Metagenomi Therapeutics, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

Refer to Note 8 in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

This discussion and analysis generally covers our financial condition and results of operations for the year ended December 31, 2024, as compared to the year ended December 31, 2023. For our discussion of the year ended December 31, 2023, as compared to the year ended December 31, 2022, refer to Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations" located in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

We are a precision genetic medicines company committed to developing curative therapeutics for patients using our proprietary, comprehensive metagenomics-derived genome editing toolbox. Genetic diseases are caused by a diverse set of mutations that have been largely inaccessible by genome engineering approaches to date. Genetic mutations are seen in a variety of forms, including deletions, insertions, single-base-pair changes and sequence repeats, and are found throughout the genome and across a variety of different cell types, tissues, and organ systems. Additionally, many diseases lack a genetic origin but have the potential to be effectively and permanently addressed through genome editing. We are harnessing the power of metagenomics, the study of genetic material recovered from the natural environment, to unlock four billion years of microbial evolution to discover and develop a suite of novel editing tools capable of correcting any type of genetic mutation found anywhere in the genome. Our comprehensive genome editing toolbox includes programmable nucleases, base editors, and RNA and DNA-mediated integration systems (including prime editing systems and clustered regularly interspaced short palindromic repeat (“CRISPR”)-associated transposases (“CASTs”)). We believe our diverse and modular toolbox positions us to access the entire genome and select the optimal tool to unlock the full potential of genome editing for patients.

Current wording

We are a precision genetic medicines company committed to developing curative therapeutics for patients using our proprietary, genome editing toolbox. We are harnessing the power of metagenomics, the study of genetic material recovered from the natural environment, to unlock four billion years of microbial evolution to discover and develop a suite of novel editing tools capable of correcting any type of genetic mutation found anywhere in the genome. Our platform combines artificial intelligence (“AI”), ancestral state reconstruction, and proprietary algorithms run on expansive cloud computing infrastructure to identify novel clustered regularly interspaced short palindromic repeat (“CRISPR”) nucleases and other effector enzymes at high speed. Our comprehensive genome editing toolbox includes systems for making small edits such as programmable nucleases, base editors, and small RNA-mediated integration systems (“RIGS”), as well as large gene integration systems including large template RIGS and CRISPR-associated transposases (“CASTs”). In addition, our toolbox includes ultra-small editing systems that are small enough to be packaged into a single adeno-associated virus (“AAV”) to potentially address extrahepatic therapeutic indications. Together, these tools form a toolbox with the potential to make any desired gene modification – gene knockdown, gene knock-in as well as small and large genomic corrections.

Previous wording

We previously operated as a Delaware limited liability company under the name Metagenomi Technologies, LLC. On January 24, 2024, we completed a series of transactions pursuant to which Metagenomi Technologies, LLC merged with and into its wholly-owned subsidiary, Metagenomi, Inc., a Delaware corporation, with Metagenomi, Inc. continuing as the surviving corporation. In connection with the Reorganization (i) all of the outstanding common unitholders of Metagenomi Technologies, LLC received shares of common stock of Metagenomi, Inc., (ii) all of the outstanding redeemable convertible preferred unitholders of Metagenomi Technologies, LLC received shares of redeemable convertible preferred stock of Metagenomi, Inc. with the same rights and privileges and (iii) certain holders of profits interests in Metagenomi Technologies, LLC received shares of common stock or unvested restricted common stock in Metagenomi, Inc.as determined by the applicable provisions of the Amended and Restated Limited Liability Company Agreement in effect immediately prior to the Reorganization. In connection with the Reorganization, by operation of law, Metagenomi, Inc. acquired all assets of the Metagenomi Technologies, LLC, and assumed all of its liabilities and obligations. The Reorganization generally did not result in a taxable event to Metagenomi, Inc. for U.S. income tax purposes.

Current wording

We previously operated as a Delaware limited liability company under the name Metagenomi Technologies, LLC (“Metagenomi LLC”). On January 24, 2024, we completed a series of transactions pursuant to which Metagenomi LLC merged with and into its wholly-owned subsidiary Metagenomi, Inc., a Delaware corporation, with Metagenomi, Inc. (“Metagenomi” or the “Company”) continuing as the surviving corporation (the “Reorganization”). In connection with the Reorganization, (i) all of the outstanding common unitholders of Metagenomi LLC received shares of common stock of Metagenomi, Inc., (ii) all of the outstanding redeemable convertible preferred unitholders of Metagenomi LLC received shares of redeemable convertible preferred stock of

Previous wording

On January 26, 2024, following the Reorganization, Metagenomi, Inc. effected a reverse stock splitof the shares of common stock at a ratio of 1-for-1.74692. Immediately prior to the IPO closing, each share of Metagenomi, Inc.’s redeemable convertible preferred stock then outstanding converted into a number of shares of common stock based on the formula set forth in Metagenomi Inc.’s amended and restated certificate of incorporation in effect immediately prior to the closing of the IPO and giving effect to the reverse stock split.

Current wording

On January 26, 2024, following the Reorganization, Metagenomi, Inc. effected a reverse stock split of the shares of common stock at a ratio of 1-for-1.74692 (the “Reverse Stock Split”). Immediately prior to the closing of the IPO, each share of Metagenomi, Inc.’s redeemable convertible preferred stock then outstanding converted into 23,935,594 shares of common stock.

Previous wording

On February 8, 2024, Metagenomi, Inc.’s Form S-1 Registration Statement for its IPO was declared effective, and on February 13, 2024, its IPO was completed. Metagenomi, Inc issued 6,250,000 shares of common stock at a price to the public of $15.00 per share and received gross proceeds of $93.8 million. Net proceeds were approximately $81.1 million, after deducting underwriting discounts and commissions and other offering costs totaling approximately $12.7 million. Our common stock began trading on the Nasdaq Global Select Market on February 9, 2024, under the symbol “MGX”.

Current wording

On February 13, 2024, we completed our initial public offering (“IPO”) in which we issued 6,250,000 shares of our common stock at a price to the public of $15.00 per share. We received net proceeds of approximately $80.7 million, after deducting underwriting discounts and commissions and other offering costs totaling approximately $13.0 million.

Previous wording

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, research and development activities, building our intellectual property portfolio and providing general and administrative support for these operations. We have historically financed our operations primarily through issuing redeemable convertible preferred units and convertible promissory notes and entering into collaboration agreements, which generate collaboration revenue.

Current wording

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, research and development activities, building our intellectual property portfolio and providing general and administrative support for these operations. We have historically financed our operations primarily through issuing redeemable convertible preferred stock and convertible promissory notes, sales of our common stock and entering into collaboration agreements.

Previous wording

Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including, rising inflation, tensions in U.S.-China relations, the COVID-19 pandemic, the U.S. Federal Reserve raising interest rates, recent and potential future disruptions in access to bank deposits and lending commitments due to bank failures and the effects of the ongoing geopolitical conflict in Ukraine and the Israel-Hamas war, have led to economic uncertainty and volatility globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. To date, the macroeconomic trends discussed above have not had a material adverse impact on our business, financial condition or results of operations. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, refer to the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Current wording

Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including, inflationary pressures, interest rate and currency rate fluctuations, increased U.S. trade tariffs and trade disputes with other countries, economic slowdown or recession, banking instability, monetary policy changes, geopolitical tensions or the outbreak of hostilities or war, including from the ongoing Russia-Ukraine conflict, the current conflict in Israel and Gaza (including any escalation or expansion) and increasing tensions between China and Taiwan, have led to economic uncertainty and volatility globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. To date, the macroeconomic trends discussed above have not had a material adverse impact on our business, financial condition or results of operations. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, refer to the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Previous wording

Moderna Strategic Collaboration and License Agreement

Current wording

As part of our strategy, we have entered into collaborations with third parties for one or more of our programs or product candidates we may develop. For example, in June 2022, we entered into a Development, Option and License Agreement with Affini-T Therapeutics, Inc. (“Affini-T”) (the “Affini-T Agreement”) to develop and commercialize gene edited T-cell receptor (“TCR”)-based therapeutic products exclusively in the field of treatment, prevention or diagnosis of any human cancer using products with any engineered primary TCR alpha/beta T cells and non-exclusively in the field of treatment, prevention or diagnosis of any human cancer using products with certain other engineered immune cells worldwide, and in November 2022, we entered into a Collaboration and License Agreement with Ionis to research, develop and commercialize investigational medicines using genome editing technologies. In October 2021, we entered into a Strategic Collaboration and License Agreement (the “Moderna Agreement”) with ModernaTx, Inc. (“Moderna”), focused on advancing new genome editing system for in vivo human therapeutic applications, and in April 2024, we and Moderna mutually terminated the Moderna Agreement. Refer to Note 7 in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to the terms of the agreements between us and our collaborators.

Previous wording

To date, all of our revenue consists of collaboration revenue, earned from collaboration agreements with Moderna, Ionis and Affini-T. These agreements may include the following types of promised goods or services: (i) grants of licenses; (ii) performance of research and development services and (iii) participation on joint research and/or development committees. They also may include options to obtain licenses to our intellectual property or to extend the term of the research activities. Our revenues under such collaboration agreements were $44.8 million and $17.2 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

To date, all of our revenue consists of collaboration revenue, earned from collaboration agreements with Moderna (prior to the termination of the Moderna Agreement), Ionis and Affini-T. These agreements may include the following types of promised goods or services: (i) grants of licenses; (ii) performance of research and development services and (iii) participation on joint research and/or development committees. They also may include options to obtain licenses to our intellectual property or to extend the term of the research activities. Our revenues under such collaboration agreements were $52.3 million and $44.8 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

The largest component of our total operating expenses since our inception has been research and development activities. Research and development expenses consist primarily of compensation and benefits for research and development employees, including unit-based compensation; the costs of acquiring research and development supplies and services; manufacturing process development costs; the research and development expenses that we share with our collaboration partners for co-development programs; other outside services and consulting costs; and allocated facilities, information technology and overhead expenses. Research and development costs are expensed as incurred.

Current wording

The largest component of our total operating expenses since our inception has been research and development activities. Research and development expenses consist primarily of personnel costs for research and development employees, including stock-based compensation; the costs of acquiring research and development supplies and services; manufacturing process development costs; the research and development expenses that we share with our collaboration partners for co-development programs; other outside services and consulting costs; and allocated facilities, information technology and overhead expenses. Research and development costs are expensed as incurred.

Previous wording

General and administrative expenses consist primarily of personnel costs, including unit-based compensation expense and other expenses for outside professional services, including legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, consulting and tax services; insurance costs; administrative travel expenses; website development costs; marketing and public relations costs; and facilities, information technology and other allocated overhead costs.

Current wording

General and administrative expenses consist primarily of personnel costs, including stock-based compensation expense, and other expenses for outside professional services, including legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, consulting and tax services; insurance costs; administrative travel expenses; website development costs; marketing and public relations costs; and facilities, information technology and other allocated overhead costs.

Previous wording

Total other income, net includes interest income from our investments in available-for-sale marketable securities, grant income, change in fair value of our investments in the Affini-T convertible note, preferred stock and common stock shares related to our investment in Affini-T and interest expense on the Moderna convertible note issued in November 2021, which was converted into redeemable convertible preferred units in January 2022.

Current wording

Total other income, net, includes interest income from our investments in available-for-sale marketable securities and changes in the fair value of our investments in Affini-T.

Previous wording

Metagenomi Technologies, LLC was taxed under the provisions of Subchapter K — Partners and Partnerships of the Internal Revenue Code. Under those provisions, Metagenomi Technologies, LLC does not pay federal or state corporate income taxes on its taxable income. Instead, each member includes net operating income or loss for Metagenomi on its individual return.

Current wording

Metagenomi LLC was taxed under the provisions of Subchapter K — Partners and Partnerships of the Internal Revenue Code. Under those provisions, Metagenomi LLC does not pay federal or state corporate income taxes on its taxable income. Instead, each member includes net operating income or loss for Metagenomi LLC on its individual return. Metagenomi is a corporation for tax purposes and is subject to income taxes. Prior to the Reorganization, Metagenomi was a wholly-owned subsidiary of Metagenomi LLC. After the Reorganization, Metagenomi continues as the surviving corporation.

Previous wording

As of December 31, 2023, we had net operating loss carryforwards of less than $0.1 million and $17.5 million for federal and state income tax purposes, respectively, available to reduce future taxable income, if any. The federal net operating loss carryforwards do not expire. State net operating loss carryforwards begin expiring in 2037. As of December 31, 2023, we had state research and development credit carryforwards of $4.7 million, which do not expire. As of December 31, 2023, we had $0 million federal research and development credit carryforwards.

Current wording

As of December 31, 2024, we had net operating loss carryforwards of $45.6 million and $118.3 million for federal and state income tax purposes, respectively, available to reduce future taxable income, if any. The federal net operating loss carryforwards do not expire. State net operating loss carryforwards begin expiring in 2037. As of December 31, 2024, we had state research and development credit carryforwards of $4.5 million, which do not expire. As of December 31, 2024, we had zero federal research and development credit carryforwards.

Previous wording

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Current wording

The following table summarizes our results of operations for the periods indicated (in thousands):

Previous wording

Our revenue consists of collaboration revenue recognized under our agreements with Moderna, Affini-T and Ionis. We recognize revenue as the performance obligations are satisfied. Collaboration revenue increased by $27.6 million, from $17.2 million for the year ended December 31, 2022 to $44.8 million for the year ended December 31, 2023. The increase in collaboration revenue for the year ended December 31, 2023, was primarily driven by a $21.8 million increase in revenue related to the Ionis Agreement, a $3.6 million increase in revenue related to the Moderna Agreement and a $2.2 million increase in revenue related to the Affini-T

Current wording

Collaboration revenue increased by $7.5 million, from $44.8 million for the year ended December 31, 2023 to $52.3 million for the year ended December 31, 2024. The increase in collaboration revenue for the year ended December 31, 2024 was primarily driven by an $8.5 million increase in revenue related to the Ionis Agreement as we performed more services and a $0.6 million increase in revenue related to the Moderna Agreement due to the recognition of all remaining deferred revenue during the year ended December 31, 2024, offset by a $1.6 million decrease in revenue related to the Affini-T Agreement.

Previous wording

Income tax expense for the year ended December 31, 2022 was mainly due to our taxable income related to an upfront payment received under the Moderna Agreement and the change in the net capitalization of our research and development expenses under Section 174.

Current wording

Provision for income taxes decreased by $13.5 million for the year ended December 31, 2024, from a provision for income taxes of $8.0 million for the year ended December 31, 2023, to a benefit for income taxes of $5.5 million for the year ended December 31, 2024. The benefit for income taxes for the year ended December 31, 2024 was primarily due to our intention to elect to carry back the 2024 research and development credit to the prior year, in addition to a return to provision adjustment related to the prior year return. The provision for income taxes for the year ended December 31, 2023 was mainly due to our taxable income related to an upfront payment received under the Ionis Agreement and capitalization of research and development expenses under the Internal Revenue Code Section 174 (“Section 174”).

Previous wording

Since our inception, we have incurred significant operating losses. We have historically funded our operations primarily through sales of our redeemable convertible preferred units and convertible promissory notes, which generated approximately $351.7 million in aggregate gross proceeds. Additionally, through December 31, 2023, we received approximately $120.0 million upfront cash payments from collaboration and licensing agreements. As of December 31, 2023, we had $271.2 million in cash, cash equivalents and available-for-sale marketable securities. In February 2024, upon the closing of the IPO, we received net proceeds of approximately $81.1 million, after deducting underwriting discounts and commissions and other offering costs.

Current wording

Since our inception, we have historically funded our operations primarily through sales of our redeemable convertible preferred units and convertible promissory notes, which generated approximately $351.7 million in aggregate gross proceeds, in addition to net proceeds of approximately $80.7 million received in February 2024 upon the closing of our IPO. Additionally, through December 31, 2024, we received approximately $120.0 million upfront cash payments from collaboration and licensing agreements.

Previous wording

We will not generate revenue from product sales unless and until we successfully initiate and complete clinical development and obtain regulatory approval for one or more product candidates. If we obtain regulatory approval for any product candidate and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, manufacturing, marketing, and distribution. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of our platform or delay our pursuit of potential in-licenses or acquisitions.

Current wording

Our revenue to date has been generated from collaboration agreements. We will not generate revenue from product sales unless and until we successfully initiate and complete clinical development and obtain regulatory approval for one or more product candidates. If we obtain regulatory approval for any product candidate and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, manufacturing, marketing, and distribution. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of our platform or delay our pursuit of potential in-licenses or acquisitions.

Previous wording

We have incurred significant operating losses since inception and we expect to continue to incur substantial losses for the foreseeable future. Our net losses were $68.3 million and $43.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $144.9 million. We anticipate that our expenses and operating losses will increase substantially for the foreseeable future as we:

Current wording

We have incurred significant operating losses since inception and we expect to continue to incur substantial losses for the foreseeable future. Our net losses were $78.1 million and $68.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $223.0 million.

Previous wording

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our portfolio of products toward the clinical trials. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

Current wording

We expect our short and long-term expenses to increase substantially in connection with our ongoing activities, particularly as we advance our portfolio towards candidate nomination and preclinical trials. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

Previous wording

the costs of manufacturing clinical and commercial supplies of our future product candidates;

Current wording

the costs of manufacturing clinical and commercial supplies of our future product candidates, including internal manufacturing facilities and contracting with other vendors;

Previous wording

acquire or in-license product candidates, intellectual property and technologies;

Current wording

the costs to acquire or in-license product candidates, intellectual property and technologies;

Previous wording

incur additional legal, audit, accounting, compliance, insurance, investor relations and other expenses to operate as a public company that we did not incur as a private company.

Current wording

the additional costs of legal, audit, accounting, compliance, insurance, investor relations and other expenses related to operating as a public company;

Previous wording

As of December 31, 2023, we had $271.2 million in cash, cash equivalents and available-for-sale marketable securities. We believe that our existing cash, cash equivalents and available-for-sale marketable securities together with the IPO proceeds will be sufficient to fund our current operating plan for at least the next 12 months. Based on our current operating plan, we estimate that our existing cash, cash equivalents and available-for-sale marketable securities, together with the estimated net proceeds from our IPO, will be sufficient to fund our projected operating expenses and capital expenditure requirements into 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We expect that we will require additional funding to: continue our current research development activities; develop, maintain, expand and protect our intellectual property portfolio; further develop our platform; and hire additional research, clinical and scientific personnel. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize our products.

Current wording

As of December 31, 2024, we had $248.3 million in cash, cash equivalents and available-for-sale marketable securities. Based on our current operating plan, we estimate that our existing cash, cash equivalents and available-for-sale marketable securities will be sufficient to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources” and “Risk Factors—Risks Related To Our Financial Position and Need for Additional Capital.” We expect that we will require additional funding to: continue our current research development activities; develop, maintain, expand and protect our intellectual property portfolio; further develop our platform; and hire additional research, clinical and scientific personnel. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize our products.

Previous wording

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest for existing investors may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect existing investors’ rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Current wording

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our short and long-term cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest for existing investors may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect existing investors’ rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Previous wording

Net cash used in operating activities for the year ended December 31, 2023 was $91.4 million. This was primarily due to our net loss of $68.3 million, decreased by non-cash charges of $3.3 million and increased by a net reduction of $26.4 million in our net operating assets and liabilities. The net non-cash charges consisted of $6.9 million unit-based compensation expense, $4.2 million non-cash lease expense and $4.2 million depreciation and amortization expense, all partially offset by $8.5 million credit related to amortization of the discounts on available-for-sale marketable securities, $2.9 million increase in in fair value of our investments in Affini-T and $0.7 million amortization of non-cash collaboration revenue related to the Affini-T Agreement. The net change in our operating assets and liabilities primarily consisted of a $30.3 million decrease in deferred revenue and collaboration advances as we recognized revenue under our collaboration agreements, a $2.5 million increase in accounts receivable related to the Affini-T Agreement and the Moderna Agreement, a $1.2 million decrease in operating lease liabilities due to recurring payments under the existing lease agreements, a $1.1 million increase in prepaid expenses and other assets, and a $0.1 million decrease in account payable due to the timing of payments to our vendors, all partially offset by a $4.0 million increase in other non-current liabilities, a $1.7 million increase in income tax payable due to additional tax expense, a $1.6 million increase in accrued expenses and other current liabilities and a $1.3 million decrease in contract assets related to the Affini-T Agreement.

Current wording

Net cash used in operating activities for the year ended December 31, 2023 was $91.4 million and consisted primarily of our net loss of $68.3 million, a net reduction of $26.4 million in our net operating assets and liabilities, and decreased by non-cash charges of $3.3 million. The net change in our net operating assets and liabilities primarily consisted of a $30.3 million decrease in deferred revenue and collaboration advances as we recognized revenue under our collaboration agreements, a $2.5 million increase in accounts receivable related to the Affini-T Agreement and the Moderna Agreement, a $1.2 million decrease in operating lease liabilities due to recurring payments under the existing lease agreements, and a $1.1 million increase in prepaid expenses and other assets, all partially offset by a $4.0 million increase in other non-current liabilities, a $1.7 million increase in income tax payable due to additional tax expense, a $1.6 million increase in accrued expenses and other current liabilities and a $1.3 million decrease in contract assets related to the Affini-T Agreement. The net non-cash charges consisted of $6.9 million stock-based compensation expense, $4.2 million non-cash lease expense and $4.2 million depreciation expense, all partially offset by $8.5 million credit related to amortization of the discounts on available-for-sale marketable securities, $2.9 million increase in fair value of our investments in Affini-T and $0.7 million amortization of non-cash collaboration revenue related to the Affini-T Agreement.

Previous wording

Net cash used in investing activities for the year ended December 31, 2022 was $122.2 million, which consisted of $214.9 million of purchases of available-for-sale marketable securities, $14.0 million of purchases of property and equipment, partially offset by $106.6 million in proceeds from maturities and sales of available-for-sale marketable securities.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $88.2 million primarily due to net purchases of available-for-sale securities of $84.7 million and purchases of property and equipment of $3.1 million.

Previous wording

Net cash provided by investing activities for the year ended December 31, 2023 was $45.7 million, which consisted of $263.6 million in proceeds from maturities of available-for-sale marketable securities, partially offset by $208.1 million of purchases of available-for-sale marketable securities and $9.8 million of purchases of property and equipment.

Current wording

Net cash provided by investing activities for the year ended December 31, 2023 was $45.7 million, which consisted of $55.5 million in net maturities of available-for-sale marketable securities, offset by $9.8 million of purchases of property and equipment.

Previous wording

Net cash provided by financing activities for the year ended December 31, 2023 was $1.0 million, which consisted of $4.3 million of net cash proceeds from our issuance of Series B-1 redeemable convertible preferred units, partially offset by $3.3 million of payments of IPO costs.

Current wording

Net cash provided by financing activities for the year ended December 31, 2023 was $1.0 million, which consisted of $4.3 million of net cash proceeds from our issuance of Series B-1 preferred redeemable convertible preferred stock, partially offset by $3.3 million of payments of IPO costs.

Previous wording

As of December 31, 2023, we leased our office and laboratory space under three lease agreements and had one vivarium lease agreement. Remaining lease obligations under our non-cancellable leases were $71.0 million as of December 31, 2023, including $8.6 million payable through December 31, 2024 and $62.4 million for the reminder of the leases’ terms, and had a weighted-average remaining lease term of 7.1 years.

Current wording

As of December 31, 2024, we leased our office and laboratory space under three lease agreements and one vivarium lease agreement. Remaining lease obligations under our non-cancellable leases were $63.4 million as of December 31, 2024, including $10.4 million payable through December 31, 2025 and $53.0 million for the reminder of the leases’ terms. For additional information on our leases and timing of future lease payments refer to Note 8 in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Previous wording

On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to revenue recognition under our collaboration agreements, accrued research and development costs, the fair value of common units and unit-based compensation expense, the valuation of deferred tax assets, and uncertain income tax positions. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Current wording

On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to revenue recognition under our collaboration agreements, the fair value of common stock and stock-based compensation expense, the valuation of deferred tax assets, and uncertain income tax positions. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Previous wording

The grant date fair value of profits interests issued and modified beginning from July 31, 2023 was estimated using the valuation model based on the Probability Weighted Expected Return Method (“PWERM”), which is further discussed in the section below “Determination of Fair Value of Common Units”. The estimated equity fair value was allocated via the distribution waterfall in accordance with the amendment to the LLC Agreement to all outstanding redeemable convertible preferred units, common units and profits interests.

Current wording

We issued profits interests units to our employees, consultants and our board of managers prior to our IPO. In connection with the Reorganization, all outstanding unvested profits interests were exchanged for unvested restricted common stock. Prior to July 31, 2023, we used the Black-Scholes option-pricing model to determine the grant date fair value of profits interests. Beginning on July 31, 2023, the grant date fair value of profits interests issued and modified was estimated using the valuation model based on the Probability Weighted Expected Return Method (“PWERM”) with the estimated equity fair value allocated via the distribution waterfall in accordance with the amendment to the LLC Agreement to all outstanding redeemable convertible preferred units, common units and profits interests.

Previous wording

As there has been no public market for our common units prior to the IPO, the estimated fair value of our common units has been determined by our board of managers as of the date of each award grant with input from management, considering our most recently available third-party valuations of common unit, and our board of managers’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

Current wording

As there was no public market for our common units prior to the IPO, the estimated fair value of our common units was determined by our board of managers as of the date of each award grant with input from management, considering our most recently available third-party valuations of common unit, and our board of managers’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

Previous wording

For valuations performed after December 20, 2022, in accordance with the Practice Aid, we determined the hybrid method was the most appropriate method for determining the fair value of our common unit based on our stage of development and other relevant factors. The hybrid method is a PWERM, where the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common unit based upon an analysis of future values for the company, assuming various outcomes. The common unit value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of members’ units. The future value of the common unit under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common unit. A discount for lack of marketability of the common unit is then applied to arrive at an indication of value for the common unit. In addition to considering the results of independent third-party valuations, our board of managers considered various objective and subjective factors to determine the thresholds for the profits interests as of each grant date, including:

Current wording

In accordance with the Practice Aid, we determined the hybrid method was the most appropriate method for determining the fair value of our common units based on our stage of development and other relevant factors. The hybrid method is a PWERM, where the equity value in one or more scenarios is calculated using an option-pricing method (“OPM”). The PWERM is a scenario-based methodology that estimates the fair value of common unit based upon an analysis of future values for the company, assuming various outcomes. The common unit value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of members’ units. The future value of the common unit under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common unit. A discount for lack of marketability of the common unit is then applied to arrive at an indication of value for the common unit. In addition to considering the results of independent third-party valuations, our board of managers considered various objective and subjective factors to determine the thresholds for the profits interests as of each grant date, including: