Dyne Therapeutics Inc

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Nature of Business and Basis of Presentation

Dyne Therapeutics, Inc. (the “Company”) is a clinical-stage muscle disease company focused on advancing innovative life-transforming therapeutics for people living with genetically driven diseases. The Company was incorporated in Delaware on December 1, 2017 and has a principal place of business in Waltham, Massachusetts.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for its product candidates, fluctuations in operating results, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. Product candidates and programs currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of a product. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations with proceeds from the sales of equity securities. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance of these condensed consolidated financial statements.

To continue its development efforts, the Company will need to obtain substantial additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements in order to fund its research and development and ongoing operating expenses. The Company may not be able to obtain financing on acceptable terms, when needed or at all, and the Company may not be able to enter into collaborations, strategic alliances or licensing arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Any collaborations, strategic alliances or licensing arrangements may require the Company to relinquish rights to certain of its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to the Company. If the Company is unable to obtain funding, the Company could be forced to delay, limit, reduce or eliminate some or all of its research and development programs, pipeline expansion or future commercialization efforts or grant rights to develop and market product candidates, which could adversely affect its business prospects. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations when needed or at all.

2. Summary of Significant Accounting Policies

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited interim financial statements have been prepared on the same basis as audited annual financial statements, except certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. In the opinion of management, the interim financial information reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair representation of the results for the reported periods. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the SEC on March 5, 2024. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

Fair value measurements

Certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.

•

Level 2—Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

•

quoted prices for similar assets and liabilities in active markets;

•

quoted prices for identical or similar assets or liabilities in markets that are not active;

•

observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals); and

•

inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3—Unobservable inputs for the assets or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Net loss per share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share is computed by dividing the diluted net loss by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The following potentially dilutive common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, includingnew segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for the Company in the consolidated financial statements for the year ending December 31, 2024, and interim periods beginning on January 1, 2025. The adoption of this standard only impacts disclosures and is not expected to have amaterial impact on the Company’s consolidated financial statements.

3. Cash, Cash Equivalents and Restricted Cash

Cash includes cash in readily available checking accounts and cash equivalents include money market funds that invest in U.S. treasury securities and all highly liquid investments maturing within 90 days from the date of purchase.

Amounts included in restricted cash represent amounts pledged as collateral for letters of credit required for security deposits on the Company’s leased facilities.

Cash, cash equivalents and restricted cash consisted of the following:

4. Fair Value Measurements

The following tables set forth marketable securities for the periods presented:

The following tables set forth by level, within the fair value hierarchy (see Note 2), the assets carried at fair value on a recurring basis for the periods presented:

The fair value of U.S. government treasury notes and money market funds were determined by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. Certificates of deposit, commercial paper and corporate debt securities were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.

There wereno transfers between Level 1, Level 2, or Level 3 during the periods presented.

The following table summarizes the scheduled maturity for the Company's marketable securities for the periods presented:

Financial instruments not recorded at fair value

The carrying values of cash, cash equivalents, accounts payable and accrued expenses that are reported on the balance sheets approximate their fair value due to the short-term nature of these assets and liabilities.

5. Property and Equipment

Property and equipment consisted of the following:

Depreciation and amortization expense for the three and nine months ended September 30, 2024 was $0.4 million and $1.2 million, respectively. Depreciation and amortization expense for thethree and nine months ended September 30, 2023 was $0.4 million and $1.3 million, respectively.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

7. Stockholders' Equity

Common Stock

In November 2021, the Company entered into an Open Market Sale Agreement (the "Sales Agreement") with Jefferies LLC ("Jefferies") as the Company's sales agent, and filed a universal shelf registration statement on Form S-3 (the "2021 Shelf Registration Statement") that included a prospectus relating to the Sales Agreement and pursuant to which, from time to time, the Company could offer and sell shares of its common stock having an aggregate offering price of up to $150.0 million in an "at-the-market" offering. On January 4, 2024, the Company notified Jefferies that it was suspending and terminating the prospectus filed under the 2021 Shelf Registration Statement relating to the Sales Agreement for the Company's "at-the-market" offering program.

On March 5, 2024, the Company filed a universal shelf registration statement on Form S-3 with the SEC, (the “2024 Shelf Registration Statement”) that included a prospectus relating to the Sales Agreement (the “2024 ATM Prospectus”). Under the 2024 Shelf Registration Statement, the Company may offer and sell debt securities, common stock, preferred stock, units and/or warrants from time to time at an indeterminate aggregate offering price in one or more offerings. Under the

2024 ATM Prospectus, in accordance with the Sales Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $200.0 million in an “at-the-market” offering.

During the nine months ended September 30, 2024, the Company issued and sold an aggregate of 3,800,465 shares of common stock pursuant to the Sales Agreement for aggregate net proceeds of $97.9 million, after deducting fees and offering expenses payable by the Company. The Company sold such shares at a weighted average price of $26.86 per share.

In January 2024, the Company completed a follow-on public offering, pursuant to which the Company issued and sold 19,722,500 shares of the Company’s common stock. The Company received net proceeds of $323.9 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Forbion Capital Fund IV Cooperatief U.A. and related affiliated entities (collectively, “Forbion”) were a beneficial owner of more than 5.0% of the Company's outstanding common stock as of the closing of the January 2024 offering. Two members of the Company's board of directors are partners at Forbion. In the January 2024 offering, the Company issued and sold 1,714,285 shares of common stock that Forbion and related affiliated entities purchased at the public offering price of $17.50 per share for aggregate gross proceeds of $30.0 million. The shares were purchased on the same terms as the other shares that were offered and sold in the offering.

In May 2024, the Company completed a follow-on public offering, pursuant to which the Company issued and sold 12,075,000 shares of the Company's common stock. The Company received net proceeds of $351.3 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

2020 Stock Incentive Plan

In August 2020 the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Stock Incentive Plan, (the "2020 Plan"), which became effective on September 16, 2020. The 2020 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards to employees, directors, consultants and advisors of the Company. The 2020 Plan is administered by the Company’s board of directors or by a committee appointed by the board of directors. Upon the effectiveness of the 2020 Plan, the Company ceased granting awards under the 2018 Stock Incentive Plan.

As of September 30, 2024,4,213,838 shares remained available for future issuance under the 2020 Plan.

2024 Inducement Stock Incentive Plan

In March 2024, the Company's board of directors adopted the 2024 Inducement Stock Incentive Plan (the "2024 Inducement Plan"). The 2024 Inducement Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards with respect to an aggregate of 900,000 shares of Common Stock (subject to adjustment as provided in the 2024 Inducement Plan). Awards under the 2024 Inducement Plan may only be granted to new employees who were not previously an employee or director of the Company or are commencing employment with the Company following a bona fide period of non-employment, in either case, as an inducement material to the individual’s entering into employment with the Company and in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4).

As of September 30, 2024,220,147 shares remained available for future issuance under the 2024 Inducement Plan.

Stock option valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The fair value is determined based upon the quoted price of the Company’s common stock. The Company lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the grant-date fair value of options granted were as follows:

Stock option activity

A summary of the Company’s stock option activity and related information for thenine months ended September 30, 2024 is as follows:

The intrinsic value of options exercised for the nine months ended September 30, 2024 and 2023 totaled $83.3 million and $8.0 million, respectively. The weighted-average grant date fair value of the options granted during thenine months ended September 30, 2024 and 2023 was $19.65 and $7.79 per share, respectively. As of September 30, 2024 there was $52.4 million of unrecognized compensation expense, which the Company expects to recognize over a weighted-average period of 2.8 years.

In March 2024, the Company entered into separation and consulting agreements with its former chief executive officer resulting in the acceleration of vesting and modification of previously issued stock option awards. The acceleration of vesting and modification resulted in the recognition of $3.2 million of stock-based compensation expense for the nine months ended September 30, 2024, all of which was recorded in the first quarter of 2024. The expense was recorded within general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss. Based upon the terms of the separation and consulting agreements, options to purchase 223,533 shares of common stock were forfeited in March 2024.

In September 2024, the Company entered into a consulting agreement with its former chief business officer resulting in the modification of previously issued stock option awards. The modification resulted in the recognition of $0.6 million of stock-based compensation expense for the nine months ended September 30, 2024, all of which was recorded in the third quarter of 2024. The expense was recorded within general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss. Based on the terms of the consulting agreement, options to purchase 95,587 shares of common stock were forfeited in September 2024.

Restricted stock units

A restricted stock unit (“RSU”) represents the right to receiveone share of common stock upon vesting of the RSU. The Company grants RSUs with service conditions that vest infour equal annual installments provided that the employee remains employed with the Company, RSUs with service conditions that vest in sixteen equal quarterly installments provided that the employee remains employed with the Company and RSUs with performance-based vesting conditions. As of September 30, 2024, there are no RSUs with performance-based vesting conditions outstanding. Thefair value of each RSU is based on the closing price of the Company’s common stock on the date of grant. A summary of the Company’s RSU activity and related information for thenine months ended September 30, 2024 is as follows:

As of September 30, 2024, there was $33.4 million of unrecognized compensation costs ​​​​​​​related to unvested RSUs, which are expected to be recognized over a weighted-average period of 2.9 years.

In March 2024, the Company entered into separation and consulting agreements with its former chief executive officer resulting in the acceleration of vesting and modification of previously issued restricted stock unit awards. The acceleration of vesting and modification resulted in the recognition of $10.5 million of stock-based compensation expense for the nine months ended September 30, 2024, all of which was recorded in the first quarter of 2024. The expense was recorded within general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss.

In September 2024, the Company entered into a consulting agreement with its former chief business officer resulting in the modification of previously issued restricted stock unit awards. The modification resulted in the recognition of $0.5 million of stock-based compensation expense for the nine months ended September 30, 2024, all of which was recorded in the third quarter of 2024. The expense was recorded within general and administrative expenses on the condensed consolidated statement of operations and comprehensive loss. Based upon the terms of the consulting agreement,99,448 restricted stock units were forfeited in September, 2024.

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss: