ROCKET PHARMACEUTICALS, INC. 10-K

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, 2022, our principal executive officer and interim principal financial and accounting officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-1I) and 15I5(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 interim principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 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, 2022, 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, 2022, based on criteria established in the COSO 2013 framework. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by EisnerAmper LLP, an independent registered public accounting firm, as stated in their report which is included herein. 73 Table of Contents 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 2023 Annual Meeting of Stockholders (“Proxy Statement”) under the headings “Nominees for Election as Directors,” “Information about Our Executive Officers,” “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 11. Executive Compensation Information with respect to this item will be set forth in the Proxy Statement under the headings “Executive Officer Compensation” and “Director Compensation” and “Equity Compensation Plan Information” 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 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 “Equity Compensation Plan Information” 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. 74 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, 2022 and 2021 F-5 Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020 F-6 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022, 2021 and 2020 F-7 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020 F-8 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 F-9 Notes to Consolidated Financial Statements F-10 (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. 75 Table of Contents (3) Exhibits: Exhibit Exhibit Index Number 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, filed with the SEC on September 13, 2017, and incorporated herein by reference) 2.2 Agreement and Plan of Merger, dated September 19, 2022, by and among Rocket Pharmaceuticals, Renovacor, Inc., Zebrafish Merger Sub, Inc. and Zebrafish Merger Sub, LLC (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 20, 2022, 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, 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 3.2 to the Company’s Current Report on Form 8-K, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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 April 29, 2021, by and between the registrant and Isabel Carmona. 10.12** 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, filed with the SEC on August 8, 2018, and incorporated herein by reference) 10.13# 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, filed with the SEC on March 7, 2018, and incorporated herein by reference) 10.14# 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, filed with the SEC on January 5, 2018, and incorporated herein by reference) 10.15# 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, filed with the SEC on January 5, 2018, and incorporated herein by reference) 10.16# 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, filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.17 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, filed with the SEC on August 14, 2018, and incorporated herein by reference) 76 Table of Contents 10.18† 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, filed with the SEC on March 8, 2019, and incorporated herein by reference) 10.19 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, filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.20 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, filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.21 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, filed with the SEC on March 1, 2021, and incorporated herein by reference) 10.22 Warrant to Purchase Shares of Common Stock, dated as of December 17, 2021, by and between the Registrant and Neptune Consulting, LLC. (First Indication) 10.23 Warrant to Purchase Shares of Common Stock, dated as of December 17, 2021, by and between the Registrant and Neptune Consulting, LLC. (Second Indication) 10.24 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, filed with the SEC on August 30, 2021, and incorporated herein by reference) 10.25 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, filed with the SEC on August 30, 2021, and incorporated herein by reference) 10.26 Sales Agreement, dated February 28, 2022, by and between the Company and Cowen and Company, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 1, 2022, and incorporated herein by reference) 21.1 List of Subsidiaries (Filed as Exhibit 21.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 1, 2021, and incorporated herein by reference) 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. 77 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, 2023. 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 John Militello, 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, 2023 Gaurav Shah, MD (Principal Executive Officer) /s/ John C. Militello VP, Finance, Senior Controller & Treasurer February 28, 2023 John C. Militello (Interim Principal Financial Officer, Principal Accounting Officer) /s/ Carsten Boess Carsten Boess Director February 28, 2023 /s/ Pedro Granadillo Pedro Granadillo Director February 28, 2023 /s/ Gotham Makker, MD Gotham Makker, MD Director February 28, 2023 /s/ David P. Southwell David P. Southwell Director February 28, 2023 /s/ Roderick Wong, MD Roderick Wong, MD Director February 28, 2023 /s/ Naveen Yalamanchi, MD Naveen Yalamanchi, MD Director February 28, 2023 /s/ Elisabeth Björk Elisabeth Björk Director February 28, 2023 /s/ Fady Malik Fady Malik Director February 28, 2023 79 Table of Contents Rocket Pharmaceuticals, Inc. Index to Consolidated Financial Statements Contents Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020 F-5 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022, 2021 and 2020 F-6 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 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, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022, 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, 2023 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 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 matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Accruals for research and development expenses As disclosed in Note 3 to the 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 accounts payable and accrued research and development expenses as of December 31, 2022 were approximately $19.1 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 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 amount owed by the Company as of December 31, 2022 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 of the resulting accruals. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2016. EISNERAMPER LLP Iselin, New Jersey February 28, 2023 F-2 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of 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, 2022, 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, 2022, 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 Rocket Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2022, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and our report dated February 28, 2023 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, 2023 F-3 Table of Contents Rocket Pharmaceuticals, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 140,517 $ 232,694 Investments 215,877 156,046 Prepaid expenses and other current assets 7,666 3,319 Total current assets 364,060 392,059 Property and equipment, net 29,009 22,299 Goodwill 39,154 30,815 Intangible assets 25,724 - Restricted cash 1,340 1,343 Deposits 608 455 Investments 43,276 - Operating lease right-of-use assets 1,972 1,569 Finance lease right-of-use asset 46,664 48,480 Total assets $ 551,807 $ 497,020 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 36,660 $ 19,615 Operating lease liabilities, current 773 863 Finance lease liability, current 1,736 1,689 Total current liabilities 39,169 22,167 Operating lease liabilities, non-current 1,088 905 Finance lease liability, non-current 19,269 19,144 Other liabilities 2,595 80 Total liabilities 62,121 42,296 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; 79,123,312 and 64,505,889 shares issued and 79,120,741 and 64,505,889 shares outstanding at December 31, 2022 and December 31, 2021, respectively 791 645 Treasury stock, at cost, 2,571 and 0 common shares at December 31, 2022 and December 31, 2021 respectively ( 47 ) - Additional paid-in capital 1,203,074 946,152 Accumulated other comprehensive loss ( 357 ) ( 161 ) Accumulated deficit ( 713,775 ) ( 491,912 ) Total stockholders’ equity 489,686 454,724 Total liabilities and stockholders’ equity $ 551,807 $ 497,020 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, 2022 2021 2020 Revenue $ - $ - $ - Operating expenses: Research and development 165,570 125,476 105,438 General and administrative 58,773 41,772 28,865 Total operating expenses 224,343 167,248 134,303 Loss from operations ( 224,343 ) ( 167,248 ) ( 134,303 ) Research and development incentives 500 1,000 - Interest expense ( 1,862 ) ( 2,977 ) ( 6,967 ) Interest and other income, net 3,889 3,068 2,150 Amortization of premium on investments, net ( 47 ) ( 2,912 ) ( 580 ) Total other income (expense), net 2,480 ( 1,821 ) ( 5,397 ) Net loss $ ( 221,863 ) $ ( 169,069 ) $ ( 139,700 ) Net loss per share attributable to common stockholders - basic and diluted $ ( 3.26 ) $ ( 2.67 ) $ ( 2.52 ) Weighted-average common shares outstanding - basic and diluted 68,148,925 63,235,417 55,380,740 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, 2022 2021 2020 Net loss $ ( 221,863 ) $ ( 169,069 ) $ ( 139,700 ) Other comprehensive loss Net unrealized loss on investments ( 196 ) ( 119 ) ( 62 ) Total comprehensive loss $ ( 222,059 ) $ ( 169,188 ) $ ( 139,762 ) 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 Treasury Additional paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Stock capital Income / (Loss) Deficit Equity 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 ) Stock-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 marketable securities - - - - ( 119 ) - ( 119 ) Stock-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 Issuance of common stock, net of issuance costs 7,820,000 78 - 108,060 - - 108,138 Issuance of common stock pursuant to exercise of stock options 66,887 1 - 630 - - 631 Issuance of common stock pursuant to vesting of restricted stock units 10,168 - - - - - - Issuance of common stock related to acquisition 3,420,774 34 - 70,690 - - 70,724 Issuance of common stock related to earnout restricted stock units settlement 5,101 - - - - - - Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs 3,291,922 33 - 46,533 - - 46,566 Treasury stock repurchase 2,571 - ( 47 ) - - - ( 47 ) Unrealized comprehensive loss on marketable securities - - - - ( 196 ) - ( 196 ) Stock-based compensation - - - 31,009 - - 31,009 Net loss - - - - - ( 221,863 ) ( 221,863 ) Balance at December 31, 2022 79,123,312 $ 791 $ ( 47 ) $ 1,203,074 $ ( 357 ) $ ( 713,775 ) $ 489,686 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, 2022 2021 2020 Operating activities: Net loss $ ( 221,863 ) $ ( 169,069 ) $ ( 139,700 ) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discount on convertible notes - 753 2,758 Depreciation and amortization of property and equipment 3,932 3,240 1,145 Amortization of right of use asset 2,334 2,133 5,105 Write down of property and equipment, net 236 261 419 Stock-based compensation 31,009 29,237 18,567 Amortization of premium on investments, net 134 2,887 580 Expense in connection with warrant issuance - 12,781 26,562 Changes in operating assets and liabilities, net of acquisition: Prepaid expenses and other assets ( 3,593 ) 1,307 ( 1,517 ) Accounts payable and accrued expenses 9,674 ( 4,827 ) 11,015 Operating lease liabilities ( 120 ) ( 11 ) ( 139 ) Finance lease liability 172 201 452 Other liabilities ( 57 ) ( 56 ) 113 Net cash used in operating activities ( 178,142 ) ( 121,163 ) ( 74,640 ) Investing activities: Purchases of investments ( 376,327 ) ( 245,875 ) ( 209,343 ) Proceeds from maturities of investments 272,894 272,443 141,811 Cash proceeds from acquisition of business, net of cash paid 42,726 - - Payments made to acquire right of use asset ( 261 ) ( 95 ) ( 8,452 ) Purchases of property and equipment ( 8,358 ) ( 7,620 ) ( 20,607 ) Net cash (used in) provided by investing activities ( 69,326 ) 18,853 ( 96,591 ) Financing activities: Issuance of common stock, pursuant to exercise of stock options 631 26,354 2,558 Issuance of common stock, net of issuance costs 108,138 11,327 280,763 Proceeds from sale of treasury stock, net of cash paid - - 591 Payment of withholding tax on option exercise - - ( 614 ) Treasury stock repurchase ( 47 ) - ( 72 ) Convertible notes refinancing costs to the lender - - ( 237 ) Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs 46,566 - - Net cash provided by financing activities 155,288 37,681 282,989 Net change in cash, cash equivalents and restricted cash ( 92,180 ) ( 64,629 ) 111,758 Cash, cash equivalents and restricted cash at beginning of period 234,037 298,666 186,908 Cash, cash equivalents and restricted cash at end of period $ 141,857 $ 234,037 $ 298,666 Supplemental disclosure of non-cash financing and investing activities: Accrued purchases of property and equipment, ending balance $ 2,095 $ 728 $ 1,756 Unrealized loss on investments ( 196 ) ( 119 ) ( 62 ) Conversion of convertible notes into common stock - 40,694 7,629 Issuance of common stock related to acquisition 70,724 - - Finance lease right of use asset and lease liability - - 20,179 Reclassification of construction in process from finance right of use asset 261 98 26,465 Supplemental cash flow information: Cash paid for interest $ - $ 148 $ 2,960 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 first, only and best-in-class gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. The Company has three clinical-stage ex vivo lentiviral vector (“LV”) 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”). Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. In the U.S., the Company also 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. The Danon program is currently in an ongoing Phase 1 trial. Additionally, the Company has an AAV vector program targeting Plakophilin-2 Arrhythmogenic Cardiomyopathy (“PKP2-ACM”), an inheritable cardiac disorder that is characterized by a progressive loss of cardiac muscle mass, severe right ventricular dilation, dysplasia, fibrofatty replacement of the myocardium and a high propensity to arrhythmias and sudden death. As a result of the Company’s acquisition of Renovacor Inc. (“Renovacor”) (see Note 17-“Renovacor Acquisition”), the Company is able to utilize recombinant AAV9-based gene therapy designed to slow or halt progression of BAG3 Dilated Cardiomyopathy (“DCM”), which is the most common form of cardiomyopathy and is characterized by progressive thinning of the walls of the heart resulting in enlarged heart chambers that are unable to pump blood. The Company has global commercialization and development rights to all of these product candidates under royalty-bearing license agreements. Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. Although the Company believes that gene therapy may be beneficial to patients afflicted with this disorder, it has opted to focus available resources towards advancement of RP-A601, RP-A501, RP-L102, RP-L201, RP-L301 and BAG3-DCM. 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 $ 713.8 million as of December 31, 2022. As of December 31, 2022, the Company has $ 399.7 million of cash, cash equivalents, and short-term and long-term investments. The Company expects such resources will be sufficient to fund the Company’s operating expenses and capital expenditure requirements through 2024. On February 28, 2022, the Company entered into a sales agreement (the “Sales Agreement”), with Cowen and Company, LLC (“Cowen”), with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $ 0.01 per share, having an aggregate offering price of up to $ 200 million (the “Shares”) through Cowen as its sales agent. Through December 31, 2022, the Company has sold 3.3 million shares of common stock for net proceeds of $ 46.6 million pursuant to the at-the-market offering program (see Note 9-“Stockholder’s Equity”). On October 6, 2022, the Company completed a follow-on offering (the “Offering”) pursuant to which it sold 7,820,000 shares of common stock for net proceeds of $ 108.1 million (see Note 9-“Stockholder’s Equity”). 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, intangible assets, 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 14 “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, 2022 December 31, 2021 Cash and cash equivalents $ 140,517 $ 232,694 Restricted cash 1,340 1,343 $ 141,857 $ 234,037 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, 2022, 2021, and 2020, the Company offset $ 0 , $ 0.1 million, and $ 3.6 million of CIRM grant funds, respectively against research and development (“R&D”) expenses (See Note 16 “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, Commercial Paper and Corporate, Government Municipal and Agency Bonds. The Company’s investment policy 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 U.S. Treasury Securities, Commercial Paper and Corporate, Government 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, 2022, 2021 and 2020. For the years ended December 31, 2022, 2021 and 2020, there was net unrealized losses on investments of $ 0.2 million, $ 0.1 million, and $ 0.1 million, respectively. F-10 Table of Contents Intangible Assets Intangible assets related to in process research and development (“IPR&D”) projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. IPR&D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized in R&D expenses in the Consolidated Statements of Operations. These IPR&D intangible assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment based on indicators including progress of R&D activities, changes in projected development of assets, and changes in regulatory environment and future commercial markets . 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, 2022, 2021 and 2020. 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 its 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, 2022, 2021 and 2020. F-11 Table of Contents 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 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: 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 most of these instruments. Warrants The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (”ASC 480”) and/or ASC Topic 815, Derivatives and Hedging (”ASC 815”), depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are recorded in Change in Fair Value of Warrant Liability in the Company’s consolidated statements of operations. Equity-classified warrants are recorded within additional paid-in capital at the time of issuance and not subject to remeasurement. 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. 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, 2022, 2021 and 2020 are denominated in Euros and British pounds. Gains and losses on foreign currency transactions were not significant for the years ended December 31, 2022, 2021 and 2020. Treasury Stock The Company records treasury stock at cost. F-12 Table of Contents 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 non-employee 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. 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 statements 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. New York State Life Sciences Research and Development Tax Credit New York State (“NYS”)allows investors and owners of emerging technology companies focused on biotechnology to claim a tax credit against their NYS Tax return for certain expenditures incurred in NYS, including applicable R&D related expenditures. The credit is recognized as R&D incentives when the eligibility and amount has been approved by NYS. During the years ended December 31, 2022, 2021 and 2020, the Company recorded R&D incentive income of $ 0.5 million, $ 1.0 million, and $ 0 , respectively related to the NYS Life Sciences Research and Development Tax Credit. 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, 2022 and 2021. 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. Recent Accounting Pronouncements There were no recent accounting pronouncements that impacted the Company or are expected to have a significant effect on the consolidated financial statements. F-13 Table of Contents 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, 2022 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market mutual funds $ 90,527 $ - $ - $ 90,527 Commercial Paper - 3,899 - 3,899 United States Treasury Securities 3,848 - - 3,848 Corporate Bonds - 8,618 - 8,618 94,375 12,517 - 106,892 Investments: Commercial Paper - 1,151 - 1,151 United States Treasury securities 189,444 - - 189,444 Corporate Bonds - 60,905 - 60,905 Agency Bonds - 7,653 - 7,653 189,444 69,709 - 259,153 Total assets $ 283,819 $ 82,226 $ - $ 366,045 Liabilities: Warrant liability $ - $ - $ 1,512 $ 1,512 Total liabilities $ - $ - $ 1,512 $ 1,512 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 Total assets $ 223,945 $ 112,001 $ - $ 335,946 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 Commercial Paper and 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 Warrant Liability The reconciliation of the Company’s warrant liability, which is recorded as part of Other Liabilities in the consolidated balance sheets, measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows: Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis Warrant Liability Balance, January 1, 2022 $ - Acquisition of Renovacor 1,512 Balance, December 31, 2022 $ 1,512 Assumptions Used in Determining Fair Value of Liability-Classified Warrants The Company utilizes a Black-Scholes model to value the Private Warrants (see Note 11-“Warrants”) at each reporting period, with changes in fair value recognized in the consolidated statements of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in an options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the expected volatility of its common stock based on historical volatility of a peer group, considering the expected remaining life of the Private Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the Private Warrants. The expected life of the Private Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero . The fair value of the Private Warrants has been estimated with the following assumptions: December 1, 2022 Stock price $ 18.39 Exercise price $ 65.23 Expected volatility 71.25 % Risk-free interest rate 4.14 % Expected dividend yield - Expected life (years) 2.39 Fair value per warrant $ 2.45 The fair value change from December 1, 2022, to December 31, 2022, was immaterial. 5. Property and Equipment, Net The Company’s property and equipment consisted of the following: December 31, 2022 December 31, 2021 Laboratory equipment $ 21,905 $ 12,600 Machinery and equipment 11,326 10,432 Computer equipment 244 218 Furniture and fixtures 2,135 1,963 Leasehold improvements 589 407 Internal use software 1,903 1,902 38,102 27,522 Less: accumulated depreciation and amortization ( 9,093 ) ( 5,223 ) $ 29,009 $ 22,299 Depreciation and amortization during the years ended December 31, 2022, 2021, and 2020 was $ 3.9 million, $ 3.2 million and $ 1.1 million, respectively. F-15 Table of Contents 6. Intangible Assets and Goodwill The Company’s indefinite lived intangible assets consists of acquired IPR&D asset and mice colony model received from the acquisition of Renovacor. Intangible assets as of December 31, 2022 are summarized as follows: Gross Carrying Value Accumulated Amortization Intangible Assets, Net In process research & development $ 25,150 $ - $ 25,150 Mice colony model 574 - 574 Total intangible assets $ 25,724 $ - $ 25,724 The increase in gross carrying value of intangible assets was due to the acquisition of Renovacor (see Note 17-“Renovacor Acquisition”). The carrying value of Goodwill increased to $ 39.2 million as of December 31, 2022 compared to $ 30.8 million as of December 31, 2021 as a result of the acquisition of Renovacor (see Note 17-“Renovacor Acquisition”). 7. Accounts Payable and Accrued Expenses At December 31, 2022 and 2021, the Company’s accounts payable and accrued expenses consisted of the following: December 31, 2022 December 31, 2021 Research and development $ 19,100 $ 12,082 Employee compensation 10,006 4,533 Property and equipment 2,095 725 Professional fees 1,436 1,196 Acquisition related expenses 1,153 - Government grant payable 597 597 Other 2,273 482 $ 36,660 $ 19,615 8. Convertible Notes 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”). 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 $39.4 million aggregate principal amount of the 2021 Convertible Notes for (a) approximately $ 39.4 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. On April 26, 2021, the Company redeemed the remaining approximately $ 38.4 million principal amount of the 2022 Convertible Notes as the Company’s stock price traded 30 % above the initial conversion price for more than 20 trading days during a 30 -day consecutive trading period. Holders of the 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. As of December 31, 2022, there were no 2022 Convertible Notes were outstanding. Accretion of the 2021 Convertible Notes discount was $ 0 , $ 0.3 million, and $ 1.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. Accretion of the 2022 Convertible Notes discount was $ 0 , $ 0.5 million and $ 1.5 million for the years ended December 31, 2022, 2021 and 2020, which was recorded in interest expense in the consolidated statements of operations. F-16 Table of Contents 9. 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 2022, the Company recorded treasury stock of $ 0.05 million for shares withheld to pay the payroll tax liability of the vesting of RSUs. There was no treasury stock as of December 31, 2021. 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 issued and sold 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. At-the-Market Offering Program On February 28, 2022, the Company entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares through Cowen as its sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3. The Company filed a prospectus supplement with the SEC on February 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement. The Company will pay Cowen a cash commission of 3.0 % of gross proceeds from the sale of the shares pursuant to the Sales Agreement and has provided Cowen with customary indemnification and contribution rights. The Company reimbursed Cowen for certain expenses incurred in connection with the Sales Agreement. Through December 31, 2022 , the Company has sold 3.3 million shares under the at-the-market offering program for gross proceeds of $ 48.0 million, less commissions of $ 1.4 million for net proceeds of $ 46.6 million. Public Offerings On October 6, 2022, the Company completed a public offering of 7,820,000 shares of our common stock at a public offering price of $ 14.75 per share. The gross proceeds to Rocket from the public offering were approximately $ 115.3 million, net of $ 7.2 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of $ 108.1 million. 10. 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, 2022 2021 2020 Risk-free interest rate 2.19 % 0.83 % 1.00 % Expected term (in years) 5.09 5.84 5.84 Expected volatility 64.12 % 69.27 % 76.98 % Expected dividend yield 0.00 % 0.00 % 0.00 % Exercise price $ 18.56 $ 51.20 $ 22.96 Fair value of common stock $ 18.56 $ 51.20 $ 22.96 F-17 Table of Contents The following table summarizes stock option activity for the years ended December 31, 2022 and 2021, 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, 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 Conversion of Renovacor awards 367,852 4.63 0.40 Granted 2,305,910 13.94 5.53 Exercised ( 66,887 ) 9.43 514 Cancelled ( 611,766 ) 32.55 Outstanding as of December 31, 2022 13,138,870 $ 14.52 5.46 $ 118,767 Options vested and exercisable as of December 31, 2022 10,246,291 $ 12.31 4.46 $ 110,512 Options unvested as of December 31, 2022 2,892,579 $ 22.35 9.02 $ 8,255 The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $ 9.88 , $ 31.07 , and $ 15.10 , respectively. The total fair value of options vested during the years ended December 31, 2022, 2021 and 2020 was $ 34.9 million, $ 22.6 million and $ 15.6 million, respectively. Restricted Stock Units (“RSU”) The following table summarizes the RSU activity for the years ended December 31, 2022 and 2021: Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2020 20,000 $ 25.06 Granted 3,500 62.32 Vested - Forfeited - Unvested as of December 31, 2021 23,500 $ 30.61 Conversion of Renovacor awards 28,798 0.49 Granted 1,047,301 15.91 Vested ( 38,966 ) 23.15 Forfeited ( 67,759 ) 15.94 Unvested as of December 31, 2022 992,874 $ 16.49 The intrinsic value of RSU’s vested during the years ended December 31, 2022, 2021 and 2020 was $ 0.8 million, $ 0.4 million, and $ 0.5 million, respectively. As of December 31, 2022, there was approximately $ 13.1 million of unrecognized compensation cost related to RSU’s unvested. This amount is expected to be recognized over a weighted average period of 2.5 years. Stock-Based Compensation Stock-based compensation expense recognized by award type is as follows: Years Ended December 31, 2022 2021 2020 Stock options $ 27,620 $ 28,811 $ 18,527 Restricted stock units 3,389 426 40 Total share based compensation expense $ 31,009 $ 29,237 $ 18,567 F-18 Table of Contents Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows: Years Ended December 31, 2022 2021 2020 Research and development $ 12,466 $ 11,954 $ 7,355 General and administrative 18,543 17,283 11,212 Total share based compensation expense $ 31,009 $ 29,237 $ 18,567 As of December 31, 2022, the Company had an aggregate of $ 45.6 million of unrecognized stock-based compensation expense, which is expected to be recognized over the weighted average period of 1.3 years. 11. Warrants A summary of the Rocket warrants outstanding at December 31, 2022 is as follows: Exercise Price Outstanding Grant/Assumption 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 65.23 617,050 December 1, 2022 April 23, 2025 65.23 760,086 December 1, 2022 December 1, 2026 0.06 126,093 December 1, 2022 N/A Total 2,721,267 The following table below is the summary of changes in Rocket warrants to purchase common stock for the years ended December 31, 2022, 2021 and 2020: Number of Warrant Shares Outstanding and Exercisable Exercise Price per Share 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 Assumed Renovacor warrants - liability 617,050 $ 65.23 Assumed Renovacor warrants - equity 760,086 65.23 Assumed Renovacor warrants - equity 126,093 0.06 Granted - - Exercised - - Balance as of December 31, 2022 2,721,267 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 18- “Related Party Transactions”). No warrants were issued to the related party during the year ended December 31, 2022. F-19 Table of Contents The fair value of the 2021 Rocket warrants was calculated using the Black-Scholes fair value pricing model with the following inputs: Year Ended December 31, 2021 Risk-free interest rate 1.37 % Expected term (in years) 10 Expected volatility 70.25 % Expected dividend yield 0.00 % Exercise price $ 28.07 Fair value of common stock $ 28.07 Assumed Renovacor Public Warrants In conjunction with the Renovacor acquisition (see “Note 17-Renovacor Acquisition”) Rocket assumed outstanding original 8,622,644 pre-acquisition public warrants (“Public Warrants”) which were issued in connection with Renovacor’s initial public offering in April 2020. Each Public Warrant initially entitled the holder to purchase one-half of one share of Renovacor’s common stock at an initial exercise price of $ 11.50 per whole share, subject to adjustment. No fractional shares will be issued upon exercise of the Public Warrants. Therefore, the Public Warrants must be exercised in multiples of two Public Warrants for one share of the Company’s common stock. The Public Warrants will expire five years following the SPAC Merger Closing Date or earlier upon redemption or liquidation. As a result of the acquisition, these former Renovacor Public Warrants were converted into Rocket warrants with a right to purchase 760,086 of Rocket common shares at an exercise price of $ 65.23 per share. The Company may redeem the Public Warrants in whole and not in part at a price of $ 0.01 per Public Warrant at any time during the exercise period upon a minimum of 30 days’ prior written notice of redemption if, and only if, the last sale price of the Company’s common stock equals or exceeds $ 90.75 per share for any 10 trading days within a 30 -trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such Public Warrants at the time of redemption and for the entire 30 -day trading period referred to above and continuing each day thereafter until the date of redemption. To date, certain of the above conditions have not been met to redeem the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants. As of December 31, 2022, the Company determined that the Public Warrants met all of the criteria for equity classification. Accordingly, upon closing of the Merger, the Public Warrants were recorded as a component of additional paid-in capital of $ 3.4 million. Assumed Renovacor Private Warrants Prior to the acquisition, Renovacor had outstanding 3,500,000 warrants (“Private Warrants”) which were issued simultaneously with the closing of the Renovacor Initial Public Offering (“IPO”), pursuant to a private placement transaction. Each Private Warrant was exercisable to purchase one share of Renovacor’s common stock at an exercise price of $ 11.50 . The Private Warrants are identical to the Public Warrants except that the Private Warrants (i) will be exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and (ii) will not be non-redeemable by the Company, in each case, so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Private Warrants purchased by Chardan Capital Markets will not be exercisable more than five years from the effective date of the Renovacor IPO, in accordance with FINRA Rule 5110(f)(2)(G)(i), as long as Chardan Capital Markets or any of its related persons beneficially own these Private Warrants. As a result of the acquisition, the Private Warrants were converted into warrants with a right to purchase 617,050 of Rocket common shares at an exercise price of $ 65.23 per share. The Private Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. The Company classifies the Private Warrants as derivative liabilities in its consolidated balance sheets. The Company measures the fair value of the warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s operating results for the current period. See Note 4 for discussion of fair value measurement of the warrant liabilities. F-20 Table of Contents Assumed Renovacor Pre-Funded Warrants Concurrently with the execution of the SPAC Merger Agreement, Renovacor entered into subscription agreements (the “Subscription Agreements”), with certain investors (“PIPE Investors”), including Chardan Healthcare, certain stockholders of Old Renovacor and certain other institutional and accredited investors, pursuant to which, on the SPAC Closing Date, and concurrently with the closing of the SPAC Business Combination, the PIPE Investors purchased an aggregate of 2,284,776 shares the Company’s common stock, at a price of $ 10.00 per share, and a pre-funded warrant entitling the holder thereof to purchase 715,224 shares of the Company’s common stock (the “Pre- Funded Warrant”) at an initial purchase price of $ 9.99 per share underlying the Pre-Funded Warrant, for aggregate gross proceeds of approximately $ 30.0 million (the “PIPE Investment”). The Pre-Funded Warrant was immediately exercisable at an exercise price of $ 0.01 and is exercisable indefinitely, provided that the holder of the Pre-Funded Warrant was prohibited from exercising such Pre-Funded Warrant in an amount that would cause such holder’s beneficial ownership of our Common Stock to exceed 9.99 %, which limitation may be increased up to 19.99 % at the option of the holder from time to time. As a result of the acquisition, these Pre-Funded Warrants were converted into warrants with a right to purchase 126,093 of Rocket common shares at an exercise price of $ 0.06 per share. These warrants were exercised in January 2023. As of December 31, 2022, the Company determined that the Pre-Funded Warrants met all of the criteria for equity classification. Accordingly, upon closing of the Merger, the Public Warrants were recorded as a component of additional paid-in capital of $ 2.3 million. 12. 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, 2022 2021 2020 Numerator: Net loss attributable to common stockholders $ ( 221,863 ) $ ( 169,069 ) $ ( 139,700 ) Denominator: Weighted-average common shares outstanding - basic and diluted 68,148,925 63,235,417 55,380,740 Net loss per share attributable to common stockholders - basic and diluted $ ( 3.26 ) $ ( 2.67 ) $ ( 2.52 ) 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: Twelve Months Ended December 31, 2022 2021 2020 Shares issuable upon conversion of the 2021 Convertible Notes - - 160,536 Shares issuable upon conversion of the 2022 Convertible Notes - - 1,195,449 Warrants exercisable for common shares 2,721,267 1,218,038 610,437 Restricted stock units convertible for common shares 992,874 23,500 - Options to purchase common shares 13,138,870 11,143,761 11,050,931 16,853,011 12,385,299 13,017,353 13. Income Taxes No provision for federal or state income taxes was recorded during the years ended December 31, 2022, 2021 and 2020, as the Company incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. F-21 Table of Contents 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, 2022 2021 2020 U.S. federal tax at statutory rate 21.0 % 21.0 % 21.0 % Foreign rate differential ( 16.9 %) ( 13.0 %) 0 % Change in state tax apportionment ( 0.1 %) 0.1 % 0.1 % Stock compensation 0.1 % 1.5 % 0.9 % Transfer pricing adjustments 0 % ( 22.8 %) 0 % Valuation allowance 6.3 % 4.6 % ( 35.0 %) Federal NOL true-up ( 2.7 %) 0 % 0 % Tax credits ( 6.7 %) 8.7 % 13.5 % Other ( 1.0 %) ( 0.1 %) ( 0.5 %) Effective tax rate 0 % 0 % 0 % The significant components of the Company’s deferred income tax assets and liabilities after applying the enacted corporate tax rates are as follows: As of December 31, 2022 2021 2020 Deferred income tax assets (liabilities) R&D credits $ 20,984 $ 35,766 $ 42,613 Net operating losses (“NOL”) and credit carryforwards 33,718 26,789 21,359 Capitalized research and development costs 19,085 19,753 23,179 Stock-based compensation 19,781 11,552 7,406 Debt discount - - ( 748 ) Warrants 8,390 8,382 5,585 Intangible assets ( 5,424 ) - - Other ( 6,332 ) ( 8,881 ) 1,189 Valuation allowance ( 91,263 ) ( 93,361 ) ( 100,583 ) Net deferred income tax asset (liability) $ ( 1,061 ) $ - $ - As of December 31, 2022, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 142.5 million, of which approximately $ 3.4 million will begin to expire in 2026 , and state NOL carryforwards of approximately $ 76.6 million, of which approximately $ 4.8 million will begin to expire in 2037 . Under the Tax Cuts and Jobs Act, federal NOL’s generated in tax years beginnig after December 31, 2017 have an unlimited carryforward period, and the amount of NOL allowed to be utilized each year is limited to 80% of taxable income. The Company has federal R&D credits of $ 21.0 million which will begin to expire in December 31, 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, 2022, 2021 and 2020. 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, 2022 and 2021, the valuation allowance decreased by $ 2.1 million and $ 7.2 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 NOL 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. In conjunction with the Renovacor Acquisition (see Note 17- “Renovacor Acquisition”), Rocket acquired Renovacor’s federal NOL’s of $ 44.5 million. A Section 382 study has not yet been performed as it relates to the Renovacor NOL’s, therefore the limitation of the Renovacor NOL’s is not yet known. F-22 Table of Contents 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, 2022, 2021 and 2020, 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 statements of operations. As of December 31, 2022, 2021 and 2020, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets. 14. 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 sheets 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 years ended December 31, 2022, and 2021, the Company reclassified an additional $ 0.3 million and $ 0.1 million, respectively of construction costs in progress bringing the aggregate reclassification through December 31, 2022, of $ 32.4 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, 2022 and 2021. The total restricted cash balance for the Company’s operating and finance leases at December 31, 2022 and 2021 was $ 0.8 million. F-23 Table of Contents Operating Leases 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 as of and for the year ended December 31, 2021. 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, 2022, and 2021, respectively. On January 4, 2018, in connection with the Reverse Merger with Inotek, the Company assumed an operating lease for Inotek’s former headquarters in Lexington, Massachusetts, with a term ending on February 28, 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 for the years ended December 31, 2022, 2021 and 2020. These amounts are netted against rent expense in the consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020. On December 1, 2022, the Company completed the acquisition of Renovacor (see Note 17- “Renovacor Acquisition”) and assumed operating leases for space at facilities in Hopewell, New Jersey and Cambridge, Massachusetts with remaining lease terms of approximately 10.25 and 1.3 years, respectively. As a result, the Company recognized a total right-of-use asset of $ 1.2 million with corresponding total lease liabilities of $ 1.0 million. In addition, the lease commencement date has not occurred for certain portions of the facility in Hopewell, New Jersey as of December 31, 2022. As a result, future lease payments of approximately $ 4.3 million are not recorded on the Company’s consolidated balance sheets and excluded from the table of future operating lease payments below. The Company intends to sublease both premises through the remainder of their lease terms. Rent expense was $ 1.2 million, $ 1.1 million, and $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Lease cost December 31, 2022 Operating lease cost $ 818 Finance lease cost Amortization of right of use assets 2,139 Interest on lease liablities 1,861 Total lease cost $ 4,818 F-24 Table of Contents 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, 2022: Maturity of operating lease liabilities December 31, 2022 2023 862 2024 429 2025 157 2026 151 2027 99 Thereafter 568 Total lease payments $ 2,266 Less: interest ( 405 ) Total operating lease liabilities $ 1,861 Maturity of finance lease liability December 31, 2022 2023 1,735 2024 1,791 2025 1,856 2026 1,912 2027 1,969 Thereafter 43,032 Total lease payments $ 52,295 Less: interest ( 31,290 ) Total finance lease liability $ 21,005 December 31, 2022 Operating right-of-use assets $ 1,972 Operating current lease liabilities 773 Operating noncurrent lease liabilities 1,088 Total operating lease liabilities $ 1,861 Finance right-of-use assets $ 46,664 Finance current lease liability 1,736 Finance noncurrent lease liability 19,269 Total finance lease liability $ 21,005 F-25 Table of Contents Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 938 Cash flows from finance lease $ 1,689 Weighted-average remaining lease term - operating leases 4.8 years Weighted-average remaining lease term - finance lease 21.7 years Weighted-average discount rate - operating leases 6.44 % 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. 15. 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 Agreements with CIEMAT In March 2016, the Company entered into a license agreement with CIEMAT, CIBER, and FIISFJD, (collectively, “CIEMAT”), granting Rocket worldwide, exclusive rights to certain patents, know-how and other intellectual property relating to lentiviral vectors containing the human PKLR gene solely within the field of treating PKD. Under the terms of the agreement, the Company is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public, (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at least two uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, Rocket is obligated to pay CIEMAT an up-front payment, royalty payments based on net sales of products or processes involving any of the licensed intellectual property, developmental and regulatory milestone payments, and sublicense revenue payments. The Company is responsible for prosecuting and maintaining the licensed patents at its expense, in cooperation with CIEMAT. Rocket also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with CIEMAT. For five years following the effective date of the license agreement, the Company has a right of first refusal to license any improvements to the licensed intellectual property obtained by CIEMAT at market value. Rocket is obligated to license (without charge) to CIEMAT for non-commercial use any improvements to the licensed intellectual property that it creates. F-26 Table of Contents As consideration for the licensed rights, Rocket paid CIEMAT an initial upfront license fee of € 0.03 million (approximately $ 0.03 million) which was expensed as research and development (“R&D”) costs. The Company is obligated to make aggregate milestone payments of up to € 1.4 million (approximately $ 1.5 million) to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the PKD license, Rocket is obligated to pay a low to mid-single digit percentage royalty on net sales, subject to specified adjustments, by the Company or its sublicensees or affiliates. In the event that Rocket 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. Rocket may terminate this agreement at any time by providing CIEMAT with 90 days advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country. In July 2016, Rocket entered into a license agreement with CIEMAT granting it worldwide, exclusive rights to certain patents, know-how, data and other intellectual property relating to lentiviral vectors containing the FA-A gene solely within the field of human therapeutic uses of VSV-G packaged integration component lentiviral vectors for FA type-A gene therapy. This license is only sublicensable with the prior consent of CIEMAT, not to be unreasonably withheld. Under the terms of the agreement, Rocket is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at least two uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, the Company is obligated to pay CIEMAT an up-front payment, royalty payments based on net sales of products or processes involving any of the licensed intellectual property, regulatory and financing milestone payments, and sublicense revenue payments. The Company is responsible for prosecuting and maintaining the licensed patents at our expense, in cooperation with CIEMAT. Rocket also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with CIEMAT. For five years following the effective date of the license agreement, the Company has a right of first refusal to license any improvements to the licensed intellectual property obtained by CIEMAT at market value. Rocket is obligated to license (without charge) to CIEMAT for non-commercial use any improvements to the licensed intellectual property that we create. As consideration for the licensed rights, Rocket paid CIEMAT an initial upfront license fee of € 0.1 million (approximately $ 0.1 million), which was expensed as R&D costs. The Company is obligated to make aggregate milestone payments of up to € 5.0 million (approximately $ 6.0 million) to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the license, Rocket is obligated to pay a mid-single digit percentage royalty on net sales, subject to specified adjustments, by Rocket or its sublicensees or affiliates. In the event that the Company enters into a sublicense agreement with a sublicensee, the Company will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances. Rocket may terminate this agreement at any time by providing CIEMAT with 90 days’ advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country. License Agreement for LAD-I with CIEMAT and UCLB The Company entered into a license agreement in November 2017, effective September 2017, with CIEMAT and UCL Business PLC (“UCLB”), collectively referred to as (“Licensors”), granting the Company worldwide, exclusive rights to certain patents, know-how and other intellectual property relating to lentiviral vectors containing the human LAD-I gene solely within the field of treating LAD-I. Under the terms of the agreement, Rocket is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public, (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at least two uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, the Company is obligated to pay Licensors an up-front payment, royalty payments in the mid-single digit percentages based on net sales of products or processes involving any of the licensed intellectual property, developmental and regulatory milestone payments, and sublicense revenue payments. Rocket is responsible for prosecuting and maintaining the licensed patents at its expense, in cooperation with Licensors. The Company also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with Licensors. For five years following the effective date of the license agreement, Rocket has a right of first refusal to license any improvements to the licensed intellectual property obtained by Licensors at market value. The Company is obligated to license (without charge) to Licensors for non-commercial use any improvements to the licensed intellectual property that it creates. As consideration for the licensed rights, Rocket paid Licensors an initial upfront license fee of € 0.03 million (approximately $ 0.04 million), which was expensed as R&D costs. The Company is obligated to make aggregate payments of up to € 1.4 million (approximately $ 1.5 million) to Licensors upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the LAD-I license, Rocket is obligated to pay a mid-single digit percentage royalty on net sales, subject to specified adjustments, by the Company or its sublicensees or affiliates. In the event that the Company 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. F-27 Table of Contents Rocket may terminate this agreement at any time by providing the Licensors with 90 days advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country. 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 in 2020. 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”). 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 expired 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. 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, 2022, 2021 and 2020. 16. CIRM Grants LAD-I CIRM Grant On April 30, 2019, the CIRM awarded the Company up to $ 6.6 million under a CLIN2 grant award to support the clinical development of its LV-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, 2022, the Company did not meet the next milestone and therefore no receivable has been recorded. F-28 Table of Contents 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 LV-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 reduction of R&D expenses of $ 0.9 million for the year ended December 31, 2020. The Company recorded a reduction of R&D expense of $ 0.1 million for the year ended December 31, 2021. 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. 17. Renovacor Acquisition On September 19, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Renovacor, a Delaware corporation pursuant to which, on December 1, 2022, the Company acquired Renovacor (the “Renovacor Acquisition”). On December 1, 2022, pursuant to the terms of the Merger Agreement, (i) Merger Sub I merged with and into the Company (the “First Merger”) and (ii) the Company, as the surviving company of the First Merger merged with and into Merger Sub II, with Merger Sub II surviving the Second Merger. Subject to the terms and conditions of the Merger Agreement, at the closing of the Renovacor Acquisition each share of Renovaor’s common stock outstanding immediately prior to the effective time of the First Merger were canceled and converted into the right to receive 0.1763 (the “Exchange Ratio”) of fully paid and non-assessable shares of the Company common stock, which was determined on the basis of the exchange formula set forth in the Merger Agreement that was subject to adjustment depending on the level of the Renovacor’s net cash at the closing. Prior to the market opening on December 1, 2022, Renovacor shares ceased to trade on NYSE and upon the closing of the acquisition, Renovacor’s outstanding common stock were converted into 3,391,976 shares of Rocket common stock. Total consideration for the acquisition was $ 72.3 million, consisting of $ 62.4 million for common stock outstanding, $ 2.7 million for the portion of equity compensation attributable to the pre-combination service period, and $ 7.2 million for assumed warrants. The consideration was based on the estimated fair values on the acquisition date of (i) 3,391,976 common shares issued for shares outstanding for common shares of Renovacor, (ii) estimated fair value of employee stock options to acquire 367,852 common shares of the Company, (iii) 28,798 common shares issued for employee time-vesting RSUs, and (iv) warrants to acquire 1,503,229 common shares (see “Note 11”). The total consideration for the acquisition of Renovacor of $ 72.3 million consisted of the following: Shares Value Total Stock consideration 3,391,976 $ 18.39 $ 62,378 Cash consideration (1) 29 Stock options 367,852 2,163 Time-vesting RSUs 28,798 512 Assumed warrants (2) 1,503,229 7,183 Total consideration 5,291,855 $ 72,265 (1) Represents consideration paid for cash in lieu of fractional shares. (2) Assumed Renovacor Warrants of $ 7,183 with $ 5,671 classified as equity and $ 1,512 classified as liabilities. The acquisition has been accounted for as a business combination using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the fair value of acquired IPR&D assets are classified as indefinite-life assets until the successful completion or abandonment of the associated research and development efforts. F-29 Table of Contents The preliminary purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the acquisition date based on their respective preliminary fair values summarized below: Working capital (1) $ ( 5,210 ) Cash and cash equivalents 42,755 Property and equipment 1,414 Operating lease right-of-use assets 1,161 Other non-current assets 113 IPR&D 25,150 Other intangible asset 574 Operating lease liability ( 970 ) Deferred tax liability ( 1,061 ) Net assets acquired 63,926 Goodwill 8,339 Purchase consideration $ 72,265 (1) Includes other receivables, prepaid expenses, account payable and accrued liabilities The fair value assigned to acquired IPR&D was based on the present value of expected after-tax cash flows attributable to Renovacor’s most advanced AAV-based gene therapy targeting BAG3-DCM. The present value of expected after-tax cash flows was determined by estimating the after-tax costs to complete development into a commercially viable product, estimating future revenue and ongoing expenses to produce, and discounting the resulting net cash flows to present value. The cost and revenue projections used were reduced based on the assessed probabilities of different stages of development. Acquired IPR&D will be accounted for as an indefinite-lived intangible asset until regulatory approval in a major market or discontinuation of development. The excess of purchase price over the fair value of amounts assigned to identifiable assets acquired and liabilities assumed represents the goodwill amount of $ 8.3 million resulting from the acquisition. The goodwill recorded as part of the acquisition is primarily attributable to the broadening of our portfolio and research capabilities, deferred taxes and the assembled workforce. The goodwill attributable to the acquisition has been recorded as a non-current asset in our consolidated balance sheet as of December 31, 2022 and is not amortized, but subject to review for impairment annually. The Company incurred $ 3.2 million of acquisition related general and administrative costs during the year ended December 31, 2022. 18. 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 for the year ended December 31, 2022 and $ 0.1 million for each of the years ended December 31, 2021 and 2020, relating to services provided under this agreement. 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 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 warrants. 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. Table of Contents 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. 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. 19. 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. The Company’s 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, 2022, 2021, and 2020 was $ 0.7 million, $ 0.6 million, and $ 0.3 million, respectively. F-25