What changed in this filing

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Item 9A. Controls and Procedures

2023-03-14 compared with 2022-03-28 · 248 added, 186 removed, 1017 unchanged (30% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Business and Financial Officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.

Based on that evaluation, our Chief Executive Officer and our Chief Business and Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective.

Our Chief Executive Officer and our Vice President, Finance evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.

Based on that evaluation, our Chief Executive Officer and our Vice President, Finance concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and our Chief Business and Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and our Vice President of Finance and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S.

generally accepted accounting principles (“GAAP”), and includes those policies and procedures that:

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

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Business and Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President, Finance, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

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(incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 21, 2020)

Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on November 7, 2022)

Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on January 25, 2023)

Specimen certificate evidencing shares of common stock (incorporated by reference to Exhibit 4.1 to Amendment No.

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D escription of Securities

Form of Second Supplemental Indenture, by and between the Company and Wilmington Trust, National Association (incorporated by reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q filed by Registrant on November 9, 2020)

Form of 5.00% Convertible Note due 2048 (2020 Notes) (included in Exhibit 4.6)

2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 (File No.

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(incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K filed by the Registrant on March 6, 2014)

Employment Agreement between the Registrant and Robert Gagnon, effective August 28, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on August 29, 2018)

Employment Agreement between the Registrant and Brian Stuglik, dated July 29, 2019 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed by the Registrant on August 1, 2019)

Purchase Agreement, dated February 27, 2020 among Verastem, Inc.

and each purchaser party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed by the Registrant on February 28, 2020)

License Agreement for CKI27, dated January 7, 2020, between Verastem, Inc.

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Loan and Security Agreement, dated as of March 25, 2022, among Verastem, Inc., as borrower, Oxford Finance LLC, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed by the Registrant with the Securities and Exchange Commission on March 27, 2022)

Section 203 Agreement entered into as of March 28, 2022 by and between Baker Bros.

Advisors LP and Verastem, Inc.

(incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on March 30, 2022).

Exchange Agreement, dated November 4, 2022, by and among Verastem, Inc.

and B iotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS LP and MSI BVF SPV, LLC (incorporated by reference to Exhibit 10.1 to for the form 8-K filed by the Registrant with the Securities and Exchange Commission on November 7, 2022)

Securities Purchase Agreement, dated January 24, 2023, by and among Verastem, Inc.

and each purchaser party thereto (incorporated by reference to Exhibit 10.1 to the form 8-K filed by the Registrant with the Securities and Exchange Commission on January 25, 2023)

Subsidiaries of the Registrant

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Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)

Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)

Certification of the Vice President, Finance pursuant to Exchange Act Rule 13a-14(a)

Certification of the Chief Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification of the Chief Financial Officer pursuant to 18 U.S.C.

Certification of the Vice President, Finance pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Press Release issued by Verastem, Inc.

on March 14, 2023 (furnished herewith).

Inline XBRL Instance Document

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March 14, 2023

/s/ Robert Gagnon

Robert Gagnon

Chief Business and Financial Officer

/s/ Daniel Calkins

Daniel Calkins

Vice President, Finance

(Principal Financial and Accounting officer)

March 14, 2023

/s/ Timothy Barberich

Timothy Barberich

March 28, 2022

/s/ P AUL B UNN, M.D.

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March 14, 2023

/s/ Robert Gagnon

Robert Gagnon

March 14, 2023

/s/ Anil Kapur

March 14, 2023

/s/ Michael Kauffman, M.D.,Ph.D.

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Notes to Consolidated Financial Statements

Verastem, Inc.

Report of Independent Registered Public Accounting Firm

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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.

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

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

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

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As discussed in Note 2 to the consolidated financial statements, the Company records research and development expenses as incurred.

The Company’s determination of costs incurred to conduct research, such as the discovery and development of the Company’s product

candidates as well as the related accrued expenses at each reporting period incorporates judgment and utilizes various assumptions, including an evaluation of the information provided to the Company by third parties on actual cost incurred but not yet billed, estimated time period over which services will be performed, and the level of effort to be expended in each period.

The Company’s determination of costs incurred to conduct research, such as the discovery and development of the Company’s product candidates as well as the related accrued expenses at each reporting period incorporates

judgment and utilizes various assumptions, including an evaluation of the information provided to the Company by third parties on actual cost incurred but not yet billed, estimated time period over which services will be performed, and the level of effort to be expended in each period.

Payments for these activities are based on the terms of the individual arrangements, which often differ from the pattern of costs incurred.

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How We Addressed the Matter in Our Audit

To evaluate the Company’s estimate of services incurred as of period end pursuant to its accrued and prepaid clinical trials expenses, our audit procedures included, among others, testing the accuracy and completeness of the underlying third-party and internally generated data used in determining the accrued and prepaid clinical trial expenses and evaluating the assumptions/estimates used by management to adjust the actual information received.

For example, to assess the nature and extent of the services incurred, we corroborated the progress of clinical trials with the Company’s research and development personnel that oversee the clinical trials and confirmed cost incurred to date information directly with vendors.

To evaluate the completeness and valuation of the accrual, we also tested subsequent payments and invoices received and inspected the Company’s contracts with vendors and any pending change orders to assess the impact to the accruals.

We also performed analytical reviews over fluctuations in accruals by study or other significant work order throughout the period subject to audit.

To evaluate the Company’s estimate of services incurred as of period end pursuant to its accrued and prepaid clinical trials expenses, our audit procedures included, among others, assessing the accuracy and completeness of the underlying third-party and internally generated data used in determining the accrued and prepaid clinical trial expenses and evaluating the assumptions/estimates used by management.

To evaluate the completeness/existence and valuation of the recorded balances, we also tested subsequent payments and invoices received and inspected the Company’s contracts with vendors and any pending change orders to assess the impact.

We also performed analytical reviews over fluctuations in accruals by study throughout the period subject to audit.

/s/ Ernst & Young LLP

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Restricted cash

Long-term investments

Liabilities and stockholders’ equity

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Accrued expenses

Deferred liabilities

Lease liability, short-term

Convertible senior notes

Total current liabilities

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Convertible senior notes

Long-term debt

Lease liability, long-term

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Preferred stock, $ 0.0001 par value;

5,000 shares authorized, no shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively

5,000 shares authorized, 1,000 and 0 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value;

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Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income/(loss)

Accumulated deficit

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Loss from operations

Other expense

Other income (expense)

Interest income

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Weighted average common shares outstanding used in computing net loss per share—basic and diluted

Unrealized (loss) gain on available-for-sale securities

Unrealized gain (loss) on available-for-sale securities

Comprehensive loss

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comprehensive

Series A Preferred Stock

stockholders'

Balance at December 31, 2019

Unrealized loss on available-for-sale marketable securities

Unrealized gain on available-for-sale marketable securities

Conversion of Notes into common stock

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Issuance of common stock resulting from exercise of stock options

Issuance of common stock resulting from at-the-market transactions, net of issuance costs of $ 55

Issuance of common stock resulting from private investment in public equity offering, net of issuance costs of $ 6,171

Stock-based compensation expense

Balance at December 31, 2020

Unrealized gain on available-for-sale marketable securities

Unrealized loss on available-for-sale marketable securities

Conversion of Notes into common stock

Change in fair value of conversion option of Notes on exchange

Issuance of common stock under Employee Stock Purchase Plan

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Issuance of common stock resulting from exercise of stock options

Issuance of common stock resulting from at-the-market transactions, net of issuance costs of $ 55

Issuance of common stock resulting from private investment in public equity offering, net of issuance costs of $ 6,171

Issuance of common stock resulting from at-the-market transactions, net

Stock-based compensation expense

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Unrealized loss on available-for-sale marketable securities

Conversion of Notes into common stock

Issuance of Series A Preferred Stock in exchange for common stock

( 10,000,000 )

Issuance of common stock under Employee Stock Purchase Plan

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Accrued expenses and other liabilities

Deferred liabilities

Other long-term liabilities

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Financing activities

Proceeds from long-term debt, net of issuance costs

Repayment of long-term, debt

Principal payments on the 2019 Notes

Proceeds from long-term debt, net

Repayment of long-term debt, net

Interest make-whole payments on the 2019 Notes

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Proceeds from the issuance of common stock, net

Net cash provided by (used in) financing activities

Decrease in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Conversion of 2020 Notes into common stock

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

Purchases of property and equipment including in accounts payable and accrued expenses

Change in fair value of conversion option of 2020 Notes on exchange

Settlement of restricted stock units for tax withholdings included in accrued expenses

Settlement of restricted stock for tax withholdings included in accrued expenses

See accompanying notes to the consolidated financial statements.

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Verastem, Inc.

(the Company) is a late stage development-stage biopharmaceutical company, with ongoing registration directed trials, committed to advancing new medicines for patients battling cancer.

(the “Company”) is a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer.

The Company’s pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition.

The Company’s most advanced product candidates, VS-6766 and defactinib, are being investigated in both preclinical and clinical studies for treatment of various solid tumors, including, low-grade serous ovarian cancer (LGSOC), non-small cell lung cancer (NSCLC), colorectal cancer (CRC), pancreatic cancer, uveal melanoma, and endometrial cancer.

The Company believes that VS-6766 may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

The Company’s most advanced product candidates, avutometinib (VS-6766) and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, and melanoma.

The Company believes that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

On September 24, 2018, the Company’s first commercial product, COPIKTRA® (duvelisib), was approved by the U.S.

Food and Drug Administration (the FDA) for the treatment of adult patients with certain hematologic cancers including relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma (CLL/SLL) after at least two prior therapies and relapsed or refractory follicular lymphoma (FL) after at least two prior systemic therapies.

Food and Drug Administration (the “FDA”) for the treatment of adult patients with certain hematologic cancers including relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies and relapsed or refractory follicular lymphoma after at least two prior systemic therapies.

On August 10, 2020, the Company and Secura Bio, Inc.

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All intercompany balances and transactions have been eliminated in consolidation.

The Company is subject to the risks associated with other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, inability to obtain marketing approval of the Company’s product candidates, VS-6766 and defactinib, market acceptance and commercial success of the Company’s product candidates, VS-6766 and defactinib, following receipt of regulatory approval, and, protection of proprietary technology and the continued ability to obtain adequate financing to fund the Company’s future operations.

If the Company does not obtain marketing approval and successfully commercialize its product candidates, VS-6766 and defactinib, following regulatory approval, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital.

The Company has historical losses from operations and anticipates that it will continue to incur losses as it continues the research and development of its product candidates.

As of December 31, 2021, the Company had cash, cash equivalents, and investments of $ 100.3 million, and accumulated deficit of $ 663.7 million.

The Company expects its existing cash resources will be sufficient to fund its planned operations through 12 months from the date of issuance of these consolidated financial statements.

The Company expects to finance the future development costs of its clinical product portfolio with its existing cash, cash equivalents and investments, through future milestones and royalties received through the Secura APA or through strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt.

The Company is subject to the risks associated with other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, inability to obtain marketing approval of the Company’s product candidates, avutometinib and defactinib, market acceptance and commercial success of the Company’s product candidates, avutometinib and defactinib, following receipt of regulatory approval, and, protection of proprietary technology and the continued ability to obtain adequate financing to fund the Company’s future operations.

If the Company does not obtain marketing approval and successfully commercialize its product candidates, avutometinib and defactinib, following regulatory approval, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital.

The Company has historical losses from operations and anticipates that it may continue to incur operating losses as it continues the research and development of its product candidates.

As of December 31, 2022, the Company had cash, cash equivalents, and investments of $ 87.9 million, and an accumulated deficit of $ 737.5 million.

The Company expects its existing cash resources along with $ 30.0 million of gross proceeds raised through the Series B Preferred Stock issuance in January 2023, and expected $ 15.0 million debt drawdown through its loan and security agreement with Oxford Finance LLC (“Oxford”) expected in March 2023 will be sufficient to fund its planned operations through at least 12 months from the date of issuance of these consolidated financial statements.

Subsequent events for detailed description of the Series B Preferred Stock issuance.

The Company expects to finance the future development costs of its clinical product portfolio with its existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt.

However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders.

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All material long-lived assets of the Company reside in the United States.

Proceeds from grants

During the year ended December 31, 2022, the Company was awarded the “Therapeutic Accelerator Award” grant from Pancreatic Cancer Network (“PanCAN”) for up to $ 3.8 million (the “PanCAN Grant”).

In August 2022, PanCAN agreed to provide the Company with an additional $ 0.5 million for the collection and analysis of patient samples.

The grant is expected to support a Phase 1b/2 clinical trial of GEMZAR (gemcitabine) and ABRAXANE (Nab-paclitaxel) in combination with avutometinib and defactinib entitled RAMP 205.

The RAMP 205 trial will evaluate whether combining avutometinib (to target mutant KRAS which is mutated in more than 90% of pancreatic tumors) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with pancreatic cancer.

The Company received $ 1.0 million of cash proceeds in July 2022 which was initially recorded as deferred liabilities on the balance sheet.

The Company recognizes grants as contra research and development expense in the consolidated statement of operations and comprehensive loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

The Company recorded $ 0.3 million of the proceeds as a reduction of research and development expense during the year ended December 31, 2022.

As of December 31, 2022, the Company recorded $ 0.7 million as deferred liabilities in the consolidated balance sheet related to the PanCAN Grant.

Cash, cash equivalents and restricted cash

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Total cash, cash equivalents and restricted cash

Amounts included in restricted cash as of December 31, 2021 and 2020 represent cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of $ 0.2 million.

Amounts included in restricted cash as of December 31, 2022 represent (i) cash received pursuant to the PanCAN Grant restricted for future expenditures for specific research and development activities and (ii) cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amounts of $ 0.6 million and $ 0.2 million, respectively.

Amounts included in restricted cash as of December 31, 2021 represent cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of $ 0.2 million.

Cash received pursuant to the PanCAN Grant is included in prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2022.

The letters of credit are included in non-current restricted cash on the consolidated balance sheets as of December 31, 2022 and December 31, 2021.

Fair value of financial instruments

The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs.

The fair value hierarchy applies

only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality.

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

The hierarchy defines three levels of valuation inputs:

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Short-term investments

Long-term investments

Total financial assets

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These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and

confirming that the relevant markets are active.

After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2022 and 2021.

Fair Value of Financial Instruments

The fair value of the Company’s 2018 issued 5.00 % Convertible Senior Notes due 2048 (the 2018 Notes) was approximately $ 0.3 million, as of December 31, 2021, which differs from the aggregate carrying value of the 2018 Notes of $ 0.2 million as of December 31, 2021.

The fair value of the 2018 Notes and the 2020 issued 5.00 % Convertible Senior Notes due 2048 (the 2020 Notes, together with the 2018 Notes referred to as the Notes) was approximately $ 0.3 million and $ 30.0 million, respectively, as of December 31, 2020, which differs from the aggregate carrying value of the Notes of $ 19.1 million as of December 31, 2020.

During the year ended December 31, 2021, all 2020 Notes have converted into shares of common stock (see Note 10.

Convertible Senior Notes ).

The fair value of the Company’s 2018 issued 5.00 % Convertible Senior Notes due 2048 (the “2018 Notes”) was approximately $ 0.3 million as of December 31, 2022, which equals the carrying value of the 2018 Notes as of December 31, 2022.

The fair value of the 2018 Notes was approximately $ 0.3 million as of December 31, 2021, which differed from the carrying value of the 2018 Notes of $ 0.2 million as of December 31, 2021.

The fair value of the 2018 Notes is influenced by the Company’s stock price, stock price volatility, and current market yields and was determined using Level 3 inputs.

The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis with current applicable rates for similar instruments as of the consolidated balance sheet date.

The carrying value of the Company’s long-term debt as of December 31, 2022, was approximately $ 24.5 million.

The Company estimates that the fair value of its long-term debt was approximately $ 24.9 million as of December 31, 2022.

There was no long-term debt outstanding as of December 31, 2021.

The fair value of the Company’s long-term debt was determined using Level 3 inputs.

Investments and cash equivalents consist of investments in a U.S.

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The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets.

Investments are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity, until such gains and losses are realized.

Debt securities are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity, until such gains and losses are realized.

The fair value of these securities is based on quoted prices for identical or similar assets.

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There were no realized gains or losses on investments for the years ended December 31, 2022, 2021 or 2020.

There were three debt securities and one debt security in an unrealized loss position as of December 31, 2021 and December 31, 2020, respectively.

None of these investments had been in an unrealized loss position for more than 12 months as of December 31, 2021, or December 31, 2020, respectively.

There were two debt securities and three debt securities in an unrealized loss position as of December 31, 2022 and December 31, 2021, respectively.

None of these investments had been in an unrealized loss position for more than 12 months as of December 31, 2022, or December 31, 2021.

The fair value of these securities as of December 31, 2022, and December 31, 2021, was $ 6.0 million and $ 15.8 million, respectively, and the aggregate unrealized loss was immaterial.

The Company considered the decline in the market value for these securities to be primarily attributable to current economic conditions.

As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2021, and December 31, 2020, respectively.

As it was not more likely than not that the Company would be

required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2022, and December 31, 2021, respectively.

Cash, cash equivalents, restricted cash and investments consist of the following (in thousands):

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Cash and money market accounts

Corporate bonds, agency bonds and commercial paper (due within 90 days )

Total cash, cash equivalents & restricted cash:

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Cash and money market accounts

Corporate bonds, agency bonds and commercial paper (due within 90 days )

Total cash, cash equivalents & restricted cash:

Corporate bonds and commercial paper (due within 1 year )

Corporate bonds and commercial paper (due between 1 and 5 years )

Total investments

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As of December 31, 2022, the Company’s cash, cash equivalents and investments were deposited at three financial institutions and it has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

As of December 31, 2021, and 2020, there was one customer, Secura, and two customers, respectively that cumulatively made up more than 50 % of the Company’s trade accounts receivable balance.

As of December 31, 2022, and 2021, there was one customer, Secura, that made up more than 60 % of the Company’s trade accounts receivable balance.

The Company assesses the creditworthiness of all its customers and sets and reassesses customer credit limits to ensure collectability of any trade accounts receivable balances are assured.

For the year ended December 31, 2021 and 2020, one customer, Secura, individually accounted for greater than 10 % of the Company’s total revenues.

For the year ended December 31, 2022 and 2021, one customer, Secura, individually accounted for all of the Company’s total revenue.

Refer to Note 13.

License, collaboration, and commercial agreements for a detailed discussion of the Secura APA.

Property and equipment

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● employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;

● external research and development expenses incurred under arrangements with third parties, such as CROs, clinical trial sites, manufacturing organizations and consultants, including the scientific advisory board;

● external research and development expenses incurred under arrangements with third parties, such as clinical research organizations (“CROs”), clinical trial sites, manufacturing organizations and consultants, including the scientific advisory board;

● license fees;

● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and laboratory supplies;

● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, and laboratory supplies;

Costs for certain development activities, such as clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and information provided to the Company by its vendor on their actual costs incurred or level of effort expended.

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The Company accounts for forfeitures as they occur.

The Company issues shares under the Company’s employee stock purchase plan (ESPP) to employees.

The Company issues shares under the Company’s ESPP to employees.

Stock-based compensation expense for discounted purchases under the ESPP is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the offering period .

Effective January 1, 2019, the Company adopted ASC Topic 842, Leases (ASC 842).

Leases are accounted for in accordance with ASC Topic 842, Leases (“ ASC 842 ”).

This standard requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases.

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The Company’s analyses contemplate the application of the constraint in accordance with ASC 606.

For the years ended December 31, 2020 and 2019, the Company determined a material reversal of revenue would not occur in a future period for the estimates detailed below and, therefore, the transaction price was not reduced further.

There was no t any product revenue, net recorded for the year ended December 31, 2021.

For the year ended December 31, 2020, the Company determined a material reversal of revenue would not occur in a future period for the estimates detailed below and, therefore, the transaction price was not reduced further.

There was no t any product revenue, net recorded for the year ended December 31, 2021 and 2022.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

However, as of December 31, 2022, there are not any reserve balances associated with product revenue, net.

Trade Discounts and Allowances:

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In addition, the Company compensated its specialty distributor customers for sales order management, data, and distribution services.

The Company has determined such services are not distinct from the Company’s sale of COPIKTRA to the specialty distributor customers and, therefore, these payments have also been recorded as a reduction of revenue within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and 2019.

There were no amounts recorded for the year ended December 31, 2021.

consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

There were no amounts recorded for the years ended December 31, 2022 and 2021.

Third-Party Payer Chargebacks, Discounts and Fees:

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In addition, the Company compensated certain Third-Party Payers for administrative services, such as account management and data reporting.

These administrative service fees have also been recorded as a reduction of product revenue within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2020 and 2019.

There were no amounts recorded for the year ended December 31, 2021.

There were no amounts recorded for the years ended December 31, 2022 and 2021.

Government Rebates:

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rather, such goods and services are contingent on exercise of the option, and the associated option fees are not included in the transaction price.

The Company evaluates customer options for material rights or options to acquire additional goods or services for free or at a discount.

The Company evaluates customer options for material rights or options

to acquire additional goods or services for free or at a discount.

If a customer option is determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement.

The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the estimated probability that the customer will exercise the

Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.

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Accounts receivable have standard payments that generally require payment within 30 to 90 days .

The Company analyzes accounts that are past due for collectability and provides an allowance for receivables when collection becomes doubtful.

The Company analyzes accounts that are past due for collectability and provides an allowance for receivables when collection

becomes doubtful.

Given the nature and credit profile of the Company’s limited number of customers, an allowance for doubtful accounts is not deemed necessary at December 31, 2022.

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Basic net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net loss per common share is calculated by increasing the denominator by the weighted-average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options, restricted stock units and warrants (using the “treasury stock” method) and Notes (using the “if-converted” method), unless their effect on net loss per share is antidilutive.

Diluted net loss per common share is calculated by increasing the denominator by the weighted-average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options, restricted stock units and warrants (using the “treasury stock” method), Notes and Series A Preferred Stock (using the “if-converted” method), unless their effect on net loss per share is antidilutive.

The effect of computing diluted net loss per common share was antidilutive for any potentially issuable shares of common stock from the conversion of stock options, restricted stock units and warrants and, as such, have been excluded from the calculation.

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Additionally, the effects of any interest expense and changes in fair value of bifurcated derivatives shall be added back to the numerator of the diluted net loss per share calculation.

Refer to Note 11, Net Loss per share for further details related to the calculation of net loss per share.

Refer to Note 10.

Net Loss per share for further details related to the calculation of net loss per share.

Recently issued accounting standards updates

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The Company is currently evaluating the impact ASU 2020-06 will have on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Standards Updates

In December 2019, the FASB issued Accounting Standard Update (ASU) No 2019-12, Simplifying Accounting for Income Taxes (ASU 2019-12).

ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocations, calculating income taxes in interim periods, and adds certain guidance to remove complexity in certain areas.

ASU 2019-12 is effective for all entities for annual and interim periods beginning after December 15, 2020.

In the first quarter of 2021, the Company adopted ASU 2019-12.

The provisions related to intraperiod tax allocation and interim recognition of enactment of tax laws are being adopted on a prospective basis.

The adoption of ASU 2019-12 did not have an effect on the Company’s consolidated financial statements or disclosures.

Property and equipment, net

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Long-term debt

On March 25, 2022 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”) with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which the Lenders have agreed to lend the Company up to an aggregate principal amount of $ 150.0 million in a series of term loans (the “Term Loans”).

Pursuant to the Loan Agreement, the Company received an initial Term Loan of $ 25.0 million on the Closing Date and may borrow an additional $ 125.0 million of Term Loans at its option upon the satisfaction of certain conditions as follows:

$ 15.0 million (the “Term B Loan”), when the Company has either (a) received the Regulatory Milestone Payment (as defined in the Secura APA) from Secura of $ 35.0 million which is due upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma (“PTCL”) or (b) received at least $ 50.0 million in unrestricted cash proceeds from the sale or issuance of equity securities after the Closing Date (the “Term B Milestones”).

The Company may draw the Term B Loan within 60 days after the occurrence of one of the Term B Milestones, but no later than March 31, 2023.

$ 25.0 million (the “Term C Loan”), when the Company has received accelerated or full approval from the FDA of avutometinib for the treatment of LGSOC (the “Term C Milestone”).

The Company may draw the Term C Loan within 60 days after the occurrence the Term C Milestone, but no later than March 31, 2024.

$ 35.0 million (the “Term D Loan”), when the Company has achieved at least $ 50.0 million in gross product revenue calculated on a trailing six-month basis (the “Term D Milestone”).

The Company may draw the Term D Loan within 30 days after the occurrence of the Term D Milestone, but no later than March 31, 2025.

$ 50.0 million (the “Term E Loan”), at the sole discretion of the Lenders.

The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13 % plus (b) 7.37 % , which is subject to an overall floor and cap.

Interest is payable monthly in arrears on the first calendar day of each calendar month.

Beginning (i) April 1, 2024, if the Term B Loan is not made, (ii) April 1, 2025, if the Term B Loan is made, or (iii) April 1, 2026, if the Term B Loan is made and either (A) avutometinib h as received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of PTCL, the Company shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears.

All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027.

The Company is required to make a final payment of 5.0 % of the original principal amount of the Term Loans that are drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans (the “Final Payment Fee”).

The Company may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0 % of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the funding date of such Term Loan, (ii) 2.0 % of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0 % of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan.

All Term Loans are subject to a facility fee of 0.5 % of the principal amount.

The Loan Agreement contains no financial covenants.

The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change.

The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.

During the existence of an event of default, the Term Loans will accrue interest at a rate per annum equal to 5.0 % above the otherwise applicable interest rate.

In connection with the Loan Agreement, the Company granted Oxford a security interest in all of the Company’s personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property.

The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation.

As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features.

The Company determined that all features of the Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements.

The Company reassesses the features on a quarterly basis to determine if they require separate accounting.

There have been no changes to the Company ’s assessment through December 31, 2022.

The debt issuance costs and the Final Payment Fee have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the Term Loan using the effective interest method.

The components of the carrying value of the debt as of December 31, 2022 (in thousands):

December 31, 2022

Principal loan balance

Final Payment Fee

Debt issuance costs, net of accretion

Long-term debt, net of discount

As of December 31, 2022, future principal payments due are as follows (in thousands):

Total principal payments

On March 21, 2017, the Company entered into a term loan facility of up to $ 25.0 million with Hercules Capital, Inc.

(“Hercules”).

The term loan facility was governed by a loan and security agreement, dated March 21, 2017 (the “Original Loan Agreement”).

The Original Loan Agreement was amended on January 4, 2018, March 6, 2018, October 11, 2018, April 23, 2019, and November 14, 2019 (the Amended Loan Agreement) to increase the total borrowing limit under the Original Loan Agreement from up to $ 25.0 million to up to $ 75.0 million, pursuant to certain conditions of funding.

The Original Loan Agreement was amended on January 4, 2018, March 6, 2018, October 11, 2018, April 23, 2019, and November 14, 2019 (the “Amended Loan Agreement”) to increase the total borrowing limit under the Original Loan Agreement from $ 25.0 million to up to $ 75.0 million, pursuant to certain conditions of funding.

The Amended Term Loan was scheduled to mature on December 1, 2022.

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As a result, the Company recorded a loss on debt extinguishment of $ 1.6 million included in the statements of operations and comprehensive loss for the year ended December 31, 2020.

Product revenue reserves and allowances

From September 24, 2018 (the date of the Company’s U.S.

commercial launch of COPIKTRA) through September 30, 2020 (the date the Company sold COPIKTRA to Secura), the Company’s sole source of product revenue was from the gross sales of COPIKTRA in the United States less provisions for product sales allowances and accruals.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2021 and December 31, 2020 (in thousands):

Balance at December 31, 2019

Provision related to sales in the current year

Adjustments related to prior period sales

Credits and payments made

Balance at December 31, 2020

Provision related to sales in the current year

Adjustments related to prior period sales

Credits and payments made

Ending balance at December 31, 2021

Trade discounts and Third-Party Payer chargebacks and discounts are recorded as a reduction to accounts receivable, net on the consolidated balance sheets.

Trade allowances and Third-Party Payer fees, government rebates, other incentives and returns are recorded as a component of accrued expenses on the consolidated balance sheets.

On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts.

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The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025.

Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $ 660,000 , which increases during the lease term to $ 1.1 million for the last twelve-month period.

Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $ 0.7 million, which increases during the lease term to $ 1.1 million for the last twelve-month period.

The Company has accounted for its Needham, Massachusetts office space as an operating lease.

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Lease Liability

As of December 31, 2021 and 2020, the Company had reserved the following shares of common stock for the issuance of common stock for vested restricted stock units, the exercise of stock options, employee stock purchase plan and Notes conversions to shares of common stock (in thousands):

As of December 31, 2022 and 2021, the Company had reserved the following shares of common stock for the issuance of common stock for vested restricted stock units, the exercise of stock options, employee stock purchase plan, 2018 Notes and Series A Preferred Stock conversions to shares of common stock (in thousands):

Shares reserved under equity compensation plans

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Shares reserved for 2018 Notes

Shares reserved for 2020 Notes

Employee Stock Purchase Plan

Shares reserved for ESPP

Shares reserved for Series A Preferred Stock

Total shares reserved

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The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors.

Private Investment in Public Equity (PIPE)

On February 27, 2020, the Company entered into a Securities Purchase Agreement (Purchase Agreement) with certain institutional investors in which the Company agreed to sell 46,511,628 shares of common stock at a purchase price of $ 2.15 per share, which represents 12.6 % premium to the last reported sale price of the Company’s common stock of $ 1.91 per share on February 27, 2020.

On March 3, 2020, the closing occurred.

The aggregate proceeds net of underwriting discounts and offering costs, were approximately $ 93.8 million.

Series A Preferred Stock

Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

On November 4, 2022, the Company e ntered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS

LP and MSI BVF SPV, LLC (collectively referred to as “BVF”), pursuant to which BVF exchanged 10,000,000 shares of the Company’s common stock for 1,000,000 shares of newly designated Series A convertible preferred stock, par value $ 0.0001 per share (the “Series A Preferred Stock”) (the “Exchange”).

Each share of the Series A Preferred Stock is convertible into 10 shares of common stock at the option of the holder at any time, subject to certain limitations, including that the holder will be prohibited from converting Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99 % (the “Conversion Blocker”) of the total common stock then issued and outstanding immediately following the conversion of such shares of Preferred Stock.

Holders of the Series A Preferred Stock are permitted to increase the Conversion Blocker to an amount not to exceed 19.99 % upon 60 days ’ notice.

Shares of Series A Preferred Stock will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series A Preferred Stock will be required to amend the terms of the Series A Preferred Stock.

In the event of the Company’s liquidation, dissolution or winding up, holders of Series A Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock.

Holders of Series A Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the common stock, an equivalent dividend, calculated on an as-converted basis.

Shares of Series A Preferred Stock are otherwise not entitled to dividends.

The Series A Preferred Stock ranks (i) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to the Series A Preferred Stock;

(ii) on parity with the common stock and any class or series of capital stock of the Company created specifically ranking by its terms on parity with the Series A Preferred Stock;

and (iii) junior to any class or series of capital stock of the Company created specifically ranking by its terms senior to any Series A Preferred Stock, in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily.

The Company evaluated the Series A Preferred Stock for liability or equity classification under ASC 480, Distinguishing Liabilities from Equity , and determined that equity treatment was appropriate because the Series A Preferred Stock did not meet the definition of the liability under ASC 480.

Additionally, the Series A Preferred Stock is not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within control of the Company.

As such, the Company recorded the Series A Preferred Stock as permanent equity.

At-the-market equity offering programs

On March 30, 2017, the Company established an at-the-market equity offering program pursuant to which it was able to offer and sell up to $ 35.0 million of its common stock at then-current market prices from time to time

through Cantor, as sales agent.

(“Cantor”), as sales agent.

On August 28, 2017, the Company amended its sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the at-the-market equity offering program to $ 75.0 million.

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During the year ended December 31, 2020, the Company sold 6,769,559 shares under this program for net proceeds of approximately $ 12.2 million (after deducting commissions and other offering expenses).

Through December 31, 2021, the Company has sold a total of 18,287,913 shares under this program for net proceeds of approximately $ 59.6 million (after deducting commissions and other offering expenses).

In August 2021, the Company entered into a sales agreement with Cantor pursuant to which the Company can offer and sell up to $ 100.0 million of its common stock at the current market prices from time to time through Cantor as sales agent (August 2021 ATM).

During the year-ended December 31, 2021, the Company sold 2,930,585 shares under the August 2021 ATM for net proceeds of approximately $ 6.8 million (after deducting commissions and other offering expenses).

During the year-ended December 31, 2022 and 2021, the Company sold 23,573,403 shares and 2,930,585 shares, respectively, under the August 2021 ATM for net proceeds of approximately $ 27.4 million and $ 6.8 million, respectively, (after deducting commissions and other offering expenses).

Private Investment in Public Equity (PIPE)

On February 27, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors in which the Company agreed to sell 46,511,628 shares of common stock at a purchase price of $ 2.15 per share, which represents 12.6 % premium to the last reported sale price of the Company’s common stock of $ 1.91 per share on February 27, 2020.

On March 3, 2020, the closing occurred.

The aggregate proceeds net of underwriting discounts and offering costs, were approximately $ 93.8 million.

Stock-based compensation

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All of the $ 6.0 million, $ 7.7 million, and $ 8.1 million of stock-based compensation expense recorded during the years ended December 31, 2022, 2021, and 2020, respectively, was recorded to additional paid-in capital.

The Company has awards outstanding under two equity compensation plans, the 2021 Equity Incentive Plan (2021 Plan), and the Amended and Restated 2012 Incentive Plan (the 2012 Plan), as well as the inducement award program.

As of December 31, 2021, there are no awards outstanding under the 2010 Equity Incentive Plan (the 2010 Plan).

The Company has awards outstanding under two equity compensation plans, the 2021 Equity Incentive Plan (the “2021 Plan”), and the Amended and Restated 2012 Incentive Plan (the “2012 Plan”), as well as the inducement award program.

As of December 31, 2022 and 2021, there were no awards outstanding under the 2010 Equity Incentive Plan (the “2010 Plan”).

Terms of stock award agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the individual plans.

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As of December 31, 2022, 20,996,662 shares remain available for future issuance.

The exercise price of each option has been equal to the closing price of a share of the Company’s common stock on the grant date.

The 2012 Plan became effective immediately upon the closing of the Company’s IPO in February 2012.

Upon effectiveness of the 2012 Plan, the Company ceased making awards under the 2010 Plan.

The 2012 Plan

initially allowed the Company to grant awards for up to 3,428,571 shares of common stock, plus the number of shares of common stock available for grant under the 2010 Plan as of the effectiveness of the 2012 Plan (which was an additional 30,101 shares), plus that number of shares of common stock related to awards outstanding under the 2010 Plan which terminate by expiration, forfeiture, cancellation or otherwise.

The 2012 Plan included an “evergreen provision” that allowed for an annual increase in the number of shares of common stock available for issuance under the 2012 Plan.

The 2012 Plan initially allowed the Company to grant awards for up to 3,428,571 shares of common stock, plus the number of shares of common stock available for grant under the 2010 Plan as of the effectiveness of the 2012 Plan (which was an additional 30,101 shares), plus that number of shares of common stock related to awards outstanding under the 2010 Plan which terminate by expiration, forfeiture, cancellation or otherwise.

The 2012 Plan included an “evergreen provision” that allowed for an annual increase in the number of shares of common stock available for

issuance under the 2012 Plan.

The annual increase was added on the first day of each year from 2013 through 2018 and was equal to the lesser of 1,285,714 shares of common stock and 4.0 % of the number of shares of common stock outstanding, or a lesser amount as determined by the board of directors.

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Forfeited/cancelled

( 3,695,310 )

Outstanding at December 31, 2022

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The fair value of options that vested during the years ended December 31, 2022, 2021, and 2020 was $ 4.4 million, $ 3.8 million, and $ 7.4 million, respectively.

The aggregate intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercise the option) during the years ended December 31, 2021 and 2020 was $ 0.8 million and $ 1.0 million, respectively.

The aggregate intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercise the option) during the years ended December 31, 2022 and 2021 was less than $ 0.1 million and $ 0.8 million, respectively.

At December 31, 2022 there was $ 6.6 million of total unrecognized compensation cost related to unvested stock options and the Company expects to recognize this cost over a remaining weighted-average period of 2.6 years.

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Outstanding at December 31, 2021

( 2,204,485 )

Forfeited/cancelled

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The amendment was implemented to provide assurance to the Company’s existing employees and not in response to any change of control offer for the Company.

The modification affected 93 employees and will result in incremental stock compensation expense of $ 0.2 million to be recognized over the remaining requisite service period for each award.

The modification resulted in incremental stock compensation expense of $ 0.1 million recognized in the year ended December 31, 2021, and 2020.

The modification affected 93 employees and resulted in incremental stock compensation expense of $ 0.2 million that was recognized over the remaining requisite service period for each award.

The modification resulted in incremental stock compensation expense of $ 0.0 million, $ 0.1 million, and $ 0.1 million recognized in the years ended December 31, 2022, 2021 and 2020, respectively.

The Company modified all unvested equity awards held by 41 employees included in the August 2020 Restructuring discussed in Note 14.

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Expected term (years)

The Company has recognized $ 0.1 million, $ 0.1 million and $ 0.4 million of stock-based compensation expense under the Amended and Restated 2018 ESPP, for the years ended December 31, 2021, 2020, and 2019 respectively.

The Company has recognized $ 0.1 million of stock-based compensation expense under the Amended and Restated 2018 ESPP, for each of the years ended December 31, 2022, 2021, and 2020.

During the year ended December 31, 2022, 2021, and 2020, the Company issued 122,332 shares, 110,060 shares and 358,193 shares, respectively, of common stock for proceeds of $ 0.2 million, $ 0.2 million and $ 0.4 million, respectively under the Amended and Restated 2018 ESPP.

Convertible Senior Notes

On October 17, 2018, the Company closed a registered direct public offering of $ 150.0 million aggregate principal amount of the Company’s 5.00 % Convertible Senior Notes due 2048 (the 2018 Notes), for net proceeds of approximately $ 145.3 million.

On October 17, 2018, the Company closed a registered direct public offering of $ 150.0 million aggregate principal amount of the Company’s 2018 Notes for net proceeds of approximately $ 145.3 million.

The 2018 Notes are governed by the terms of a base indenture for senior debt securities (the “2018 Base Indenture”), as supplemented by the first supplemental indenture thereto (the “Supplemental Indenture” and together with the “2018 Base Indenture”, the “2018 Indenture”), each dated October 17, 2018, by and between the Company and Wilmington Trust, National Association, (“Wilmington”) as trustee.

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There have been no changes to the Company’s original assessment through December 31, 2022.

On November 14, 2019 and December 23, 2019, the Company entered into privately negotiated agreements to exchange approximately $ 114.3 million and $ 7.4 million, respectively, aggregate principal amount of the 2018 Notes for (i) approximately $ 62.9 million and $ 4.0 million, respectively, aggregate principal amount of 2019 Notes (ii) an aggregate of approximately $ 11.4 million and $ 0.7 million in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through November 14, 2019 and December 23, 2019, respectively.

On November 14, 2019 and December 23, 2019, the Company entered into privately negotiated agreements to exchange approximately $ 114.3 million and $ 7.4 million, respectively, aggregate principal amount of the 2018 Notes for (i) approximately $ 62.9 million and $ 4.0 million, respectively, aggregate principal amount of newly issued 5.00 % Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of $ 11.4 million and $ 0.7 million, respectively, in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through November 14, 2019 and December 23, 2019, respectively.

The 2019 Notes are governed by the terms of an indenture (the “2019 Indenture”).

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The 2019 Notes were convertible into shares of the Company’s common stock, par value $ 0.0001 per share, together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 606.0606 shares of common stock per $ 1,000 principal amount of the 2019 Notes, which corresponds to an initial conversion price of approximately $ 1.65 per share of common stock.

In addition, if the holders converted the 2019 Notes with a conversion date that is on or prior to November 1, 2020, then the consideration due upon any such conversion will also include a cash interest make-whole payment for all future scheduled interest payments on the converted 2019 Notes through November 1, 2020 (“2019 Notes Interest Make-Whole Provision”).

The Company assessed all terms and features of the 2019 Notes in order to identify any potential embedded features that would require bifurcation.

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In consideration of the 2019 Notes Interest Make-Whole Provision, the Company concluded the provision required bifurcation as a derivative.

The fair value of the 2019 Interest Make-Whole Provision was determined using a Monte Carlo model.

value of the 2019 Interest Make-Whole Provision was determined using a Monte Carlo model.

It was determined that the fair value of the derivative upon the November 14, 2019 and December 23, 2019 issuance of the 2019 Notes was $ 0.2 million in aggregate;

and recorded this amount as a derivative liability and the offsetting amount as a debt

discount as a reduction to the carrying value of the 2019 Notes on the closing dates.

and recorded this amount as a derivative liability and the offsetting amount as a debt discount as a reduction to the carrying value of the 2019 Notes on the closing dates.

During the period November 14, 2019 to December 31, 2019, 2019 Note holders converted $ 9.5 million aggregate principal of 2019 Notes in exchange for 5,767,872 shares of common stock, $ 0.4 million of cash for 2019 Interest Make-Whole Provision payments, and accrued interest.

As of December 31, 2019, the Company determined the fair value of the 2019 Interest Make-Whole Provision was $ 0.5 million.

The Company recorded the change in the fair value of the 2019 Interest Make-Whole Provision for the period from November 14, 2019 to December 31, 2019 of $ 0.6 million as other expense on the consolidated statements of operations and comprehensive loss.

During the first quarter of 2020, 2019 Note holders converted $ 57.4 million aggregate principal of 2019 Notes in exchange for 34,796,350 shares of common stock, $ 1.8 million of cash for the 2019 Note Interest Make-Whole Provision, and accrued interest.

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As of March 31, 2020, all 2019 Notes have converted into shares of common stock.

On November 6, 2020, the Company entered into a privately negotiated agreement with an investor who was a holder of the Company’s 2018 Notes to exchange approximately $ 28.0 million aggregate principal amount of 2018 Notes for approximately $ 28.0 million aggregate principal amount of newly issued 5.00 % Convertible Senior Notes due 2048 (the 2020 Notes).

The issuance of the 2020 Notes closed on November 13, 2020.

The 2020 Notes were governed pursuant to the Base Indenture between the Company and Wilmington, as trustee and collateral agent, dated as of October 17, 2018 as supplemented by the second supplemental indenture thereto dated as of November 13, 2020 (the “2020 Notes Supplemental Indenture” and together with the Base Indenture, the “2020 Indenture”).

The Company had the right, exercisable at its option, to cause all 2020 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2020 Indenture) per share of the Company’s common stock equaled or exceeded 123.08 % of the conversion price on each of at least 20 “VWAP Trading Days” (as defined in the 2020 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the 2020 Notes (2020 Notes Mandatory Conversion Option).

The initial conversion rate for the 2020 Notes was 307.6923 shares of the Company’s common stock per $ 1,000 principal amount of the 2020 Notes, which is equivalent to an initial conversion price of approximately $ 3.25 per share.

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Pursuant to ASC 815-15-40-1, upon conversion of the 2019 Notes and 2020 Notes into common stock, the remaining debt discount on the conversion date was recorded to interest expense in the s tatements of operations and comprehensive loss .

For the year ended December 31, 2021, the Company recognized an aggregate of $ 10.0 million of interest expense related to the 2018 Notes, and 2020 Notes.

For the year ended December 31, 2022, the Company recognized less than $ 0.1 million of interest expense related to the 2018 Notes.

Net Loss per Share

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Employee stock purchase plan

Series A Preferred Stock

Total potentially dilutive securities

17 unchanged sentences

Research and development tax credits

Stock-based compensation

Permanent items

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Net deferred tax asset

The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company during 2022 and resulted in capitalized R&D costs of $ 44.5 million as of December 31, 2022.

The Company will amortize these costs for tax purposes over 5 years for R&D performed in the U.S.

and over 15 years for R&D performed outside the U.S.

The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2022 and 2021 because the Company’s management believes that it is more likely than not that these assets will not be fully realized.

The increase in the valuation allowance of approximately $ 15.1 .

million in the year ended December 31, 2021, primarily relates to the generation of net operating losses and research and development credits.

The increase in the valuation allowance of approximately $ 15.8 million in the year ended December 31, 2022, primarily relates to the capitalization of research and development expenses, the generation of NOLs and R&D credits.

Section 382 of the Internal Revenue Code and similar provisions under state law limit the utilization of U.S.

NOL carryforwards, state NOL carryforwards, Research and Development (R&D) credits, and Orphan Drug (OD) credits following certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%.

NOL carryforwards, state NOL carryforwards, R&D credits, and Orphan Drug (“OD”) credits following certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%.

Based on the Company’s analysis under Section 382, the Company believes that its federal NOL carryforwards, its state NOL carryforwards, R&D credits, and OD credits are limited by Section 382 and similar provisions under state law as of December 31, 2022.

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The Company would recognize both accrued interest and penalties related to unrecognized benefits in income tax expense.

The Company’s uncertain tax positions are related to years that remain subject to examination by relevant tax authorities.

The Company’s uncertain tax positions are related to years that remain

subject to examination by relevant tax authorities.

Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S.

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(“Yakult”), CSPC Pharmaceutical Group Limited (“CSPC”), and Sanofi.

Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity (Infinity License Agreement).

Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity Pharmaceuticals, Inc.

(“Infinity”) (“Infinity License Agreement”).

Pursuant to the terms of the Secura APA, Secura has paid the Company an up-front payment of $ 70.0 million in September 2020 and has agreed to pay the Company (i) regulatory milestone payments up to $ 45.0 million, consisting of a payment of $ 35.0 million upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma and a payment of $ 10.0 million upon receipt of the first regulatory approval for the commercial sale of COPIKTRA in the European Union for the treatment of peripheral T-cell lymphoma, (ii) sales milestone payments of up to $ 50.0 million, consisting of $ 10.0 million when total worldwide net sales of COPIKTRA exceed $ 100.0 million, $ 15.0 million when total worldwide net sales of COPIKTRA exceed $ 200.0 million and $ 25.0 million when total worldwide net sales of COPIKTRA exceed $ 300.0 million, (iii) low double-digit royalties on the annual aggregate net sales above $ 100.0 million in the United States, European Union, and the United Kingdom of Great Britain and Northern Ireland and (iv) 50 % of all royalty, milestone and sublicense revenue payments payable to Secura under the Company’s existing license agreements with Sanofi, Yakult, and CSPC, and 50 % of all royalty and milestone payments payable to Secura under any license or sublicense agreement entered into by Secura in certain jurisdictions.

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When estimating the amount of royalties to be received that were not constrained, the Company used the expected value method as there are a range of possible outcomes.

When estimating royalties to be received, the Company used a combination of internal projections and forecasts and data from external sources.

When estimating royalties expected to be received, the Company used a combination of internal projections and forecasts and data from external sources.

The Company determined that all other future potential royalties were constrained under the guidance as of December 31, 2022.

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the likelihood and magnitude of revenue reversals related to future royalties, the amount of variable consideration is highly susceptible to factors outside of the Company’s influence, the amount of time to resolve the uncertainty, and lack of significant history of selling COPIKTRA outside of the United States.

In addition, the Company has recognized less than $ 0.1 million of sale of COPIKTRA license and related assets revenue for royalties earned on sales that occurred during the year ended December 31, 2021.

As the consideration for future royalties is conditional, the Company recorded a corresponding contract asset for the expected future royalties.

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Contract asset - Secura

During the year ended December 31, 2021, two regulatory milestones were achieved by Secura’s sublicensee, Sanofi, of which 50 % of the milestone or $ 1.3 million was paid to the Company pursuant to the Secura APA.

During the year ended December 31, 2022, one regulatory milestone was achieved by Secura’s sublicensee, CSPC, of which 50 % of the milestone or $ 2.5 million was paid to the Company pursuant to the Secura APA.

The Company determined all other future potential milestones were excluded from the transaction price, as all other milestone amounts were fully constrained under the guidance as of December 31, 2022.

As part of the Company’s evaluation of the constraint, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that would result in the milestone payments.

Those factors

the likelihood and magnitude of revenue reversals related to future milestones, the amount of variable consideration is highly susceptible to factors outside of the Company’s influence and the uncertainty about the consideration is not expected to be resolved for a long period of time.

As part of the Company’s

evaluation of the constraint, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that would result in the milestone payments.

Those factors included:

the likelihood and magnitude of revenue reversals related to future milestones, the amount of variable consideration that is highly susceptible to factors outside of the Company’s influence and the uncertainty about the consideration is not expected to be resolved for a long period of time.

All other future potential milestone payments were fully constrained as the risk of significant revenue reversal related to these amounts has not yet been resolved.

During the year ended December 31, 2022, the Company recognized $ 2.6 million of sale of COPIKTRA license and related assets revenue within the statements of operations and comprehensive loss.

The sale of COPIKTRA license and related assets revenue for the year ended December 31, 2022 related to one regulatory milestone for $ 2.5 million achieved by Secura’s sublicensee, CSPC, and $ 0.1 million related to royalties on COPIKTRA sales in the year ended December 31, 2022, and future royalties expected to be received pursuant to the Secura APA that were not constrained.

During the year ended December 31, 2021, the Company recognized $ 1.4 million of sale of COPIKTRA license and related assets revenue within the statements of operations and comprehensive loss.

The sale of COPIKTRA license and related assets revenue for the year ended December 31, 2021 primarily related to two regulatory milestone for $ 1.3 million achieved by Secura’s sublicensee and $ 0.2 million related to royalties received and expected to be received pursuant to the Secura APA.

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Chugai Pharmaceutical Co., Ltd (Chugai)

On January 7, 2020, the Company entered into a license agreement with Chugai (the Chugai Agreement) whereby Chugai granted the Company an exclusive worldwide license for the development, commercialization and manufacture of products containing VS-6766, a dual RAF/MEK inhibitor.

Under the terms of the Chugai Agreement, the Company received an exclusive right to develop and commercialize products containing VS-6766 at the Company’s own cost and expense.

On January 7, 2020, the Company entered into a license agreement with Chugai (the “Chugai Agreement”) whereby Chugai granted the Company an exclusive worldwide license for the development, commercialization and manufacture of products containing avutometinib, a dual RAF/MEK inhibitor.

Under the terms of the Chugai Agreement, the Company received an exclusive right to develop and commercialize products containing avutometinib at the Company’s own cost and expense.

The Company is required to pay Chugai a non-refundable payment of $ 3.0 million which was paid in February 2020.

The Company is further obligated to pay Chugai double-digit royalties on net sales of products containing VS-6766, subject to reduction in certain circumstances.

Chugai also obtained opt back rights to develop and commercialize VS-6766 (a) in the European Union, which option may be exercised through the date the Company submits a NDA to the FDA for a product which contains VS-6766 as the sole active pharmaceutical ingredient and (b) in Japan and Taiwan, which option may be exercised through the date the Company receives marketing authorization from the FDA for a product which contains VS-6766 as the sole active pharmaceutical ingredient.

The Company is further obligated to pay Chugai double-digit royalties on net sales of products containing avutometinib, subject to reduction in certain circumstances.

Chugai also obtained opt back rights to develop and commercialize avutometinib (a) in the European Union, which option may be exercised through the date the Company submits a NDA to the FDA for a product which contains avutometinib as the sole active pharmaceutical ingredient and (b) in Japan and Taiwan, which option may be exercised through the date the Company receives marketing authorization from the FDA for a product which contains avutometinib as the sole active pharmaceutical ingredient.

As consideration for executing either option, Chugai would have to make a payment to the Company calculated on the Company’s development costs to date.

Chugai has communicated their intention not to exercise their opt back rights for Japan, Taiwan, or the European Union.

Chugai and the Company have made customary representations and warranties and have agreed to certain customary covenants, including confidentiality and indemnification.

Unless earlier terminated, the Chugai Agreement will expire upon the fulfillment of the Company’s royalty obligations to Chugai for the sale of any products containing the VS-6766, which royalty obligations expire on a product-by-product and country-by-country basis, upon the last to occur, in each specific country, of (a) expiration of valid patent claims covering such product or (b) 12 years from the first commercial sale of such product in such country.

Unless earlier terminated, the Chugai Agreement will expire upon the fulfillment of the Company’s royalty obligations to Chugai for the sale of any products containing avutometinib, which royalty obligations expire on a product-by-product and country-by-country basis, upon the last to occur, in each specific country, of (a) expiration of valid patent claims covering such product or (b) 12 years from the first commercial sale of such product in such country.

The Company may terminate the Chugai Agreement upon 180 days ’ written notice.

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Either party may also terminate the Chugai Agreement in its entirety upon certain insolvency events involving the other party.

The Company evaluated the license agreement with Chugai under ASC Topic 805, Business Combinations (ASC 805 ) and concluded that as the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets, the transaction did not meet the requirements to be accounted for as a business

combination and therefore was accounted for as an asset acquisition.

The Company evaluated the license agreement with Chugai under ASC Topic 805, Business Combinations (“ASC 805” ) and concluded that as the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets, the transaction did not meet the requirements to be accounted for as a business combination and therefore was accounted for as an asset acquisition.

The Company recorded the up-front payment of $ 3.0 million as research and development expense within the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

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Pursuant to the terms of the Infinity License Agreement, the Company was obligated to pay Infinity royalties on worldwide net sales of any products in an oncology indication containing duvelisib ranging from the mid-single digits to the high single-digits.

In addition to the foregoing, the Company was obligated to pay Infinity an additional royalty of 4 % on worldwide net sales of any products in an oncology indication containing duvelisib to cover the reimbursement of research and development costs owed by Infinity to Mundipharma International Corporation Limited (MICL) and Purdue Pharmaceutical Products L.P.

During the year ended December 31, 2022, 2021, and 2020, the Company recorded royalty expense of $ 0.0 million, $ 0.0 million, and $ 1.3 million, respectively related to the Infinity License Agreement, which are included in costs of sales - product within the consolidated statements of operation and comprehensive loss.

1 unchanged sentence

(“Secura”) as of September 30, 2020, Secura has assumed from the Company all responsibilities and obligations under the Infinity License Agreement.

All royalties due pursuant to the Infinity License Agreement are the sole responsible of Secura.

All royalties due pursuant to the Infinity License Agreement are the sole responsibility of Secura.

On July 25, 2019, the Company entered into a license and collaboration agreement with Sanofi (the “Sanofi Agreement”), under which the Company granted exclusive rights to Sanofi to develop and commercialize products containing duvelisib in Russia, the Commonwealth of Independent States (“CIS”), Turkey, the Middle East and Africa (collectively the “Sanofi Territory”) for the treatment, prevention, palliation or diagnosis of any oncology indication in humans or animals.

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(“Secura”) as of September 30, 2020, Secura has assumed from the Company all responsibilities and obligations under the Sanofi Agreement.

After September 30, 2020, the Company is entitled to 50 % of future milestone payments and royalties pursuant to the Secura APA discussed under heading Secura Bio, Inc.

After September 30, 2020, the Company is entitled to 50 % of future milestone payments and royalties pursuant to the Secura APA

discussed under heading Secura Bio, Inc.

(“Secura”) above.

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Restructurings

On October 28, 2019, the Company committed to an operational plan to reduce overall operating expenses, including the elimination of approximately 40 positions across the Company and other cost-saving measures (the October 2019 Restructuring).

The October 2019 Restructuring was designed to streamline operations, speed execution, and reflect the focused, account-based approach in the field.

The Company recorded $ 1.2 million of expense for the year ended December 31, 2019 for one-time termination benefits to the affected employees, including cash severance payments, healthcare benefits, and outplacement assistance.

On February 27, 2020, following further analysis of the Company’s strategy, the Company committed to an operational plan to reduce overall operating expenses, including the elimination of approximately 31 positions across the Company and other cost-saving measures (the “February 2020 Restructuring”).

The February 2020 Restructuring is designed to streamline operations, speed execution of the Company’s clinical development of VS-6766 and defactinib, and reflect a focused, account-based approach in the field.

The February 2020 Restructuring is designed to streamline operations, speed execution of the Company’s clinical development of avutometinib and defactinib, and reflect a focused, account-based approach in the field.

In August 2020, in connection with the duvelisib sale to Secura pursuant to the Secura APA, the Company committed to a strategic restructuring (the “August 2020 Restructuring”).

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This expense is reflected in the consolidated statements of operation and comprehensive loss as selling general, and administrative expense for $ 4.1 million, and research and development expense for $ 0.5 million.

There were no restructuring expenses for the year ended December 31, 2021.

The following table summarizes the accrued liabilities activity recorded in connection with the restructurings for the year ended December 31, 2021 (in thousands):

Employee severance, benefits and related costs

December 31, 2020

December 31, 2021

August 2020 Restructuring

There were no restructuring expenses for the years ended December 31, 2022 and 2021.

Employee benefit plan

6 unchanged sentences

The Company is not aware of any material subsequent events other than the following:

Loan and Security Agreement

On March 25, 2022, the Company entered into a Loan and Security Agreement (Loan Agreement) with Oxford Finance, LLC (Oxford) pursuant to which it may obtain a loan of up to $ 150.0 million (Term Loans) in five tranches.

Contemporaneously with executing the Loan Agreement, the Company drew down the first $ 25.0 million tranche (Term Loan A).

The second, third and fourth tranches (Term Loan B, Term Loan C, and Term Loan D, respectively) may be drawn at the Company’s option upon the achievement of certain pre-determined milestones.

The fifth tranche of $ 50.0 million (Term Loan E) will only be available at the sole discretion of the lender.

The Term Loans will bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13 % plus (b) 7.37 %, which is subject to an overall floor and cap.

Interest is payable monthly in arrears on the first calendar day of each calendar month.

Beginning (i) April 1, 2024, if the Term B Loan is not made, (ii) April 1, 2025, if the Term B Loan is made, or (iii) April 1, 2026, if the Term B Loan is made and an additional predetermined milestone is met, the Company shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears.

All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027.

The Company will be required to make a final payment of 5.0 % of the original principal amount of the Term Loans that were drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans.

All Term Loans will be subject to a facility fee of 0.5 % of the principal amount.

Securities Purchase Agreement

On January 24, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with BVF, pursuant to which the Company agreed to sell and issue to BVF in a private placement (the “Private Placement”) up to 2,144,160 shares of its Series B convertible preferred stock, par value $ 0.0001 per share (the “Series B Preferred Stock”), in two tranches.

The Series B Preferred Shares will be convertible into the Company’s common stock at the option of the holders at any time, subject to certain limitations, at a conversion rate equal to $ 0.5901 per share.

The Company agreed to sell and issue in the first tranche of the Private Placement 1,200,000 shares of Preferred Stock at a purchase price of $ 25.00 per share of Preferred Stock (equivalent to $ 0.5901 per share of common stock).

The first tranche of the Private Placement closed on January 27, 2023 and the Company received gross proceeds from the first tranche of the Private Placement of approximately $ 30.0 million, before deducting fees to the placement agent and other offering expenses.

In addition, the Company agreed to sell and issue in the second tranche of the Private Placement 944,160 shares of Series B Preferred Stock at a purchase price of $ 31.77 per share of Preferred Stock (equivalent to $ 0.75 per share of common stock) if at any time within 18 months following the closing of the first tranche the 10 -day volume weighted average price of the Company’s Common Stock (as quoted on Nasdaq and as calculated by Bloomberg) should reach at least $ 1.125 per share (adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as needed) with aggregate trading volume during the same 10 -

day period of at least $ 25 million within 18 months from the closing date of the initial tranche.

The second tranche of the Private Placement is expected to close within seven trading days of meeting the second tranche conditions and will be subject to additional, customary closing conditions.

If the second tranche conditions are satisfied, the Company anticipates receiving gross proceeds from the second tranche of the Private Placement of approximately $ 30.0 million, before deducting fees to the placement agent and other offering expenses payable by the Company.

Silicon Valley Bank

On March 10, 2023, Silicon Valley Bank (“SVB”), based in Santa Clara, California, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver.

On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC announced that all depositors of SVB will be fully protected and have access to all their money starting March 13, 2023.

As of March 13, 2023, the Company’s deposit balance at SVB was approximately $ 2 million.

The Company is continually monitoring developments related to the recovery of its uninsured funds at SVB.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures