Septerna Inc

Notes to Condensed Financial Statements

Note 1. Organization and Basis of Presentation

Description of the Business

Septerna, Inc. (“Septerna” or the “Company”) is a clinical-stage biotechnology company pioneering a new era of G protein-coupled receptor (“GPCR”) oral small molecule drug discovery powered by its proprietary Native Complex Platform TM. The Company's industrial-scale platform aims to unlock the full potential of GPCR therapies and has led to the discovery and development of its deep pipeline of product candidates focused on treating patients in three therapeutic areas: endocrinology, immunology and inflammation, and metabolic diseases.

The Company was incorporated in Delaware in December 2019, under the name GPCR NewCo, Inc. In June 2021, the Company changed its name to Septerna, Inc. The Company is headquartered in South San Francisco, California.

Reverse Stock Split

On October 18, 2024, the Company effected a 1-for-8.6103 reverse stock split of its issued and outstanding shares of common stock. Upon the effectiveness of the reverse stock split, (i) all shares of outstanding common stock were adjusted; (ii) the conversion ratio of the convertible preferred stock was adjusted; (iii) the number of shares of common stock for which each outstanding option to purchase common stock is exercisable were adjusted; and (iv) the exercise price of each outstanding option to purchase common stock was adjusted. All of the outstanding common stock (including shares of common stock subject to the Company’s options and as converted for the outstanding convertible preferred stock), share prices, exercise prices and per share amounts contained in the condensed financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented. The par value per share and the authorized number of shares of common stock and preferred stock were not adjusted as a result of the reverse stock split. The number of authorized shares did not change.

Initial Public Offering

In October 2024, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold an aggregate of 18.4 million shares of its common stock at the IPO price of $18.00 per share, including 2.4 million shares that were issued to the underwriters pursuant to the full exercise of their option to purchase additional shares, resulting in net proceeds of approximately $302.6 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $28.6 million. Immediately prior to the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into 22,839,774 shares of common stock.

Following the closing of the IPO, no shares of convertible preferred stock were authorized or outstanding. In connection with the completion of the IPO, on October 28, 2024, the Company’s certificate of incorporation was amended and restated to (i) authorize 500.0 million shares of common stock, par value $0.001 per share, which eliminates all references to the previously existing series of convertible preferred stock; and (ii) authorize 10.0 million shares of undesignated preferred stock, par value $0.001 per share, that may be issued from time to time by the Company’s board of directors in one or more series.

The Company’s unaudited condensed financial statements as of September 30, 2024, including share and per share amounts, do not give effect to the IPO and related actions as it closed subsequent to September 30, 2024.

Liquidity and Capital Resources

The accompanying unaudited condensed financial statements have been prepared assuming the Company will continue as a going concern, which assumes that the Company will realize its assets and satisfies its liabilities in the normal course of business. The Company is subject to risks inherent in operating an early-stage biotechnology business. These risks include, but are not limited to, dependence on the development of marketable products, the ability to attract, retain, and motivate qualified personnel, rapid technological changes and the rapidly evolving nature of the biotechnology industry.

The Company has incurred significant losses and negative cash flows from operations since its inception and expects to incur losses as a result of its continued research and development activities. To date, none of the Company’s product candidates have been approved by the U.S. Food and Drug Administration (the “FDA”) for commercial sale and, therefore, the Company has not generated any revenue from product sales.

The Company historically financed its operations primarily through the issuances of convertible promissory notes and convertible preferred stock, and most recently, through sale of its common stock in an IPO.

The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through equity offerings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain funding on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

For the nine months ended September 30, 2024 and 2023, the Company incurred net losses of$51.1 million and $30.7 million, respectively. The Company had an accumulated deficit of$97.7 million as of September 30, 2024. The Company expects to continue to generate operating losses for the foreseeable future. The Company believes its cash, cash equivalents, marketable securities, and marketable securities, non-current of $137.5 million as of September 30, 2024, together with the net proceeds of approximately $302.6 million from its IPO, will be sufficient to fund its operations for, at least, 12 months from the date of issuance of the unaudited condensed financial statements.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”), and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of the Company’s unaudited interim condensed financial statements as of September 30, 2024 and December 31, 2023, and for the three and nine months ended September 30, 2024 and 2023. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification and Accounting Standards Updates (“ASUs”), of the Financial Accounting Standards Board (“FASB”). The interim condensed financial statements are unaudited. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for the full year or for any other future annual or interim period. Actual results could differ materially from estimates and assumptions. As appropriate, the Company assesses estimates each period and updates them to reflect current information, and generally reflect any changes in estimates in the period first identified.

These unaudited interim condensed financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2023 and notes thereto, included in the Company’s final IPO prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act on October 25, 2024.

Significant Accounting Policies

During the nine months ended September 30, 2024, there were no changes to the Company’s significant accounting policies as described in Note 2 of the audited financial statements for the year ended December 31, 2023 as referenced above, other than the policies outlined below.

Cash Equivalents and Marketable Securities

The Company holds marketable securities that consist of highly liquid, investment grade debt securities. The Company's cash and marketable securities are held or issued by financial institutions that management believes are of high credit quality. Marketable securities are classified and accounted for as available-for-sale. Available-for-sale marketable securities with original maturities of 90 days or less are classified as cash equivalents. Available-for-sale marketable securities with original maturities over 90 days and remaining maturities of less than 12 months are classified as current. Available-for-sale marketable securities with remaining maturities of more than 12 months for which the Company has the intent and ability to hold the security for more than 12 months are classified as non-current. The Company’s marketable securities are carried at estimated fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities. Unrealized gains and losses are reported in stockholders’ deficit as accumulated other comprehensive income (loss). The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the condensed statements of operations and comprehensive loss.

The Company has the ability, if necessary, to liquidate any of its cash equivalents and available-for-sale marketable securities to meet its liquidity needs in the next 12 months. After consideration of the Company’s objectives to preserve capital, as well as its liquidity requirements, it may sell these available-for-sale marketable securities prior to their stated maturities.

The Company reviews its portfolio of available-for-sale marketable securities, using both quantitative and qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors. If the decline in fair value is due to credit-related factors, the Company recognizes a loss in its condensed statement of operations, whereas if the decline in fair value is not due to credit-related factors, the Company recognizes the loss in other comprehensive loss.

The Company excludes the applicable accrued interest from both the fair value and amortized cost basis of available-for-sale marketable securities for purposes of identifying and measuring an impairment. Accrued interest receivable on available-for-sale marketable securities is recorded within prepaid expenses and other current assets on the interim condensed balance sheets. The Company’s accounting policy is to not measure an allowance for credit loss for accrued interest receivable and to write-off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which is considered to be in the period in which it is determined the accrued interest will not be collected.

Deferred Offering Costs

The Company’s deferred offering costs consist of legal, accounting and other general and administrative costs directly attributable to the Company’s IPO. As of September 30, 2024, $3.2 million of deferred offering costs were included within other non-current assets in the Company’s condensed balance sheet. As of December 31, 2023, there were no deferred offering costs. Upon the consummation of the Company's IPO in October 2024, these costs will be reclassified to additional paid-in capital in stockholders' equity in the Company's condensed balance sheets.

Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB, under its Accounting Standards Codification (“ASC”) or other standard setting bodies, and adopted by the Company as of the specified date.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods after December 5, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07 on its financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The standard is intended to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024, on a prospective basis with early adoption and retrospective reporting permitted. The Company is currently evaluating the impact of ASU 2023-09 on its financial statements and related disclosures.

Note 2. Balance Sheet Components

Restricted Cash

Restricted cash is comprised of cash that is restricted as to withdrawal or use under the terms of certain contractual agreements. In connection with the Company’s lease agreement, the Company is required to maintain a collateral account to secure a letter of credit issued to its landlord. The collateral account is classified as restricted cash on the Company’s condensed balance sheets.

Accounts Receivable and Other Receivables

The Company assessed if an allowance for expected credit losses over the life of its receivables should be reserved for based on a combination of historical experience, aging analysis, current economic trends and information on specific accounts, with related amounts recorded as a reserve against revenue recognized. The reserve is re-evaluated on a regular basis and adjusted as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. Based on its assessment, as of September 30, 2024 and December 31, 2023, the Company determined that an allowance for credit loss was not required.

As of September 30, 2024, the Company’s accounts receivable was entirely attributed to Vertex Pharmaceuticals Incorporated (“Vertex”). As of December 31, 2023, the Company’s accounts receivable and other receivable related to sale of non-financial asset balances were entirely attributed to Vertex.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

Depreciation and amortization expense was $0.4 million and $1.0 million for thethree and nine months ended September 30, 2024, respectively. Depreciation and amortization expense was $0.2 million and $0.6 million for the three and nine months ended September 30, 2023, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

Note 3. Revenue

The Company recognizes service revenue associated with the Vertex Research Service Agreement (the “Vertex Research Service Agreement”) over the performance period of the research services as the services are provided in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”).

During the three and nine months ended September 30, 2024, the Company recorded service revenueof $0.2 million and $0.9 million related to research activities performed in connection with the Vertex Research Service Agreement, respectively. During thethree and nine months ended September 30, 2023, service revenue related to research activities performed in connection with the Vertex Research Service Agreement was not material.

Note 4. Available-for-Sale Marketable Securities and Fair Value Measurements

The Company records marketable securities and cash equivalents at their estimated fair values, which are based on market prices from a variety of industry standard data providers and generally represent quoted prices for similar assets in active markets or have been derived from observable market data.

Fair value is determined based on a three-tier hierarchy under the authoritative guidance for fair value measurements and disclosures that prioritizes the inputs used in measuring fair value as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurements and unobservable (i.e., supported by little or no market activity).

The fair value measurements of the Company’s cash equivalents and marketable securities are identified at the following levels within the fair value hierarchy (in thousands):

Available-for-Sale Marketable Securities

As of September 30, 2024, the Company’s available-for-sale marketable securities consist of debt securities, including U.S. Treasury and agency securities, corporate debt securities and commercial paper. These available-for-sale marketable securities are carried at fair value and are included in the tables above. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. At each reporting date, the Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. The Company evaluates, among others, whether the Company has the intention to sell any of these available-for-sale marketable securities and whether it is not more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met at September 30, 2024. The credit ratings of the securities held remain of the highest quality. Moreover, the Company continues to receive payments of interest and principal as they become due, and the Company's expectation is that those payments will continue to be received timely. Based on this evaluation, as of September 30, 2024, the Company determined that unrealized losses of its available-for-sale marketable securities were primarily attributable to changes in interest rates and non-credit related factors. As such, no allowances for credit losses were recorded at September 30, 2024. The Company did not hold available-for-sale marketable securities at December 31, 2023.

Interest receivable as of September 30, 2024 was $0.1 million and is recorded as a component of prepaid expenses and other current assets on the Company’s condensed balance sheet. The Company didnot have interest receivable at December 31, 2023.

As of September 30, 2024, all available-for-sale marketable securities in an unrealized loss position had been in an unrealized loss position for less than 12 months. As of September 30, 2024, the Company held 13 available-for-sale marketable securities which have been in an unrealized loss position for a period of less than 12 months.

As of September 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available-for-sale marketable securities presented within marketable securities, marketable securities, non-current and cash equivalents (in thousands):

As of September 30, 2024, the following table summarizes available-for-sale marketable securities in an unrealized loss position (in thousands):

Note 5. Commitments and Contingencies

Leases

During the three months ended September 30, 2024, the Company recorded a $12.5 million operating lease right-of-use asset and operating lease liability upon completion of the renovations of the 21,908 square foot office and research and development space (the "Original Leased Space") and as the Company occupied the property.

As of September 30, 2024, the remaining lease term of the Original Leased Space was approximately 7.8 years. The incremental borrowing rate used for the calculation of the present value of lease payments over the lease term at the lease commencement date was approximately 10.44%.

As of September 30, 2024, future minimum rental payments for operating leases, including for the Original Leased Space, were as follows (in thousands):

Legal Proceedings

In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation, as the Company operates in an industry susceptible to patent or other legal claims. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when incurred. The Company was not subject to any material legal proceedings as of September 30, 2024 and December 31, 2023, and the Company is not currently a party to any legal proceeding that, if determined adversely to the Company, in management’s opinion, is currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, financial condition or results of operations taken as a whole.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors.

The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable; however, the Company currently holds director and officer liability insurance. This insurance limits the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. In addition, the Company is not currently aware of any indemnification claims. Accordingly, the Company didnot record any liabilities associated with these indemnification rights and agreements as of September 30, 2024 and December 31, 2023.

Note 6. Convertible Preferred Stock

Immediately prior to the closing of the Company's IPO in October 2024, the Company’s outstanding convertible preferred stock automatically converted into 22,839,774 shares of common stock. Converted preferred stock outstanding as of the date of the IPO consisted of 196,657,452 shares. Each share of outstanding convertible preferred stock was converted into 8.6103 shares of common stock.

As of September 30, 2024, the Company's convertible preferred stock consisted of the following (in thousands, except for share and per share amounts):

As of December 31, 2023, the Company's convertible preferred stock consisted of the following (in thousands, except for share and per share amounts):

In June 2023 and July 2023, the Company issued 58.8 million and 2.0 million, respectively, shares of Series B Convertible Preferred Stock at an issuance price of $1.23297 per share for total net proceeds of $74.5 million under the first tranche.

In May 2024, the Company executed the second tranche of the Series B Convertible Preferred Stock financing arrangement and issued the remaining 60.8 million shares of Series B Convertible Preferred Stock for net proceeds of $74.9 million.

Note 7. Common Stock

As of September 30, 2024, the Company was authorized toissue 260,590,689 shares of common stock, par value $0.001 per share. As of December 31, 2023, the Company was authorized to issue 260,590,689 shares of common stock, par value $0.001 per share.

In September 2024, the Company amended the 2021 Stock Option and Grant Plan, as amended (“2021 Plan”) to, among other things, increase the shares reserved for issuance under the 2021 Plan to 5,403,314 shares.

On October 28, 2024, the Company amended and restated its certificate of incorporation, which was filed immediately prior to the closing of its IPOand among other things, increased the number of shares of common stock authorized for issuance to 500.0 million shares of common stock.

In October 2024, the Company completed its IPO of its common stock. In connection with the Company's IPO, the Company issued and sold 18.4 million shares of its common stock, which included an additional 2.4 million shares of common stock that were issued to the underwriters pursuant to the full exercise of their option to purchase additional shares of common stock, at the public offering price of $18.00 per share. Asa result, the Company rece ived approximately $302.6 million in net proceeds, after deducting underwriting discounts and commissions and other offering costs payable by the Company of approximately $28.6 million.

The Company reserved the following shares of common stock, on an as-converted basis, for future issuance:

Note 8. Stock-Based Compensation

Executive Officer and Director Equity Awards Modification

In May 2024, the Company’s board of directors modified the terms of stock option awards for 1.3 million shares of the Company’s common stock and restricted stock awards for 0.9 million shares of the Company's common stock to certain executive officers and members of the Company’s board of directors. Under the modified terms, accelerated vesting provisions were added associated with certain change of control events. No incremental stock-based compensation expense was recognized as a result of the modification.

Restricted Stock Awards

The following summarizes restricted stock award activity under the 2021 Plan:

The following summarizes restricted stock award activity outside of the 2021 Plan:

Restricted stock awards of 679,236 and 1,002,044 shares were subject to repurchase as of September 30, 2024 and December 31, 2023, respectively. The total fair value of shares vested during thethree and nine months ended September 30, 2024 was $0.3 million and $0.9 million, respectively.

Stock Options

The following summarizes stock option activity under the 2021 Plan:

The aggregate fair value of stock options that vested for the three and nine months ended September 30, 2024 was $0.4 million and $0.9 million. The stock options granted in thethree months ended September 30, 2024 had a weighted-average grant-date fair value per share of$8.54 and a total grant-date fair value of$10.5 million. The options granted in the nine months ended September 30, 2024 had a weighted-average grant-date fair value per share of$6.46 and a total grant date fair value of$12.4 million.

During the three and nine months ended September 30, 2024, the Company granted a total of 1.2 million and 1.9 million sharesof stock options to its employees, respectively. A total of 0.6 million of the stock options granted in thethree and nine months ended September 30, 2024 include vesting criteria subject to both service conditions and the achievement of performance-based conditions, related to the consummation of the Company’s IPO or a Sale Event, while the remainder include vesting criteria subject to service conditions only. A total of 0.7 million of the stock options granted in thethree and nine months ended September 30, 2024 also include accelerated vesting provisions associated with certain change of control events.

Stock Option Valuation

The weighted-average assumptions used to value employee and non-employee stock option awards granted under the 2021 Plan using the Black Scholes option pricing model, were as follows:

There wereno stock options granted during thethree months ended September 30, 2023.

Stock-based Compensation Expense

Stock-based compensation expense for restricted stock awards and stock options recognized in the Company’s condensed statements of operations and comprehensive loss is presented as follows (in thousands):

As of September 30, 2024, total unrecognized stock-based compensation expense related to unvested restricted stock awards and unvested stock options was$10.2 million, which is expected to be recognized over a weighted-average period of 3.0 years.

As of September 30, 2024, total unrecognized stock-based compensation expense related to unvested restricted stock awards and unvested stock options subject to performance conditions, which were improbable of achievement, was $0.3 million and $5.5 million, respectively.

Note 9. Related Parties

Third Rock Ventures

During the nine months ended September 30, 2024, the Company issued a total of 12.4 million shares of its Series B Convertible Preferred Stock to Third Rock Ventures VI, L.P., a holder of more than 5% of the Company’s outstanding capital stock, during the second tranche closing in May 2024, for cash proceeds of $15.3 million.

During the nine months ended September 30, 2023, the Company issued a total of 12.4 million shares of its Series B Convertible Preferred Stock to Third Rock Ventures V, L.P., a holder of more than 5% of the Company’s outstanding capital stock, during the first tranche closing in June 2023, for cash proceeds of $15.2 million.

In August 2021, the Company entered into a service agreement with Third Rock Ventures, LLC (“TRV”), a holder of more than 5% of the Company’s outstanding capital stock, (the “TRV service agreement”) under which TRV provides consulting services to the Company. For the three and nine months ended September 30, 2024, under the TRV service agreement, the Company incurred fees of $0.1 million and $0.2 million, respectively, which were recorded within general and administrative expenses in the Company’s condensed statements of operations and comprehensive loss. For thethree and nine months ended September 30, 2023, under the TRV service agreement, the Company incurred fees of $0.1 million and $0.2 million, respectively, which were recorded within general and administrative expenses in the Company’s condensed statements of operations and comprehensive loss. As of December 31, 2023 and September 30, 2024, outstanding accounts payable to TRV was $0.1 million.

For the three and nine months ended September 30, 2024, of the total fees under the TRV service agreement, $0.1 million and $0.2 million, respectively, were attributed to the Company's interim Chief Medical Officer. For the three and nine months ended September 30, 2023, of the total fees under the TRV service agreement, $0.1 million and $0.2 million, respectively, were attributed to the Company's interim Chief Medical Officer. Additionally, the Company granted its interim Chief Medical Officer options to purchase 23,227 shares during thenine months ended September 30, 2024, at exercise prices of $2.76 per share.

RA Capital

During the nine months ended September 30, 2024, the Company issued a total of 12.2 million shares of its Series B Convertible Preferred Stock to entities affiliated with RA Capital Management, L.P. (collectively, “RA Capital”), which held more than 5% of the Company’s outstanding capital stock, during the second tranche closing in May 2024, for total cash proceeds of $15.0 million. During thenine months ended September 30, 2023, the Company issued a total of 12.2 million shares of its Series B Convertible Preferred Stock to RA Capital during the first tranche closing in June 2023, for total cash proceeds of $15.0 million.

Samsara BioCapital

During the nine months ended September 30, 2024, the Company issued a total of 4.3 million shares of its Series B Convertible Preferred Stock to Samsara BioCapital, L.P. (“Samsara BioCapital”), a holder of more than 5% of the Company’s outstanding capital stock, during the second tranche closing in May 2024, for cash proceeds of $5.2 million. During thenine months ended September 30, 2023, the Company issued a total of 4.3 million shares of its Series B Convertible Preferred Stock to Samsara BioCapital during the first tranche closing in June 2023, for cash proceeds of $5.2 million.

Note 10. Net Loss Per Share

For all periods presented, diluted net loss per share is the same as basic net loss per share since the effect of including potential common shares is anti-dilutive. Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares):

Note 11. Subsequent Events

2024 Plan

In October 2024, the Company's board of directors adopted, and its stockholders approved, the 2024 Option and Incentive Plan (the “2024 Plan”), which became effective upon the date immediately preceding the date on which the IPO registration statement was declared effective by the SEC. The 2024 Plan allows for the issuance of equity-based and cash-based incentive awards to the Company's officers, employees, directors and consultants. The 2024 Plan is administered by the Company's compensation committee. The exercise prices, vesting and other restrictions are determined at the discretion of the compensation committee, subject to the provisions of the 2024 Plan.

The Company initially reserved for issuance under the 2024 Plan 3,690,000 shares of its common stock. The 2024 Plan provides that the number of shares reserved and available for issuance under the 2024 Plan will automatically increase on January 1, 2025 and each January 1 thereafter through January 1, 2034, by 5% of the outstanding number of shares of the Company's common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company's compensation committee.

The number of shares reserved under the 2024 Plan is subject to adjustment in the event of a stock split, stock dividend or other change in the Company's capitalization. The 2024 Plan replaced the 2021 Plan as the Company’s board of directors determined not to make additional awards under the 2021 Plan following the completion of the IPO. However, the 2021 Plan will continue to govern outstanding equity awards granted thereunder. The shares of common stock underlying any awards under the 2024 Plan and the 2021 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added to the shares of the Company's common stock available for issuance under the 2024 Plan.

2024 ESPP

In October 2024, the Company's board of directors adopted, and its stockholders approved, the 2024 Employee Stock Purchase Plan (the “2024 ESPP”), which became effective upon the date immediately preceding the date on which the IPO registration statement was declared effective by the SEC. The 2024 ESPP initially reserved and authorized the issuance of up to a total of 369,402 shares of the Company’s common stock to part icipating employees. The 2024 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2026 and each January 1 thereafter through January 1, 2034, by the lesser of (i)369,402 shares of common stock, (ii)1%of the outstanding number of shares of common stock on the immediately preceding December

31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2024 ESPP. The number of shares reserved under the 2024 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company's capitalization.