Stoke Therapeutics, Inc.

Previous wording

We are dedicated to addressing the underlying causes of severe diseases by upregulating protein expression with RNA-based medicines. Using our proprietary TANGO (Targeted Augmentation of Nuclear Gene Output) approach, we are developing antisense oligonucleotides (“ASOs”) to selectively restore protein levels.

Current wording

We are a late-stage clinical-stage company dedicated to addressing the underlying causes of severe diseases by upregulating protein expression with RNA-based medicines. Using our proprietary TANGO (Targeted Augmentation of Nuclear Gene Output) approach, we are developing antisense oligonucleotides (“ASOs”) to selectively restore protein levels.

Previous wording

Our first compound, STK-001, is in clinical testing for the treatment of Dravet syndrome, a severe and progressive genetic epilepsy. Dravet syndrome is characterized by frequent, prolonged and refractory seizures beginning within the first year of life. The disease is classified as a developmental and epileptic encephalopathy due to the developmental delays and cognitive impairment associated with it. Dravet syndrome is one of many diseases caused by a haploinsufficiency, in which a loss of approximately 50% of normal protein levels leads to disease. We have announced end of study data from our two Phase 1/2a open-label studies of STK-001, MONARCH in the United States and ADMIRAL in the United Kingdom. We also have SWALLOWTAIL in the U.S. and LONGWING in the U.K., which are Open Label Extension (“OLE”) studies of STK-001 for children and adolescents with Dravet syndrome. Patients who participated in the MONARCH study in the United States or the ADMIRAL study in the United Kingdom and met study entry criteria are eligible to continue treatment in SWALLOWTAIL or LONGWING, respectively, both of which are designed to evaluate the long-term safety and tolerability of repeat doses of STK-001.

Current wording

Our first compound, zorevunersen (STK-001), is in clinical testing for the treatment of Dravet syndrome, a severe and progressive genetic epilepsy. Dravet syndrome is characterized by frequent, prolonged and refractory seizures beginning within the first year of life. The disease is classified as a developmental and epileptic encephalopathy due to the developmental delays and cognitive impairment associated with it. Dravet syndrome is one of many diseases caused by a haploinsufficiency, in which a loss of approximately 50% of normal protein levels leads to disease. We have completed two Phase 1/2a open-label studies of zorevunersen, MONARCH in the United States and ADMIRAL in the United Kingdom, and we have announced plans to initiate the EMPEROR Phase 3 study of zorevunersen in the second quarter of 2025. We also have two ongoing Open Label Extension (“OLE”) studies of zorevunersen for children and adolescents with Dravet syndrome, SWALLOWTAIL in the U.S. and LONGWING in the United Kingdom. Patients who participated in the MONARCH study in the United States or the ADMIRAL study in the United Kingdom and met study entry criteria were eligible to continue treatment in SWALLOWTAIL or LONGWING, respectively, both of which are designed to evaluate the long-term safety and tolerability of repeat doses of zorevunersen.

Previous wording

We are also pursuing treatment for a second haploinsufficient disease, autosomal dominant optic atrophy (“ADOA”), the most common inherited optic nerve disorder. STK-002 is our lead clinical candidate for the treatment of ADOA. STK-002 is designed to upregulate OPA1 protein expression by leveraging the non-mutant (wild-type) copy of the OPA1 gene to restore OPA1 protein expression with the aim to stop or slow vision loss in patients with ADOA. We have received authorization in the United Kingdom to proceed with a Phase 1 open-label study (OSPREY) of STK-002, and we expect the study to start in 2024.

Current wording

We are also pursuing treatment for a second haploinsufficient disease, autosomal dominant optic atrophy (“ADOA”), the most common inherited optic nerve disorder. STK-002 is our lead clinical candidate for the treatment of ADOA. STK-002 is designed to upregulate OPA1 protein expression by leveraging the non-mutant (wild-type) copy of the OPA1 gene to restore OPA1 protein expression with the aim to stop or slow vision loss in patients with ADOA. We have received authorization in the United Kingdom to proceed with a Phase 1 open-label study (OSPREY) of children and adults ages 6 to 55 who have an established diagnosis of ADOA and have evidence of a genetic mutation in the OPA1 gene. However, we have also identified additional important pre-clinical activities to support our understanding of dosing for the Phase 1 OSPREY study and other OPA1 indications as we seek to optimize our clinical plans and better understand the potential for targeting OPA1 beyond ADOA. We anticipate that these data, along with further research on the commercial opportunity, will provide a more complete picture of the opportunity and support for the clinical studies prior to initiating the Phase 1 OSPREY study.

Previous wording

In May 2022, we filed a universal Shelf Registration statement on Form S-3 (the “Registration Statement”) with the SEC. The Registration Statement was declared effective by the SEC on May 31, 2022, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by us of up to a maximum aggregate offering price of $400.0 million of our common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, subscription rights to purchase common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and a sales agreement prospectus covering the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of common stock that may be issued and sold under a Controlled Equity Offering Sales Agreement (“Sales Agreement”). The specific terms of any securities to be offered pursuant to the base prospectus will be specified in a prospectus supplement to the base prospectus. The $150.0 million of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $400.0 million of securities that may be offered, issued and sold by us under the base prospectus. As of December 31, 2023, we had issued approximately 6.3 million shares of common stock pursuant to the Sales Agreement for net proceeds of $52.1 million. We may terminate this at-the-market program at any time, pursuant to its terms.

Current wording

In May 2022, we filed a universal Shelf Registration statement on Form S-3 (the “2022 Registration Statement”) with the SEC. The 2022 Registration Statement was declared effective by the SEC on May 31, 2022, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by us of up to a maximum aggregate offering price of $400.0 million of our common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, subscription rights to purchase common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and a sales agreement prospectus covering the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of common stock that may be issued and sold under a Controlled Equity Offering Sales Agreement (the “Sales Agreement”).

Previous wording

As of December 31, 2023 and 2022 we had $201.4 million and $229.6 million, respectively, in cash, cash equivalents and marketable securities.

Current wording

As of December 31, 2024 and December 31, 2023 we had $246.7 million and $201.4 million, respectively, in cash, cash equivalents and marketable securities.

Previous wording

Since inception, we have had operating losses, the majority of which are attributable to research and development activities. Our net losses were $104.7 million and $101.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $401.8 million and as of December 31, 2022, we had an accumulated deficit of $297.2 million.

Current wording

Since inception, we have had operating losses, the majority of which are attributable to research and development activities. Our net losses were $89.0 million and $104.7 million for the years months ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $490.8 million.

Previous wording

Based upon our current operating plan, we believe that our cash, cash equivalents and marketable securities of $201.4 million as of December 31, 2023, together with the proceeds since December 31, 2023 from the Sales Agreement of $1.3 million, will enable us to fund our operating expenses and capital expenditure requirements to the end of 2025. To date, we have not had any products approved for sale and have not generated any product sales. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Current wording

Based upon our current operating plan, we believe that our cash, cash equivalents, and marketable securities of $246.7 million as of December 31, 2024, which, along with the $165 million upfront payment received in March 2025 and other eligible cash flows from the Biogen collaboration, we anticipate will fund operations to mid-2028. To date, we have not had any products approved for sale and have not generated any product sales. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Previous wording

We currently do not have any products approved for sale and have not generated any revenue since inception through December 31, 2023. If we are able to successfully develop, receive regulatory approval for and commercialize any of our current or future product candidates alone or in collaboration with third parties, we may generate revenue from the sales of these product candidates.

Current wording

We are comprised of one reportable segment and as of December 31, 2024 and 2023, have not generated any product revenue since inception, as we do not yet have approved products for sale. If we are able to successfully develop, receive regulatory approval for and commercialize any of our current or future product candidates alone or in collaboration with third parties, we may generate revenue from the sales of these product candidates.

Previous wording

SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest. In connection with each target, we will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products. With respect to SYNGAP1, we have agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith we granted to Acadia worldwide, co-exclusive (with us) licenses for such licensed products. With respect to MECP2 and the neurodevelopmental target, we granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.

Current wording

In January 2022, we entered into a license and collaboration agreement with Acadia Pharmaceuticals Inc. (“Acadia”) for the discovery, development and commercialization of novel RNA-based medicines for the treatment of severe and rare genetic neurodevelopmental diseases of the central nervous system (the “CNS”). The agreement focuses on the targets SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest. In connection with each target, we will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products. With respect to SYNGAP1, we have agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith we granted to Acadia worldwide, co-exclusive (with us) licenses for such licensed products. With respect to MECP2 and the neurodevelopmental target, we granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.

Previous wording

For the year ended, December 31, 2023, we recognized revenue related to the Acadia collaboration of $8.8 million and for the year ended, December 31, 2022, we recognized revenue related to the Acadia collaboration of $12.4 million.

Current wording

For the year ended, December 31, 2024, we recognized revenue related to the Acadia collaboration of $36.6 million and for the year ended, December 31, 2023, we recognized revenue related to the Acadia collaboration of $8.8 million.

Previous wording

The table below summarizes our research and development expenses incurred by development program:

Current wording

The table below summarizes our research and development expenses incurred by development program (in thousands):

Previous wording

General and administrative expenses consist primarily of personnel costs, costs related to maintenance and filing of intellectual property, expenses for outside professional services, including legal, human resources, information technology, audit and accounting services, and facilities and other expenses. Personnel costs consist of salaries, benefits and stock-based compensation expense. We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of operating as a public company and the potential commercialization of our product candidates. These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs.

Current wording

General and administrative expenses consist primarily of personnel costs, costs related to maintenance and filing of intellectual property, expenses for outside professional services, including legal, human resources, information technology, audit and accounting services, and facilities and other expenses. Personnel costs consist of salaries, benefits and stock-based compensation expense. We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of operating as a public company and the potential commercialization of our product candidates. These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs.

Previous wording

Our other income (expense), includes (i) interest income earned on cash reserves in our operating money market fund, investment accounts and on our marketable securities investments and (ii) other items of income (expense), net.

Current wording

Our other income (expense), net includes (i) interest income earned on cash reserves in our operating money market fund, investment accounts and on our marketable securities investments and (ii) other items of income (expense), net.

Previous wording

The following table sets forth our results of operations:

Current wording

The following table sets forth our results of operations (in thousands):

Previous wording

Research and development expenses were $82.2 million for the year ended December 31, 2023 as compared to $77.8 million for the year ended December 31, 2022, an increase of $4.4 million. The table below summarizes our research and development expenses:

Current wording

Research and development expenses were $89.1 million for the year ended December 31, 2024 as compared to $82.2 million for the year ended December 31, 2023, an increase of $6.9 million. The table below summarizes our research and development expenses (in thousands):

Previous wording

The increase in research and development expenses were primarily attributable to an increase of $2.5 million in personnel costs resulting from annual compensation increases and increases in stock-based compensation expense, $1.9 million in facilities and other research and development costs, an increase of $1.8 million in expenses related to our STK-001 program, which is comprised of third-party services and scientific consulting fees, offset by a decrease of $1.1 million in expenses related to our STK-002 program, which is comprised of third-party services and scientific consulting fees, and a decrease of $0.7 million in external third-party expenses related to SYNGAP1, MECP2, and non-project specific consulting and third-party services. The increase in expenses reflects the accelerating pace of research and development activities and the increases in personnel needed to support those activities.

Current wording

The increase in research and development expenses were primarily attributable to an increase of $4.7 million in personnel costs resulting from annual compensation increases and increases in stock-based compensation expense, $2.9 million in expenses related to our zorevunersen program, which is comprised of third-party services and scientific consulting fees, $1.1 million in facilities and other research and development costs, and an increase of $0.7 million in external third-party expenses related to SYNGAP1 and MECP2, offset by a decrease of $2.2 million in expenses related to our STK-002 program, which is comprised of third-party services and scientific consulting fees and $0.3 million of non-project specific consulting and third-party services. The increase in expenses reflects the accelerating pace of research and development activities and the increases in personnel needed to support those activities.

Previous wording

General and administrative expenses were $41.3 million for the year ended December 31, 2023 as compared to $38.9 million for the year ended December 31, 2022, an increase of $2.4 million.

Current wording

General and administrative expenses were $48.8 million for the year ended December 31, 2024 as compared to $41.3 million for the year ended December 31, 2023, an increase of $7.5 million.

Previous wording

The increases in general and administrative expenses were primarily attributable to an increase of $2.2 million in personnel costs, including increases in stock-based compensation expense, from increases in headcount and the annual options award and an increase of $0.2 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including human resources, information technology, audit, tax, public relations, communications and other general and administrative activities.

Current wording

The increases in general and administrative expenses were primarily attributable to an increase of $4.4 million in personnel costs, including increases in stock-based compensation expense, from increases in headcount and the annual options award and an increase of $3.1 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including commercialization efforts, human resources, information technology, audit, tax, public relations, communications and other general and administrative activities.

Previous wording

The change in our other income (expense) for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily reflects an increase in cash balances throughout the year as well as increased interest rates.

Current wording

The change in our other income (expense) for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily reflects an increase in cash balances throughout the year as well as changes in interest rates.

Previous wording

Since our inception through December 31, 2023, our operations have been financed by net proceeds of $542.6 million from the sale of convertible notes payable and our convertible preferred stock, our initial public offering, follow-on offering, proceeds from the controlled equity offering sales agreements and the upfront payment from Acadia. As of December 31, 2023, we had $201.4 million in cash, cash equivalents and marketable securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Current wording

Since our inception through December 31, 2024, our operations have been financed by net proceeds of $671.6 million from the sale of convertible notes payable and our convertible preferred stock, our initial public offering, follow-on offering, proceeds from the controlled equity offering sales agreements and the upfront payment from Acadia. As of December 31, 2024, we had $246.7 million in cash, cash equivalents and marketable securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Previous wording

We have incurred losses since our inception in June 2014 and, as of December 31, 2023 and 2022, we had accumulated deficits of $401.8 million and $297.2 million, respectively. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Current wording

We have incurred losses since our inception in June 2014 and, as of December 31, 2024 and 2023, we had accumulated deficits of $490.8 million and $401.8 million, respectively. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Previous wording

Based upon our current operating plan, we believe that our cash, cash equivalents and marketable securities of $201.4 million as of December 31, 2023, together with the proceeds since December 31, 2023 from the Sales Agreement of $1.3 million, will enable us to fund our operating expenses and capital expenditure requirements to the end of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Current wording

Based upon our current operating plan, we believe that our cash, cash equivalents, and marketable securities of $246.7 million as of December 31, 2024, which, along with the $165 million upfront payment received in March 2025 and other eligible cash flows from the Biogen collaboration, we anticipate will fund operations to mid-2028. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Previous wording

The following table summarizes our cash flows:

Current wording

The following table summarizes our cash flows (in thousands):

Previous wording

During the year ended December 31, 2022, cash used in operating activities was $31.9 million. This was primarily attributable to a net loss of $101.1 million and by a net change of $8.7 million in our net operating assets and liabilities, offset by $51.7 million in deferred revenue received as part of the Acadia collaboration and to non-cash charges of $26.2 million for share-based compensation, depreciation, amortization and accretion of marketable securities, and reduction in the carrying amount of right of use assets.

Current wording

During the year ended December 31, 2024, cash used in operating activities was $86.9 million. This was primarily attributable to a net loss of $89.0 million and by a net change of $28.1 million in our net operating assets and liabilities, offset by non-cash charges of $30.3 million for stock-based compensation, depreciation, amortization and accretion of marketable securities, and reduction in the carrying amount of right of use assets.

Previous wording

Our investing activities during the years ended December 31, 2023 and 2022 have consisted of purchases of property and equipment and purchases and sales of marketable securities.

Current wording

Our investing activities during the year ended December 31, 2023 consisted of $107.6 million from the sales of marketable securities partially offset by purchases of property and equipment.

Previous wording

Our financing activities during year ended December 31, 2022 consisted of $0.5 million from the exercise of stock options, $0.6 million in proceeds from our Employee Stock Purchase Plan and $45.3 million of net proceeds from the controlled equity offering sales agreements.

Current wording

Our financing activities during year ended December 31, 2024 consisted of $119.9 million of net proceeds from a follow-on offering, $1.7 million from the exercise of stock options, $0.5 million in proceeds from our Employee Stock Purchase Plan and $9.0 million of net proceeds from the controlled equity offering sales agreements.

Previous wording

The following table summarizes our contractual obligations as of December 31, 2023 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

Current wording

The following table summarizes our contractual obligations as of December 31, 2024 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

Previous wording

In June 2021, we amended the agreement to extend the initial term of the 2,485 square foot lease for a period of three years ending April 30, 2025. In addition, the amendment provided for the lease of an additional 2,357 square feet of rentable space beginning on July 6, 2021 and ending on April 30, 2025. The amended lease provides us with the option to extend the term of the lease for an additional two years with a base annual rent increase of 3%.

Current wording

In June 2021, we amended the agreement to extend the initial term of the 2,485 square foot lease for a period of three years ending April 30, 2025. In addition, the amendment provided for the lease of an additional 2,357 square feet of rentable space beginning on July 6, 2021 and ending on April 30, 2025. The amended lease provides us with the option to extend the term of the lease for an additional two years with a base annual rent increase of 3%. In March 2025, we further amended this lease to extend the term from April 30, 2025 to June 30, 2025.

Previous wording

As of December 31, 2023, and 2022, the Company had federal NOL carryforwards of $189.5 million and $210.9 million, respectively, which may be available to reduce future taxable income. Federal NOLs generated prior to December 31, 2018 expire at various dates beginning in 2035 and NOLs generated after December 31, 2018 carryforward indefinitely. As of December 31, 2023, and 2022, the Company had state NOLs of $199.4 million and $212.8 million, respectively, which may be available to reduce future taxable income. The state NOLs expire at various dates beginning in 2035.

Current wording

As of December 31, 2024, and 2023, we have federal NOL carryforwards of $242.1 million and $189.5 million, respectively, which may be available to reduce future taxable income. Federal NOLs generated prior to December 31, 2018 expire at various dates beginning in 2035 and NOLs generated after December 31, 2018 carryforward indefinitely. As of December 31, 2024, and 2023, we have state NOLs of $261.5 million and $199.4 million, respectively, which may be available to reduce future taxable income. The state NOLs expire at various dates beginning in 2035.

Previous wording

In accordance with ASC 740, Accounting for Income Taxes, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and has determined that it is more likely than not that the Company will not recognize the net benefits of federal and state deferred tax assets. A full valuation allowance of $133.3 million and $97.9 million was established at December 31, 2023 and 2022, respectively. The change in the valuation allowance was an increase of $35.4 million and $31.8 million in 2023 and 2022, respectively.

Current wording

In accordance with ASC 740, Accounting for Income Taxes, we have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets and have determined that it is more likely than not that we will not recognize the net benefits of federal and state deferred tax assets. A full valuation allowance of $165.6 million and $133.3 million was established at December 31, 2024 and 2023, respectively. The change in the valuation allowance was an increase of $32.3 million and $35.4 million in 2024 and 2023, respectively.

Previous wording

As of December 31, 2023 and 2022, the Company had federal research and development tax credit (“R&D Credit”) carryforwards of $12.8 million and $9.2 million, respectively, and state R&D Credit carryforwards of $5.9 million and $4.3 million, respectively. Both federal and state R&D Credit carryforwards may be available to reduce future tax liabilities and expire at various dates beginning in 2034.

Current wording

As of December 31, 2024 and 2023, we have federal research and development tax credit (“R&D Credit”) carryforwards of $15.3 million and $12.8 million, respectively, and state R&D Credit carryforwards of $8.4 million and $5.9 million, respectively. Both federal and state R&D Credit carryforwards may be available to reduce future tax liabilities and expire at various dates beginning in 2034.

Previous wording

The Internal Revenue Code of 1986, as amended (“IRC”), provides for a limitation of the annual use of NOLs, R&D Credits, and other tax attributes following certain ownership changes that could limit our ability to utilize NOL and R&D Credit carryforwards. Under IRC Sections 382 and 383 an ownership change is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period. The Company has experienced ownership changes in the past and based on the existing Section 382 limitations, $0.9 million and $0.02 million of existing Federal NOLs and R&D credits, respectively, will not be utilizable. The Company may experience additional ownership changes in the future because of subsequent shifts in our stock ownership. As a result, our ability to use our pre-change NOLs to offset taxable income, if any, is subject to limitations, which could potentially result in increased future tax liability. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Current wording

The Internal Revenue Code of 1986, as amended (“IRC”), provides for a limitation of the annual use of NOLs, R&D Credits, and other tax attributes following certain ownership changes that could limit our ability to utilize NOL and R&D Credit carryforwards. Under IRC Sections 382 and 383 an ownership change is generally defined as a greater than 50% change (by value) in our equity ownership over a three-year period. We have experienced ownership changes in the past and based on the existing Section 382 limitations, $0.9 million and $0.02 million of existing federal NOLs and R&D credits, respectively, will not be utilizable. We may experience additional ownership changes in the future because of subsequent shifts in our stock ownership. As a result, our ability to use our pre-change NOLs to offset taxable income, if any, is subject to limitations, which could potentially result in increased future tax liability. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Previous wording

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates was less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We will continue to be a smaller reporting company for so long as either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Current wording

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates was less than $700.0 million and our annual revenue is less than $100.0 million as of the last business day of our most recently completed fiscal year. We will continue to be a smaller reporting company for so long as either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. In addition, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Previous wording

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The standard is effective for annual reporting periods beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact that the adoption will have on its consolidated financial statements.

Current wording

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The standard is effective for annual reporting periods beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024, with early adoption permitted. The Company has adopted this standard effective December 31, 2024.