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Item 8. Financial Statements and Supplementary Data

2022-03-16 compared with 2021-03-24 · 420 added, 828 removed, 390 unchanged (76% of the section changed)

6 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders Deficit

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

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Sana Biotechnology Inc.

To the Stockholders and the Board of Directors of Sana Biotechnology, Inc.

Opinion on the Financial Statements

We have audited

the accompanying consolidated balance sheets of Sana Biotechnology Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders

deficit and cash flows for the years ended December 31, 2020 and 2019 and for the period from July 13, 2018 (inception) to December 31, 2018, and the related notes (collectively referred to as the consolidated financial

statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the

years ended December 31, 2020 and 2019 and for the period from July 13, 2018 (inception) to December 31, 2018, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Sana Biotechnology Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the

responsibility of the Companys management.

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

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

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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

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

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

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

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

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

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

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

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.

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

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

/s/ Ernst & Young LLP

We have served as the

Companys auditor since 2018

We have served as the Company’s auditor since 2018.

Seattle, Washington

March 16, 2022

Index to Financial Statements

Sana Biotechnology, Inc.

6 unchanged sentences

Total current assets

Long-term marketable securities

Property and equipment, net

Operating lease

right-of-use assets, net

Operating lease right-of-use assets

Restricted cash

Long-term marketable securities

Intangible asset

Other non-current assets

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS DEFICIT

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS'

EQUITY (DEFICIT)

Current liabilities:

3 unchanged sentences

Operating lease liabilities

Total current liabilities

Operating lease liabilities, net of current portion

Contingent consideration

Success payment liabilities

Total current liabilities

Operating lease liabilities, net of current portion

Contingent consideration, net of current portion

Success payment liabilities, net of current portion

Other non-current liabilities

2 unchanged sentences

Convertible preferred stock, $ 0.0001 par value;

537,786 shares

authorized as of December 31, 2020 and 2019;

134,113 and 106,890 shares issued and outstanding as of December 31, 2020 and 2019, respectively;

aggregate liquidation preference of $926,666 and $450,837 as of December 31, 2020 and 2019,

Stockholders deficit:

zero and 537,786 shares authorized

as of December 31, 2021 and 2020, respectively;

zero and 134,113 shares issued and

outstanding as of December 31, 2021 and 2020, respectively

Stockholders' equity (deficit):

Preferred stock, $ 0.0001 par value;

50,000 and zero shares authorized as of

December 31, 2021 and 2020, respectively;

zero shares issued and outstanding as of

December 31, 2021 and 2020

Common stock, $ 0.0001 par value;

707,000 and 700,000 shares authorized as of December 31, 2020

and 2019, respectively;

16,170 and 10,003 shares issued and outstanding as of December 31, 2020 and 2019, respectively

750,000 and 707,000 shares authorized as of

December 31, 2021 and 2020, respectively;

184,929 and 16,170 shares issued and

outstanding as of December 31, 2021 and 2020, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders deficit

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS DEFICIT

Total stockholders' equity (deficit)

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND

STOCKHOLDERS' EQUITY (DEFICIT)

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

Index to Financial Statements

Sana Biotechnology, Inc.

2 unchanged sentences

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

Operating expenses:

Research and development

Research and development related success payments and contingent consideration

General and administrative

5 unchanged sentences

Benefit from income taxes

Net loss per share, basic and diluted

Weighted-average shares outstanding, basic and diluted

Net loss per common share - basic and diluted

Weighted-average number of common shares - basic and diluted

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

Index to Financial Statements

Sana Biotechnology, Inc.

2 unchanged sentences

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

Other comprehensive income, net of tax:

Unrealized gain on marketable securities, net

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on marketable securities, net

Total comprehensive loss

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

Index to Financial Statements

Sana Biotechnology, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders Deficit

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

(in thousands)

Convertible Preferred Stock

Convertible Preferred

Comprehensive

Stockholders'

Balance as of July 13, 2018 (Inception)

Issuance of common stock

Issuance of Series A-1

convertible preferred stock, net of issuance costs of $100

Stock-based compensation expense

Income (Loss)

Balance as of December 31, 2018

Adjustment to beginning accumulated deficit from adoption of ASC 842

Issuance of Series A-2 convertible preferred stock, net of

issuance costs of $300

Issuance of Series A-2

convertible preferred stock for acquisition, non-cash

Issuance of Series A-2 convertible preferred stock in

connection with license agreements

Stock-based compensation expense

Issuance of Series A-2 convertible preferred stock, net of $ 300 in issuance costs

Issuance of Series A-2 convertible preferred stock for acquisition, non-cash

Issuance of Series A-2 convertible preferred stock in connection with license agreements

Vesting of restricted stock

Stock-based compensation

Exercise of stock options

1 unchanged sentence

Balance as of December 31, 2019

Issuance of Series B convertible preferred stock, net of issuance costs of $33

Issuance of common stock in connection with license

Stock-based compensation expense

Issuance of Series B convertible preferred stock, net of $ 33 in issuance costs

Issuance of common stock in connection with license agreements

Vesting of restricted stock

Stock-based compensation

Exercise of stock options

1 unchanged sentence

Balance as of December 31, 2020

Conversion of convertible preferred stock into common stock upon initial public offering

Issuance of common stock in initial public offering, net of $ 49,220 in offering costs

Vesting of restricted stock

Exercise of stock options

Issuance of common stock related to employee stock purchase plan

Stock-based compensation

Unrealized loss on marketable securities, net

Balance as of December 31, 2021

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

Index to Financial Statements

Sana Biotechnology, Inc.

2 unchanged sentences

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

OPERATING ACTIVITIES:

2 unchanged sentences

Stock-based compensation expense

Change in fair value of contingent consideration

Change in fair value of success payment liabilities

Non-cash expense for equity issuance in connection with

license agreements

Non-cash expense in connection with license

Non-cash expense in connection with asset

Change in the estimated fair value of contingent consideration

Change in the estimated fair value of success payment liabilities

Non-cash expense in connection with license agreement and asset acquisition

Non-cash expense for operating lease right-of-use assets

2 unchanged sentences

Prepaid expenses and other assets

Operating lease

right-of-use assets and liabilities

Operating lease right-of-use assets and liabilities

Accounts payable

6 unchanged sentences

Acquisitions, net of cash acquired

Proceeds from disposal of assets

Issuance of promissory note

Other investing activities

Net cash used in investing activities

FINANCING ACTIVITIES:

Proceeds from initial public offering, net of issuance costs

Proceeds from issuance of convertible preferred stock, net of issuance costs

Proceeds from issuance of common stock

Payment of contingent consideration

Proceeds from employee stock purchase plan and exercise of stock options, net

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Right-of-use assets obtained in

exchange for operating lease liabilities

Tenant improvement allowance included in contra-lease

Purchases of property and equipment included in accounts payable

accrued liabilities

Cash received from lessor for tenant improvement allowance

SUPPLEMENTAL CASH FLOW INFORMATION:

Operating lease right-of-use assets obtained in exchange for lease obligations

Cash received for amounts related to tenant improvement allowances

Purchases of property and equipment included in accounts payable and accrued liabilities

Issuance of convertible preferred stock for acquisition

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

Index to Financial Statements

Sana Biotechnology, Inc.

1 unchanged sentence

Sana Biotechnology, Inc.

(the Company or Sana) was incorporated in Delaware on July 13, 2018 (inception) as FD Therapeutics, Inc., and changed its name to Sana Biotechnology, Inc.

on September 17, 2018.

Sana is a biotechnology company, focusing on utilizing

engineered cells as medicines.

The Companys operations to date have included identifying and developing potential product candidates, executing preclinical studies, acquiring technology, organizing and staffing the Company, business planning,

establishing the Companys intellectual property portfolio, raising capital, and providing general and administrative support for these operations.

In September 2020, the Company acquired 100% of the outstanding shares of common stock of Oscine Corp.

(Oscine), a privately-held early-stage

biotechnology company developing ex vivo glial progenitor cell programs focused on brain disorders.

The acquisition of Oscine complements the Companys ex vivo cell engineering portfolio.

See Note 3, Acquisitions.

In November 2019, the Company acquired Cytocardia, Inc.

(Cytocardia), a privately-held early-stage biotechnology company whose primary asset

was in-process research and development related to its ex vivo cell engineering programs focused on replacement of damaged heart cells.

See Note 3, Acquisitions.

In February 2019, the Company acquired 100% of the outstanding equity in Cobalt Biomedicine, Inc.

(Cobalt), a privately-held early-stage

biotechnology company developing a platform technology using its fusogen technology to specifically and consistently deliver various biological payloads to cells.

The Cobalt acquisition adds in-vivo cell

engineering technology to complement the Companys existing ex-vivo cell engineering technology.

See Note 3, Acquisitions.

(the Company or Sana) is a biotechnology company focusing on utilizing engineered cells as medicines.

The Company’s operations to date have included identifying and developing potential product candidates, executing preclinical studies, establishing manufacturing capabilities, acquiring technology, organizing and staffing the Company, business planning, establishing the Company’s intellectual property portfolio, raising capital, and providing general and administrative support for these operations.

Reverse stock split

January 26, 2021, the Companys board of directors approved an amendment to the Companys amended and restated certificate of incorporation to effect a

1-for-4 reverse stock split of shares of the Companys common and convertible preferred stock, which was effected on January 27, 2021.

The par value per share

and authorized shares of common and convertible preferred stock were not adjusted as a result of the reverse stock split.

All share and per share information included in the accompanying consolidated financial statements have been adjusted to

reflect the reverse stock split.

In January 2021, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a 1-for-4 reverse stock split of shares of the Company’s common and convertible preferred stock, which was effected on January 27, 2021.

The par value per share and authorized shares of common and convertible preferred stock were not adjusted as a result of the reverse stock split.

All share and per share information included in the accompanying consolidated financial statements has been adjusted to reflect the reverse stock split.

Initial public offering

In February 2021, the Company completed its initial public offering (IPO) of its common stock.

In connection with its IPO, the Company issued

27.0 million shares of its common stock, including 3.5 million shares pursuant to the full exercise of the underwriters option to purchase additional shares, at a price of $25.00 per share, and received $626.6 million in net

proceeds, after deducting underwriting discounts and commissions of $45.2 million and offering expenses of $3.8 million.

At the closing of the IPO, 134.1 million shares of convertible preferred stock then outstanding were

automatically converted into shares of common stock.

In February 2021, the Company successfully completed its initial public offering (IPO) of its common stock.

In connection with its IPO, the Company issued 27.0 million shares of its common stock, including 3.5 million shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price of $ 25.00 per share, and received $ 626.4 million in net proceeds, after deducting underwriting discounts and commissions of $ 45.2 million and offering expenses of $ 4.0 million.

At the closing of the IPO, 134.1 million shares of convertible preferred stock then outstanding were automatically converted into shares of common stock.

The related carrying value of the converted preferred stock of $ 852.9 million was reclassified to common stock and additional paid in-capital.

Additionally, the Company amended and restated its certificate of incorporation, effective February 2021, increasing the number of shares of all classes of stock the Company has authority to issue to 800.0 million shares, of which

750.0 million shares shall be common stock, and 50.0 million shares shall be convertible preferred stock.

Need for additional capital

The Company is subject to a number of risks and uncertainties similar to other biotechnology companies in the development stage

including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, competitors developing new technological

innovations, the need to successfully commercialize and gain market acceptance of the

Index to Financial Statements

Companys products, protect the Companys intellectual property and proprietary technology, and the need to attract and retain key scientific and management personnel.

If the Company

does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Until such time as the Company can generate significant revenue from product sales, if ever, it

expects to finance its operations from the sale of additional equity or debt financings, or other capital which come in the form of strategic collaborations, licensing, or other arrangements.

In the event that additional financing is required, the

Company may not be able to raise it on terms acceptable to it, or at all.

The Company has incurred operating losses each year since

inception and expects such losses to continue for the foreseeable future.

As of December 31, 2020, the Company had an accumulated deficit of $429.4 million and cash, cash equivalents, and marketable securities of $412.0 million.

The Company is subject to a number of risks and uncertainties similar to other biotechnology companies in the development stage, including, but not limited to, those related to the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, building out internal and external manufacturing capabilities, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, the need to protect the Company’s intellectual property and proprietary technology, and the need to attract and retain key scientific and management personnel.

If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations with the proceeds from additional equity or debt financings or capital obtained in connection with strategic collaborations or licensing or other arrangements.

In the event that additional financing is required, the Company may not be able to raise it on terms acceptable to it or at all.

The Company has incurred operating losses each year since inception and expects such losses to continue for the foreseeable future.

As of December 31, 2021, the Company had cash, cash equivalents, and marketable securities of $ 746.9 million, and an accumulated deficit of $ 785.4 million, which includes non-cash charges related to the revaluation of the success payment liabilities and contingent consideration of $ 100.1 million and $ 102.5 million, respectively.

Summary of significant accounting policies

Basis of presentation

accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

The Companys consolidated financial statements have been prepared in accordance with generally accepted accounting principles

in the United States (GAAP).

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that

affect the amounts reported in the consolidated financial statements and accompanying notes.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and

assumptions when facts and circumstances dictate.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

Actual results could materially differ from those estimates.

The most significant estimates in the Companys consolidated financial statements relate to success payment liabilities, contingent

consideration, business combinations, accrued expenses, the valuation of convertible preferred stock, common stock, and stock options.

cash equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or

less at acquisition.

The most significant estimates in the Company’s consolidated financial statements relate to success payment liabilities, contingent consideration, business combinations, accrued expenses, operating lease right of use assets and liabilities, and the valuation of stock options.

Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less at acquisition.

Cash equivalents include investments in money market funds with commercial banks and financial institutions and are stated at fair value.

Marketable securities

securities are classified as available-for-sale debt securities and are carried at fair value which is derived from independent pricing sources based on quoted prices in

active markets for similar securities.

Unrealized gains and losses are reported as a component of accumulated comprehensive income (loss).

Amortization, accretion, interest, dividends, realized gains and losses, and declines in value judged to be

other than-temporary are included in other income (expense).

Marketable securities are classified as available-for-sale debt securities and are carried at fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities.

Investments in securities with maturities of less than one year, or those for which management intends to use to fund current operations, are included in current assets.

Unrealized gains and losses that are deemed to be temporary in nature are reported as a component of accumulated comprehensive income (loss).

Amortization, accretion, and dividends are included in other income (expense), net on the consolidated statement of operations.

The cost of securities sold is based on the specific-identification method.

Investments in securities with maturities of less than one year, or those which management intends to use to

fund current operations, are included in current assets.

The Company evaluates whether an investment is other-than-temporarily impaired

based on the specific facts and circumstances.

Factors that are considered in determining whether an other-than-temporary decline in value has occurred include the market value of the security in relation to its cost basis, the financial condition

of the investee, and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

Each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs.

Expected credit losses are recorded as an allowance through other income (expense), net.

Concentrations of credit risk and off-balance sheet risk

The Company maintains its cash, cash equivalents, and marketable securities with high quality, accredited financial institutions.

amounts, at times, may exceed federally insured limits.

The Company has not experienced any credit

Index to Financial Statements

losses in such accounts and does not believe it is exposed to significant risk on these funds.

The Company has no off-balance sheet concentrations of

credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

These amounts, at times, may exceed federally insured limits.

The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant risk on these funds.

The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts, or other hedging arrangements.

Fair value measurement

The Company accounts for certain assets and liabilities at fair value and is required to disclose information that enables an assessment of the

inputs used in determining the reported fair values.

The Company accounts for certain assets and liabilities at fair value and is required to disclose information that enables an assessment of the inputs used in determining the reported fair values.

The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs.

The hierarchy applies only to the valuation inputs used to determine the reported fair value

of the investments and is not a measure of the investment credit quality.

The hierarchy applies only to the valuation inputs used to determine the reported fair value of the investments and is not a measure of the investment credit quality.

The hierarchy defines three levels of valuation inputs:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly or indirectly.

Level 3 Unobservable inputs that reflect the Companys own assumptions about the

assumptions market participants would use in pricing the asset or liability.

The Companys financial instruments include cash and

cash equivalents, marketable securities, note receivable, accounts payable, contingent consideration, success payment liabilities, contingent license liability, and other accrued liabilities.

The carrying amounts of cash, cash equivalents, accounts

payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.

To the extent the valuation of financial instruments is based on models or inputs that are less observable or unobservable in the market, the

determination of fair value requires more judgment.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company’s financial instruments include cash and cash equivalents, short- and long-term marketable securities, accounts payable, contingent consideration, success payment liabilities, and other accrued liabilities.

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

To the extent the valuation of financial instruments 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.

See Note 7, Fair value measurements.

See Note 6, Fair value measurements for more information on how the Company determines fair value.

Property and equipment, net

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation of property and equipment is computed using the

straight-line method over the estimated useful lives of the respective assets, generally three to five years.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years .

Leasehold improvements are depreciated over the lesser of their useful lives or the remaining life of the lease.

When assets are retired or

otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is recorded in other income (expense), net in the period realized.

Maintenance and repairs are

expensed as incurred.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the

resulting gain or loss is recorded in other income (expense), net in the period realized.

Maintenance and repairs are expensed as incurred.

Impairment of long-lived assets

The Company reviews the carrying value and estimated lives of its long-lived assets whenever events or circumstances indicate the carrying

values may not be recoverable.

The Company reviews the carrying value and estimated lives of its long-lived assets whenever events or circumstances indicate the carrying values may not be recoverable.

Should an impairment exist, the impairment loss would be measured based on the excess of the asset’s carrying amount over its fair value.

The Company has not recognized any impairment losses since inception.

Deferred offering costs

offering costs, consisting of legal, accounting, and other third-party fees directly association with the IPO, are capitalized.

Upon completion of the IPO in February 2021, these costs will be recorded in stockholders equity as a reduction of

the additional paid-in-capital generated as a result of the offering.

As of December 31, 2020, the Company had incurred $2.0 million in deferred offering costs

related to the IPO which were included in other current assets in the consolidated balance sheet.

The Company accounts for business combinations using the acquisition method of accounting, which requires the assets acquired, including in-process research and development (IPR&D), and liabilities assumed be recorded at fair value

Index to Financial Statements

as of the acquisition date.

Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill.

The determination of the estimated fair value of these items

requires significant estimates and assumptions.

The determination of the estimated fair value of these items requires significant estimates and assumptions.

Transaction costs associated with business combinations are recorded in general and administrative expense as they are incurred.

If the Company determines the acquisition does not meet the definition of a business combination under the acquisition method of accounting,

the transaction is accounted for as an asset acquisition.

In an asset acquisition, up-front payments allocated to IPR&D are recorded in research and development expense if it is determined that there is no

alternative future use, and subsequent milestone payments are recorded in research and development expense when achieved.

Goodwill and intangible

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and

liabilities assumed in a business combination.

If the Company determines the acquisition does not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an asset acquisition.

In an asset acquisition, up-front payments allocated to IPR&D are recorded in research and development expense if it is determined that there is no alternative future use, and subsequent milestone payments are recorded in research and development expense when achieved.

Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination.

The Company evaluates goodwill for impairment annually or when a triggering event occurs that could indicate a potential impairment.

The evaluation for impairment includes assessing qualitative factors

or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets is below the carrying amount.

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at fair value at the

acquisition date.

The fair value of the IPR&D has been estimated using the replacement cost method.

Under this method, the Company estimated the cost to recreate the technology and derived an estimated value to develop the technology.

assets are required to be classified as indefinite-lived assets and are not amortized until they become finite-lived assets, upon the successful completion of the associated research and development technology.

At that time, the useful life of the

asset will be determined, and amortization will begin.

The evaluation for impairment includes assessing qualitative factors or performing a quantitative analysis to determine whether it is more-likely-than-not that the fair value of net assets is below the carrying amount.

As of December 31, 2021, the Company had goodwill of $ 140.6 million related to the 2019 acquisition of Cobalt, which represents the excess of the purchase price over the estimated fair value of the net assets acquired.

There have been no impairments of goodwill since the acquisition.

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at fair value at the acquisition date.

The fair value of the IPR&D is estimated using the replacement cost method.

Under this method, the Company estimates the cost to recreate the technology and derive an estimated value to develop the technology.

IPR&D assets are required to be classified as indefinite-lived assets and are not amortized until they become finite-lived assets upon the successful completion of the associated research and development technology.

At that time, the useful life of the asset will be determined, and amortization will begin.

If the associated research and development technology is abandoned, the related IPR&D asset will be written off and an impairment charge recorded.

Intangible assets are reviewed for impairment at least annually or when a triggering event occurs that could indicate a potential impairment.

As of December 31, 2021, there was no amortization or impairments of the intangible asset.

Contingent consideration from business combinations

Contingent consideration from a business combination is recorded at fair value on the acquisition date and remeasured at each subsequent

reporting period with changes in fair value recognized in research and development expense.

Changes in fair values reflect changes to the Companys assumptions regarding probabilities of successful achievement of related milestones, the timing

in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation.

Contingent consideration from a business combination is recorded at fair value on the acquisition date and remeasured at each subsequent reporting period with changes in fair value recognized in research and development related success payments and contingent consideration.

Changes in fair values reflect changes to the Company’s assumptions regarding probabilities of successful achievement of related milestones, the timing in which the milestones are expected to be achieved, and the discount rate used to estimate the fair value of the obligation.

Success payments

The Company granted rights to a success payment to Cobalt pursuant to the terms of its acquisition agreement and to the President

and Fellows of Harvard College (Harvard) pursuant to the terms of its exclusive license agreement.

The Company granted rights to a success payment to Cobalt Biomedicine, Inc.

(Cobalt) pursuant to the terms of its acquisition agreement and to the President and Fellows of Harvard College (Harvard) pursuant to the terms of its exclusive license agreement.

See Note 3, Acquisitions and Note 4, License and collaboration agreements for more details on the success payments.

The success payments are accounted for under Accounting Standards Codification (ASC) 815, Derivatives and Hedging .

The success payment

related to the acquisition of Cobalt (Cobalt Success Payment) was recorded as a liability on the consolidated balance sheets at fair value on the acquisition date and is remeasured at each subsequent reporting period with changes in fair value

recognized in research and development expense.

For the success payments to Harvard (Harvard Success Payments), both the initial value and subsequent changes in fair value are recorded in research and development expense.

To determine the estimated fair value of the success payment liabilities, the Company uses a Monte Carlo simulation methodology which models

the value of the liabilities based on several key assumptions including the remaining terms of the success payments, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payments may be triggered,

and expected volatility of the Companys common stock.

Expected volatility is estimated using the volatility of peer companies for a period of time

Index to Financial Statements

commensurate with the remaining terms of the success payments.

Additionally, prior to the IPO, the Cobalt Success Payment liability incorporated the estimated future value of the Company implied

by the estimated per share value of the Companys Series B convertible preferred stock at issuance, and the Harvard Success Payment liability incorporated the estimated per share value of the Companys Series A convertible preferred stock.

The success payment related to the acquisition of Cobalt (Cobalt Success Payment) was recorded as a liability on the consolidated balance sheet at fair value on the acquisition date and is remeasured at each subsequent reporting period, with changes in fair value recognized

in research and development related success payments and contingent consideration .

For the success payments to Harvard (Harvard Success Payments), both the initial value and subsequent changes in fair value are recorded in research and development related success payments and contingent consideration .

To determine the estimated fair value of the success payment liabilities, the Company uses a Monte Carlo simulation methodology, which models the value of the liabilities based on several key assumptions, including the remaining terms of the success payments, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payments may be triggered, and expected volatility of the Company’s common stock.

Expected volatility is estimated using the volatility of peer companies for a period of time commensurate with the remaining terms of the success payments.

Additionally, prior to the IPO, the Cobalt Success Payment liability incorporated the estimated future value of the Company implied by the estimated per share value of the Company’s Series B convertible preferred stock at issuance, and the Harvard Success Payment liability incorporated the estimated per share value of the Company’s Series A convertible preferred stock.

Concurrent with the closing of the Company’s IPO in February 2021, the Company’s Series A and Series B convertible preferred stock converted into common stock.

Subsequent to the IPO, the computation of the estimated fair value of the

Cobalt Success Payment liability will incorporate the market capitalization of the Company and the computation of the estimated fair value of the Harvard Success Payments will incorporate the per share fair market value of the Companys common

stock at the end of each reporting period.

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2016-02, Leases (ASC 842).

The new guidance requires lessees to recognize assets and liabilities arising from leases with a term of greater than 12 months on the balance sheet and

certain qualitative and quantitative disclosures are required.

The Company adopted this standard on January 1, 2019 and elected to apply the package of practical expedients as permitted under the transition guidance.

As a result, the

Company did not reassess the classification of existing leases, whether any expired or existing contracts contain leases, the initial direct costs for any existing leases, or separate lease and non-lease

The adoption of ASC 842 resulted in the recognition of an operating lease right-of-use (ROU) asset and operating lease liability of $8.9 million on the

Companys consolidated balance sheet on January 1, 2019.

At the inception of the arrangement, the Company determines whether

the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Lease liabilities represent an obligation to make payments arising from a lease and are measured at the present value of the remaining

future lease payments over the term of the lease.

The present value of the lease payments is determined using an incremental borrowing rate (IBR) which reflects the fixed rate at which the Company could borrow the amount of the lease payments, on a

collateralized basis, for a similar term and economic environment.

Subsequent to the IPO, the computation of the estimated fair value of the Cobalt Success Payment liability incorporates the market capitalization of the Company at the end of each reporting period, and the computation of the estimated fair value of the Harvard Success Payments incorporates the per share fair market value of the Company’s common stock at the end of each reporting period.

At the inception of the arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Lease liabilities represent an obligation to make payments arising from a lease and are measured at the present value of the remaining future lease payments over the term of the lease.

The present value of the lease payments is determined using an incremental borrowing rate (IBR), which reflects the fixed rate at which the Company could borrow the amount of the lease payments, on a collateralized basis, for a similar term and economic environment.

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

Assumptions made by the

Company at the commencement date are re-evaluated upon the occurrence of certain events, including a lease modification.

When a lease modification results in a separate contract, it is accounted for in the

same manner as a new lease.

ROU assets represent the right to use the underlying asset identified in the lease for the term of the agreement.

The calculation of the ROU asset incorporates the value of the lease liability and excludes any lease

incentives received and initial direct costs incurred.

The Companys lease portfolio consists of operating leases related to its

facilities for office, laboratory, and non-good manufacturing process (GMP) pilot plant manufacturing space.

Assumptions made by the Company at the commencement date are re-evaluated upon the occurrence of certain events, including a lease modification.

When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Right-of-use (ROU) assets represent the right to use the underlying asset identified in the lease for the term of the agreement.

The calculation of the ROU asset incorporates the value of the lease liability and excludes any lease incentives received and initial direct costs incurred.

The Company’s lease portfolio consists of operating leases related to its facilities for office, laboratory, and manufacturing space.

The Company does not have any financing leases.

Leases with a term of 12 months or less are

considered short-term, and do not require recognition under ASC 842 on the balance sheet, and payments associated with short-term leases are expensed as incurred.

Rent expense for operating leases is recognized on a straight-line basis over the

Leases with a term of 12 months or less are considered short-term and do not require recognition on the balance sheet, and payments associated with short-term leases are expensed as incurred.

Rent expense for operating leases is recognized on a straight-line basis over the lease term.

Claims and contingencies

From time to time, the Company may become involved in litigation and proceedings relating to claims arising from the ordinary course of

From time to time, the Company may become involved in litigation and proceedings relating to claims arising from the ordinary course of business.

The Company accrues a liability if the likelihood of an adverse outcome is probable, and the amount can be reasonably estimated.

If the likelihood of an adverse outcome is only reasonably possible, or if an adverse outcome is probable, but

an estimate is not determinable, the Company provides disclosure of the material claim or contingency.

If the likelihood of an adverse outcome is only reasonably possible, or if an adverse outcome is probable, but an estimate is not determinable, the Company provides disclosure of the material claim or contingency.

Convertible preferred stock

The carrying value of the Companys Series A-1, Series

A-2, and Series B convertible preferred stock is adjusted to reflect dividends if and when declared by the Companys board of directors.

No dividends have been declared by the board of directors since

The Company classifies its convertible preferred stock outside of permanent equity, as the redemption of such stock is not solely under the control of the Company.

The Company recorded its convertible preferred stock at the issuance price

on the dates of issuance, net of issuance costs.

The carrying value of the Company’s Series A-1, Series A-2, and Series B convertible preferred stock was adjusted to reflect dividends if and when declared by the Company’s board of directors.

No dividends have been declared by the board of directors since inception.

The Company classified its convertible preferred stock outside of permanent equity, as the redemption of such stock was not solely under the control of the Company.

The Company recorded its convertible preferred stock at the issuance price on the dates of issuance, net of issuance costs.

Concurrent with the closing of the Company’s IPO in February 2021, all of the Company’s convertible preferred stock converted into common stock.

Index to Financial Statements

Stock-based compensation

The Company grants stock-based awards to employees, directors, and non-employees, in the form of

incentive stock options, non-qualified stock options, restricted stock awards (RSAs), and restricted stock units (RSUs).

The Company utilizes significant estimates and assumptions in determining the fair value

of its common stock.

The Company records stock-based compensation expense at prices not less than the fair value of its common stock as determined by management with consideration of the American Institute of Certified Public Accountants Technical

Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, (AICPA Guide) .

The estimated fair value of the Companys common stock is based on a number of objective and subjective factors,

including the most recently available valuations of the Companys common stock performed by an independent third-party valuation firm, the prices of shares of convertible preferred stock sold to investors in arms length transactions, the

superior rights and preferences of securities senior to the Companys common stock at the time, the Companys stage of development, results of operation and financial position, material risks to the Companys business, the lack of

marketability of the common stock, and external market conditions affecting the biotechnology industry sector.

Following the closing of the IPO, the fair value of the common stock will be based on its closing price as reported on the Nasdaq Global

Select Market on the date of grant.

The Company accounts for stock-based compensation awards in accordance with ASC Topic

718, CompensationStock Compensation by measuring the fair value of the award on the date of grant.

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally

the vesting period of the award.

The Company recognizes compensation costs related to restricted stock awards (RSAs), restricted stock units (RSUs), and stock options granted to employees and nonemployees based on the estimated fair value of the awards on the date of grant and recognizes expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award.

Forfeitures are recognized as they occur.

The Company accounts for stock-based awards issued to non-employees under ASU 2018-07, CompensationStock Compensation, by measuring the fair value of the award on the date of grant and recognizing stock-based

compensation expense over the requisite service period, which is generally the vesting period of the award.

The majority of the Companys stock-based awards vest over four years.

The fair value of stock options is estimated at the date of grant using a Black-Scholes option pricing model which requires management to

apply judgment and make estimates, including:

Fair Value of Common Stock The Companys board of directors, with the assistance and upon the

recommendation of management, has for financial reporting purposes periodically determined the estimated per share fair value of the Companys common stock on the grant date in part using contemporaneous independent third-party valuations

consistent with the AICPA Guide.

Expected Term The expected term represents the period that the stock-based awards are expected to be

The Company uses the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the

Expected Volatility Due to the lack of a public market for the Companys common stock, the

expected volatility is estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period of time commensurate with the expected term of the stock option grants.

The comparable companies are

chosen based on their size, stage in the product development cycle or area of specialty.

For RSAs and RSUs, the fair value of the Company’s common stock is used to determine the resulting

stock-based compensation expense.

The fair value of stock options is estimated on the date of grant using a Black-Scholes option pricing model which requires management to apply judgment and make estimates, including:

Fair Value of Common Stock —The fair value of common stock is based on the closing price as reported on The Nasdaq Global Select Market on the date of grant.

Expected Term —The expected term represents the period that a stock-based award is expected to be outstanding.

The Company uses the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the option.

Expected Volatility — Due to the Company’s limited operating history and lack of company-specific historical and implied volatility data, the expected volatility is estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period of time commensurate with the expected term of the stock option grants.

The comparable companies are chosen based on their size, stage in the product development cycle, or area of specialty.

The Company will continue to apply this process until sufficient historical information regarding the volatility of its own stock price becomes available.

Risk-Free Interest Rate— The risk-free interest rate is based on the U.S.

Treasury yield in effect at

the time of grant for zero-coupon U.S.

Treasury yield in effect at the time of grant for zero-coupon U.S.

Treasury notes with maturities approximately equal to the expected term of the awards.

Expected Dividend The Company has never paid dividends on its common stock and has no plans to pay

dividends on its common stock.

Expected Dividend— The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.

Therefore, the Company used an expected dividend yield of zero .

1 unchanged sentence

The Company records expense for research and development costs as incurred.

Nonrefundable, advance payments for goods or contracts

for services are deferred, and expense is recognized in the period in which the goods are received, or the services are rendered.

Research and development expense consist of costs incurred by the Company for the

Index to Financial Statements

discovery and development of the Companys platform technology and product candidates, and contain personnel costs, including salaries, benefits, and

non-cash stock-based compensation, external research and development expenses incurred under arrangements with third parties, laboratory supplies, costs to acquire and license technologies aligned with the

Companys goal of translating engineered cells to medicine, changes in the estimated fair value of the success payment liabilities and contingent consideration, and other expenses, which include facility and other allocated expenses, including

rent, depreciation, and allocated overhead costs, and other research and development costs.

Nonrefundable, advance payments for goods or contracts for services are deferred, and expense is recognized in the period in which the goods are received or the services are rendered.

Research and development expense consist of personnel-related costs, including salaries, benefits, and non-cash stock-based compensation, external research and development expenses incurred under arrangements with third parties, costs for laboratory supplies, costs to acquire and license technologies aligned with our goal of translating engineered cells to medicines, facility and other allocated expenses, including rent, depreciation, and allocated overhead costs, and other research and development expenses.

Research and development related success payment and contingent consideration

Research and development related success payments and contingent consideration include the change in the estimated fair value of the Cobalt Success Payment and Harvard Success Payment liabilities and Cobalt Contingent Consideration.

Research and development expense related to the success payment liabilities and contingent consideration is unpredictable and may vary significantly from quarter-to-quarter and year-to-year due to changes in the assumptions used in the calculations.

General and administrative expenses

General and administrative expenses consist of personnel costs, including salaries, benefits, and

non-cash stock-based compensation, for our employees in finance, human resources, legal, information technology, executive, and other administrative functions, legal and consulting fees, recruiting costs, and

facility costs not otherwise included in research and development expenses.

General and administrative expenses consist of personnel costs, including salaries, benefits, and non-cash stock-based compensation, for employees in finance, legal, executive, human resources, information technology, and other administrative functions, legal and consulting fees, recruiting costs, and facility costs not otherwise included in research and development expenses.

Legal fees include those related to corporate and patent matters.

determines its deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered.

The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or

expected to be taken in a tax return.

The Company determines its deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered.

The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense.

2 unchanged sentences

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

The Company is currently not under examination by the Internal Revenue Service or other

jurisdictions for any tax years.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for

evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

The Company is currently not under examination by the Internal Revenue Service or other jurisdictions for any tax years.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment.

JOBS Act accounting election

Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to

the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates

for public and private companies;

The Company is an emerging growth company (EGC), as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies;

however, the Company may adopt new or revised accounting standards early if the standard allows for early adoption.

Index to Financial Statements

In addition, the Company will utilize other exemptions and reduced reporting requirements provided to EGCs by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, an EGC is not required to, among other things, (i) provide an auditor’s attestation report on the Company’s system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), or (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

Recent accounting pronouncements

Recently adopted

Accounting Standards Update (ASU) No.

2018-13, Fair Value Measurement (Topic 820):

FrameworkChanges to the Disclosure Requirements for Fair Value Measurement

In August 2018, the Financial Accounting Standards

Board (FASB) issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement, (ASU 2018-13).

The new standard removes certain disclosures, modifies certain disclosures, and adds additional disclosures related to fair value measurement.

The Company adopted ASU

2018-13 on January 1, 2020 and the adoption resulted in additional disclosures related to the Companys Level 3 financial instruments.

See Note 7, Fair value measurements.

Not yet adopted

2016-13, Financial InstrumentsCredit Losses (Topic 362):

Measurement of Credit Losses on Financial Statements, ASU No.

2019-05 Financial

InstrumentsCredit Losses (Topic 326):

Targeted Transition Relief, ASU No.

2019-11, Codification Improvements to Topic 326, Financial InstrumentsCredit Losses

In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses (Topic 362):

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 362):

Measurement of Credit Losses on Financial Statements (ASU 2016-13).

The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.

It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value

It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which the carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.

The targeted transition relief standard allows companies an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments.

As an emerging growth company, Topic 326 is effective for the Company for fiscal years beginning after

December 15, 2022, including interim periods within those fiscal years.

The Company plans to adopt ASU 2016-13 effective January 1, 2021 and does not expect the adoption to have a material impact on

the consolidated financial statements and disclosures.

The Company adopted ASU 2016-13 effective January 1, 2021 .

The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures, and no allowance for losses on available-for-sale debt securities attributable to credit risk has been recorded.

Not yet adopted

2017-04 , Intangibles—Goodwill and Other (Topic 350):

2 unchanged sentences

Simplifying the Test for Goodwill Impairment (ASU 2017-04).

To address concerns over the cost and complexity

of the two-step goodwill impairment test, the amendments in this ASU remove the second step of the test.

An entity will instead apply a one-step quantitative test

and record the amount of goodwill impairment as the excess of a reporting units carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

The new guidance does not amend the

optional qualitative assessment of goodwill impairment.

To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this ASU remove the second step of the test.

An entity will instead apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

The new guidance does not amend the optional qualitative assessment of goodwill impairment.

The new standard will be effective beginning January 1, 2023.

The adoption of ASU 2017-04 is not expected to have a material impact on the

Companys consolidated financial statements.

In September 2020,

the Company entered into a stock purchase agreement to acquire 100% of the outstanding equity in Oscine for a purchase price of $8.5 million, of which $7.6 million was an upfront cash payment, and $0.9 million was set aside to satisfy

certain general representations and warranties as set forth in the stock purchase agreement (Oscine Holdback Amount).

The primary asset

acquired in the acquisition was IPR&D technology related to Oscines glial progenitor ex vivo cell engineering programs focused on brain disorders.

The Company evaluated the acquisition and determined the screen test, as permitted

under ASC 805, Business Combinations , was met as the $8.5 million purchase price represented consideration for a single identifiable asset related to the technology.

The Company concluded the asset acquired did not meet the definition of

a business, and the asset had no alternative future use.

The adoption of ASU 2017-04 is not expected to have a material impact on the Company’s consolidated financial statements.

In September 2020, the Company entered into a stock purchase agreement to acquire 100 % of the outstanding equity of Oscine Corp.

(Oscine), a privately-held early-stage biotechnology company whose primary asset was IPR&D related to its ex vivo glial progenitor cell technology focused on brain disorders.

The Company acquired Oscine for a purchase price of $ 8.5 million, of which $ 7.6 million was an upfront cash payment, and $ 0.9 million was set aside to satisfy certain general representations and warranties set forth in the stock purchase agreement (Oscine Holdback Amount).

The Oscine Holdback Amount was paid in full in December 2021.

The Company evaluated the acquisition and determined the screen test, as permitted under ASC 805, Business Combinations , was met, as the $ 8.5 million purchase price represented consideration for a single identifiable asset related to the technology.

The Company concluded the asset acquired did not meet the definition of a business, and the asset had no alternative future use.

The transaction was accounted for as an asset acquisition, and the purchase price of $ 8.5 million was recorded in research and development expense for the year ended December 31, 2020.

Index to Financial Statements

The Oscine Holdback Amount will be held for 15 months, until December 2021, at which time

the remainder of the balance, after payment of any claims, will be released.

In addition, the Company is required to make up to an aggregate of $225.8 million in future milestone payments upon the achievement of certain development and

commercial milestones.

Prior to the acquisition in November 2018, the Company entered into a collaboration, license, and option to

purchase agreement with Oscine and paid a $5.0 million non-refundable upfront fee, which was recognized in research and development expense for the period from July 13, 2018 (inception) to

December 31, 2018.

In connection with the Oscine agreement, the Company recognized $3.4 million, $4.2 million, and $0.2 million in research and development expenses for the years ended December 31, 2020 and 2019, and the

period from July 13, 2018 (inception) to December 31, 2018, respectively.

The Company is required to make up to an aggregate of $ 225.8 million in future milestone payments upon the achievement of certain development and commercial milestones.

Cytocardia, Inc.

In November 2019, the Company acquired 100% of the outstanding equity in Cytocardia for a purchase price of $8.0 million, of which

$6.8 million was an upfront cash payment, and $1.2 million was set aside to satisfy certain general representations and warranties as set forth in the stock purchase agreement (Cytocardia Holdback Amount).

The primary asset acquired in the acquisition was IPR&D technology related to Cytocardias ex vivo cell engineering programs

focused on replacement of damaged heart cells.

The Company evaluated the acquisition and determined the screen test, as permitted under ASC 805, Business Combinations , was met as the $8.0 million purchase price represented consideration

for a single identifiable asset related to the technology.

The Company concluded the asset acquired did not meet the accounting definition of a business as inputs were acquired, but no processes or outputs were acquired, and the asset had no

alternative future use.

The transaction was accounted for as an asset acquisition and the purchase price was recorded in research and development expense for the year ended December 31, 2019.

The Cytocardia Holdback Amount was held for 15 months, until February 2021, at which time the remainder of the balance, after payment of any

claims, was released to the co-founders.

In addition, the Company is required to make future milestone payments of up to an aggregate of $140.0 million upon the achievement of certain pre-specified development and commercial milestones.

In November 2019, the Company acquired 100 % of the outstanding equity of Cytocardia, Inc.

(Cytocardia), a privately-held early-stage biotechnology company whose primary asset was IPR&D related to its ex vivo cell engineering technology focused on replacement of damaged heart cells.

The Company acquired Cytocardia for a purchase price of $ 8.0 million, of which $ 6.8 million was an upfront cash payment, and $ 1.2 million was set aside to satisfy certain general representations and warranties set forth in the stock purchase agreement (Cytocardia Holdback Amount).

The Cytocardia Holdback Amount was paid in full in February 2021.

The Company evaluated the acquisition and determined the screen test, as permitted under ASC 805, Business Combinations , was met, as the $ 8.0 million purchase price represented consideration for a single identifiable asset related to the technology.

The Company concluded the asset acquired did not meet the accounting definition of a business, and the asset had no alternative future use.

The transaction was accounted for as an asset acquisition, and the purchase price of $ 8.0 million was recorded in research and development expense for the year ended December 31, 2019.

The Company is required to make future milestone payments of up to an aggregate of $ 140.0 million upon the achievement of certain pre-specified development and commercial milestones.

Cobalt Biomedicine, Inc.

In February 2019, the Company acquired 100% of the outstanding equity in Cobalt, a privately-held early-stage biotechnology company developing

a platform technology using its fusogen technology to specifically and consistently deliver various biological payloads to cells.

The Company issued 36.4 million shares of its Series A-2 convertible

preferred stock in consideration for this transaction, valued at $136.0 million.

Of the 36.4 million shares of Series A-2 convertible preferred stock issued, 12.1 million shares were restricted

based on the achievement of a pre-specified development milestone, which was achieved in July 2019.

In February 2019, the Company acquired 100 % of the outstanding equity in Cobalt, a privately-held early-stage biotechnology company developing a platform technology using its fusogen technology to specifically and consistently deliver various biological payloads to cells.

The Company issued 36.4 million shares of its Series A-2 convertible preferred stock, valued at $ 136.0 million, in consideration for this transaction.

Of the 36.4 million shares of Series A-2 convertible preferred stock issued, 12.1 million shares were restricted based on the achievement of a pre-specified development milestone, which was achieved in July 2019.

Additionally, 0.7 million RSAs and 0.3 million RSUs were granted to former employees of Cobalt.

Upon the closing of the Company’s IPO in February 2021, the Series A-2 convertible preferred stock issued in connection with the acquisition of Cobalt converted into common stock.

The Company accounted for the Cobalt acquisition as a business combination using the acquisition method of accounting.

Under this method,

the assets acquired and liabilities assumed are measured at their fair values as of the acquisition date.

Under this method, the assets acquired and liabilities assumed are measured at their fair values as of the acquisition date.

The elements of the purchase consideration are as follows (in thousands):

Series A-2 convertible preferred stock issued (1)

First milestone - restricted Series A-2 convertible

preferred stock (2)

First milestone - restricted Series A-2 convertible preferred stock (2)

Success payment (3)

Fair value of contingent

consideration (4)

Fair value of contingent consideration (4)

Total consideration

The purchase consideration included 24.3 million shares of the Company’s Series A-2 convertible preferred stock.

The value of the stock issued was $4.00 per share, equivalent to the purchase price per share of the Series A-2 convertible preferred stock

financing that occurred in February 2019.

The value of the stock issued was $ 4.00 per share, equivalent to the purchase price per share of the Series A-2 convertible preferred stock financing that occurred in February 2019.

The Company concluded the value of the first milestone, to be paid in restricted shares of Series A-2 convertible preferred stock, met the definition of being indexed to common stock.

The restricted Series A-2 convertible preferred shares were recorded in convertible

preferred stock valued at

Index to Financial Statements

$38.8 million based on the estimated probability and timing of the milestone achievement on the date of acquisition and are not subject to remeasurement upon achievement.

In July 2019, the

first milestone was achieved, and the Company issued a total of 12.1 million shares of its Series A-2 convertible preferred stock.

The fair value of the success payment was determined using a Monte Carlo simulation methodology which models the

estimated fair value of the liability based on several key assumptions including the term of the success payment, expected volatility, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payment

may be triggered, and the estimated future value of the Company implied by the estimated future per share value of the Companys Series B convertible preferred stock at issuance.

The fair value of the contingent consideration was determined by calculating the probability-weighted value of

the milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved and using estimated discount rates ranging from 15.3% to 17.6%.

The discount rate captures the credit risk associated

with the payment of the contingent consideration when earned and due.

The allocation of the purchase price is based on

the estimated fair value of the assets acquired and liabilities assumed as of the date of acquisition.

The restricted Series A-2 convertible preferred shares were recorded in convertible preferred stock valued at $ 38.8 million based on the estimated probability and timing of the milestone achievement on the date of acquisition and are not subject to remeasurement upon achievement of the milestone.

In July 2019, the first milestone was achieved, and the Company issued a total of 12.1 million shares of its Series A-2 convertible preferred stock.

The fair value of the success payment was determined using a Monte Carlo simulation methodology, which models the estimated fair value of the liability based on several key assumptions including the term of the success payment, expected volatility, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payment may be triggered, and the estimated future value of the Company implied by the estimated future per share value of the Company’s Series B convertible preferred stock at issuance.

The fair value of the contingent consideration was determined by calculating the probability-weighted value of the milestone payments based on the assessment of the likelihood and estimated timing that certain milestones would be achieved and using estimated discount rates ranging from 15.3 % to 17.6 %.

The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.

The allocation of the purchase price is based on the estimated fair value of the assets acquired and liabilities assumed as of the date of acquisition.

The components of the purchase price allocation are as follows (in thousands):

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Deferred tax liability

Acquired in-process research

and development

Acquired in-process research and development

Total consideration

As part of the Cobalt acquisition, the Company recorded an intangible asset of $59.2 million, which

consists of IPR&D that is classified as indefinite-lived until the successful completion of the associated research and development technology, at which point it becomes a finite-lived asset and will be amortized over its estimated useful life.

As part of the Cobalt acquisition, the Company recorded an intangible asset of $ 59.2 million, which consists of IPR&D that is classified as indefinite-lived until the successful completion of the associated research and development technology, at which point it becomes a finite-lived asset and will be amortized over its estimated useful life.

If the research and development technology is abandoned, an impairment charge will be recorded.

The Company is actively developing the fusogen technology and, accordingly, the intangible asset is not complete.

Amortization will begin when regulatory

approval is obtained in a major market, typically either the United States (U.S.) or the European Union, subject to management judgment.

The Company recognized $140.6 million of goodwill as a result of the Cobalt acquisition which is primarily attributable to the value the

acquisition provides the Company by complementing its ex-vivo portfolio with in-vivo cell engineering technology and furthers the continued research in

using engineered cells as medicines.

Amortization will begin when regulatory approval is obtained in a major market, typically either the United States or the European Union.

The Company recognized $ 140.6 million of goodwill as a result of the Cobalt acquisition, which is primarily attributable to the value the acquisition provides the Company by complementing the Company’s ex vivo portfolio with in vivo cell engineering technology and furthering the Company’s research in using engineered cells as medicines.

The goodwill is not deductible for income tax purposes.

The Company also agreed to pay contingent

consideration of up to an aggregate of $500.0 million upon the achievement of certain pre-specified development milestones (Cobalt Contingent Consideration), and a Cobalt Success Payment of up to

$500.0 million, payable in cash or stock, at the Companys discretion, pursuant to the terms and conditions in the Cobalt acquisition agreement.

Prior to the IPO, the Cobalt Success Payment was payable, if, at pre-determined valuation measurement dates, the value of the Company was equal to or exceeded three times the value of the Company implied by the per share value of the Companys Series B convertible preferred

stock at issuance, or any security into which such stock had been converted or exchanged, and the Company had an active program based on the fusogen technology in a clinical trial pursuant to an investigational new drug (IND), or have filed for, or

received approval for, a biologics license application (BLA) or new drug application (NDA).

Subsequent to the IPO, the threshold to determine if a payment is due will be based on whether the Companys market capitalization equals or exceeds

$8.1 billion at pre-determined valuation measurement dates, and the Company has an active program based on the fusogen technology in a clinical trial pursuant to an IND, or have filed for, or received

approval for, a BLA or NDA.

The Cobalt Success Payment can be achieved over a maximum of 20 years but could be shorter upon the occurrence of certain events.

The valuation measurement dates for the Cobalt Success Payment are triggered by an IPO, and periodically thereafter.

The IPO in February 2021

did not trigger a success payment to Cobalt.

In addition to an IPO, a valuation measurement date is triggered upon a change of control when at least one company product utilizing technology acquired from Cobalt is the subject of an active research

If there is a change of control and Companys market capitalization falls below certain thresholds on the change of control date, the amount of the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt

Contingent Consideration will increase.

Index to Financial Statements

The following table sets forth the different market capitalizations and resulting potential

Cobalt Success Payment and additional potential Cobalt Contingent Consideration if there is a change of control subsequent to the IPO:

Sana Market Capitalization Upon a Change of Control and Resulting

Impact to Cobalt Success

Payment and Additional Potential Cobalt Consideration

Pursuant to the terms and conditions in the Cobalt acquisition agreement, the Company has an obligation to pay to certain former Cobalt stockholders up to an aggregate of $ 500.0 million in contingent consideration (Cobalt Contingent Consideration) upon the achievement of certain pre-specified development milestones, and a success payment (Cobalt Success Payment) of up to $ 500.0 million, payable in cash or stock.

The Cobalt Success Payment is payable if, at pre-determined valuation measurement dates, including the closing of the Company’s IPO, the Company’s market capitalization equals or exceeds $ 8.1 billion, and the Company is advancing a program based on the fusogen technology in a clinical trial pursuant to an investigational new drug application (IND), or has filed for, or received approval for, a biologics license application (BLA) or new drug application (NDA).

The Cobalt Success Payment can be achieved over a maximum of 20 years from the date of the Cobalt acquisition, but this period could be shorter upon the occurrence of certain events.

As of December 31, 2021, a Cobalt Success Payment had not been triggered.

In addition to our IPO, a valuation measurement date would be triggered upon a change of control of the Company if at least one Company product based on the fusogen technology is the subject of an active research program at the time of such change of control.

If there is a change of control and the Company’s market capitalization is below $ 8.1 billion as of the date of the change of control,

the amount of the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt Contingent Consideration will increase.

The following table sets forth various thresholds for the Company’s market capitalizations as of the date of a change of control and the resulting potential Cobalt Success Payment and additional potential Cobalt Contingent Consideration:

Sana market capitalization upon a change of control and resulting impact to Cobalt Success

Payment and additional potential Cobalt Contingent Consideration

Cobalt Success

Additional Potential

Cobalt Contingent

potential Cobalt

Consideration

4 unchanged sentences

Less than $ 6.8 billion

The Cobalt Success Payment and Cobalt Contingent Consideration liabilities are carried at fair value with

changes in fair value recognized in research and development expense.

As of December 31, 2020 and 2019, the estimated fair value of the Cobalt Success Payment liability was $64.7 million and $2.4 million, respectively, and the

estimated fair value of the Cobalt Contingent Consideration was $121.9 million and $69.1 million, respectively.

For the years ended December 31, 2020 and 2019 the Company recognized $62.3 million and an immaterial amount in

research and development expense in connection with the change in fair value of the Cobalt Success Payment, respectively, and $52.8 million and $17.9 million in connection with the change in fair value of the Cobalt Contingent

Consideration, respectively.

Intangible asset and goodwill

As of December 31, 2020, the Company had an intangible asset of $59.2 million, which consists of IPR&D acquired from the Cobalt

acquisition which occurred in 2019 and is classified as indefinite-lived until the successful completion of the associated research and development technology, at which point it becomes a finite-lived asset that will be amortized over its estimated

As of December 31, 2020, there was no amortization of the intangible asset.

As of December 31, 2020, the Company had goodwill of $140.6 million, which represents the excess of the purchase price over the estimated fair

value of the net assets acquired from the Cobalt acquisition which occurred in 2019.

There were no impairments of the intangible asset or goodwill since the acquisition.

The Cobalt Success Payment and Cobalt Contingent Consideration liabilities are carried at fair value with changes in fair value recognized in research and development related success payments and contingent consideration.

As of December 31, 2021 and 2020, the estimated fair value of the Cobalt Success Payment liability was $ 88.3 million and $ 64.7 million, respectively, and was recorded in long-term liabilities in the consolidated balance sheets.

As of December 31, 2021, the estimated fair value of the Cobalt Contingent Consideration was $ 153.7 million, of which $ 51.4 million was recorded in short-term liabilities and $ 102.3 million was recorded in long-term liabilities in the consolidated balance sheet.

As of December 31, 2020, the estimated fair value of the Cobalt Contingent Consideration was $ 121.9 million and was recorded in long-term liabilities in the consolidated balance sheet.

For the years ended December 31, 2021, 2020, and 2019 the Company recognized $ 23.6 million, $ 62.3 million, and an immaterial amount, respectively, in connection with the change in fair value of the Cobalt Success Payment, and $ 31.8 million, $ 52.8 million, and $ 17.9 million, respectively, in connection with the change in fair value of the Cobalt Contingent Consideration.

License and collaboration agreements

Beam Therapeutics Inc.

In October 2021, the Company entered into an option and license agreement with Beam Therapeutics Inc.

(Beam), pursuant to which the Company was granted a non-exclusive license to use Beam’s proprietary CRISPR Cas12b nuclease editing technology to research, develop, and commercialize engineered cell therapy products that (i) are directed to certain antigen targets, with respect to the Company’s allogeneic T cell programs, or (ii) comprise certain human cell types, with respect to the Company’s stem cell-derived programs.

The Company made an upfront payment of $ 50.0 million to Beam, which was recorded in research and development expense for the year ended December 31, 2021.

Additionally, under the terms of the agreement, the Company may be obligated to pay up to $ 65.0 million for each licensed product in specified developmental and commercial milestone payments and royalties on licensed products.

At the time of the entry into the option and license agreement, a member of the Company’s board of directors was a beneficial owner of greater than 10 % of the outstanding shares of Beam and is affiliated with a member of the board of directors of Beam.

President and Fellows of Harvard College

In March 2019, the Company entered into an exclusive license agreement with Harvard to access certain intellectual property for the

development of hypo-immune cells (the Harvard Agreement).

Under this agreement, the Company paid $3.0 million in cash and issued 2.2 million shares of its Series A-2 convertible preferred stock,

valued at $4.00 per share, for total consideration of $12.0 million.

The Company determined the licensed technology had no alternative future use and therefore the $12.0 million was recorded in research and development expense for the year

ended December 31, 2019.

In connection with this agreement, the Company agreed to pay Harvard a license payment of $6.0 million

in cash contingent upon the closing of the Companys Series B convertible preferred stock financing.

This contingent license payment was accounted for as a derivative under ASC 815, Derivatives and Hedging, carried at fair value, and was

revalued each reporting period with changes recognized in research and development expense.

As of December 31, 2019, the estimated fair value of the contingent license payment to Harvard was $4.6 million and the Company recorded research

and development expense of $4.6 million for the year ended December 31, 2019.

The Series B convertible preferred stock financing closed in June 2020, and the Company paid Harvard $6.0 million in cash, and recorded $1.4 million in

research and development expense for the year ended December 31, 2020.

The Company may also be required to pay certain pre-specified development and regulatory milestone payments up to an aggregate of

$76.0 million, which would double upon a change of control.

Further, under the terms of the agreement, the Company may be required

to make success payments to Harvard (Harvard Success Payments) up to an aggregate of $175.0 million, payable in cash, based on increases in the fair value of the Companys Series A convertible preferred stock, or any security into which

such stock has been converted or exchanged.

Concurrent with the closing of the Companys IPO in February 2021, the Series A convertible preferred stock

Index to Financial Statements

was converted into common stock and as a result, going forward the per share fair market value of the Companys common stock will determine whether a success payment is owed to Harvard.

potential payments are based on multiples of increased value ranging from 5x to 40x based on a comparison of the fair market value of the Companys common stock relative to the original issuance price of $4.00 per share at pre-determined valuation measurement dates.

The aggregate amount of the Harvard Success Payments does not exceed an aggregate of $175.0 million which would only occur upon a 40x increase in value.

success payment tier is first met at the same time a lower tier is first met, both tiers will be owed.

Any previous success payments made to Harvard are credited against the success payment owed as of any valuation measurement date, so that Harvard

does not receive multiple success payments in connection with the same threshold.

The valuation measurement dates are triggered by events

which include:

the one year anniversary of an IPO and periodically thereafter, a merger, an asset sale, the sale of the majority of the shares held by the Companys Series A convertible preferred stockholders, and the last day of the term of

the success payments.

The first Harvard valuation measurement date is expected to occur in February 2022, one year from the IPO.

Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement.

In March 2019, the Company entered into an exclusive license agreement with Harvard to access certain intellectual property for the development of hypoimmune cells.

Under this agreement, the Company paid $ 3.0 million in cash and issued 2.2 million shares of its Series A-2 convertible preferred stock, valued at $ 4.00 per share, for total consideration of $ 12.0 million.

The Company determined the licensed technology had no alternative future use and the $ 12.0 million was therefore recorded in research and development expense for the year ended December 31, 2019.

Upon the closing of the Company’s IPO in February 2021, the Series A-2 convertible preferred stock issued in connection with the license agreement with Harvard converted into common stock.

In connection with this agreement, the Company agreed to pay Harvard a license payment of $ 6.0 million in cash contingent upon the closing of the Company’s Series B convertible preferred stock financing.

This contingent license payment was accounted for as a derivative under ASC 815, Derivatives and Hedging , carried at fair value, and was revalued each reporting period, with changes recognized in research and development expense.

As of December 31, 2019, the estimated fair value of the contingent license payment to Harvard was $ 4.6 million, and the Company recorded research and development expense of $ 1.4 million and $ 4.6 million, respectively, for the years ended December 31, 2020 and 2019.

The Series B convertible preferred stock financing closed in June 2020, and the Company paid Harvard $ 6.0 million in cash.

Under the terms of the agreement, the Company may be required to pay up to an aggregate of $ 175.0 million in success payments to Harvard, payable in cash, based on increases in the fair value of the Company’s common stock.

The potential Harvard Success Payments are based on multiples of increased value ranging from 5x to 40x, based on a comparison of the fair market value of

the Company’s common stock relative to the original issuance price of $ 4.00 per share at pre-determined valuation measurement dates , which include:

the one year anniversary of the IPO, the date of the consummation of a merger, an asset sale, or the sale of the majority of the shares held by the Company’s Series A convertible preferred stockholders, and the last day of the term of the Harvard Success Payments.

The first Harvard valuation measurement date occurred i n February 2022 on the one - year anniversary of the IPO .

The threshold was not met, and therefore no payment was made as of measurement date.

The aggregate amount of the Harvard Success Payments will not exceed an aggregate of $ 175.0 million, which payment amount would only occur upon a 40x increase in the fair value of the Company’s common stock based on a comparison of the fair market value of the Company’s common stock relative to the original issuance price of $ 4.00 per share.

If a higher success payment tier is first met at the same time a lower tier is first met, both tiers will be owed.

Any previous success payments made to Harvard would be credited against the success payment owed as of any valuation measurement date so that Harvard does not receive multiple success payments in connection with the same threshold.

The Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement.

The following table summarizes the potential success payments and common stock price required for payment:

2 unchanged sentences

Success payment(s) (in millions)

To determine the estimated fair value of the Harvard Success Payment liability the Company uses a Monte Carlo

simulation methodology which models the future movement of its common stock price based on several key assumptions.

See Note 7, Fair value measurements.

As of December 31, 2020 and 2019, the estimated fair value of the Harvard Success Payment liability was $11.8 million and

$1.9 million, respectively, and the Company recorded research and development expense of $9.9 million and $1.9 million for the years ended December 31, 2020 and 2019, respectively.

The Harvard Success Payment liabilities are carried at fair value, with the initial value and changes in fair value recognized in the consolidated statements of operations in research and development related success payments and contingent consideration.

As of December 31, 2021 and 2020, the estimated fair value of the Harvard Success Payment liability was $ 14.2 million and $ 11.8 million, respectively, of which $ 5.0 million and $ 0 , respectively, were recorded in short-term liabilities, and $ 9.2 million and $ 11.8 million, respectively, were recorded in long-term liabilities in the consolidated balance sheet.

In connection with the change in the estimated fair value of the Harvard Success Payment liability the Company recognized expenses of $ 2.4 million, $ 9.9 million, and $ 1.9 million, respectively, for the years ended December 31, 2021, 2020, and 2019.

Restricted cash

December 31, 2020 and 2019, the Company maintained standby letters of credit of $2.1 million and $1.8 million, respectively, which are collateralized with a bank account at a financial institution in accordance with the lease

agreements as follows:

As of December 31, 2021 and 2020, the Company maintained standby letters of credit of $ 8.8 million and $ 2.1 million, respectively, which are collateralized with a bank account at a financial institution in accordance with the applicable lease agreements.

The following table sets forth the standby letters of credit associated with the leases for each of the Company’s locations:

(in thousands)

South San Francisco, CA

Cambridge, MA

South San Francisco, CA

Total restricted cash

Index to Financial Statements

Fair value measurements

The following tables summarize the Companys financial assets and liabilities measured at fair value on a recurring basis based on the

three-tier fair value hierarchy:

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy:

December 31, 2021

Amortized Cost

Holding Gains

Holding Losses

(in thousands)

2 unchanged sentences

Money market funds

government and agency securities

Corporate debt securities

3 unchanged sentences

Corporate debt securities

Total marketable securities

Total short-term marketable securities

Long-term marketable securities:

government and agency securities

Corporate debt securities

Total long-term marketable securities

1 unchanged sentence

Financial liabilities:

Short-term financial liabilities:

Contingent consideration

Success payment liabilities

Total short-term financial liabilities

Long-term financial liabilities:

Contingent consideration

Success payment liabilities

Total long-term financial liabilities

Total financial liabilities

December 31, 2020

Amortized Cost

Holding Gains

Holding Losses

(in thousands)

8 unchanged sentences

Corporate debt securities

Total marketable securities

Total short-term marketable securities

Long-term marketable securities:

government and agency securities

Total long-term marketable securities

Total financial assets

Financial liabilities:

Contingent license payment

Long-term financial liabilities:

Contingent consideration

1 unchanged sentence

Total financial liabilities

Index to Financial Statements

The Company evaluated its securities for other-than-temporary impairment and considers the

decline in market value for the securities to be primarily attributable to current economic and market conditions.

Securities in an unrealized loss position have been in an unrealized loss position for less than one year.

For the debt securities, it

is not more-likely-than-not that the Company will be required to sell the securities, and the Company does not intend to do so prior to the recovery of the amortized cost basis.

As of December 31, 2020, all marketable securities had an effective maturity date of two years or less.

Investments in securities with

maturities of less than one year, or those for which management intends to use to fund current operations, are included in current assets and classified as

available-for-sale.

As of December 31, 2020, the balance in accumulated other comprehensive income included the net unrealized gains related to the Companys available-for-sale debt securities.

There were no material realized gains or losses recognized on the sale or maturity of available-for-sale securities during the years ended December 31, 2020 or 2019.

measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities.

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities.

The Level 2 marketable securities include U.S.

government, agency securities and corporate debt securities and are

valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

government, agency securities, and corporate debt securities and are valued based on either recent trades of securities in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

As of December 31, 2021, all marketable securities had an effective maturity date of two years or less.

Securities in an unrealized loss position have been in an unrealized loss position for less than one year.

The Company determined that there was no material change in the credit risk of the above investments during the year ended December 31, 2021.

As such, an allowance for credit losses has not been recognized.

As of December 31, 2021, the Company does not intend to sell such securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to the recovery of the amortized cost basis.

As of December 31, 2021 and 2020, the balance in accumulated other comprehensive income (loss) included net unrealized gains (losses) related to the Company’s available-for-sale debt securities.

There were no material realized gains or losses recognized on the sale or maturity of available-for-sale securities during the years ended December 31, 2021, 2020 and 2019.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities:

Contingent License

Consideration

Success Payment

(in thousands)

Balance as of December 31, 2020

Changes in fair value

Changes in fair value - expense (gain)

Balance as of March 31, 2021

Changes in fair value - expense (gain)

Balance as of June 30, 2021

Changes in fair value - expense (gain)

Balance as of September 30, 2021

Changes in fair value - expense (gain)

Balance as of December 31, 2021

Contingent license payment

The Company utilized estimates and assumptions in determining the estimated Harvard contingent license payment liability and associated expense

at each balance sheet date.

The assumptions used to calculate the fair value of the contingent license payment were subject to a significant amount of judgment including the expected probability of the Companys Series B convertible preferred

stock financing occurring and estimated timing of achievement.

The Series B convertible preferred stock financing closed in June 2020, and the Company paid Harvard $6.0 million in cash, and recognized an additional $1.4 million in research

and development expense for the year ended December 31, 2020.

Contingent consideration

In connection with the acquisition of Cobalt, the Company may be required to pay future consideration that is contingent upon the achievement

of certain pre-specified development milestones.

The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant.

The fair value of the Cobalt Contingent

Consideration was determined by calculating the probability-weighted estimated value of the pre-specified development milestone payments based on the assessment of the likelihood and estimated timing that

certain milestones would be achieved, and the applicable discount rates.

The Company utilizes significant estimates and assumptions it believes would be made by a market participant in determining the estimated fair value of the Cobalt Contingent Consideration at each balance sheet date.

The fair value of the Cobalt Contingent Consideration was determined by calculating the probability-weighted estimated value of the pre-specified development milestone payments based on the assessment of the likelihood and estimated timing that the milestones would be achieved and the applicable discount rates.

The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due.

The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained.

The fair value of the Cobalt

Contingent Consideration was calculated using the following unobservable inputs:

The Company assesses these estimates on an on-going basis as additional data impacting the assumptions are obtained.

The fair value of the Cobalt Contingent Consideration was calculated using the following unobservable inputs:

Unobservable Input

5 unchanged sentences

Probability of milestone achievement

Index to Financial Statements

The weighted-average unobservable inputs were calculated based on the relative value of the

Cobalt Contingent Consideration.

achievement of the milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved.

In evaluating the fair value assumptions, judgment is required to interpret the market data used to develop the

The weighted-average unobservable inputs were calculated based on the relative value of the pre-specified development milestones.

The estimated fair value of the Cobalt Contingent Consideration may change significantly as development progresses and additional data are obtained, impacting the assumptions regarding probabilities of successful achievement of the milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved.

In evaluating the fair value assumptions, judgment is required to interpret the market data used to develop the estimates.

The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange.

Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially

different fair value estimates.

Significant increases or decreases in any of the inputs would result in a significantly higher or lower fair value measurement.

Accordingly, the use of different market assumptions, inputs, and/or different valuation techniques could result in materially different fair value estimates.

Success payments

The estimated

fair value of the Cobalt and Harvard Success Payments was determined using a Monte Carlo simulation model in which the Company utilizes significant estimates and assumptions in determining the estimated success payment liabilities and associated

expense or gain at each balance sheet date.

The assumptions used to calculate the fair value of the success payment liabilities include expected volatility, remaining terms of the success payments, and estimated number and timing of valuation

measurement dates.

In addition, prior to the IPO, the calculation of the fair value of the success payment liabilities incorporated the estimated future per share value of the Companys Series A convertible preferred stock and the estimated

future value of the Company implied by the estimated future per share value of the Companys Series B convertible preferred stock at issuance.

Concurrent with the closing of the Companys IPO in February 2021, the Companys Series A

and Series B convertible preferred stock converted into common stock.

Subsequent to the IPO, the computation of the estimated fair value of the Harvard Success Payment liabilities will incorporate the per share fair market value of the

Companys common stock, and the estimated fair value of the Cobalt Success Payment liability will incorporate the market capitalization of the Company.

The Company utilizes significant estimates and assumptions in determining the estimated fair value of the success payment liabilities and the associated expense or gain at each balance sheet date.

The estimated fair value of the Cobalt and Harvard success payment liabilities was determined using a Monte Carlo simulation methodology, which models the estimated fair value of the liability based on several key assumptions, including the expected volatility, remaining term, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payment may be triggered, and for the Cobalt Success Payment, the Company’s market capitalization, and for the Harvard Success Payments, the per share fair value of the Company’s common stock.

Prior to the IPO, the calculation of the estimated fair value of the success payment liabilities incorporated the estimated future per share value of the Company’s Series A convertible preferred stock and the estimated future value of the Company implied by the estimated future per share value of the Company’s Series B convertible preferred stock at issuance.

Concurrent with the closing of the Company’s IPO in February 2021, the Company’s Series A and Series B convertible preferred stock converted into common stock.

As such, subsequent to the IPO, the computation of the estimated fair value of the Harvard Success Payment liabilities incorporates the per share fair market value of the Company’s common stock, and the estimated fair value of the Cobalt Success Payment liability incorporates the market capitalization of the Company.

The fair values of the Cobalt and Harvard success payments were calculated using the following unobservable inputs:

12 unchanged sentences

Property and equipment, net

Depreciation expense was $5.9 million and $1.8 million for the year ended December 31, 2020 and

2019, respectively.

Depreciation expense was immaterial for the period from July 13, 2018 (inception) to December 31, 2018.

Index to Financial Statements

Depreciation expense was $ 11.1 million, $ 5.9 million, and $ 1.8 million, respectively, for the years ended December 31, 2021, 2020, and 2019.

Accrued liabilities

2 unchanged sentences

Accrued compensation:

Accrued bonuses

Other accrued compensation

Accrued bonus

Accrued paid time off

Accrued payroll

Total accrued compensation

Accrued expenses and other current liabilities:

Accrued research and development expense services

Accrued property and equipment

Accrued professional fees

Accrued research and development

Accrued contingent license payment

Other accrued current liabilities

Total accrued expenses and other current liabilities

1 unchanged sentence

Lease commitments

Companys lease portfolio is primarily comprised of operating leases for office, laboratory, and non-GMP pilot plant manufacturing space located in Seattle, WA, Cambridge, MA, and South San Francisco, CA.

Operating leases have contractual periods expiring between April 2024 and April 2030.

These leases contain various rent abatement periods, after which they require monthly lease payments that may be subject to annual increases throughout the lease

The Seattle and South San Francisco lease agreements provide the Company with the option to renew for an additional period of five years.

The Company is not reasonably certain it will renew these leases, and therefore the renewal options are

not considered in the remaining lease term.

Certain leases provide the Company the right to make tenant improvements, including the addition of laboratory space, and include a lease incentive allowance.

The following table contains additional information related to our operating leases:

The Company’s lease portfolio is primarily composed of operating leases for office, laboratory, non-good manufacturing practices (GMP) pilot plant manufacturing, and industrial space located in Seattle, WA, Cambridge, MA, South San Francisco, CA, and Fremont, CA.

Our operating leases have contractual periods expiring between April 2024 and November 2031 .

These leases contain various rent abatement periods, after which they require monthly lease payments that may be subject to annual increases throughout the lease term.

The Seattle and South San Francisco lease agreements each provide the Company with the option to renew for an additional period of five years .

The Company is not reasonably certain it will renew these leases, and the renewal options therefore are not considered in the remaining lease term for these leases.

The industrial space located in Fremont, CA will be used for the construction of a GMP manufacturing facility.

The lease agreement initial term is ten years and includes the option to extend for up to two additional five-year terms.

The Company anticipates that it will exercise both options to extend.

Certain leases provide the Company with the right to make tenant improvements, including the addition of laboratory space or build-out of manufacturing

capabilities, and include a lease incentive allowance.

The following table contains additional information related to the Company’s operating leases:

Square Footage

7 unchanged sentences

South San Francisco, CA

December 2019 to October 2020

December 2019 to November 2021

April 2024 to April 2030

Throughout the term of the lease agreements, the Company is

responsible for paying certain operating costs, in addition to rent, such as common area maintenance, taxes, utilities, and insurance.

These additional charges are considered variable lease costs and are recognized in the period in which the costs

are incurred.

November 2031

Throughout the term of the lease agreements, the Company is responsible for paying certain operating costs in addition to rent, such as common area maintenance, taxes, utilities, and insurance.

These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

The following table summarizes the Company’s lease costs:

Period from July 13,

2018 (Inception) to

December 31, 2018 (1)

Year Ended December 31,

1 unchanged sentence

Operating lease cost

Shot-term lease cost

Short-term lease cost

Variable lease cost

Total lease cost

The Company adopted ASC 842 effective January 1, 2019 using the prospective transition method and utilizing

the effective date as its date of initial application.

Lease costs for the period from July 13, 2018 (inception) to December 31, 2018 is presented under previous guidance and is not comparable to the amounts recorded under ASC 842.

Index to Financial Statements

As of December 31, 2020, the weighted-average remaining lease term was 7.34 years and

the weighted-average IBR was 10.62%.

The following table presents the scheduled maturities of the Companys operating lease

liabilities by fiscal year and the present value of those lease liabilities as of December 31, 2020 (in thousands):

As of December 31, 2021, the weighted-average remaining lease term was 9.88 years and the weighted-average IBR was 9.15 %.

The following table reconciles the Company’s undiscounted operating lease cash flows by fiscal year to the present value of the operating lease liabilities as of December 31, 2021 (in thousands):

2026 and thereafter

Total lease payments

Total undiscounted lease payments

imputed interest

tenant improvement allowances

Present value of lease liabilities

Present value of operating lease liabilities

Convertible preferred stock

Series A-1 convertible preferred stock financing

In October 2018, the Company executed an agreement to sell up to 11.5 million shares of its

Series A-1 convertible preferred stock at a price of $4.00 per share.

The Company issued 11.5 million shares in October 2018 for gross proceeds of $45.9 million.

Upon certain change in control events that are outside of the Companys control, holders of the convertible preferred stock can cause its

This requires the Companys convertible preferred stock to be classified outside of stockholders deficit on the accompanying consolidated balance sheets.

Series A-2 and Series B convertible preferred stock financing

In February 2019, the Company executed an agreement for 54.0 million shares of its Series A-2

convertible preferred stock at a price of $4.00 per share, for gross proceeds of $216.1 million.

In October 2019, an additional 2.0 million shares the Companys Series A-2 convertible preferred

stock were issued at a price of $4.00 per share, for gross proceeds of $7.9 million.

The Series A-2 convertible preferred agreement also committed these investors to a Series B convertible preferred stock

financing for up to 27.6 million shares of the Companys Series B convertible preferred stock at a price of $16.00 per share contingent upon the occurrence of certain clinical milestones or the unanimous approval of the Companys

board of directors.

Additionally, in the event the clinical milestones were not achieved, the agreement stated at least two large Series B convertible preferred stock investors, defined as investors with at least a $29.0 million Series B

convertible preferred stock investment, had the right to object to the board of directors decision to call the Series B convertible preferred stock closing within seven days.

In June 2020, the Company completed the Series B convertible preferred stock and issued 27.2 million shares of Series B convertible

preferred stock at $16.00 per share for gross proceeds of $435.6 million.

In December 2020, the Company amended and restated its

certificate of incorporation and amended the investors rights agreement and voting agreement with its stockholders.

Under the amended and restated certificate of incorporation, the authorized capital stock of the Company increased to

707.0 million shares, each with a par value of $0.0001 per share.

The authorized shares consisted of 169.2 million shares designated as common stock and 537.8 million shares designated as convertible preferred stock.

Rights issued with Series A-1, Series A-2, and Series B convertible

preferred stock

The Company assessed the Series A-1, Series

A-2, and Series B convertible preferred stock for any beneficial conversion features or embedded derivatives, including the conversion option, that would require bifurcation from the

Index to Financial Statements

convertible preferred stock and receive separate accounting treatment.

On the dates of the issuances, the fair value of the common stock into which the convertible preferred stock was convertible

was less than the effective conversion price of the Series A-1, Series A-2, and Series B convertible preferred stock;

as such, there was no intrinsic value of the

conversion option on the commitment date.

Prior to the IPO in February 2021, shares of the Companys Series A-1, Series A-2, and Series B convertible preferred stock were convertible at any time at the option of the holder into shares of the Companys common stock based on a defined conversion ratio, set at one-for-one, adjustable for certain dilutive events.

The conversion ratio for the convertible preferred stock was subject to change in accordance with anti-dilution provisions

contained in the Companys certificate of incorporation.

In addition, the convertible preferred stock would have automatically converted into shares of common stock upon the vote or written consent of the holders of at least 61% of the

outstanding convertible preferred stock, voting together as a single class on an as-converted basis, and which must have included a majority of the Series B preferred stock then held by the Series B

investors that purchased at least $29.0 million in the Series B convertible preferred stock financing (Series B Large Investors).

Concurrent with closing of the Companys IPO in February 2021, all outstanding shares of convertible preferred stock converted into

134.1 million shares of common stock.

Prior to the IPO in February 2021, each holder of the Companys Series A-1, Series A-2, and Series B convertible preferred stock was entitled to receive non-cumulative dividends, when and if declared by the Companys board of directors, at an annual

rate of 6% of the original issue price prior to and in preference to the payment of a dividend on common stock.

Any additional dividends would have been distributed among the holders of common stock pro rata based on the number of shares of common

stock (on an as-converted basis).

No dividends have been declared to date.

Prior to the IPO in February 2021, the Company could have been liquidated voluntarily by the Companys board of

directors with consent of the holders of at least 61% of the outstanding convertible preferred stock, voting together as a single class on an as-converted basis, and which must have included the holders of at

least a majority of the Series B preferred stock then held by the Series B Large Investors.

In the event that the Company was liquidated

either voluntarily or involuntarily, or if any event had occurred that was deemed a liquidation under the Companys certificate of incorporation, each holder of the Companys Series A-1, Series A-2, and Series B convertible preferred stock would have been entitled to receive a liquidation preference out of any proceeds from the liquidation before any distributions were made to the holders of common stock.

The liquidation preference for each share of the Series A-1, Series A-2, and Series B convertible preferred stock was equal to the greater of a) the original issue price

(plus any declared but unpaid dividends), or b) such amount per share as would have been payable had all the Series A-1, Series A-2, and Series B convertible preferred

stock been converted into common stock immediately prior to a liquidation event.

Voting rights

Prior to the IPO in February 2021, each of the Companys Series A-1, Series A-2, and Series B convertible preferred stock voted (on an as-converted to common stock basis) with the other voting stock of the Company.

The consent of the holders of at least 61% of the Companys outstanding convertible preferred stock, voting together as a single class on

an as-converted basis, and which must have included the holders of at least a majority of the Series B preferred stock then held by the Series B Large Investors, was required for any of the following actions:

the amendment or waiver of any provision of the certificate of incorporation or bylaws of the Company in a manner that adversely affects the rights, preferences or privileges of the Series A-1, Series A-2, and Series B convertible preferred stock;

any change in the authorized number of Series A-1, Series A-2, and Series B convertible

preferred stock, or any other class of stock of the

Index to Financial Statements

the creation of any new class or series of shares having rights, preferences or privileges senior to or on a parity with the Series A-1, Series A-2, and Series B convertible preferred stock;

the approval of any change in control event;

the redemption of any securities of the Company, other than repurchases of common stock upon termination of a consultant,

director or employee approved by the Companys board of directors;

any increase or decrease in the authorized size of the Companys board of directors;

the declaration or payment of any dividend or distribution on the Series A-1, Series A-2, and Series B convertible preferred stock (except as provided in the certificate of incorporation) or common stock;

or the liquidation or dissolution of the

In addition, the stockholders of the Company entered into a voting agreement pursuant to which the Companys Series A-1, Series A-2, and Series B convertible preferred stock and common stockholders elected five members to its board of directors.

Reorganization

the IPO in February 2021, any change in control event, including any change in the holders of a majority of the equity of the Company by merger, consolidation, reorganization or otherwise, or any sale or exclusive license of substantially all the

assets of the Company, would have been deemed a liquidation under the Companys certificate of incorporation unless waived by the holders of at least 61% of the Companys outstanding convertible preferred stock, voting together as a single

class on an as-converted basis, and which must have included the holders of at least a majority of the Series B preferred stock then held by the Series B Large Investors.

After liquidation preferences for the Companys Series A-1, Series

A-2, and Series B convertible preferred stock described above had been satisfied, any additional proceeds from any deemed liquidation would have been distributed among the holders of common stock pro rata

based on the number of shares of common stock (on an as-converted basis).

As of December 31, 2020, there were 16.2 million shares of the Companys common stock outstanding, excluding 10.1 million

shares of restricted common stock outstanding that are subject to vesting requirements.

As of December 31, 2020, the Company had

reserved 134.1 million shares of its common stock for future issuance upon the conversion of its Series A-1, Series A-2, and Series B convertible preferred stock

outstanding, which occurred in February 2021 concurrent with the closing of the IPO.

Series A-1, A-2, and B convertible preferred stock financings

In 2018 and 2019, the Company issued 67.5 million shares of its Series A-1 and Series A-2 convertible preferred stock at a price of $ 4.00 per share, for gross proceeds of $ 269.9 million.

In 2020, the Company issued 27.2 million shares of Series B convertible preferred stock at $ 16.00 per share for gross proceeds of $ 435.5 million.

In December 2020, the Company amended and restated its certificate of incorporation and amended the investors’ rights agreement and voting agreement with its stockholders.

Under the Company’s amended and restated certificate of incorporation, the authorized capital stock of the Company increased to 707.0 million shares.

The authorized shares consisted of 169.2 million shares designated as common stock and 537.8 million shares designated as convertible preferred stock, each with a par value of $ 0.0001 per share.

Stockholders’ equity

Effective February 2021, the Company amended and restated its certificate of incorporation, increasing the number of shares of all classes of stock the Company has authority to issue to 800.0 million shares, of which 750.0 million shares are common stock and 50.0 million shares are preferred stock.

As of December 31, 2021, there were 184.9 million shares of the Company’s common stock outstanding, excluding 4.4 million shares of restricted common stock outstanding that are subject to vesting requirements.

As of December 31, 2020, there were 16.2 million shares of the Company’s common stock outstanding, excluding 10.1 million shares of restricted common stock outstanding that are subject to vesting requirements.

Stock-based compensation

2018 Equity Incentive Plan

October 2018, the Company adopted the 2018 Equity Incentive Plan (2018 Plan) under which it may grant incentive stock options, non-statutory stock options, RSAs, RSUs, and other stock-based awards to any

person, including officers, directors, and consultants.

Terms of stock agreements, including vesting requirements, are determined by the Companys board of directors, or by a committee appointed by the board of directors, subject to the

provisions of the 2018 Plan.

Generally, awards granted by the Company vest over four years and have an exercise price equal to the estimated fair value of the common stock as determined by the board of directors with consideration given to

contemporaneous valuations of the Companys common stock prepared by an independent third party valuation firm in accordance with the guidance provided by the AICPA Guide.

As of December 31, 2020, there were 0.1 million shares

available for future issuance under the 2018 Plan.

In March 2019, pursuant to the terms of the Cobalt merger agreement, the Company adopted a restricted stock unit plan (RSU Plan) under which it

may grant RSUs to certain employees and consultants.

The RSU Plan provides for up to 0.3 million shares of common stock to be awarded.

Index to Financial Statements

2021 Incentive Award Plan

In February 2021, the Company adopted the 2021 Incentive Award Plan (2021 Plan), which became effective on the completion of the Company’s IPO.

The 2021 Plan provides for a variety of stock-based compensation awards, including stock options, restricted stock awards (RSAs), and restricted stock units (RSUs).

In conjunction with adopting the 2021 Plan, the Company discontinued the 2018 Equity Incentive Plan with respect to new equity awards.

The 2021 Plan provides for an annual increase in the shares available for issuance thereunder, to be added on the first day of each year, beginning in 2022 and ending in 2031, equal to the lesser of (i) 5 % of the outstanding shares of the Company’s common stock on the last day of the immediately preceding year, or (ii) such smaller number of shares determined by the board of directors or an authorized committee of the board of directors.

As of December 31, 2021, the total number of shares available for future issuance of awards under the 2021 Plan was 13.2 million.

As a result of the operation of this provision, on January 1, 2022, an additional 9.5 million shares became available for issuance under the 2021 Plan.

2021 Employee Stock Purchase Plan

In February 2021, the Company adopted the 2021 Employee Stock Purchase Plan (2021 ESPP), which became effective on the completion of the Company’s IPO.

The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their earnings, subject to plan limitations.

Unless otherwise determined by the Company’s board of directors, employees may purchase shares at 85 % of the lower of the fair market value of the Company’s common stock on the first date of an offering or on the purchase date.

The Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering.

The 2021 ESPP also provides for an annual share increase, to be added on the first day of each year, beginning in 2022 and ending in 2031, equal to the lesser of (i) 1 % of the outstanding shares of the Company’s common stock on the last day of the immediately preceding year and (ii) such number of shares determined by the board of directors or authorized committee of the board of directors, provided that no more than 27.9 million shares may be issued under the 2021 ESPP.

As of December 31, 2021, the total number of shares available for future issuance pursuant to the 2021 ESPP was 1.9 million.

As a result of the operation of this provision, on January 1, 2022, an additional 1.9 million shares became available for issuance under the 2021 ESPP.

Stock-based compensation expense

1 unchanged sentence

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

(in thousands)

2 unchanged sentences

Total stock-based compensation expense

Unrecognized stock-based compensation costs related to unvested awards and the weighted-average period over

which the costs are expected to be recognized as of December 31, 2020 are as follows:

Unrecognized stock-based compensation costs related to unvested awards and the weighted-average period over which the costs are expected to be recognized as of December 31, 2021 are as follows:

Stock Options

Unrecognized stock-based compensation expense (in thousands)

Expected weighted-average period compensation costs to be recognized (years)

As of December 31, 2020, the Company had $0.5 million of unrecognized stock-based compensation costs

related to 0.3 million RSUs originating from the Cobalt acquisition that are subject to (i) service-based vesting over four years, (ii) achievement of the first milestone which occurred in July 2019, and (iii) a liquidity event.

As of December 31, 2020, 0.1 million shares had satisfied the vesting conditions and will vest and become outstanding six months after the completion of the IPO.

The estimated compensation expense will be recognized ratably over the

service period, or remaining service period, if and when it becomes probable that the vesting conditions will be satisfied.

No stock-based compensation expense has been recognized related to RSUs as of December 31, 2020.

Weighted-average period costs expected to be recognized (in years)

Stock options

A summary of the

Companys stock option activity is as follows:

A summary of the Company’s stock option activity is as follows:

Stock Options

(in thousands)

Weighted-Average

Exercise Price per

Weighted-Average

Contractual Life

Intrinsic Value

Weighted-Average Exercise Price per Share

Weighted-Average Remaining Contractual Life (in years)

Aggregate Intrinsic Value

(in thousands)

2 unchanged sentences

Outstanding as of December 31, 2021

Forfeited/Cancelled

Outstanding as of December 31, 2020

Exercisable as of December 31, 2021

The fair value of stock options granted to employees, directors, and consultants was estimated on the date of

grant using the Black-Scholes option pricing model using the following assumptions:

The fair value of stock options granted to employees, directors, and consultants was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

Year Ended December 31,

2 unchanged sentences

0.36% - 1.51%

1.53% - 2.62%

Expected volatility

1 unchanged sentence

Expected dividend

Index to Financial Statements

The following table summarizes additional information related to stock option activity:

2 unchanged sentences

Aggregate intrinsic value of stock options exercised (in thousands)

Restricted stock awards

A summary of the Companys RSA activity is as follows:

Restricted stock

A summary of the Company’s RSA and RSU activity is as follows:

(in thousands)

Weighted-Average

Grant Date Fair

Value per Share

Unvested shares as of July 13, 2018 (inception)

Unvested shares as of December 31, 2018

Weighted-Average Grant Date Fair Value per Share

(in thousands)

Weighted-Average Grant Date Fair Value per Share

Unvested shares as of December 31, 2020

Unvested shares as of December 31, 2021

The fair value of vested RSAs was $1.5 million and $1.0 million for the year ended December 31,

2020 and 2019, respectively.

The fair value of vested RSAs was $ 1.5 million, $ 1.5 million and $ 1.0 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

The fair value of vested RSUs was $ 4.1 million for the year ended December 31, 2021 and immaterial for each of the years ended December 31, 2020 and 2019.

As of December 31, 2021, the Company had U.S.

federal and state tax-effected net operating loss

(NOL) carryforwards of $51.3 million and $7.2 million, respectively, which are available to reduce future taxable income.

As of December 31, 2020, the Company also had federal and state research tax credits of $8.3 million and

$3.6 million, respectively, which may be used to offset future liabilities.

federal and state tax-effected net operating loss (NOL) carryforwards of $ 101.9 million and $ 12.4 million, respectively, which are available to reduce future taxable income.

As of December 31, 2021, the Company also had federal and state research tax credits of $ 17.5 million and $ 6.5 million, respectively, which may be used to offset future liabilities.

The federal NOL carries forward indefinitely, and the state NOL will begin to expire in 2038 .

The federal tax credit carryforward will begin to expire in 2038, and the

state tax credit will carry forward indefinitely.

The federal tax credit carryforward will begin to expire in 2038 , and the state tax credit will carry forward indefinitely.

The NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest.

This could limit the amount of tax attributes

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

This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

Subsequent ownership changes may further affect the limitation in future years.

In connection with the 2019 Cobalt acquisition, the Company recorded a deferred tax liability of $7.5 million associated with the

acquired intangible asset, and for the year ended December 31, 2019 the Company recorded a tax benefit of $7.5 million related to the release of valuation allowance on U.S.

deferred tax assets as a result of this deferred tax liabilities.

Index to Financial Statements

In connection with the 2019 Cobalt acquisition, the Company recorded a deferred tax liability of $ 7.5 million associated with the acquired intangible asset, and the Company recorded a tax benefit of $ 7.5 million for the year ended December 31, 2019 related to the release of valuation allowance on U.S.

deferred tax assets as a result of this deferred tax liability .

A reconciliation of income taxes computed using the U.S.

federal statutory rate to that

reflected in operations follows:

federal statutory rate to that reflected in operations follows:

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

Federal statutory tax

3 unchanged sentences

Contingent consideration

In-process research & development

Effective income tax rate

The principal components of the Company’s net deferred tax assets are as follows:

Year Ended December 31,

(in thousands)

5 unchanged sentences

Success payment liabilities

Business transactions

Stock-based compensation

Gross deferred tax assets

2 unchanged sentences

Deferred tax liabilities:

Right-of-use assets

Stock-based compensation

2 unchanged sentences

The valuation allowance relates primarily to net U.S.

deferred tax assets from operating losses, research tax

credit carryforwards, and amounts paid and accrued to enter into various agreements for which the tax treatment requires capitalization and amortization.

deferred tax assets from operating losses, research tax credit carryforwards, and amounts paid and accrued to enter into various agreements for which the tax treatment requires capitalization and amortization.

The Company maintains a full valuation allowance on its net U.S.

deferred tax assets.

The assessment regarding whether a valuation allowance

is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable.

In making this assessment, significant weight is given to evidence that can be objectively

The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable.

In making this assessment, significant weight is given to evidence that can be objectively verified.

In its evaluation, the Company considered its cumulative loss in the first year of operation and its forecasted losses in the near term as significant negative evidence.

Based upon a review of the four sources of income identified within

ASC 740, Accounting for Income Taxes , the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its net deferred tax assets will be maintained.

The Company will continue to

assess the realizability of its deferred tax assets going forward and will adjust the valuation allowance as needed.

Index to Financial Statements

The Company determines its uncertain tax positions based on a determination of whether and

how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities.

Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes , the Company determined that the negative evidence outweighed the positive evidence, and a full valuation allowance on its net deferred tax assets should be maintained.

The Company will continue to assess the realizability of its deferred tax assets going forward and will adjust the valuation allowance as needed.

The Company determines its uncertain tax positions based on a determination of whether and how much of the tax benefit the Company takes in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax

The Company is generally subject to examination by U.S.

federal and local

income tax authorities for all tax years in which the loss carryforward is available.

The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax

As of December 31, 2020 and 2019, the Company had no uncertain tax positions.

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

The Company applies judgment in its determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

As of December 31, 202 1 and 20 20 , the Company ’s uncertain tax positions were immaterial.

Net loss per share

Basic and diluted net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding

during the period, without consideration for common stock equivalents.

The Company was in a loss position for all periods presented, therefore basic net loss per share and diluted net loss per share are the same for all periods as the inclusion of

all potential common securities outstanding would have been anti-dilutive.

The following table sets forth the computation of basic and

diluted net loss per share of common stock:

Basic and diluted net loss per common share are calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.

The Company was in a loss position for all periods presented, and basic net loss per share and diluted net loss per share are therefore the same for all periods, as the inclusion of all potential common securities outstanding would have been anti-dilutive.

The following table summarizes the calculation of basic and diluted net loss per share of common stock:

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

(in thousands, except per share amounts)

Weighted-average common shares used in net loss per share, basic and diluted

Net loss per share, basic and diluted

The amounts in the table below were excluded from the calculation of diluted net loss per share due to their

anti-dilutive effect:

Weighted-average number of common shares - basic and diluted

Net loss per common share - basic and diluted

The following securities were excluded from the computation of net loss per diluted share of common stock for periods presented as their effect would have been anti-dilutive:

Year Ended December 31,

Period from July 13,

2018 (Inception) to

December 31, 2018

(in thousands)

Series A-1 convertible preferred stock

Series A-2 convertible preferred stock

Series B convertible preferred stock

Unvested restricted common stock

Convertible preferred stock

Options to purchase common stock

Unvested restricted common stock

Unvested RSUs

1 unchanged sentence

In January 2019, the Company adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering all employees.

The 401(k) Plan allows

employees to make pre- and post-tax contributions up to the maximum allowable amount set by the IRS.

As of December 31, 2020, the Company has not made any matching

contributions to the 401(k) Plan on behalf of participants.

Subsequent events

2021 Incentive award plan

February 2021, the Company adopted the 2021 Incentive Award Plan.

The 2021 Incentive Award Plan provides for a variety of stock-based compensation awards, including stock options, RSAs, and RSUs.

In conjunction with adopting the 2021 Incentive Award

Plan, the Company discontinued the 2018 Equity Plan with respect to new equity awards, and the 0.2 million available shares under the 2018 Equity Plan became available under the 2021 Incentive Award Plan.

The Company has initially reserved for

issuance 16.4 million shares of common stock pursuant to the 2021 Incentive Award Plan.

The number of shares of the Companys common stock reserved for issuance is subject to automatically increase by 5% of all shares outstanding at the

beginning of each calendar year.

Index to Financial Statements

2021 Employee stock purchase plan

In February 2021, the Company adopted the 2021 Employee Stock Purchase Plan (2021 ESPP).

The 2021 ESPP became effective on the completion of

the Companys IPO and authorized the issuance of 2.0 million shares of the Companys common stock under purchase rights granted to its employees or to employees of any of the Companys designated affiliates.

The number of

shares of the Companys common stock reserved for issuance is subject to automatically increase by 1% of all shares outstanding at the beginning of each calendar year.

Under the 2021 ESPP, the Company may specify offerings with durations of not

more than 27 months and may specify shorter purchase periods within each offering.

The 2021 ESPP allows eligible employees to purchase shares of the Companys common stock at a discount through payroll deductions of up to 15% of

their earnings, subject to plan limitations.

Unless otherwise determined by the Companys board of directors, employees are able to purchase shares at 85% of the lower of the fair market value of the Companys common stock on the

first date of an offering or on the purchase date.

Changes in and Disagreements With Accountants on Accounting

and Financial Disclosure.

The 401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the IRS.

The Company has no t made any matching contributions to the 401(k) Plan on behalf of participants.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data