” and “us” refer to Rocket Pharmaceuticals, Inc. (formerly known as Inotek Pharmaceuticals Corporation) and its subsidiaries. The term “Rocket Ltd” refers to privately-held Rocket Pharmaceuticals, Ltd. prior to its merger with Rome Merger Sub, a wholly owned subsidiary of Rocket Pharmaceuticals, Inc. The term “Inotek” refers to Inotek Pharmaceuticals Corporation and its subsidiaries prior to the reverse merger. For accounting purposes, the reverse merger is treated as a “reverse acquisition” under U.S. GAAP and Rocket Ltd is considered the accounting acquirer. Accordingly, the historical financial information included in this Annual Report, unless otherwise indicated or as the context otherwise requires, is that of Rocket Ltd prior to the reverse merger. 64 Table of Contents Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Rocket’s financial statements with a narrative from the perspective of management. Our management’s discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. Introduction We are a clinical-stage, multi-platform biotechnology company focused on the development of first, only and best-in-class gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. We have three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I ” ), a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in potentially registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., we have a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. We have global commercialization and development rights to all of these product candidates under royalty-bearing license agreements. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. Recent Developments On April 26, 2021, we redeemed in full our 2022 Convertible Notes prior to the redemption date. Holders of approximately $38.4 million remaining principal amount of the 2022 Convertible Notes converted such notes into approximately 1.3 million shares of the Company’s common stock and cash in lieu of fractional shares. As of December 31, 2021, there were no 2022 Convertible Notes outstanding. On August 2, 2021, holders of the 2021 Convertible Notes converted the $5.15 million remaining balance of the 2021 Convertible Notes into 160,614 shares of common stock. As of December 31, 2021, there were no 2021 Convertible Notes outstanding. On August 27, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, our largest shareholder (the “Purchaser”), pursuant to which we agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of our common stock at a purchase price of $32.48 per share for aggregate net proceeds of approximately $26.4 million after deducting estimated offering expenses payable. The Private Placement closed on August 31, 2021. Financial Overview Since our inception, we have devoted substantially all of our resources to organizing and staffing the company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights, conducting discovery, R&D activities for our product candidates and planning for potential commercialization. We do not have any products approved for sale and have not generated any revenue from product sales. From inception through December 31, 2021, we raised net cash proceeds of approximately $680.5 million from investors through both equity and convertible debt financing to fund operating activities. Revenue To date, we have not generated any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the near future. If our development efforts for product candidates are successful and result in regulatory approval or license agreements with third parties, we may generate revenue in the future from product sales. Research and Development Expenses Our R&D program expenses consist primarily of external costs incurred for the development of our product candidates. These expenses include: • expenses incurred under agreements with research institutions that conduct R&D activities including, process development, preclinical, and clinical activities on our behalf; • costs related to process development, production of preclinical and clinical materials, including fees paid to contract manufacturers and manufacturing input costs for use in internal manufacturing processes; • consultants supporting process development and regulatory activities; • patent fees; and • costs related to in-licensing of rights to develop and commercialize our product candidate portfolio. 65 Table of Contents We recognize external development costs based on contractual payment schedules aligned with program activities, invoices for work incurred, and milestones which correspond with costs incurred by the third parties. Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses. Our direct R&D expenses are tracked on a program-by-program basis for product candidates and consist primarily of external costs, such as research collaborations and third-party manufacturing agreements associated with our preclinical research, process development, manufacturing, and clinical development activities. Our direct R&D expenses by program also include fees incurred under license agreements. Our personnel, non-program and unallocated program expenses include costs associated with activities performed by our internal R&D organization and generally benefit multiple programs. These costs are not separately allocated by product candidate and consist primarily of: • salaries and personnel-related costs, including benefits, travel, and stock-based compensation, for our scientific personnel performing R&D activities; • facilities and other expenses, which include expenses for rent and maintenance of facilities, and depreciation expense; and • laboratory supplies and equipment used for internal R&D activities. Our direct R&D expenses consist principally of external costs, such as fees paid to investigators, consultants, laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, costs associated with our general discovery platform improvements, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other R&D expenses. The following table of R&D expenses tracked on a program-by-program basis as well as by type and nature of our expense for our product candidates for the years ended December 31, 2021 and 2020. For the year ended December 31, 2019, we did not track expenses by program. For the Years Ended December 31, 2021 2020 Direct Expenses: Danon Disease (AAV) RP-A501 $ 15,804 $ 18,459 Leukocyte Adhesion Deficiency (LVV) RP-L201 24,222 5,531 Fanconi Anemia (LVV) RP-L102 15,453 15,015 Pyruvate Kinase Deficiency (LVV) RP-L301 4,206 4,990 Infantile Malignant Osteopetrosis (LVV) RP-L401 (1) 2,236 2,057 Other product candidates 4,576 1,321 Total direct expenses 66,496 47,373 Unallocated Expenses Employee compensation 20,780 14,137 Non-cash R&D expense related to the issuance of warrants 12,781 26,562 Stock based compensation expense 11,954 7,121 Depreciation and amortization expense 5,130 2,770 Laboratory and related expenses 3,359 4,240 Legal and patent fees 15 96 Professional Fees 1,797 1,443 Other expenses 3,164 1,696 Total other research and development expenses 58,979 58,066 Total research and development expense $ 125,476 $ 105,438 (1) Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program is to be returned to academic innovators. We cannot determine with certainty the duration and costs to complete current or future clinical studies of product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of clinical studies and development of product candidates will depend on a variety of factors, including: • the scope, rate of progress, and expense of ongoing as well as any clinical studies and other R&D activities that we undertake; • future clinical study results; 66 Table of Contents • uncertainties in clinical study enrollment rates; • changing standards for regulatory approval; and • the timing and receipt of any regulatory approvals. We expect R&D expenses to increase for the foreseeable future as we continue to invest in R&D activities related to developing product candidates, including investments in manufacturing, as our programs advance into later stages of development and as we conduct additional clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of R&D projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. Our future R&D expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of the commercial potential of such product candidates. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our R&D expenses to increase in future periods for the foreseeable future as we seek to complete development of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of: • the scope, progress, outcome and costs of our clinical trials and other R&D activities; • the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care; • the market acceptance of our product candidates; • obtaining, maintaining, defending, and enforcing patent claims and other intellectual property rights; • significant and changing government regulation; and • the timing, receipt, and terms of any marketing approvals. A change in the outcome of any of these variables with respect to the development of our product candidates that we may develop could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate for the completion of clinical development of any of our product candidates that we may develop or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefit costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance, legal, business development, and human resource functions. In addition, other significant general and administrative expenses include professional fees for legal, consulting, investor and public relations, auditing, and tax services as well as other expenses for rent and maintenance of facilities, insurance and other supplies used in general and administrative activities. We expect general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to support the continued advancement of our product candidates. We also anticipate that as we continue to operate as a public company with increasing complexity, we will continue to incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses. Interest Expense Interest expense is related to the 2021 Convertible Notes, which were converted into common stock on August 2, 2021, the 2022 Convertible Notes, which were redeemed and converted into common stock in April 2021, and our financing lease obligation for the Cranbury, NJ facility. Interest Income Interest income is related to interest earned from investments and cash equivalents. 67 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2021 and 2020 The following table summarizes our results of operations for the years ended December 31, 2021 and 2020: For the Years Ended December 31, 2021 2020 Change (in thousands) Operating expenses: Research and development $ 125,476 $ 105,438 $ 20,038 General and administrative 41,772 28,865 12,907 Total operating expenses 167,248 134,303 32,945 Loss from operations (167,248 ) (134,303 ) (32,945 ) Research and development incentives 1,000 - 1,000 Interest expense (2,977 ) (6,967 ) 3,990 Interest and other income, net 3,068 2,150 918 (Amortization of premium) accretion of discount on investments - net (2,912 ) (580 ) (2,332 ) Total other expense, net (1,821 ) (5,397 ) 3,576 Net loss $ (169,069 ) $ (139,700 ) $ (29,369 ) Research and Development Expenses R&D expenses increased $20.0 million to $125.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily due to an increase in manufacturing and development costs of $14.8 million, an increase in compensation and benefits of $6.6 million due to increased R&D headcount, an increase in non-cash stock compensation expense of $4.8 million, an increase in lab supplies and office expense of $2.9 million, an increase in depreciation and amortization of $1.9 million, offset by a decrease in new research agreements of $13.8 million in non-cash expenses due to the issuance of warrants in December 2020 and August and December 2021. General and Administrative Expenses G&A expenses increased $12.9 million to $41.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increases in G&A expenses were primarily driven by an increase in non-cash stock compensation expense of $5.8 million, an increase in compensation and benefits of $1.8 million due to increased G&A headcount, an increase in office and administrative costs of $2.5 million due to increased insurance costs, an increase in commercial preparation expenses of $2.2 million, offset by a decrease in debt conversion expense recorded for the year ended December 31, 2020 of $2.0 million due to the refinancing of the 2021 Convertible Notes in February 2020. There were no debt conversion expenses recorded for the year ended December 31, 2021. Other Expense, Net Other expense, net was $1.8 million for the year ended December 31, 2021 compared to $5.4 million for the year ended December 31, 2020. The change was primarily due to reduced interest expense associated with the 2022 Convertible Notes which were fully redeemed in April 2021 and the 2021 Convertible Notes which were converted in August 2021, as well as a decrease of $2.3 million in accretion income related to our investments, due to lower interest rates for the year ended December 31, 2021 as compared to the year ended December 31, 2020. 68 Table of Contents Comparison of the Years Ended December 31, 2020 and 2019 The following table summarizes our results of operations for the years ended December 31, 2020 and 2019: For the Years Ended December 31, 2020 2019 Change (in thousands) Operating expenses: Research and development $ 105,438 $ 57,907 $ 47,531 General and administrative 28,865 18,244 10,621 Total operating expenses 134,303 76,151 58,152 Loss from operations (134,303 ) (76,151 ) (58,152 ) Research and development incentives - 250 (250 ) Interest expense (6,967 ) (5,958 ) (1,009 ) Interest and other income, net 2,150 3,414 (1,264 ) (Amortization of premium) accretion of discount on investments - net (580 ) 1,175 (1,755 ) Total other expense, net (5,397 ) (1,119 ) (4,278 ) Net loss $ (139,700 ) $ (77,270 ) $ (62,430 ) Research and Development Expenses R&D expenses increased $47.5 million to $105.4 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily the result of an increase in new research agreements totaling $26.6 million in non-cash R&D expenses due to the issuance of a warrant in December 2020, an increase in manufacturing consumables of $5.5 million, an increase in compensation expense of $6.2 million due to increased R&D headcount; an increase in clinical trials expense of $3.9 million, an increase in amortization expense related to the Cranbury, NJ lease of $1.7 million, and an increase in lab supplies of $2.0 million, offset by the CIRM grant of $1.1 million which was offset against LAD-1 R&D expenses, and a decrease in research agreements of $0.6 million primarily due to the $1.4 million license payment for the Stanford University’s Laboratory for Cell and Gene Therapy (“LCGM”) facility made in 2019. General and Administrative Expenses G&A expenses increased $10.6 million to $28.9 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase in G&A expenses was primarily driven by fees of $2.0 million incurred in connection with the February and June 2020 convertible notes exchange, an increase in non-cash stock compensation expense of $4.2 million, an increase in compensation and benefits of $2.5 million due to increased G&A headcount and an increase in office and administrative expense of $1.0 million due primarily to increased insurance expense for the year ended December 31, 2020 as compared to 2019. Other Expense, Net Other expense, net was $5.4 million for the year ended December 31, 2020 compared to other expense, net of $1.1 million for the year ended December 31, 2019. The change was primarily due to a decrease in interest income related to our investments of $2.8 million due to lower interest rates, an increase in interest expense of $1.0 million, and a decrease in research and development incentives due to the receipt of the New York City biotech tax credit in 2019, which was phased out by New York City and did not reoccur in 2020. Liquidity and Capital Resources We have not generated any revenue and have incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional R&D efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. Our drug candidates are in the development and clinical stage. There can be no assurance that our R&D will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate significant revenue from product sales. We operate in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. 69 Table of Contents Our consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Rocket has incurred net losses and negative cash flows from its operations each year since inception. Rocket incurred net losses of $169.1 million, $139.7 million, and $77.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. We have experienced negative cash flows from operations and has an accumulated deficit of $491.9 million as of December 31, 2021. As of December 31, 2021, we had $388.7 million of cash, cash equivalents and investments. We expect such resources would be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2023. We have funded our operations primarily through the sale of its equity and debt securities. On April 30, 2019, the California Institute for Regenerative Medicine (“CIRM”) awarded us up to $6.5 million under a CLIN2 grant award to support the clinical development of gene therapy for LAD-I. Proceeds from the grant will help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients enrolled at the U.S. clinical site, University of California, Los Angeles (“UCLA”) Mattel Children’s Hospital, led by principal investigator Donald Kohn, M.D., UCLA Professor of Microbiology, Immunology and Molecular Genetics, Pediatrics (Hematology/Oncology), Molecular and Medical Pharmacology and member of the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA. In 2019, we received the first two grants from CIRM in the aggregate of $1.2 million which were included as an offset against R&D expenses. In 2020, we met additional CIRM milestones and received an additional $1.1 million milestone which was recorded as a reduction of R&D expenses in 2020. We received the additional milestone payments of $1.1 million and $1.0 million in January and April of 2021, respectively. As of December 31, 2021 we did not meet the next milestone and therefore no receivable has been recorded. On November 12, 2020, the CIRM awarded us up to $3.7 million under a CLIN2 grant award to support the clinical development of our lentiviral vector (LVV)-based gene therapy, RP-L401, for the treatment of IMO. We received $1.0 million pursuant to the grant on January 4, 2021 related to the CIRM IMO award and recorded a receivable, included in prepaid and other assets in the consolidated balance sheet, and a reduction of R&D expenses of $0.9 million as of December 31, 2020. We recorded a reduction of research and development expense of $0.1 million for the year ended December 31, 2021. As of December 31, 2021, we did not meet the next milestone and no receivable has been recorded. In the longer term, our future viability is dependent on our ability to generate cash from operating activities or to raise additional capital to finance our operations. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. Convertible Notes Payable On January 4, 2018, in connection with the reverse merger with Inotek, Inotek’s obligations under its outstanding convertible notes, with an aggregate principal value of $52.0 million, were assumed by us (the “2021 Convertible Notes”). The 2021 Convertible Notes were issued in 2016 and matured on August 1, 2021 (“Maturity Date”). The 2021 Convertible Notes were unsecured and accrued interest at a rate of 5.75% per annum. Each holder of a 2021 Convertible Note (the “Holder”) had the option until the close of business on the second business day immediately preceding the Maturity Date to convert all, or any portion, of the 2021 Convertible Notes held by them at a conversion rate of 31.1876 shares of our common stock per $1.00 principal amount of 2021 Convertible Notes (the “Conversion Rate”) which is $32.08 per share. On February 20, 2020 and June 5, 2020, we entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of the 2021 Convertible Notes. Pursuant to the Exchange Agreements, on February 20, 2020, we exchanged approximately $39.35 million aggregate principal amount of the 2021 Convertible Notes (representing approximately 76% of the aggregate outstanding principal amount of the 2021 Convertible Notes) for (a) approximately $39.35 million aggregate principal amount of 6.25% Convertible Senior Notes due August 2022 (the “2022 Convertible Notes”) (an exchange ratio equal to 1.00 2022 Convertible Note per exchanged 2021 Convertible Note) and (b) $0.1 million to pay the accrued and unpaid interest on the exchanged 2021 Convertible Notes from February 1, 2020, to February 20, 2020, the closing date of the February 20, 2020 exchange transactions. Additionally, we repurchased 3,000 shares of our common stock that have been retired for an aggregate amount of $72 from certain holders of the 2021 Convertible Notes participating in the exchange transactions in privately negotiated, private transactions. Also pursuant to the Exchange Agreements, on June 12, 2020, we exchanged $7.5 million aggregate principal amount of the 2021 Convertible Notes for (a) $7.5 million aggregate principal amount of our newly issued 2022 Convertible Notes (an exchange ratio equal to 1.00 2022 Convertible Notes per exchanged 2021 Convertible Notes) and (b) approximately $11 to pay the accrued and unpaid interest on the exchanged 2021 Convertible Notes from, and including, February 1, 2020, to, but excluding, the closing date of the exchange transaction, adjusted to take into account the unearned accrued interest on the 2022 Convertible Notes from, and including, February 20, 2020, to, but excluding, the closing date of the exchange transaction. 70 Table of Contents In December, 2020, $8.5 million principal amount, representing a carrying value of $7.6 million of the 2022 Convertible Notes were converted into 298,562 shares of common stock. On April 26, 2021, we called for the redemption of the remaining $38.4 million principal amount of the 2022 Convertible Notes as our stock price traded above the Conversion Rate for at least 20 trading days during a 30-day consecutive trading period. On April 26, 2021, we redeemed in full the 2022 Convertible Notes prior to the redemption date. Holders of approximately $38.4 million remaining principal amount of the 2022 Convertible Notes converted such notes in accordance with the terms of the Exchange Agreements into approximately 1.3 million shares of our common stock and cash in lieu of fractional shares. As of December 31, 2021, there were no 2022 Convertible Notes outstanding. On August 2, 2021, holders of the 2021 Convertible Notes converted the $5.15 million remaining balance of the 2021 Convertible Notes into 160,614 shares of our common stock. As of December 31, 2021, there were no 2021 Convertible Notes outstanding. Contractual Obligations In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to income taxes and lease arrangements are provided in “Item 8. Financial Statements”, “Note 11. Income Taxes” and “Note 12. Commitments and Contingencies”, respectively. We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations. Cash Flows The following table summarizes our cash flows for each of the periods presented: For the Years Ended December 31, 2021 2020 2019 Cash used in operating activities $ (121,163 ) $ (74,640 ) $ (64,663 ) Cash provided by (used in) investing activities 18,853 (96,591 ) (39,011 ) Cash provided by financing activities 37,681 282,989 177,791 Net change in cash, cash equivalents and restricted cash $ (64,629 ) $ 111,758 $ 74,117 Net Cash Used in Operating Activities During the year ended December 31, 2021, operating activities used $121.2 million of cash, primarily resulting from our net loss of $169.1 million and net changes in our operating assets and liabilities of $3.4 million, partially offset by net non-cash charges of $51.3 million, including expenses in connection with the issuance of warrant of $12.8 million, stock-based compensation expense of $29.2 million, accretion of discount on investments of $2.9 million and depreciation and amortization expense of $5.4 million. Changes in our operating assets and liabilities for the year ended December 31, 2021 consisted of a decrease in accounts payable and accrued expenses of $4.8 million and a decrease in prepaid expenses and other assets of $1.3 million. During the year ended December 31, 2020, operating activities used $74.6 million of cash, primarily resulting from our net loss of $139.7 million and net changes in our operating assets and liabilities of $15.0 million, partially offset by net non-cash charges of $50.0 million, including expenses in connection with the issuance of warrants of $26.6 million, stock-based compensation expense of $18.6 million and accretion of discount on convertible notes of $2.8 million. Changes in our operating assets and liabilities for the year ended December 31, 2020 consisted of an increase in finance lease liability of $5.6 million, an increase in accounts payable and accrued expenses of $6.4 million and an increase in prepaid expenses and other assets of $1.5 million. During the year ended December 31, 2019, operating activities used $64.7 million of cash, primarily resulting from our net loss of $77.3 million and net changes in our operating assets and liabilities of $3.7 million, partially offset by net non-cash charges of $16.3 million, including stock-based compensation expense of $13.4 million and accretion of discount on convertible notes of $3.6 million. Changes in our operating assets and liabilities for the year ended December 31, 2019 consisted of a decrease in accounts payable and accrued expenses of $2.7 million and an increase in prepaid expenses and other assets of $0.9 million. Net Cash Provided by (Used in) Investing Activities During the year ended December 31, 2021, net cash provided by investing activities was $18.9 million, consisting of proceeds of $272.4 million from the maturities of investments, offset by purchases of investments of $245.9 million, and purchases of property and equipment of $7.6 million. 71 Table of Contents During the year ended December 31, 2020, net cash used in investing activities was $96.6 million, consisting of proceeds of $141.8 million from the maturities of investments, offset by purchases of investments of $209.3 million, purchases of property and equipment of $20.6 million, and payments made to acquire right of use asset of $8.5 million. During the year ended December 31, 2019, net cash used in investing activities was $39.0 million, consisting primarily of purchases of property and equipment which is considered construction in progress of $23.3 million related primarily to our Cranbury, New Jersey facility, and investment purchases of $184.3 million offset by proceeds of $168.6 million from the maturities of investments. Net Cash Provided by Financing Activities During the year ended December 31, 2021, net cash provided by financing activities was $37.7 million, consisting of proceeds from the issuance of common stock related to the August 2021 Private Placement and issuance of common stock, pursuant to exercises of stock options. During the year ended December 31, 2020, net cash provided by financing activities was $283.0 million, consisting primarily of proceeds from the issuance of common stock for $280.8 million. On December 14, 2020, we completed a public offering of 5,339,286 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 696,428 shares of our common stock, at a public offering price of $56.00 per share. The net proceeds to Rocket from the December 2020 public offering were approximately $280.8 million. During the year ended December 31, 2019, net cash provided by financing activities was $177.8 million, consisting of proceeds from the issuance of common stock for $177.8 million. On April 18, 2019, we completed a public offering of 5,175,000 shares of common stock. The net proceeds to Rocket from the April 2019 public offering were approximately $86.1 million. On December 10, 2019, we completed a public offering of 4,393,000 shares of common stock. The net proceeds to Rocket from the December 2019 public offering were approximately $91.7 million. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in in conformity with accounting principles generally accepted in the United States (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We periodically review our estimates as a result of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. For a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies” included in the notes to our consolidated financial statements appearing elsewhere in this report. We consider the most critical accounting policies to be those related to our Accrued Research and Development Expenses. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to: • CROs in connection with performing R&D services on our behalf; • investigative sites or other providers in connection with clinical trials; • vendors in connection with non-clinical development activities; and • vendors related to product manufacturing, development and distribution of clinical supplies. 72 Table of Contents We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage non-clinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period. Stock-Based Compensation We issue stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units. We account for stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. We measure the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as expected volatility and expected term. These assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. We classify stock-based compensation expense in our statement of operations in the same manner in which the award recipient’s payroll costs and services are classified or in which the award recipient’s service payments are classified. The Company recognizes compensation expense for at least the portion of awards that are vested. Forfeitures are accounted for as they occur. Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. The new standard was effective beginning January 1, 2021. The adoption of ASU 2016-13, and related updates, did not have a material impact on the Company’s consolidated financial position and results of operations. Item 7A. Quantitative and Qualitative Disclosures about Market Risks Not Applicable Item 8. Financial Statements and Supplementary Data The financial statements required by this Item 8 are included in Item 15 of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive and our principal financial and accounting officers, evaluated, as of the end of the period covered by this Annual Report, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of December 31, 2021, our principal executive officer and principal financial and accounting officers concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 73 Table of Contents Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13(a)-15(f) and 15(d)-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internal control over financial reporting as of December 31, 2021, based on criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management’s assessment of the effectiveness of our internal control over financial reporting included testing and evaluating the design and operating effectiveness of our internal controls. In our management’s opinion, we have maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in the COSO 2013 framework. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by EisnerAmper LLP, an independent registered public accounting firm, as stated in their report which is included herein. Inherent Limitations of Internal Controls Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not Applicable. PART III. — OTHER INFORMATION Item 10. Directors, Executive Officers and Corporate Governance Information with respect to this item will be set forth in the Proxy Statement for the 2022 Annual Meeting of Stockholders (“Proxy Statement”) under the headings “Election of Directors,” “Executive Officers,” “Delinquent Section 16(a) Reports” and “Corporate Governance” and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report. Item 11. Executive Compensation Information with respect to this item will be set forth in the Proxy Statement under the headings “Executive Compensation” and “Director Compensation” and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report. 74 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information with respect to this item will be set forth in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report. Item 13. Certain Relationships and Related Party Transactions, and Director Independence Information with respect to this item will be set forth in the Proxy Statement under the headings “Transactions with Related Persons” and “Information about the Board and Corporate Governance” and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report. Item 14. Principal Accountant Fees and Services Our independent public accounting firm is EisnerAmper LLP, New York, New York, PCAOB Auditor ID 274. Information with respect to this item will be set forth in the Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report. 75 Table of Contents PART IV Item 15. Exhibits, Financial Statements and Schedules (a) The following documents are filed as part of this Annual Report: (1) Financial Statements: Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 F-5 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021, 2020 and 2019 F-6 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 F-8 Notes to Consolidated Financial Statements F-9 (2) Financial Statement Schedules: All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto. 76 Table of Contents (3) Exhibits: Exhibit Number Exhibit Index Description of Exhibit 2.1 Agreement and Plan of Merger and Reorganization, dated as of September 12, 2017, by and among Inotek Pharmaceuticals Corporation, Rocket Pharmaceuticals, Ltd. and Rome Merger Sub (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on September 13, 2017, and incorporated herein by reference) 3.1 Seventh Amended and Restated Certificate of Incorporation of Rocket Pharmaceuticals, Inc., effective as of February 23, 2015 (Filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 31, 2015, and incorporated herein by reference) 3.2 Certificate of Amendment (Reverse Stock Split) to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective as of January 4, 2018 (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018, and incorporated herein by reference) 3.3 Certificate of Amendment (Name Change) to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective January 4, 2018 (Filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018, and incorporated herein by reference) 3.4 Certificate of Amendment to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective June 25, 2018 (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on June 25, 2019, and incorporated herein by reference) 3.5 Amended and Restated By-Laws of Rocket Pharmaceuticals, Inc., effective as of March 29, 2018 (Filed as Exhibit 3.4 to the Company’s registration statement on Form 8-A/A, as amended (001-36829), filed with the SEC on January 11, 2018, and incorporated herein by reference) 4.1 Form of Common Stock Certificate of Rocket Pharmaceuticals, Inc. (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018, and incorporated herein by reference) 4.2 Description of Securities (Filed as Exhibit 4.8 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.1# 2004 Stock Option and Incentive Plan (Filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (333-199859), filed with the SEC on November 5, 2014, as amended, and incorporated herein by reference) 10.2# Rocket Pharmaceuticals, Inc. Second Amended and Restated 2014 Stock Option and Incentive Plan ( Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on June 25, 2018, and incorporated herein by reference) 10.3# Form of Incentive Stock Option Agreement (Employees) (Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 14, 2018, and incorporated herein by reference) 10.4# Form of Non-Qualified Stock Option Agreement (Employees) (Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 14, 2018, and incorporated herein by reference) 10.5# Form of Non-Qualified Stock Option Agreement (Non-Employee Directors) (Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 14, 2018, and incorporated herein by reference) 10.6# Form of Non-Qualified Stock Option Agreement (Consultants) (Filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 14, 2018, and incorporated herein by reference) 10.6.1# Form of Restricted Stock Unit Award Agreement (Filed as Exhibit 10.6.1 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.7# Rocket Pharmaceuticals, Ltd. 2015 Share Option Plan (Filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 7, 2018, and incorporated herein by reference) 10.8# Letter Agreement, dated as of July 28, 2014, by and between the Registrant and David P. Southwell (Filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (333-199859), filed with the SEC on November 5, 2014, as amended, and incorporated herein by reference) 10.9# Amendment to Offer Letter, effective as of September 1, 2017, by and between Inotek and David Southwell (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on September 1, 2017, and incorporated herein by reference) 10.10#* Offer Letter, dated September 29, 2017, by and between the Registrant and Raj Prabhakar. 10.11# Offer Letter, dated November 25, 2020, by and between the registrant and Carlos Garcia-Parada. (Filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.12#* Offer Letter, dated April 29, 2021, by and between the registrant and Isabel Carmona. 10.13** Amended and Restated Lease Agreement, dated as of June 26, 2019, by and between Rocket Pharmaceuticals, Inc. and Cedar Brook 12 Corporate Center, L.P. (Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 8, 2018, and incorporated herein by reference) 10.14# Rocket Pharmaceuticals, Inc. Amended and Restated 2014 Employee Stock Purchase Plan (Filed as Exhibit 10.10 to the Company’s Annual Report on Form 8-K (001-36829), filed with the SEC on March 7, 2018, and incorporated herein by reference) 10.15# Form of Indemnification Agreement, to be entered into between the Registrant and its directors (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018, and incorporated herein by reference) 10.16# Form of Indemnification Agreement, to be entered into between the Registrant and its officers (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018, and incorporated herein by reference) 10.17# Form of Severance and Change of Control Agreements, to be entered into between the Registrant and certain of its officers (Filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 77 Table of Contents 10.20 Agreement of Lease, dated as of June 6, 2018, by and between Rocket Pharmaceuticals, Inc. and ESRT Empire State Building, L.L.C., (Filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q (001-36829), filed with the SEC on August 14, 2018, and incorporated herein by reference) 10.22† License Agreement, dated as of November 19, 2018, by and between Rocket Pharmaceuticals, Ltd. and REGENXBIO Inc. (Filed as Exhibit 10.26 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 8, 2019, and incorporated herein by reference) 10.23 Warrant to Purchase Shares of Common Stock, dated as of December 21, 2020, by and between the Registrant and Neptune Consulting, LLC. (Filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.24 Warrant to Purchase Shares of Series Preferred Stock, dated as of June 28, 2013, by and between Inotek Pharmaceuticals Corporation and Horizon Technology Finance Corporation (Filed as Exhibit 10.24 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.25 Warrant to Purchase Shares of Series Preferred Stock dated as of June 28, 2013, by and between Inotek Pharmaceuticals Corporation and Fortress Credit Co LLC (Filed as Exhibit 10.25 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.26* Warrant to Purchase Shares of Common Stock, dated as of December 17, 2021, by and between the Registrant and Neptune Consulting, LLC. (First Indication) 10.27* Warrant to Purchase Shares of Common Stock, dated as of December 17, 2021, by and between the Registrant and Neptune Consulting, LLC. (Second Indication) 10.28 Securities Purchase Agreement, dated as of August 27, 2021, by and among Rocket Pharmaceuticals, Inc., and each of those persons listed as a Purchaser on the Schedule of Purchasers attached as Schedule I thereto (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on August 30, 2021, and incorporated herein by reference) 10.29 Registration Rights Agreement, dated as of August 27, 2021, by and among Rocket Pharmaceuticals, Inc., and each of those persons listed as an Investor on the Schedule of Inventors attached as Schedule A thereto (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on August 30, 2021, and incorporated herein by reference). 21.1* List of Subsidiaries 23.1* Consent of EisnerAmper LLP 24.1* Power of Attorney (included in the signature page) 31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Link Document. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in exhibit 101) * Filed herewith. # Indicates management contract or compensatory plan. † Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC. ** Certain portions of this exhibit have been excluded because they are both not material and would likely cause competitive harm to the Company if publicly disclosed. † The certification attached as Exhibit 32.1 accompanying this Annual Report on Form 10- K is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Rocket Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. Item 16. Form 10-K Summary Not Applicable. 78 Table of Contents SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, Rocket Pharmaceuticals, Inc. (the Registrant) has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cranbury, State of New Jersey, on February 28, 2022. Rocket Pharmaceuticals, Inc. By: /s/ Gaurav Shah, MD Gaurav Shah, MD President and Chief Executive Officer POWER OF ATTORNEY Each person whose individual signature appears below hereby constitutes and appoints Gaurav Shah, MD and Carlos Garcia-Parada, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Title Date /s/ Gaurav Shah, MD Chief Executive Officer and Director February 28, 2022 Gaurav Shah, MD (Principal Executive Officer) /s/ Carlos Garcia-Parada, MBA Chief Financial Officer February 28, 2022 Carlos Garcia-Parada (Principal Financial Officer) /s/ John C. Militello VP, Finance, Senior Controller & Treasurer February 28, 2022 John C. Militello (Principal Accounting Officer) /s/ Carsten Boess Director February 28, 2022 Carsten Boess /s/ Pedro Granadillo Director February 28, 2022 Pedro Granadillo /s/ Gotham Makker, MD Director February 28, 2022 Gotham Makker, MD /s/ David P. Southwell Director February 28, 2022 David P. Southwell /s/ Roderick Wong, MD Director February 28, 2022 Roderick Wong, MD /s/ Naveen Yalamanchi, MD Director February 28, 2022 Naveen Yalamanchi, MD /s/ Elisabeth Björk Director February 28, 2022 Elisabeth Björk 79 Table of Contents Rocket Pharmaceuticals, Inc. Index to Consolidated Financial Statements Contents Reports of Independent Registered Public Accounting Firm (PCAOB ID 274 ) F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 F-5 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021, 2020 and 2019 F-6 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 F-8 Notes to Consolidated Financial Statements F-9 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Rocket Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Rocket Pharmaceuticals, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its their operations and their cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion. 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. 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. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. A ccruals for research and development expenses As disclosed in Note 3 to the consolidated financial statements, the Company estimates accrued research and development expenses for existing contracts, evaluates and identifies services that have been performed for the Company, estimates the level of service performed and the associated costs incurred for the services when not yet invoiced or otherwise notified of the actual costs, and evaluates contractual milestones reached. The Company estimates costs on clinical trials in progress based on the services received and efforts expended pursuant to contracts with multiple contract research organizations (CROs), investigative sites in connection with clinical trials, and contract manufacturing organizations (CMOs). The accrued research and development expenses as of December 31, 2021 were approximately $12 million. We identified accruals related to research and development activities as a critical audit matter due to the complexity of the estimation of those accruals related to third party CROs, CMOs and investigative sites. The complexity of the Company’s estimates for these accruals was primarily the determination of progress and direct and indirect costs incurred under these arrangements, where invoicing of costs and milestones may not match the timing of services provided to date. As a result, auditor judgement was required to perform procedures and evaluate audit evidence related to the accruals for research and development expenses. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the determination of estimates of the research and development accruals, including controls over inputs used by management to make the estimates and the completeness and accuracy of the data used in the estimates. Our audit procedures also included inspection of a sample of contracts, invoices and payments, confirmation of total payments made by the Company and the amount owed by the Company as of December 31, 2021 for a sample of third-party research and development vendors, comparing the Company’s estimates of progress to the contracts, statements of work, data confirmed by third party vendors, invoices and payments to the resulting accruals. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2016. EISNERAMPER LLP Iselin, New Jersey February 28, 2022 F-2 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Rocket Pharmaceuticals, Inc. Opinion on Internal Control over Financial Reporting We have audited Rocket Pharmaceuticals, Inc. and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in the Internal Control - Integrated Framework (2013) issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting An entity’s 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 purposes in accordance with generally accepted accounting principles. An entity’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the 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. /s/ EisnerAmper LLP EISNERAMPER LLP Iselin, New Jersey February 28, 2022 F-3 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 232,694 $ 297,098 Investments 156,046 185,621 Prepaid expenses and other current assets 3,319 4,626 Total current assets 392,059 487,345 Property and equipment, net 22,299 19,206 Goodwill 30,815 30,815 Restricted cash 1,343 1,568 Deposits 455 455 Operating lease right-of-use assets 1,569 914 Finance lease right-of-use asset 48,480 50,521 Total assets $ 497,020 $ 590,824 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 19,615 $ 25,472 Convertible notes, net of unamortized discount, current - 4,875 Operating lease liabilities, current 863 626 Finance lease liability, current 1,689 1,644 Total current liabilities 22,167 32,617 Convertible notes, net of unamortized discount, non-current - 35,066 Operating lease liabilities, non-current 905 498 Finance lease liability, non-current 19,144 18,988 Other liabilities 80 136 Total liabilities 42,296 87,305 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $ 0.01 par value, authorized 5,000,000 shares: Series A convertible preferred stock; 300,000 shares designated as Series A; 0 shares issued and outstanding - - Series B convertible preferred stock; 300,000 shares designated as Series B; 0 shares issued and outstanding - - Common stock, $ 0.01 par value, 120,000,000 shares authorized; 64,505,889 and 60,996,367 shares issued and outstanding at December 31, 2021 and 2020 , respectively 645 610 Additional paid-in capital 946,152 825,794 Accumulated other comprehensive loss ( 161 ) ( 42 ) Accumulated deficit ( 491,912 ) ( 322,843 ) Total stockholders’ equity 454,724 503,519 Total liabilities and stockholders’ equity $ 497,020 $ 590,824 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Statements of Operations (in thousands, except share and per share amounts) For the Years Ended December 31, 2021 2020 2019 Revenue $ - $ - $ - Operating expenses: Research and development 125,476 105,438 57,907 General and administrative 41,772 28,865 18,244 Total operating expenses 167,248 134,303 76,151 Loss from operations ( 167,248 ) ( 134,303 ) ( 76,151 ) Research and development incentives 1,000 - 250 Interest expense ( 2,977 ) ( 6,967 ) ( 5,958 ) Interest and other income, net 3,068 2,150 3,414 (Amortization of premium) accretion of discount on investments - net ( 2,912 ) ( 580 ) 1,175 Net loss $ ( 169,069 ) $ ( 139,700 ) $ ( 77,270 ) Net loss per share attributable to common stockholders - basic and diluted $ ( 2.67 ) $ ( 2.52 ) $ ( 1.58 ) Weighted-average common shares outstanding - basic and diluted 63,235,417 55,380,740 49,010,358 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Loss (in thousands) For the Years Ended December 31, 2021 2020 2019 Net loss $ ( 169,069 ) $ ( 139,700 ) $ ( 77,270 ) Other comprehensive loss Net unrealized (loss) gain on investments ( 119 ) ( 62 ) 147 Total comprehensive loss $ ( 169,188 ) $ ( 139,762 ) $ ( 77,123 ) The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share amounts) Common Stock Additional Accumulated Other Total Shares Amount Treasury Stock Paid-In Capital Comprehensive Income/(Loss) Accumulated Deficit Stockholders’ Equity Balance at December 31, 2018 45,194,736 $ 452 $ ( 668 ) $ 300,253 $ ( 127 ) $ ( 105,873 ) $ 194,037 Issuance of common stock, net of issuance costs 9,568,000 96 - 177,664 - - 177,760 Issuance of common stock pursuant to exercise of stock options 110,325 1 - 30 - - 31 Treasury stock purchases - - ( 725 ) ( 1 ) - - ( 726 ) Issuance of treasury stock pursuant to exercise of stock options - - ( 397 ) - - - ( 397 ) Retirement of treasury stock ( 100,000 ) ( 1 ) 1,393 ( 1,392 ) - - - Sale of treasury stock - - 344 - - - 344 Unrealized comprehensive gain on investments - - - - 147 - 147 Share-based compensation - - - 13,371 - - 13,371 Net loss - - - - - ( 77,270 ) ( 77,270 ) Balance at December 31, 2019 54,773,061 548 ( 53 ) 489,925 20 ( 183,143 ) 307,297 Issuance of common stock, net of issuance costs 5,339,286 53 - 280,710 - - 280,763 Issuance of common stock pursuant to exercise of stock options 586,857 6 - 2,552 - - 2,558 Issuance of common stock pursuant to exercise of warrant 1,601 - - - - - - Issuance of common stock pursuant to conversion of notes 298,562 3 - 7,626 - - 7,629 Issuance of warrants - - - 26,562 - - 26,562 Stock repurchase ( 3,000 ) - - ( 72 ) - - ( 72 ) Sale of treasury stock - - 667 ( 76 ) - - 591 Issuance of treasury stock pursuant to exercise of stock options - - ( 614 ) - - - ( 614 ) Unrealized comprehensive loss on marketable securities - - - - ( 62 ) - ( 62 ) Share-based compensation - - - 18,567 - - 18,567 Net loss - - - - - ( 139,700 ) ( 139,700 ) Balance at December 31, 2020 60,996,367 610 - 825,794 ( 42 ) ( 322,843 ) 503,519 Issuance of common stock pursuant to exercise of stock options 1,209,960 12 - 11,315 - - 11,327 Issuance of common stock pursuant to conversion of notes 1,487,046 15 - 40,679 - - 40,694 Issuance of common stock, net of issuance costs 812,516 8 - 26,346 - - 26,354 Issuance of warrants - - - 12,781 - - 12,781 Unrealized comprehensive loss on investments - - - - ( 119 ) - ( 119 ) Share-based compensation - - - 29,237 - - 29,237 Net loss - - - - - ( 169,069 ) ( 169,069 ) Balance at December 31, 2021 64,505,889 $ 645 $ - $ 946,152 $ ( 161 ) $ ( 491,912 ) $ 454,724 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (in thousands) For the Years Ended December 31, 2021 2020 2019 Operating Activities: Net loss $ ( 169,069 ) $ ( 139,700 ) $ ( 77,270 ) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discount on convertible notes 753 2,758 3,602 Depreciation and amortization of property and equipment 3,240 1,145 426 Amortization of right of use asset 2,133 5,105 - Write down of property and equipment, net 261 419 - Stock-based compensation 29,237 18,567 13,371 Expense in connection with warrant issuances 12,781 26,562 - Accretion of discount (amortization of premium) on investments, net 2,887 580 ( 1,066 ) Changes in operating assets and liabilities: Prepaid expenses and other assets 1,307 ( 1,517 ) ( 917 ) Accounts payable and accrued expenses ( 4,827 ) 11,015 ( 2,722 ) Operating lease liabilities ( 11 ) ( 139 ) ( 87 ) Finance lease liability 201 452 - Other long term liabilities ( 56 ) 113 - Net cash used in operating activities ( 121,163 ) ( 74,640 ) ( 64,663 ) Investing activities: Purchases of investments ( 245,875 ) ( 209,343 ) ( 184,298 ) Proceeds from maturities of investments 272,443 141,811 168,556 Payments made to acquire right of use asset ( 95 ) ( 8,452 ) - Purchases of property and equipment ( 7,620 ) ( 20,607 ) ( 23,269 ) Net cash provided by (used in) investing activities 18,853 ( 96,591 ) ( 39,011 ) Financing activities: Issuance of common stock, net of issuance costs 26,354 280,763 177,760 Issuance of common stock, pursuant to exercise of stock options 11,327 2,558 31 Common stock repurchase - ( 72 ) - Proceeds from sale of treasury stock - 591 344 Payment of withholding tax on option exercises - ( 614 ) ( 344 ) Convertible notes refinancing costs to the lender - ( 237 ) - Net cash provided by financing activities 37,681 282,989 177,791 Net change in cash, cash equivalents and restricted cash ( 64,629 ) 111,758 74,117 Cash, cash equivalents and restricted cash at beginning of period 298,666 186,908 112,791 Cash, cash equivalents and restricted cash at end of period $ 234,037 $ 298,666 $ 186,908 Supplemental disclosure of non-cash financing and investing activities: Accrued purchases of property and equipment $ 728 $ 1,756 $ 4,650 Retirement of treasury stock $ - $ - $ 1,393 Treasury stock purchases paid in prior year $ - $ - $ 726 Withholding tax payable on shares withheld in treasury stock $ - $ - $ 53 Unrealized (loss) gain on investments $ ( 119 ) $ ( 62 ) $ 147 Conversion of 2021 and 2022 convertible notes into common stock $ 40,694 $ 7,629 $ - Finance lease right of use asset and lease liability $ - $ 20,179 $ - Reclassification of construction in process to finance right of use asset $ 98 $ 26,465 $ - Supplemental cash flow information: Cash paid for interest $ 148 $ 2,960 $ 2,990 Cash paid for income taxes $ - $ - $ 26 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents Rocket Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts) 1. Nature of Business and Basis of Presentation Rocket Pharmaceuticals, Inc. (“Rocket” or the “Company”) is a clinical-stage, multi-platform biotechnology company focused on the development of gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. Rocket has three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I ” ), a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., Rocket has a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. Additional discovery efforts on a gene therapy program for the less common FA subtypes C and G is ongoing. The Company has global commercialization and development rights to all of these product candidates under royalty-bearing license agreements . Effective December 2021, the Company made a decision to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program is to be returned to academic innovators. The Company has opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood. 2. Risks and Liquidity The Company has not generated any revenue and has incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities. The Company’s product candidates are in the development and clinical stage. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations and had an accumulated deficit of $ 491.9 million as of December 31, 2021. As of December 31, 2021, the Company has $ 388.7 million of cash, cash equivalents and investments. During the year ended December 31, 2021, the Company issued and sold 812,516 shares of its common stock at a purchase price of $ 32.48 per share for aggregate net proceeds of approximately $ 26.4 million in a private placement transaction to a fund affiliated with RTW Investments, LP., the Company’s largest shareholder (see Note 15) . The Compan y expects such resources will be sufficient to fund the Company’s operating expenses and capital expenditure requirements into the second half of 2023. In April 2021, the Company called for the redemption of the remaining $ 38.4 million principal balance of the Company’s 6.25 % , 2022 Convertible Senior Notes due 2022 which were converted into common stock. On August 2, 2021, holders of $ 5.15 million of the 2021 Convertible Notes converted the remaining $ 5.15 million remaining balance of the 2021 Convertible Notes into common stock (see Note 7) . As of December 31, 2021, none of the 2021 Convertible Notes or 2022 Convertible Notes were outstanding. In the longer term, the future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. F-9 Table of Contents 3. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with accounting principles generally accepted in the United States (“US GAAP”). All intercompany accounts have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to goodwill impairment, the accrual of research and development expenses, the valuation of equity transactions, and stock-based awards. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates. Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash consists of bank deposits, certificates of deposit and money market accounts with financial institutions. Cash equivalents are carried at cost which approximates fair value due to their short-term nature and which the Company believes do not have a material exposure to credit risk. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. The Company’s cash and cash equivalent accounts, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Restricted cash consists of deposits collateralizing letters of credit issued by a bank in connection with the Company’s operating leases (see Note 12 “Commitments and Contingencies” for additional disclosures) and a deposit collateralizing a letter of credit issued by a bank supporting the Company’s corporate credit card. Cash, cash equivalents and restricted cash consist of the following: December 31, 2021 December 31, 2020 Cash and cash equivalents $ 232,694 $ 297,098 Restricted cash 1,343 1,568 $ 234,037 $ 298,666 Government Grants Research and development expense is presented net of reimbursements from the California Institute for Regenerative Medicine (“CIRM”), which are recognized over the period necessary to match the reimbursement with the related costs when it is probable that the Company has complied with the CIRM conditions and will receive the reimbursement. During the years ended December 31, 2021, 2020, and 2019, the Company offset $ 0.1 million, $ 3.6 million and $ 1.2 million of CIRM grant funds against research and development (“R&D”) expenses (See Note 14 “CIRM Grant” for additional disclosure). Concentrations of credit risk and off-balance sheet risk Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and available-for-sale securities. The Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. The Company’s marketable securities consist of U.S. Treasury securities, and Corporate, Government Municipal and Agency Bonds. The Company has adopted an investment policy that limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be at least AA+/Aa1 rated, thereby reducing credit risk exposure. Investments Investments consist of investments in United States Treasury securities and Corporate, Municipal and Agency Bonds. Management determines the appropriate classification of these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its investments as available-for-sale pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 320, Investments—Debt and Equity Securities . Investments are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income (loss) in stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. Realized gains and losses are included in investment income on a specific-identification basis. There were no realized gains or losses on investments for the years ended December 31, 2021, 2020 and 2019. For the years ended December 31, 2021, 2020 and 2019, there was $ 0.1 million of net unrealized losses, $ 0.1 million of net unrealized losses and $ 0.1 million of net unrealized gains on investments, respectively. F-10 Table of Contents Goodwill Business combinations are accounted for under the acquisition method. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Goodwill is tested for impairment annually as of December 31, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has one segment and one reporting unit and as such review’s goodwill for impairment at the consolidated level. When testing goodwill, the Company has the option to first assess qualitative factors for reporting units that carry goodwill. The qualitative assessment includes assessing the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. These events and circumstances include macroeconomic conditions, industry and competitive environment conditions, overall financial performance, reporting unit specific events and market considerations. The Company also considers recent valuations of the reporting unit, including the magnitude of the difference between the most recent fair value estimate and the carrying value, as well as both positive and adverse events and circumstances, and the extent to which each of the events and circumstances identified may affect the comparison of a reporting unit’s fair value with its carrying value. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit. The Company performed the qualitative assessment of its goodwill and determined that it is more likely than not that the fair value of a reporting unit exceeds the carrying value of the reporting unit. As a result, the Company has determined there was no goodwill impairment as of and for the years ended December 31, 2021, 2020 and 2019. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the useful life of the asset. The estimated useful lives are three to fifteen years . The Company capitalizes purchases of laboratory equipment, machinery and equipment, furniture and fixtures and leasehold improvements in relation to the facility at Cranbury, New Jersey, since it has been determined these assets have alternative future uses to the Company. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations. Costs incurred in connection with development or purchase of internal use software and cloud computing arrangements, including in-substance software licenses, are capitalized. Amortization is computed on a straight-line basis over the estimated useful life of the asset, which is six years . Capitalized software is included in property and equipment in the consolidated balance sheets. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducted our long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires us to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There is no impairment of long-lived assets as of and for the years ended December 31, 2021, 2020 and 2019. Fair Value Measurements The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below: F-11 Table of Contents Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, deposits, accounts payable and accrued expenses approximate their respective carrying values due to the short-term nature of these instruments. Research and Development Expenses R&D costs, which include salaries and staff costs, license costs, manufacturing and development costs, clinical trial expenses, regulatory and scientific consulting fees, as well as contract research, and stock-based compensation expense, are accounted for in accordance with ASC Topic 730, Research and Development (“ASC 730”). The Company does not currently have any commercial biopharmaceutical products and does not expect to have any for several years, if at all. Accordingly, R&D costs are expensed as incurred. While certain of the Company’s R&D costs may have future benefits, the policy of expensing all R&D expenditures is predicated on the fact that the Company has no history of successful commercialization of product candidates to base any estimate of the number of future periods that would be benefited. Foreign Currency Transactions Certain transactions during the years ended December 31, 2021, 2020 and 2019 are denominated in Euros and British pounds. Gains and losses on foreign currency transactions were not significant for the years ended December 31, 2021, 2020 and 2019. Treasury Stock The Company records treasury stock at cost. Stock-Based Compensation The Company issues stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units. The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and nonemployee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. The Company classifies stock-based compensation expense in its consolidated statement of operations in the same manner in which the award recipient’s payroll costs and services are classified or in which the award recipient’s service payments are classified. The Company recognizes compensation expense for at least the portion of awards that are vested. Forfeitures are accounted for as they occur. NYS Life Sciences Research and Development Tax Credit New York State allows investors and owners of emerging technology companies focused on biotechnology to claim a tax credit against their New York State Tax return for certain expenditures incurred in New York State, including applicable R&D related expenditures. The credit is recognized as research and development incentives when the eligibility and amount has been approved by New York State. During the years ended December 31, 2021, 2020 and 2019, the Company recorded research and development incentive income of $ 1.0 million, $ 0 , and $ 0 , respectively related to the NYS Life Sciences Research and Development Tax Credit. F-12 Table of Contents NYC Biotechnology Tax Credit Program New York City allowed investors and owners of emerging technology companies focused on biotechnology to claim a tax credit against the General Corporation Tax and Unincorporated Business Tax for amounts paid or incurred for certain facilities, operations, and employee training in New York City. The credit was recognized as research and development incentives when approved by New York City of the eligibility for the credit and the credit amount. During the years ended December 31, 2021, 2020 and 2019, the Company recorded research and development incentive income of $ 0 million , $ 0 , and $ 0.3 million, respectively related to the NYC Biotechnology Program. This program was not renewed by NYC upon its expiration at the end of 2019. Income Taxes The Company accounts for income taxes under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which the Company expects to recover or settle those temporary differences. The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. The Company reduces the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that the Company will not realize some or all of the deferred tax asset. The Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet differences. In accordance with ASC 740 “Income Taxes”, the Company recorded a full valuation allowance to fully offset the net deferred tax asset because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets at December 31, 2021 and 2020. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net Loss Per Share The Company calculates net loss per share in accordance with FASB ASC 260, Earnings per Share. Basic net loss per share attributable to common shareholders is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common shareholders is computed by adjusting net loss attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common shareholders is computed by dividing the diluted net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purposes of this calculation, outstanding options are considered potential dilutive common shares. Segment Reporting Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment. Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources and consists of net loss and changes in unrealized gains and losses on investments. Reclassifications Certain reclassifications have been made to the prior year financial statements in order to conform to the current year’s presentation. Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. The new standard was effective beginning January 1, 2021. The adoption of ASU 2016-13, and related updates, did not have a material impact on the Company’s consolidated financial position and results of operations. F-13 Table of Contents There were no other recent accounting pronouncements that impacted the Company or are expected to have a significant effect on the consolidated financial statements. 4. Fair Value of Financial Instruments Items measured at fair value on a recurring basis are the Company’s investments. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy: Fair Value Measurements as of December 31, 2021 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market mutual funds $ 179,900 $ - $ - $ 179,900 179,900 - - 179,900 Investments: United States Treasury securities 44,045 - - 44,045 Corporate Bonds - 96,696 - 96,696 Municipal Bonds - 6,000 - 6,000 Agency Bonds - 9,305 - 9,305 44,045 112,001 - 156,046 $ 223,945 $ 112,001 $ - $ 335,946 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market mutual funds $ 193,312 $ - $ - $ 193,312 United States Treasury securities 62,497 - - 62,497 Corporate Bonds - 501 - 501 Agency Bonds - 8,015 - 8,015 255,809 8,516 - 264,325 Investments: United States Treasury securities 112,328 - - 112,328 Corporate Bonds - 63,710 - 63,710 Municipal Bonds - 6,000 - 6,000 Agency Bonds - 3,583 - 3,583 112,328 73,293 - 185,621 $ 368,137 $ 81,809 $ - $ 449,946 The Company classifies its money market mutual funds and U.S. Treasury securities as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its Corporate, Municipal and Agency Bonds as Level 2 assets as these assets are not traded in an active market and have been valued through a third-party pricing service based on quoted prices for similar assets. F-14 Table of Contents 5. Property and Equipment, Net The Company’s property and equipment consisted of the following: December 31, 2021 December 31, 2020 Laboratory equipment $ 12,600 $ 7,807 Machinery and equipment 10,432 9,933 Computer equipment 218 218 Furniture and fixtures 1,963 1,880 Leasehold improvements 407 29 Internal use software 1,902 1,385 27,522 21,252 Less: accumulated depreciation and amortization ( 5,223 ) ( 2,046 ) $ 22,299 $ 19,206 Depreciation and amortization during the years ended December 31, 2021, 2020, and 2019 was $ 3.2 million, $ 1.1 million and $ 0.4 million, respectively. 6. Accounts Payable and Accrued Expenses At December 31, 2021 and 2020, the Company’s accounts payable and accrued expenses consisted of the following: December 31, 2021 December 31, 2020 Research and development $ 12,082 $ 14,962 Property and equipment 725 1,756 Employee compensation 4,533 4,875 Accrued interest - 1,122 Government grant payable 597 590 Professional fees 1,196 1,332 Other 482 835 $ 19,615 $ 25,472 7. Convertible Notes Payable 2021 Convertible Notes On January 4, 2018, in connection with its reverse merger with Inotek Pharmaceuticals, Corporation (“Inotek”), the Company assumed the obligations of Inotek under its outstanding convertible notes, with an aggregate original principal amount of $ 52.0 million, (the “2021 Convertible Notes”). The 2021 Convertible Notes were issued in 2016 and were initially scheduled to mature on August 1, 2021 (the “Maturity Date”). The 2021 Convertible Notes were unsecured and accrued interest at a rate of 5.75 % per annum and interest was payable semi-annually on February 1 and August 1 of each year. Each holder of the 2021 Convertible Notes (“Holder”) had the option until the close of business on the second business day immediately preceding the Maturity Date to convert all, or any portion, of the 2021 Convertible Notes held by it at a conversion rate of 31.1876 shares of the Company’s common stock per $ 1.00 principal amount of 2021 Convertible Notes (the “Conversion Rate”) which is $ 32.08 per share. On August 2, 2021, holders of the 2021 Convertible Notes converted the $ 5.15 million remaining balance of the 2021 Convertible Notes into 160,614 shares of the Company’s common. As of December 31, 2021, no ne of the 2021 Convertible Notes were outstanding. 2022 Convertible Notes On February 20, 2020, and June 5, 2020, the Company entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of the 2021 Convertible Notes. Pursuant to the Exchange Agreements, on February 20, 2020, the Company exchanged approximately $ 39.35 million aggregate principal amount of the 2021 Convertible Notes for (a) approximately $ 39.35 million aggregate principal amount of 6.25 % Convertible Senior Notes due August 2022 (the “2022 Convertible Notes”). Also pursuant to the Exchange Agreements, on June 12, 2020, the Company exchanged $ 7.5 million aggregate principal amount of the 2021 Convertible Notes for (a) $ 7.5 million aggregate principal amount of its newly issued 6.25 % Convertible Senior Notes due 2022. The conversion rate for the 2022 Convertible Notes was initially 31.1876 shares of the Company’s common stock per $ 1.00 principal amount of 2022 Convertible Notes, which was equivalent to an initial conversion price of approximately $ 32.06 per share of common stock. The Company may have redeemed for cash all or any portion of the 2022 Convertible Notes, at its option, if the last reported sale price of its common stock was equal to or greater than 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. F-15 Table of Contents In December 2020, $ 8.5 million principal amount, representing a carrying value of $ 7.6 million of the 2022 Convertible Notes was converted into 298,562 shares of the Company’s common stock. On April 26, 2021, the Company called for the redemption of the remaining $ 38.4 million principal amount of the 2022 Convertible Notes as the Company’s stock price traded above the Conversion Rate for at least 20 trading days during a 30 -day consecutive trading period. On April 26, 2021, the Company redeemed in full the 2022 Convertible Notes prior to the redemption date. Holders of approximately $ 38.4 million remaining principal amount of the 2022 Convertible Notes converted such notes in accordance with the terms of the Exchange Agreements into approximately 1.3 million shares of the Company’s common stock and cash in lieu of fractional shares. In accordance with ASC 470- Debt , the settlement of the 2022 Convertible Notes is accounted for as a conversion since the 2022 Convertible Notes did not include a beneficial conversion feature and the carrying amount of the 2022 Convertible Notes. The table below summarizes the carrying value of the 2021 and 2022 Convertible Notes as of December 31, 2021 and 2020: 2021 Notes 2022 Notes December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Principal amount $ - $ 5,150 $ - $ 38,350 Discount - ( 275 ) - ( 3,284 ) Carrying value $ - $ 4,875 $ - $ 35,066 Accretion of the 2021 Convertible Notes discount was $ 0.3 million, $ 1.3 million, and $ 3.6 million for the years ended December 31, 2021, 2020, and 2019, respectively. Accretion of the 2022 Convertible Notes discount was $ 0.5 million and $ 1.5 million for the years ended December 31, 2021 and December 31, 2020. 8. Stockholders’ Equity Common Stock The Company is currently authorized to issue up to 120,000,000 shares of $ 0.01 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/ 1 vote basis. Second Amended and Restated 2014 Stock Option and Incentive Plan In March 2018, Rocket’s Board of Directors approved the Second Amended and Restated 2014 Stock Option and Incentive Plan (the “Revised 2014 Plan”) which was approved by the Company’s shareholders at the Annual Meeting held on June 25, 2018. Treasury Stock During fiscal 2019, the Company recorded treasury stock of $ 0.1 million for shares withheld to pay the payroll tax liability of an option exercise which was remitted in January 2020 . There was no treasury stock as of December 31, 2021 and 2020. Private Placement On August 27, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, the Company’s largest shareholder (the “Purchaser”), pursuant to which the Company agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of the Company’s common stock at a purchase price of $ 32.48 per share for aggregate net proceeds of approximately $ 26.4 million after deducting estimated offering expenses payable. The Private Placement closed on August 31, 2021. Public Offerings On December 14, 2020, the Company completed a public offering of 5,339,286 shares of common stock, which includes the full exercise of the underwriters’ option to purchase an additional 696,428 shares of our common stock, at a public offering price of $ 56.00 per share. The gross proceeds to Rocket from the public offering were approximately $ 299.0 million, net of $ 18.2 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of $ 280.8 million. F-16 Table of Contents 9. Stock-Based Awards Stock Option Valuation The weighted average assumptions that the Company used in the Black-Scholes pricing model to determine the fair value of the stock options granted to employees, non-employees and directors were as follows: Years Ended December 31, 2021 2020 2019 Risk-free interest rate 0.83 % 1.00 % 2.26 % Expected term (in years) 5.84 5.84 5.81 Expected volatility 69.27 % 76.98 % 75.71 % Expected dividend yield 0.00 % 0.00 % 0.00 % Exercise price $ 51.20 $ 22.96 $ 14.47 Fair value of common stock $ 51.20 $ 22.96 $ 14.47 The following table summarizes stock option activity for the years ended December 31, 2021 and 2020, under the Revised 2014 Plan: Number of Shares Weighted Average Exercise Price Weighted Average Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of December 31, 2019 9,763,541 $ 5.95 6.96 $ 164,021 Granted 2,193,546 22.96 8.97 Exercised ( 586,857 ) 4.82 13,494 Cancelled ( 319,299 ) 15.82 Outstanding as of December 31, 2020 11,050,931 $ 9.10 6.55 $ 504,079 Granted 1,671,759 51.20 8.58 Exercised ( 1,209,960 ) 9.32 54,487 Cancelled ( 368,969 ) 35.87 Outstanding as of December 31, 2021 11,143,761 $ 14.51 5.95 $ 128,817 Options vested and exercisable as of December 31, 2021 8,692,898 $ 7.31 5.11 $ 127,571 Options unvested as of December 31, 2021 2,450,863 $ 40.01 8.93 The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2021, 2020 and 2019 was $ 31.07 , $ 15.10 , and $ 9.58 , respectively. The total fair value of options vested during the years ended December 31, 2021, 2020 and 2019 was $ 22.6 million, $ 15.6 million and $ 63.1 million, respectively. Stock-Based Compensation Stock-based compensation expense recognized by award type is as follows: Years Ended December 31, 2021 2020 2019 Stock options $ 28,811 $ 18,527 $ 13,371 Restricted stock units 426 40 - Total share based compensation expense $ 29,237 $ 18,567 $ 13,371 Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows: Years Ended December 31, 2021 2020 2019 Research and development $ 11,954 $ 7,355 $ 6,153 General and administrative 17,283 11,212 7,218 Total share based compensation expense $ 29,237 $ 18,567 $ 13,371 F-17 Table of Contents As of December 31, 2021 and 2020, the Company had an aggregate of $ 46.3 million and $ 30.4 million of unrecognized stock-based compensation expense, which is expected to be recognized over the weighted average period of 1.8 year s and 2.1 years, respectively. Restricted Stock Units (“RSU”) The following table summarizes our RSU activity for the years ended December 31, 2021 and 2020: Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2019 - $ - Granted 20,000 25.06 Exercised - Forfeited - Unvested as of December 31, 2020 20,000 25.06 Granted 3,500 62.32 Exercised - Forfeited - Unvested as of December 31, 2021 23,500 30.61 The intrinsic value of RSU’s vested during the years ended December 31, 2021 and 2020 was $ 0.4 million and $ 0.5 million. As of December 31, 2021, there was approximately $ 0.5 million of unrecognized compensation cost related to RSU’s granted. This amount is expected to be recognized over a weighted average period of 2.8 years. Warrants A summary of the warrants outstanding at December 31, 2021 is as follows: Price Outstanding Grant Date Expiration Date 24.42 7,051 June 28, 2013 June 28, 2023 57.11 603,386 December 21, 2020 December 21, 2030 33.63 301,291 August 9, 2021 August 9, 2031 22.51 153,155 December 17, 2021 December 17, 2031 22.51 153,155 December 17, 2021 December 17, 2031 Total 1,218,038 The following table below is the summary of changes in warrants to purchase common stock for the years ended December 31, 2021 and 2020: Number of Warrant Shares Outstanding and Exercisable Exercise Price per Share Balance as of December 31, 2019 14,102 $ 24.42 Granted 603,386 $ 57.11 Exercised ( 7,051 ) $ - Balance as of December 31, 2020 610,437 Granted August 2021 301,291 $ 33.63 Granted December 2021 306,310 $ 22.51 Exercised - $ - Balance as of December 31, 2021 1,218,038 The Company issued warrants to a related party during the years ended December 31, 2021 and 2020 and incurred a non-cash R&D expense of $ 12.8 million and $ 26.6 million respectively (see Note 15- Related Party Transactions). During the year ended December 31, 2020, 7,051 of warrants were exercised into 1,601 shares of common stock. F-18 Table of Contents The fair value of the 2021 and 2020 warrants was calculated using the Black-Scholes fair value pricing model with the following inputs: Years Ended December 31, 2021 2020 Risk-free interest rate 1.37 % 0.95 % Expected term (in years) 10.00 10.00 Expected volatility 70.25 % 74.20 % Expected dividend yield 0.00 % 0.00 % Exercise price $ 28.07 $ 57.11 Fair value of common stock $ 28.07 $ 57.11 10. Net Loss Per Share Basic and diluted net loss per share attributable to common stockholders was calculated as follows: For the Years Ended December 31, 2021 2020 2019 Numerator: Net loss attributable to common stockholders $ ( 169,069 ) $ ( 139,700 ) $ ( 77,270 ) Denominator: Weighted-average common shares outstanding - basic and diluted 63,235,417 55,380,740 49,010,358 Net loss per share attributable to common stockholders - basic and diluted $ ( 2.67 ) $ ( 2.52 ) $ ( 1.58 ) The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: For the Years Ended December 31, 2021 2020 2019 Shares issuable upon conversion of the 2021 Convertible Notes - 160,536 1,620,948 Shares issuable upon conversion of the 2022 Convertible Notes - 1,195,449 - Warrants exercisable for common shares 1,218,038 610,437 14,102 Restricted stock units exercisable for common shares 23,500 - - Options to purchase common shares 11,143,761 11,050,931 9,608,537 12,385,299 13,017,353 11,243,587 11. Income Taxes No provision for federal or state income taxes was recorded during the years ended December 31, 2021, 2020 and 2019, as the Company incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. A reconciliation of income tax benefit computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows: For the years ended December 31, 2021 2020 2019 U.S. federal tax at statutory rate 21.0 % 21.0 % 21.0 % Foreign rate differential ( 13.0 )% 0.0 % 0.0 % Change in state tax apportionment 0.1 % 0.1 % ( 17.4 )% Stock compensation 1.5 % 0.9 % ( 0.7 )% Transfer pricing adjustments ( 22.8 )% 0.0 % 0.0 % Valuation allowance 4.6 % ( 35.0 )% ( 5.1 )% Tax credits 8.7 % 13.5 % 0.0 % Other ( 0.2 )% ( 0.5 )% 2.1 % Effective tax rate 0 % 0 % 0 % F-19 Table of Contents The significant components of the Company’s deferred income tax assets and liabilities after applying the enacted corporate tax rates are as follows: At December 31, 2021 2020 2019 Deferred income tax assets (liabilities) R&D Credits $ 35,766 $ 42,613 $ 18,471 Net operating losses ("NOL") and credit carryforwards 26,789 21,359 2,517 Capitalized research and development costs 19,753 23,179 27,652 Stock-based compensation 11,552 7,406 3,896 Debt discount - ( 748 ) ( 1,460 ) Warrants 8,382 5,585 - Other ( 8,881 ) 1,189 643 Valuation allowance ( 93,361 ) ( 100,583 ) ( 51,719 ) Net deferred income tax asset $ - $ - $ - As of December 31, 2021, the Company had federal and state net operating loss carryforwards of approximately $ 118.2 million and $ 30.9 million, respectively, which begin to expire in 2026 . Additionally, $ 85.7 million of the Federal NOLs can be carried forward indefinitely. The Company has federal R&D credits of $ 35.8 million which will begin to expire in 2038 . As required by ASC 740, Income Taxes , management of Rocket has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of NOL carryforwards and capitalized research and development costs. As a result of the fact that Rocket has incurred tax losses from inception, management has determined that it is more likely than not that Rocket will not recognize the benefits of federal and state net deferred tax assets and, as a result, a full valuation allowance has been established against its net deferred tax assets as of December 31, 2021, 2020 and 2019. Rocket has offset certain deferred tax liabilities with deferred tax assets that are expected to generate offsetting deductions within the same period. During the years ended December 31, 2021 and 2020, the valuation allowance decreased by $ 7.2 million and increased by $ 48.9 million, respectively. Realization of deferred tax assets is dependent upon the generation of future taxable income. Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company has completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company became a “loss corporation” as defined in Section 382. The Company experienced multiple ownership changes occurring in 2005, 2007, 2015, and 2018. The ownership change has and will continue to subject our pre-ownership change net operating loss carryforwards to an annual limitation, which will significantly restrict our ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. As a result of the ownership change, the Company is limited to an approximate $ 1.7 million annual limitation on our ability to utilize our pre-merger NOL’s and R&D Credits. Due to this limitation, approximately $ 91.2 million of the $ 127.1 million pre-merger Federal NOL will expire unutilized as the cumulative limitation amount over a 20-year carryforward period is $ 35.8 million. Additionally, $ 4.9 million of Federal R&D Credits will expire unutilized. As a result, the Company has reduced its deferred tax assets related to the Federal NOL and Federal R&D Credits by an aggregate of $ 4.9 million which is offset by the corresponding decrease in the valuation allowance. The company evaluated intercompany transfer pricing agreements. Based on a review of the 2018, 2019 and 2020 tax years, the Company determined that a markup of 10 % should have been applied to R&D expenses paid for on behalf of Rocket Pharmaceuticals, Ltd by Rocket Pharmaceuticals, Inc. The net impact was to reduce the Company’s net operating losses for 2018, 2019 and 2020. No income tax expense was recorded as a result of these adjustments. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which Rocket operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2021, 2020 and 2019, the Company has no t recorded any uncertain tax positions in its financial statements. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of December 31, 2021, 2020 and 2019, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets. The Company was audited by New York City for the 2017 tax year and the audit was completed with no change to the 2017 New York City tax return. F-20 Table of Contents 12. Commitments and Contingencies The Company determines if an arrangement is a lease at inception. Operating and finance leases are presented in the Company’s consolidated balance sheet as right-of-use assets from leases, current lease liabilities and long-term lease liabilities. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments using an estimate of the Company’s collateralized borrowing rate for debt with a similar term. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the biotechnology industry. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). For operating leases, the Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred. Finance Lease The Company has a lease for a facility in Cranbury, New Jersey, consisting of 103,720 square feet of space including areas for offices, process development, research and development laboratories and 50,000 square feet dedicated to AAV Current Good Manufacturing Practice (“cGMP”) manufacturing facilities to support the Company’s pipeline. A smaller area within this facility was originally leased in August 2018, and the lease was amended in June 2019 to include the full building (such lease, as amended, the “NJ Lease Agreement”). The NJ Lease Agreement has a 15 -year term from September 1, 2019, with an option to renew for two consecutive five-year renewal terms. The Company determined the lease commencement date was reached on March 15, 2020, when the construction of all landlord owned improvements had been substantially completed and when the Company began including its leasehold improvements on the balance sheet and move equipment into the space. Upon commencement of the NJ Lease Agreement, the Company recognized total right-of-use assets of $ 47.7 million, with a corresponding lease liability of $ 20.2 million. The Company reclassified $ 26.5 million of construction costs in progress and $ 1.1 million of prepaid rent as part of the right-of-use asset upon the lease commencement date of March 15, 2020. During the year ended December 31, 2021, the Company reclassified an additional $ 0.1 million of construction costs in progress bringing the aggregate reclassification through December 31, 2021, of $ 32.1 million of construction costs in progress as part of the right of use asset. Estimated rent payments for the NJ Lease Agreement are $ 1.2 million per annum, payable in monthly installments, depending upon the nature of the leased space, and subject to annual base rent increases of 3 %. The total commitment under the lease is estimated to be approximately $ 29.3 million over the 15 -year term of the lease. The Company paid a cash security deposit of $ 0.3 million to the landlord in connection with the NJ Lease Agreement which has been reflected in deposits in the consolidated balance sheets as of December 31, 2021 and 2020. The total restricted cash balance for the Company’s operating and finance leases at December 31, 2021 and 2020 was $ 0.8 million and $ 1.1 million, respectively. Operating Leases On March 31, 2016 , the Company entered into a lease agreement for its office and laboratory space at the Alexandria Center for Life Sciences in New York, New York with an initial term ending on July 31, 2022 (the “NY Lease Agreement”). Effective May 31, 2020 , the Company terminated the NY Lease Agreement and recorded a loss on lease termination of $ 76 for the year ended December 31, 2020 . On June 7, 2018, the Company entered into a three-year lease agreement for office space in the Empire State Building in New York, NY (the “ESB Lease Agreement”). In connection with the ESB Lease Agreement, the Company established an irrevocable standby letter of credit (the “Empire LOC”) for $ 0.9 million. On March 26, 2021, the Company entered in Amendment No. 1 to the ESB Lease Agreement (“ESB Lease Amendment”) that extended the term of the lease agreement to June 30, 2024 , reduced the rent payments going forward, and reduced the Empire LOC to $ 0.8 million. The Empire LOC serves as the Company’s security deposit on the lease in which the landlord is the beneficiary and expires August 29, 2024 . The Company has accounted for the ESB Lease Amendment as a modification to the ESB Lease Agreement and remeasured the lease liability and adjusted the operating lease right of use asset by $ 1.1 million. The Company has a certificate of deposit of $ 0.8 million and $ 0.9 million with a bank as collateral for the Empire LOC which is classified as part of restricted cash in the consolidated balance sheets as of December 31, 2021 and December 31, 2020, respectively. F-21 Table of Contents On January 4, 2018, in connection with the Reverse Merger, the Company assumed an operating lease for Inotek’s former headquarters in Lexington, Massachusetts, with a term ending in February 2023 . In July 2018, the Company signed an agreement to sublease a portion of the Lexington, Massachusetts space and in September 2018, the Company signed an agreement to sublease the remaining portion of the Lexington, Massachusetts space. Rental income received under the sublease agreement totaled $ 0.4 million, $ 0.4 million, and $ 0.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are netted against rent expense in the consolidated statement of operations for the years ended December 31, 2021, 2020 and 2019. Rent expense was $ 1.2 million, $ 1.1 million, and $ 0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Lease cost December 31, 2021 Operating lease cost $ 645 Finance lease cost Amortization of right of use assets 2,140 Interest on lease liablities 1,845 Total lease cost $ 4,630 The following table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on the Company’s balance sheet as of December 31, 2021: Maturity of operating lease liabilities December 31, 2021 2022 917 2023 548 2024 269 2025 64 2026 54 Total lease payments $ 1,852 Less: interest ( 84 ) Total operating lease liabilities $ 1,768 Maturity of finance lease liability December 31, 2021 2022 1,689 2023 1,736 2024 1,791 2025 1,856 2026 1,912 Thereafter 45,000 Total lease payments $ 53,984 Less: interest ( 33,151 ) Total finance lease liability $ 20,833 Leases December 31, 2021 Operating right-of-use assets $ 1,569 Operating current lease liabilities 863 Operating noncurrent lease liabilities 905 Total operating lease liabilities $ 1,768 Finance right-of-use assets $ 48,480 Finance current lease liability 1,689 Finance noncurrent lease liability 19,144 Total finance lease liability $ 20,833 F-22 Table of Contents Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 655 Cash flows from finance lease $ 1,644 Weighted-average remaining lease term - operating leases 2.5 years Weighted-average remaining lease term - finance lease 22.7 years Weighted-average discount rate - operating leases 4.46 % Weighted-average discount rate - finance lease 8.96 % Litigation From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Indemnification Arrangements Pursuant to its bylaws and as permitted under Delaware law, the Company has indemnification obligations to directors, officers, employees or agents of the Company or anyone serving in these capacities. The maximum potential amount of future payments the Company could be required to pay is unlimited. The Company has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal. Throughout the normal course of business, the Company has agreements with vendors that provide goods and services required by the Company to run its business. In some instances, vendor agreements include language that requires the Company to indemnify the vendor from certain damages caused by the Company’s use of the vendor’s goods and/or services. The Company has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal. 13. Agreements Related to Intellectual Property The Company, directly and through its subsidiary Spacecraft Seven , LLC, has various license and research and collaboration arrangements. The transactions principally resulted in the acquisition of rights to intellectual property which is in the preclinical phase and has not been tested for safety or feasibility. In all cases, the Company did not acquire tangible assets, processes, protocols or operating systems. The Company expenses the acquired intellectual property rights as of the acquisition date on the basis that the cost of intangible assets purchased from others for use in research and development activities, has no alternative future uses. License Agreement for Danon Disease with UCSD In February 2017, the Company entered into a License Agreement with The Regents of the University of California, represented by its San Diego campus (“UCSD”), under which UCSD granted us an exclusive, sublicensable, worldwide license to certain intellectual property rights for the treatment of lysosomal storage diseases, including Danon disease. In exchange for the license, the Company became obligated to make an up-front payment, certain clinical and commercial milestone payments, royalty payments (on net sales of products covered by a valid claim within the licensed intellectual property), maintenance fees and sublicense revenue payments. The upfront license fee of $ 0.05 million was expensed as research and development costs. The Company is obligated to make aggregate milestone payments of up to $ 1.5 million to UCSD upon the achievement of specified development and regulatory milestones for the treatment of Danon disease. A reduced schedule of milestone payments applies to achieving the same milestones for additional indications. With respect to any commercialized products covered by the agreement, the Company is obligated to pay a low single digit percentage royalty on net sales, subject to specified adjustments. If it enters into a sublicense agreement with a sublicensee, it will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances. The Company is also subject to certain diligence milestones for development of a product using the intellectual property licensed from UCSD under this agreement. The term of the license agreement with UCSD is through the expiration of the licensed patents, some of which are still in the pending application phase. REGENXBIO, Inc. License On November 19, 2018, the Company entered into a license agreement with REGENXBIO Inc. (“RGNX”), pursuant to which the Company obtained an exclusive license for all U.S. patents and patent applications related to RGNX’s NAV AAV-9 vector for the treatment of Danon disease in humans by in vivo gene therapy using AAV-9 to deliver any known LAMP2 transgene isoforms and all possible combinations of LAMP2 transgene isoforms (the “Field”), as well as an exclusive option to license (the “Option Right”) all U.S. patents and patent applications for two additional NAV AAV vectors in the Field (each, a “Licensed Patent” and collectively, the “Licensed Patents”). F-23 Table of Contents Under the terms of the license agreement, the Company is obligated to use commercially reasonable efforts to develop, commercialize, market, promote and sell products incorporating the Licensed Patents (“Licensed Products”). Unless the license agreement is terminated earlier as provided below, the license from RGNX expires on a country-by-country, Licensed Product-by-Licensed Product basis until the later of the expiration date of the last to expire of the last valid claim of the applicable Licensed Patent or ten years after the first commercial sale of a Licensed Product in such country. The license agreement provides that RGNX may terminate the agreement upon a material breach by the Company if the Company does not cure such breach within a specified notice period if the Company commences a challenge against RGNX or certain of its licensors to declare or render invalid or unenforceable the licensed patents or upon the Company’s bankruptcy or insolvency. The Company may terminate the agreement in its entirety or terminate one or more of the licensed vectors at any time upon six months ’ notice. The Company’s Option Right expires four years from the date of the license agreement. In consideration for the rights granted to the Company under the license agreement, the Company made an upfront payment to RGNX of $ 7.0 million included as research and development expenses. A fee of $ 2.0 million per additional vector would be due if the Company exercises its Option Right to purchase additional vectors. The license agreement provides for royalties payable to RGNX in the high-single digits to low-teens on net sales levels of Licensed Products during the royalty term. If successful, the Company will be required to make milestone payments to RGNX of up to $ 13.0 million for each Licensed Product upon the achievement of specified clinical development and regulatory milestones in the U.S. and European Union. In addition, the Company shall pay RGNX 20 % of the payment fees received from a priority review voucher issued in connection with or otherwise related to a Licensed Product. These royalty obligations are subject to specified reductions if additional licenses from third parties are required. The Company must also pay RGNX a portion of all non-royalty sublicense income (if any) received from sublicensees. The Company paid a $ 1.0 million license fee payment under the RGNX agreement upon the dosing of the first Danon patient in 2019. There were no additional milestones achieved or related payments made during the years ended December 31, 2021 and 2020. 14. CIRM Grants LAD-I CIRM Grant On April 30, 2019, the California Institute for Regenerative Medicine (“CIRM”) awarded the Company up to $ 6.5 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy for RP-L201. Proceeds from the grant will help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients enrolled at the U.S. clinical site, University of California, Los Angeles (“UCLA”) Mattel Children’s Hospital, led by principal investigator Donald Kohn, M.D., UCLA Professor of Microbiology, Immunology and Molecular Genetics, Pediatrics (Hematology/Oncology), Molecular and Medical Pharmacology and member of the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA. In 2019, the Company received the first two grants from CIRM in the aggregate of $ 1.2 million which were included as an offset against R&D expenses. In 2020, the Company met additional CIRM milestones and received an additional $ 1.1 million milestone which was recorded as a reduction of R&D expenses in 2020. The Company received the additional milestone payments of $ 1.1 million and $ 1.0 million in January and April of 2021, respectively. As of December 31, 2021, the Company did not meet the next milestone and therefore no receivable has been recorded. IMO CIRM Grant On November 12, 2020, the CIRM awarded the Company up to $ 3.7 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy, RP-L401, for the treatment of IMO. The Company received $ 1.0 million pursuant to the grant on January 4, 2021, related to the CIRM IMO award and recorded a receivable, included in prepaid and other assets in the consolidated balance sheet, and a reduction of research and development expenses of $ 0.9 million as of December 31, 2020. The Company recorded a reduction of research and development expense of $ 0.1 million for the year ended December 31, 2021. As of December 31, 2021, the Company did not meet the next milestone and no receivable has been recorded. Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program is to be returned to academic innovators. 15. Related Party Transactions During April 2018, the Company entered into an agreement with a member of the Board of Directors for business development consulting services. Payments for the services under the agreement are $ 28 per quarter, and the Company may terminate the agreement with 14 days’ notice. The Company incurred expenses of $ 0.1 million for each of the years ended December 31, 2021, 2020 and 2019, relating to services provided under this agreement. In September 2021, the Company entered into a consulting agreement with a member of the Board of Directors for pipeline development, new asset evaluation, and corporate strategy. In lieu of cash for services to be provided under the consulting agreement during its one-year term, the Company granted the board member options to purchase 20,000 shares of the Company’s common stock with a fair value of $ 0.4 million. F-24 Table of Contents In October 2020, the Company entered into a consulting agreement with the spouse of one of the Company’s executive officers for information technology advisory services. In exchange for the services provided under the agreement, the Company granted 10,000 restricted stock units which vest over a three-year period. On August 27, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, the Company’s largest shareholder (the “Purchaser”), pursuant to which it agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of the Company’s common stock at a purchase price of $ 32.48 per share for aggregate net proceeds of approximately $ 26.4 million to the Company before deducting estimated offering expenses payable by the Company. The Private Placement closed on August 31, 2021. In addition, concurrently with the execution of the Purchase Agreement, the Company entered into a registration rights agreement with the Purchaser, pursuant to which the Company agreed, following demand by the Purchaser, to file with the Securities and Exchange Commission a Registration Statement on Form S-3 covering the resale of shares of common stock held by the Purchaser as promptly as reasonably practicable following such demand, and in any event within 60 days of such demand. On December 21, 2020, the Company entered into a consulting agreement with a related party. Pursuant to the consulting agreement, the related party provides certain business development and asset identification consulting services to the Company. The term of the consulting agreement is three years and may be terminated with 60 days’ notice by either party. In exchange for the business development services to be provided under the agreement, the Company issued a warrant exercisable for 603,386 shares of Common Stock. Pursuant to the consulting agreement, the related party is entitled to receive additional warrants exercisable for common stock upon identification of new assets for the Company to in-license. The Company recorded a non-cash R&D expense of $ 26.6 million for the year ended December 31, 2020, related to the issuance of the Common Stock warrant. On August 9, 2021, the Company issued a warrant exercisable for 301,291 shares of common stock to the same related party for business development and asset identification consulting services ("August 2021 Warrant"). The Company recorded a non-cash R&D expense of $ 7.6 million during year ended December 31, 2021, related to the issuance of the August 2021 warrant. On December 17, 2021, the Company issued warrants exercisable for 153,155 and 153,155 shares of common stock, respectively to the same related party for business development and asset identification consulting services (“December 2021 Warrants”). The Company recorded a non-cash R&D expense of $ 5.2 million during year ended December 31, 2021, related to the issuance of the December 2021 warrant. Total non-cash R&D expense of $ 12.8 million during the year ended December 31, 2021, related to the issuance of the August 2021 and December 2021 warrants. 16. 401(k) Savings Plan The Company has a defined contribution savings plan (the “Plan”) under Section 401(k) of the Internal Revenue Code of 1986. This Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the Plan may be made at the discretion of the Company’s Board of Directors. The Company has elected to match 4 % of employee contributions to the Plan, subject to certain limitations. The Company’s matching contribution for the years ended December 31, 2021, 2020, and 2019 was $ 0.6 million, $ 0.3 million, and $ 0.2 million, respectively. F-25