Beta Bionics, Inc.

Organization and Basis of Presentation

The Company

Beta Bionics, Inc. (the “Company”) is a commercial-stage medical device company engaged in the design, development, and commercialization of innovative solutions to improve the health and quality of life of insulin-requiring people with diabetes (“PWD”) by utilizing advanced adaptive closed-loop algorithms to simplify and improve the treatment of their disease. The Company was incorporated as a Massachusetts benefit corporation in October 2015, and converted to a Delaware corporation in August 2024.

The Company’s product, the iLet Bionic Pancreas (“iLet”), was cleared by the U.S. Food and Drug Administration (“FDA”) for the treatment of type 1 diabetes (“T1D”) in adults and children six years of age and older in May 2023, and it began commercializing the iLet in the United States in May 2023. The iLet is the first adaptive closed-loop algorithm insulin dosing system that does not require T1D users to keep a daily tabulation of their carbohydrate intake or perform calculations to determine the correct dose of insulin to take.

From its inception to December 31, 2024, the Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, capital raising, establishing and engaging in collaborations, performing research and development, advancing and scaling up manufacturing capabilities, commercializing its products, establishing a sales infrastructure and providing general and administrative support for these activities. The Company’s operations to date have been funded primarily through the issuance and sale of convertible preferred stock and sales of the iLet and single-use products.

Reverse Stock Split

On January 21, 2025, the Company effectuated a 1-for-1.970 reverse stock split of the Company’s issued and outstanding shares of Class A, Class B and Class C common stock, Series A convertible preferred stock (the “Series A Preferred Stock”), Series A-2 convertible preferred stock (the “Series A-2 Preferred Stock”), Series B convertible preferred stock (the “Series B Preferred Stock”), Series B-2 convertible preferred stock (the “Series B-2 Preferred Stock”), Series C convertible preferred stock (the “Series C Preferred Stock”), Series D convertible preferred stock (the “Series D Preferred Stock”), and Series E convertible preferred stock (the “Series E Preferred Stock”) , as well as stock option awards to purchase shares of Class B common stock and warrants to purchase shares of Class B common stock and Series C preferred stock. Consequently, all issued and outstanding shares of stock, stock option awards, warrants, and per share data have been retroactively adjusted in these financial statements to reflect the reverse stock split for all periods presented. The authorized shares and par value of the common stock and preferred stock remain unchanged. As the number and issuance price of all outstanding preferred stock were adjusted, the conversion ratios for each series of the Company’s preferred stock were unchanged. Stockholders entitled to fractional shares as a result of the reverse stock split received cash payment in lieu of receiving fractional shares.

Initial Public Offering

On January 31, 2025, the Company completed its initial public offering (“IPO”) pursuant to which the Company issued 13,800,000 shares of its common stock, including 1,800,000 additional shares pursuant to the exercise in full of the underwriters of their option to purchase shares of common stock from the Company and other selling stockholders (consisting of 475,000 shares from the Company and 1,325,000 shares from the selling stockholders), at a public offering price of $17.00 per share (the “IPO Price”). The aggregate net proceeds from the offering, after deducting underwriting discounts, commissions, and other offering expenses, were approximately $190.4 million. In addition, upon the closing of the IPO, all 6,671,174 shares of Class A, Class B, and Class C Common Stock were converted into an equal number of shares of common stock, all 17,228,954 outstanding shares of convertible preferred stock were converted into 19,827,003 sharesof common stock, and all 3,196,025 outstanding warrants to purchase shares of Series C Preferred Stock and Class B Common Stock were converted into 3,373,409 shares of common stock.

Private Placement Offering

On January 21, 2025, the Company entered into a Common Stock Purchase Agreement (the “Private Placement Offering”) with an existing accredited investor pursuant to which the Company sold 1,000,000 shares of its common stock at a per share price equal to the IPO Price. The Private Placement Offering closed concurrently with the IPO on January 31, 2025. The aggregate net proceeds from the Private Placement Offering, after deducting underwriting discounts, commissions, and other offering expenses, were approximately $15.6 million.

Basis of Presentation

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as found in the Accounting Standards Codification (“ASC”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

On August 30, 2024, the Company converted from a Massachusetts benefit corporation to a Delaware corporation. All outstanding shares of preferred stock, common stock, options and warrants of the Massachusetts benefit corporation were converted into an equivalent share, option or warrant of the Delaware corporation and the par value of the Company’s preferred stock and common stock was adjusted to $0.0001. The impact of the change has been given retroactive effect in the financial statements and the accompanying notes as it relates to the year ended December 31, 2023.

The Reverse Stock Split became effective on January 21, 2025. Accordingly, all share and per share data included in these financial statements and the accompanying notes have been adjusted retroactively to reflect the impact of the Reverse Stock Split.

Emerging Growth Company Status

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), enacted in 2012. Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, certain judgements regarding revenue recognition, inventory valuation, valuation of common stock and stock-based awards, and convertible preferred stock and common stock warrants. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk primarily consist of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents in accounts at multiple accredited financial institutions and short-term investments in custodian accounts, in excess of federally insured limits. Additionally, the Company has established guidelines regarding investment instruments and their maturities, which are designed to maintain preservation of principal and liquidity. The Company does not believe that it is subject to unusual risk beyond the normal credit risk associated with commercial banking relationships.

The Company is exposed to concentration risk as it relates to its customers. The following table summarizes the percentages of total sales and accounts receivable, net for customers who accounted for 10% or more of the respective amounts for the periods presented:

• Amount related to the respective customer represented less than 10% for the period presented.

The Company relies on certain materials used in its development and manufacturing processes, some of which are procured from only one or a few sources. The failure of one of these suppliers to deliver on schedule could delay or interrupt the manufacturing or commercialization process and would adversely affect the Company’s operating results. In addition, a disruption in the commercial supply of, or a significant increase in the cost of one of the Company’s materials from these sources could have a material adverse effect on the Company’s business, financial position and results of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and all highly liquid investments purchased with original maturities of three months or less.

Short-Term Investments

In accordance with ASC 320, Investments – Debt Securities, the Company classifies its short-term investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive income in stockholders’ deficit and as a component of other comprehensive loss within the statements of operations and comprehensive loss. The Company determines realized gains or losses on the sale of available-for-sale securities using the specific identification method and includes net realized gains and losses as a component of other income or expense within the statements of operations and comprehensive loss. The Company periodically evaluates its short-term investments for credit losses, considering the significance of the decline in value and the market and economy in general. The Company hasnot recognized any impairment losses related to its short-term investments during the years ended December 31,2024 and 2023. All short-term investments are classified as current based on the nature of the investments and their availability for use in current operations.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable consist of amounts billed and currently due from customers. The Company maintains an allowance for its current estimate of expected credit losses and reassesses quarterly based on management’s expectations of the asset’s collectability. Provisions for expected credit losses are based upon specific reserves for known collection issues, as well as a general reserve. Determining the allowance for credit losses involves estimation and is subject to uncertainty. The Company’s allowance for credit losses is developed by using relevant available information including historical collection and loss experience, current economic conditions, and evaluations of customer balances. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Inventories

Inventories are valued at the lower of cost or net realizable value, determined by the first-in, first-out method. Capitalized inventory costs include raw materials, labor, and manufacturing overhead expenses associated with the production process. The Company periodically reviews inventories for potential impairment and adjusts inventory for potentially excess or obsolete goods to state inventories at their net realizable value. Factors influencing these adjustments include quantities on hand and firm purchase commitments, expectations of future use, judgments based on quality control testing data, and assessments of the likelihood of scrapping or obsoleting certain inventories based on future demand for its products and market conditions.

In addition, prior to receiving FDA clearance for the iLet in May 2023, the costs associated with the manufacture of the iLet inventory were expensed as incurred as research and development costs. This resulted in approximately $0.4 million and $1.9 million in inventory being sold during the years ended December 31,2024 and 2023, respectively, for which the associated costs had been previously expensed as research and development costs. As of December 31, 2024, the Company hasno remaining inventory with no cost basis (that was previously expensed).

Restricted Cash

In connection with the Company’s lease agreement entered into in May 2019, the Company is required to maintain a letter of credit of $0.1 million for the benefit of the landlord. As of December 31,2024 and 2023, this amount was guaranteed by a deposit in a money market fund and classified as restricted cash on the balance sheets.

Deferred Offering Costs

The Company capitalizes as deferred offering costs all direct and incremental legal, professional, accounting and other third-party fees incurred in connection with the Company’s IPO. As of December 31,

2024, the Company had $5.1 million in deferred offering costs, of which $0.9 million were in accrued expenses. The deferred offering costs were offset against the IPO proceeds upon the closing the IPO in January 2025 (see Note 1). As of December 31, 2023, the Company didnot have a balance in deferred offering costs.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. The Company performs fair value measurements in accordance with ASC 820, Fair Value Measurement. ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

The Company’s cash equivalents, short-term investments and restricted cash are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying value and estimated fair value of certain of the Company’s common stock and preferred stock warrants were determined using the Black-Scholes pricing model as of December 31, 2024 (see Note 4). The fair values of the Company’s accounts receivables, accounts payable and accrued expenses approximate their carrying values due to the short-term nature of these assets and liabilities.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is calculated using the straight-line method over the estimated useful life of the related assets, generallytwo tofive years. Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or the remaining lease term. Repairs and maintenance costs are charged to expense as incurred.

Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance that do not improve or extend the life of the respective asset are charged to expense as incurred.

Impairment of Long-lived Assets

Long-lived assets consist of property and equipment. The Company continually evaluates long-lived assets to be held and used for potential impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. The Company didnot recognize any impairment losses during the years ended December 31,2024 or 2023.

Leases

In accordance with ASC 842, Leases, leases include all agreements in which the Company obtains control of an identified asset. A lease liability is recognized at commencement date based on the present value of the lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; otherwise, the Company estimates the incremental borrowing rate to discount the lease payments based on information available at lease commencement (see Note 17).

The Company’s leases have initial lease terms of approximatelyone toseven years, with some including options to extend for up tofive additional years. If a lease includes options to extend the lease term, the Company only includes the periods it is reasonably certain to exercise as of the lease commencement date. The decision to exercise of lease renewal options is at the Company’s sole discretion. Variable lease costs, including maintenance and utilities, real estate taxes, and insurance are expensed as incurred and excluded from the measurement of the lease liability. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Leases with an initial term of 12 months or less are expensed and not recorded on the balance sheet. The Company’s leases provide for fixed rental payments with annual rent escalations. The Company does not have any leases that are classified as financing leases.

Classification and Accretion of Convertible Preferred Stock

The Company’s convertible preferred stock is classified outside of stockholders’ deficit on the balance sheets because the holders of such shares have liquidation rights in the event of a deemed liquidation that, in certain situations, is not solely within the control of the Company and would require the redemption of the then-outstanding convertible preferred stock. The Company’s Series A Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock, the Series B-2 Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock are not redeemable, except in the event of a deemed liquidation (see Note 11). Since convertible preferred stock is neither currently redeemable, nor probable of becoming redeemable, the carrying values of the convertible preferred stock are not being accreted to their redemption values. Subsequent adjustments to the carrying values of the convertible preferred stock would be made only when and if it either becomes currently redeemable or probable of becoming redeemable.

The issuance costs from equity financings are netted against the gross proceeds received from the equity financings.

Warrant Liabilities

Preferred Stock Warrants

The Company has classified warrants to purchase its Series C Preferred Stock as a liability on the balance sheets as these warrants are freestanding financial instruments that are exercisable for preferred stock that is contingently redeemable outside of the Company’s control (see Note 4).

Common Stock Warrants

The Company has classified warrants to purchase Class B common stock issued in connection with its Series D Preferred Stock financing as a liability on the balance sheets as these warrants are freestanding financial instruments that are not indexed to the Company’s common stock (see Note 4).

Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. The Company records accruals for those loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company does not recognize gain contingencies until realized. As of December 31, 2024 and 2023, no liabilities were recorded for loss contingencies (see Note 18).

Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a total company basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates as one operating segment. The measure of segment assets is presented as total assets in the balance sheets. The Company has concluded that gross profit and net income (loss) are the primary measures of segment profit or loss used by the CODM. The CODM assesses performance for the Company, monitors budget versus actual results, and determines how to allocate resources based on net income (loss) as reported in the statements of operations and comprehensive loss. There are no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein. During the years ended December 31, 2024 and 2023, the Company didnot generate any international revenues and as of December 31, 2024 and 2023, the Company didnot have any assets located outside of the United States.

Revenue Recognition

Revenue is generated primarily from sales of the iLet and its associated single-use products, such as cartridges for insulin storage and delivery, and infusion sets that connect the iLet to a user’s body. These products are distributed through a network of distributors and pharmacies, which then resell the products to insulin-requiring PWD. In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when it transfers control of the promised goods or services to its distributor and pharmacy customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, net of estimated returns and estimated variable consideration adjustments, including rebates, patient assistance and chargebacks.

Revenue Recognition for Arrangements with Multiple Performance Obligations

The Company considers the individual deliverables in its contracts with customers as separate performance obligations. The iLet and single-use products that are used together with the iLet are deemed performance obligations that are satisfied at a point in time when the customer obtains control of the promised good, which typically is upon shipment. The Company has determined that the user’s ability to access the mobile application and receive unspecified software updates through the mobile application are considered distinct performance obligations that are satisfied over time, as access and support are provided throughout the typical four-year warranty period of the iLet. Accordingly, revenue related to access the mobile application and unspecified software updates are deferred and recognized ratably over a four-year period. Given that access to the mobile application and unspecified software updates follow the same pattern of transfer to the customer and are provided over the same four-year period, the Company recognizes revenue for these performance obligations as if they were a single performance obligation.

The transaction price is determined based on the consideration expected to be received, based on the stated value in contractual arrangements. The Company allocates the consideration to the individual performance obligations based on the estimated relative standalone selling price of the performance obligations and recognizes the consideration based on when the performance obligation is satisfied, considering whether or not this occurs at a point in time or over time. Where there is no observable standalone selling price, the Company estimates standalone selling price by applying the expected cost plus a margin approach.

Variable Consideration

The amount of variable consideration that is included in the transaction price is included in revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company estimates reductions to revenues for rebates paid to pharmacy benefit managers (“PBM”). Rebates are based on contractual arrangements, which may vary by customer. The estimates are based on products sold, historical experience, trends, specific known market events and, as available, channel inventory data. Provisions for rebates and patient assistance are accounted for as a reduction of sales when revenue is recognized and are included within accrued expenses and other current liabilities within the balance sheets. Provisions for chargebacks are accounted for as a reduction of sales when revenue is recognized and are included as a reduction of accounts receivable, net within the balance sheets, as the right of offset exists. If the actual amounts of consideration that the Company receives differ from estimates, the Company adjusts these estimates, which affects reported revenue, in the period that such variances become known or at the end of each reporting period.

Sales Returns

The Company offers a 90-day right of return from the date of shipment of its iLet from one of its authorized distributors, provided a physician’s confirmation of the good faith medical reason for the return is received. Estimated allowances for sales returns are based on historical returned quantities as compared to iLet shipments in those same periods of return, adjusted for known or expected changes in the marketplace when appropriate. Actual product returns have not differed materially from estimated amounts recorded in the accompanying financial statements.

Contract Costs

The Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company has elected the practical expedient to expense the costs as they are incurred, within sales and marketing expenses, since the amortization period is less than one year.

Product Warranty

The Company provides afour-year warranty on the iLet to end-users to replace any iLets that do not function as intended in accordance with the product specifications. Estimated warranty costs are recorded at the time of shipment. Warranty costs are estimated primarily based on the current expected product replacement cost and expected replacement rates utilizing management’s understanding of the hardware. Although the Company’s history of product sales is limited, management also utilizes historical warranty cost data to reevaluate the estimated warranty obligation on a regular basis. Product returns and warranty replacements to date have been consistent with amounts accrued. Warranty expense is recorded as a component of cost of sales in the statements of operations and comprehensive loss.

Shipping and Handling Costs

Shipping and handling costs associated with product delivery are included within cost of sales in the Company’s statements of operations and comprehensive loss. The Company does not generally separately charge customers for shipping and handling costs, but any amounts billed to a customer for shipping and handling are reported as revenues.

Research and Development Costs

All research and development costs are expensed as incurred in accordance with ASC 730, Research and Development, which primarily consist of salaries and benefits associated with research and development personnel, overhead and occupancy costs, contract services costs and license costs for technology used in research and development without alternative future uses.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expenses in the statements of operations and comprehensive loss and expensed as incurred as recoverability of such expenditures is uncertain.

The cost of a stock-based award is measured at the grant date based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award. Forfeitures of awards are recognized as they occur. The fair value of stock options is estimated using the Black- Scholes option pricing model, which requires the input of subjective assumptions, including the fair value of the underlying Class B common stock, expected volatility, expected term, risk-free interest rate, and expected dividend yield. As the Company’s stock has never been publicly traded, the expected volatility was derived from the average historical volatilities of several comparable public companies within the Company’s industry over a period equivalent to the expected term of the stock-based awards. Due to the lack of historical exercise history, the expected term of the Company’s stock options is determined using the “simplified” method. The risk-free interest rate is rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. treasury notes with maturities approximately equal to expected term of the stock options. Expected dividend yield iszero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of Class B common stock underlying the Company’s stock options was estimated by the Board, which considered, among other things, valuations of the Company’s common stock.

Compensation expense for non-employee awards is recognized in the same manner as if the Company had paid cash in exchange for the goods or services, which is generally the vesting period of the respective award.

The Company classifies stock-based compensation expense in its statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Comprehensive Income (Loss)

Comprehensive loss includes net loss as well as other changes in stockholders’ deficit that result from transactions and economic events other than those with stockholders, including unrealized gains and losses on marketable securities. For the year ended December 31, 2024 and 2023, the unrealized gain (loss) on short-term investments, approximately $(0.1) million and $0.1 million, respectively, was recorded in other comprehensive income (loss).

Net Loss Per Share

The holders of Class A common stock, Class B common stock and Class C common stock participate in earnings and losses equally on a per share basis, as if all shares of common stock were of a single class. Therefore, undistributed earnings and losses are allocated on a proportionate basis and the resulting loss per share will be the same for Class A common stock, Class B common stock, and Class C common stock on an individual or combined basis.

The Company’s liability classified warrants to purchase Series C preferred stock and Class B common stock are exercisable to the holder at an exercise price of $0.02. The Company does not consider the exercise price of these warrants to be for a nominal amount of consideration as in addition to the exercise price received from the holder, the consideration received as a result of the exercise of a warrant also includes the value of the extinguishment of the associated warrant liabilities. Therefore, the Company does not consider the warrants to be contingently issuable shares and does not include the warrants in the calculation of weighted-average common shares outstanding in the computation of basic loss per share.

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in any dividends declared. Therefore, convertible preferred shares are considered to be participating securities. The Company’s warrants to purchase shares of Series C Preferred Stock and Class B common stock contractually require the Board to provide advanced notice to warrant holders in the event that a dividend will be declared. As a result, warrant holders would be economically compelled to exercise their warrants prior to the declaration of the dividend. Therefore, the warrants are considered to be participating securities. During periods in which the Company reports net income, the Company allocates a proportional share of net income to participating securities determined by dividing the total weighted-average participating securities by the sum of the total weighted-average common shares and participating securities (the “two-class method”). Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods where the Company reports a net loss, the Company allocates no loss to participating securities because they have no contractual obligation to share in losses.

Income Taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial statements and tax basis of assets and liabilities. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income. To the extent the Company believes that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contractsin Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments and equity-linked financial instruments in addition to amending the EPS guidance in ASC 260 to improve the consistency of the diluted EPS calculation. The standard addresses issues identified as a result of the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The standard eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The standard is effective for public companies, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2024, using themodified retrospective method for its convertible preferred instruments. Consequently, prior period comparatives have not been restated to align with the current period presentation. The cumulative effect of the adoption of ASU 2020-06 resulted in an adjustment to accumulated deficit as of January 1, 2024 of $12.3 million with a corresponding adjustment to additional paid in capital. In the period of adoption there was no impact in the net loss per share.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures(“ASU No. 2023-07”). ASU 2023-07 requires that an entity disclose significant segment expenses, a description of “other segment items,” and the title and position of the chief operating decision maker along with an explanation of how the reported segment profit or loss is assessed and allocated. The amendments in this ASU will be applied retrospectively for all prior periods presented in the financial statements. The Company adopted ASU 2023-07 during the year ended December 31, 2024 and the adoption of this guidance didnot have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in the ASU are effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact that this guidance may have on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date ("ASU 2025-01"). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that this guidance may have on its financial statements.

Revenue

The Company disaggregates net sales by product category and reimbursement channel, which the Company believes provides a meaningful depiction of how the nature, timing and uncertainty of net sales are affected by economic factors.

During the year ended December 31, 2024 and 2023, the Company’s revenues were predominantly generated from sales of the iLet. The iLet requires the use of separately purchased single-use products which include cartridges for storing and delivering insulin, and infusion sets that connect the iLet to the user’s body. These single-use products generate recurring revenue for the Company, as these are typically replaced by the end-user every 2-3 days or as directed by a healthcare provider.

The Company’s customers are distributors and pharmacies who sell these products to insulin-requiring PWD, through the durable medical equipment (“DME”) and the pharmacy benefit plan (“PBP”) reimbursement channels, which entail differing payment outlays. For the year ended December 31, 2024 and 2023, the majority of the Company’s sales were through the DME channel.

The following table summarizes the Company’s disaggregated revenues:

(2)

iLet includes the over-time recognition software updates and mobile app access.

The Company recognizes revenue at a point in time once control has transferred to the customer, as well as over time for performance obligation to provide ongoing services such as unspecified software updates. Revenue recognized during the year ended December 31, 2024 that was included in the deferred revenue balance as of December 31, 2023 was approximately $0.1 million.

At December 31, 2024 and 2023, $2.8 million and $0.3 million, respectively, was allocated to performance obligations that were not yet satisfied and is recorded in deferred revenue on the balance sheet. At December 31,2024 and 2023, of the performance obligations not yet satisfied, $0.9 million and $0.1 million, respectively, is expected to be recognized as revenue in the next 12 months, with the remainder expected to be recognized thereafter. At December 31,2024 and 2023, the $2.8 million and $0.3 million, respectively, relates to amounts deferred associated with the unspecified software updates promised to users and the user’s access to the mobile application.

Financial Instruments and Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis:

Money market funds and U.S. Treasury bills were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no changes to the valuation methods during the years ended December 31, 2024 and 2023. The Company evaluates transfers between levels at the end of each reporting period. There wereno transfers between Level 1 or Level 2 during the years ended December 31,2024 and 2023.

Warrant Liabilities

In connection with the August 2023 Series D Preferred Stock financing (see Note 11), the Company granted warrants to purchase up to 4,302,009 shares of Common B common stock equal to 70% of the shares of Series D Preferred Stock purchased by the purchaser at an exercise price of $0.02 per share and expire on the earliest to occur of (i)August 28, 2033, (ii) immediately prior to the sale of the Company or a transaction that qualifies as a Deemed Liquidation Event (as defined in the Company’s certificate of incorporation) or (iii) immediately prior to the consummation of a qualifying initial public offering or a SPAC Transaction (as defined in the Company’s certificate of incorporation). The Common B warrants have been recorded as a liability as they represent freestanding financial instruments that are not indexed to the Company’s common stock and are required to be remeasured to fair value at each reporting date. Additionally, the Common B warrants do not meet the definition of a derivative.

In connection with the February 2022 Series C Preferred Stock financing (see Note 11), the Company granted warrants to purchase up to 520,490 shares of Series C Preferred Stock at a price per share equal to $0.02 and with a term ending on the earliest to occur of (i)February 16, 2032, (ii) immediately prior to the sale of the Company or a transaction that qualifies as a Deemed Liquidation Event or (iii) immediately prior to the consummation of a qualifying initial public offering or a SPAC Transaction. As the warrants are exercisable for preferred stock that is contingently redeemable outside of the Company’s control, the warrants have been recorded as a liability and are required to be remeasured to fair value at each reporting date.

As there are significant inputs that are not observable in the market, the warrant valuations represent a Level 3 measurement within the fair value hierarchy. The Company’s valuations of the preferred stock and Common B warrants utilized the Black-Scholes option pricing model, which incorporates assumptions and estimates to value the preferred stock and Common B warrant.

Thequantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock and common stock warrant liabilities include the fair value per share of the underlying stock, expected volatility of the price of the underlying stock, the remaining contractual term of the warrant, risk-free interest rate, and expected dividend yield. The most significant assumption in the Black-Scholes option pricing model impacting the fair value of the preferred stock and common stock warrant liabilitiesis the fair value of the Company’s Series C Preferred Stock and Class B common stock as of each remeasurement date. The Company determines the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its convertible preferred stock. Further, the Board values the Company’s Class B common stock taking into consideration the most recent sales of the Company’s preferred stock, results obtained from third-party valuations and additional factors the Company deems relevant and which may have changed since the date of the most recent valuation through the effective date of the warrant. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates the expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrant. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrant. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The following table presents the assumptions used in the Black-Scholes option pricing model to determine the fair value of the preferred stock warrant liabilities as of December 31,2024 and 2023:

The following table presents the assumptions used in the Black-Scholes option pricing model to determine the fair value of the common stock warrant liabilities as of the date of issuance and as of December 31, 2024 and 2023:

The Company recognizes changes in the fair value of the warrant liabilities as a component of other income (expense) in its statements of operations and comprehensive loss. The Company will continue to recognize changes in the fair value of the warrant liabilities until the warrants are exercised, expire, or qualify for equity classification.

A reconciliation of the Level 3 warrant liabilities is as follows:

Short-Term Investments

The following represents a summary of the estimated fair value of short-term investments at December 31,2024 and 2023:

Accounts Receivable, Net

Accounts receivable, net consisted of the following:

The following table provides a reconciliation of the changes in the allowance for estimated credit losses for the years ended December 31, 2024 and 2023:

Inventories, Net

Inventories consisted of the following:

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

Property and Equipment, Net

Property and equipment, net consisted of the following:

Depreciation expense for the years ended December 31, 2024 and 2023 was $1.2 million for each period.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

Reconciliations of the changes in the Company’s product warranty liability, which is included in other current liabilities, were as follows:

Convertible Preferred Stock and Warrants

The Company has issued Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series B-2 Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and Series E Preferred Stock (collectively, the “Preferred Stock”).

Upon issuance of each class of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features. The Company also concluded that no beneficial conversion feature existed on the issuance date of each class of Preferred Stock but did identify contingent beneficial conversion features on each class of Preferred Stock related to the down round protective provisions. Although down round protection was triggered with the issuance of the Series C and Series D Preferred Stock, the contingent beneficial conversion features were not triggered requiring recognition by the Company. Upon the adoption of ASU 2020-06, the Company recorded an adjustment to reflect the cumulative effect of the down rounds triggered with the issuance of the Series C and Series D Preferred Stock, resulting in a $12.3 million adjustment to retained earnings (see Note 1 for further details). In November 2024, the Company issued and sold 4,352,393 shares of Series E Preferred Stock, at a price of $13.79 per share, for gross proceeds of $60.0 million. The Company incurred issuance costs in connection with this transaction of $0.3 million. The Series E Preferred Stock has an Original Issuance Price and Conversion Price (each as defined in the Company’s certificate of incorporation) per share of $13.79.

From August to September 2023, the Company issued and sold 6,145,740 shares of Series D Preferred Stock, at a price of $16.55 per share, for gross proceeds of $101.7 million. The Company incurred issuance costs in connection with this transaction of $0.7 million. Each purchaser of the Series D Preferred Stock also received warrants to purchase up to a certain number of shares of Class B common stock equal to 70% of the shares of Series D Preferred Stock purchased by the purchaser. The Common B warrants are exercisable at any time, at an exercise price of $0.02 per share (subject to appropriate adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization) and expire on the earliest to occur of (i) August 28, 2033, (ii) immediately prior to the sale of the Company or a transaction that qualifies as a Deemed Liquidation Event as described below or (iii) immediately prior to the consummation of a qualifying initial public offering or a SPAC Transaction. During the year ended December 31, 2024 and 2023, a total of 634,513 and 991,957, respectively, of the Common B warrants were exercised. The Series D Preferred Stock has an Original Issue Price and Conversion Price (each as defined in the Company’s certificate of incorporation) per share of $16.55.

As part of the Series E Preferred Stock issuance, the Company increased the number of shares of Class B common stock authorized for issuance from 65,000,000 shares to 70,000,000 shares and increased the number of shares of preferred stock authorized for issuance from 26,434,390 shares to 34,966,547 shares, of which 8,574,227 shares were designated as Series E Preferred Stock.

At the balance sheet dates, Preferred Stock consisted of the following:

Voting

The holders of the Preferred Stock are entitled to vote, together with the holders of Class A common stock and Class B common stock as a single class, on all matters submitted to stockholders for a vote. Each holder of Preferred Stock is entitled to the number of votes equal to the number of shares of Class B common stock into which each shareof Preferred Stock is convertible as of the record date for determining stockholders entitled to vote on such matters. The holders of Class C common stock do not have voting rights. The holders of record of the Series D Preferred shares are entitled to elect five members of the Board jointly designated from time to time by the holders of a majority of the outstanding shares of Series D Preferred Stock, exclusively and voting as a separate series, (i) one of whom shall be designated by Sands Capital Life Sciences Pulse Fund II, L.P. and its affiliates, (ii) one of whom shall be designated by Omega Fund VII, L.P. and its affiliates; (iii) one of whom shall be designated by Soleus Private Equity Fund II, L.P. and its affiliates; (iv) one of whom shall be designated by Eventide Gilead Fund and Eventide Healthcare & Life Sciences Fund and affiliates of the foregoing; and (v) one of whom shall be designated by Zone Healthcare Holdings, LLC and its affiliates. The holders of record of the shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Company. The holders of record of the shares of Series B Preferred Stock and Series B-2 Preferred Stock, voting together as a single class, on an as-converted basis, shall be entitled to elect one director of the Company. The holders of record of the shares of Class A common stock, exclusively and as a separate class, shall be entitled to elect one director of the Company.

The CEO shall also serve as a director.

Conversion

Each series of Preferred Stock will automatically convert into shares of Class B common stock at the then applicable conversion rate in the event of (i) the closing of the sale of common stock to the public at a price per share equal to at least $14.60 (subject to adjustments for stock dividends, splits, combinations and similar events) and gross proceeds to the Company of not less than $100.0 million (a “Qualified IPO”); (ii) the closing of a Qualified SPAC Transaction; or (iii) upon the written consent of the Requisite Holders. The conversion ratio of each series of Preferred Stock is determined by dividing the Original Issue Price of each series by the Conversion Price of each series. The Original Issue Price is $19.70 per share for Series A Preferred Stock, $19.70 per share for Series A-2 Preferred Stock, $29.59 per share for Series B Preferred Stock, $31.52 per share for Series B-2 Preferred Stock, $27.40 per share for share for Series C Preferred Stock and $16.55 per share for Series D Preferred Stock. The Conversion Price is $15.77 per share for Series A Preferred Stock, $15.77 per share for Series A-2 Preferred Stock, $20.94 per share for Series B Preferred Stock, $21.91 per share for Series B-2 Preferred Stock, $20.43 per share for Series C Preferred Stock, $9.73 per share for Series D Preferred Stock and $13.79 per share for Series E Preferred Stock, each subject to appropriate adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization and other adjustments as set forth in the Company’s certificate of incorporation.

Prior to August 2023, if the Company issued additional common or preferred stock at a price lower than the current Conversion Price of each series in effect immediately prior to such issuance, the applicable Conversion Price of each series of Preferred Stock would be reduced, to prevent dilution of existing holders of Preferred Stock (the “Series C Down Round Protection”). The Series C Down Round Protection was in effect until the Company amended and restated it certificate of incorporation with the issuance of Series D in August 2023. The issuance of Series D Preferred Stock triggered down round protection for existing Preferred Stockholders, as the issuance price per share was below the Conversion Price of certain Preferred Stock in effect immediately prior to the issuance.

With the issuance of the Series D Preferred Stock in August 2023, the Company amended and restated its certificate of incorporation, replacing the Series C Down Round Protection with the Series D Down Round Protection (defined below). The amendment and restatement of certificate of incorporation specified that if any additional common or preferred stock was issued at an issuance price lower than the Series D Conversion Price, the Conversion Price of each series of Preferred Stock would be reduced to prevent dilution of existing holders (the “Series D Down Round Protection”). The Series D Down Round Protection remained in effect until the Company’s certificate of incorporation was amended and restated with the issuance of Series E in November 2024. The Series E Preferred Stock issuance did not trigger down round protection for existing shareholders of the Preferred Stock as the per share issuance price was not lower than the Series D Conversion price in effect immediately prior to the issuance.

With the issuance of the Series E Preferred Stock in November 2024, the Company amended and restated its certificate of incorporation, replacing the Series D Down Round Protection with the Series E Down Round Protection (defined below). The amendment and restatement of Series E specified if any additional shares common or preferred stock was issued at an issuance price lower than the Series E Conversion Price, the Conversion Price of each series of Preferred Stock would be reduced to prevent dilution of existing holders of Preferred Stock (the “Series E Down Round Protection”). The Series E Down Round Protection remained in effect as of December 31, 2024.

As of December 31, 2024, each outstanding share of Series A Preferred Stock and Series A-2 Preferred Stock was convertible into Class B common stock on a 1.24914:1 basis, each outstanding share of Series B Preferred Stock was convertible into Class B common stock on a 1.41287:1 basis, each outstanding share of Series B-2 Preferred Stock was convertible into Class B common stock on a 1.43886:1 basis, each outstanding share of Series C Preferred Stock was convertible into Class B common stock on a 1.34082:1 basis, each outstanding share of Series D Preferred Stock was convertible into Class B common stock on a 1:1 basis and each share of Series E Preferred Stock was convertible into Class B common stock on a 1:1 basis. The Series D Preferred Stock issuance triggered down round protection for existing holders of the Preferred Stock, as set forth in the Company’s certificate of incorporation. In connection with the triggering of the down round protections for existing holders of Preferred Stock, the Company evaluated the redemption features of the Preferred Stock, which becomes redeemable in the event of a Deemed Liquidation Event (as described below). As of December 31, 2024, the Deemed Liquidation Event was not probable and no remeasurement of the redemption price was recognized.

On January 31, 2025, the Company completed its IPO and as a result, all 17,228,954 outstanding shares of the Company’s Preferred Stock were converted into 19,827,003 shares of common stock, and all 3,196,025 outstanding warrants to purchase shares of Series C Preferred Stock and Class B Common Stock were converted into 3,373,409 shares of common stock. See Note 1 for further details.

Dividends

The holders of shares of Series D Preferred Stock, Series E Preferred Stock, Series A Preferred Stock and Series A-2 Preferred Stock are entitled to receive, when, as and if declared by the Board on a pari passu basis, non-cumulative cash dividends of 4% per annum of each respective Original Issue Price, and the holders of Series B Preferred Stock, B-2 Preferred Stock and Series C Preferred Stock are entitled to receive, when, as and if declared by the Board on a pari passu basis, non-cumulative cash dividends of 2% per annum of each respective Original Issue Price (the Annual Dividend, for each respective series).

The Company shall not declare, pay or set aside any dividends on shares of any other class or series of stock of the Company unless the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to the greater of: (i) in the case of a dividend on common stock or any class or series of stock that is convertible into common stock, a dividend per share of Preferred Stock that would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common stock and (B) the number of shares of common stock issuable upon conversion of a share of Preferred Stock; or (ii) in the case of a dividend on any class or series of stock that is not convertible into common stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of stock by the Original Issue Price of such class or series of stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Original Issue Price of such class or series. If the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of stock of the Company, the dividend payable to the holders of the Preferred Stock will be calculated based upon the dividend on the class or series of stock that would result in the highest Preferred Stock dividend.

Through December 31, 2024, no dividends had been declared on any series or class of shares.

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event (as described below), the holders of shares of Series E Preferred Stock and Series D Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payments are made to the holders of shares of Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series B-2 Preferred Stock and Series C Preferred Stock. The holders of shares of Series E Preferred Stock and Series D Preferred Stock are entitled to an amount per share equal to the greater of (i) the Original Issue Price per share of the Series E Preferred Stock or Series D Preferred Stock, plus any dividends declared but unpaid thereon, or (ii) the amount that would have been payable had all shares of Series E Preferred Stock or Series D Preferred Stock been converted to common stock immediately prior to the liquidation, dissolution, winding-up or Deemed Liquidation Event. If upon any such liquidation event, the assets of the Company available for distribution are insufficient to pay the holders of the Series E Preferred Stock and Series D Preferred Stock the full amount to which they are entitled, the holders of Series E Preferred Stock and Series D Preferred Stock will share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would be otherwise payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares of Series E Preferred Stock and Series D Preferred Stock were paid in full.

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event (as described below), after the payment in full to the holders of shares of the Series D Preferred Stock, the holders of shares of Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series B-2 Preferred Stock and Series C Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to its stockholders pari passu before any payments are made to holders of the common stock. The holders of shares of Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series B-2 Preferred Stock and Series C Preferred Stock are entitled to an amount per share equal to the greater of (i) the applicable Original Issue Price per share of each respective share of Preferred Stock, plus any dividends declared but unpaid thereon, or (ii) the amount that would have been payable had all shares of the series been converted to common stock immediately prior to the liquidation, dissolution, winding-up or Deemed Liquidation Event. If upon any such liquidation event, the assets of the Company available for distribution are insufficient to pay the holders of Preferred Stock the full amount to which they are entitled, the holders of shares of Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series B-2 Preferred Stock and Series C Preferred Stock will share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would be otherwise payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Unless both (A) the holders of a majority of the outstanding shares of Series E Preferred Stock, voting as a separate class, (B) the holders of a majority of the outstanding shares of Series D Preferred Stock, voting as a separate class which majority shall include at least one of the “Lead Investors” and (C) the holders of at least a majority of the outstanding shares of Series A Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock Series B-2 Preferred Stock and Series C Preferred Stock, voting together as a single class on an as-converted basis, elect otherwise, a Deemed Liquidation Event shall include a merger, consolidation, or share exchange (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.

Common Stock

The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth above.

The Company was issued a certificate of incorporation in connection with its conversion from a Massachusetts benefit corporation to a Delaware corporation. Per the certificate of incorporation, the holders of Class A common stock and Class B common stock are entitled to one vote for each share of Class A common stock and Class B common stock held. The holders of Class C common stock do not have voting rights.

Per the certificate of incorporation, the events requiring the automatic conversion of all shares of outstanding Class A common stock, Class B common stock, and Class C common stock into common stock are defined as (i) the closing of a firm-commitment underwritten public offering of common stock, (ii) the closing of a qualifying SPAC Transaction or (iii) the vote or written consent of the holders of at least a majority of the then-outstanding shares of voting common stock.

Per the certificate of incorporation, the events requiring the automatic conversion of all shares of outstanding preferred stock into Class B common stock are defined as (i) the closing of a firm-commitment underwritten public offering of common stock at a price of at least $14.60 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization), resulting in at least $100.0 million of gross proceeds to the Company, (ii) the closing of a qualifying SPAC Transaction or (iii) the vote or written consent of the holders of at least a majority of the then-outstanding shares of Preferred Stock, voting together as a single class on an as-converted basis.

Class B common stock reserved for the potential conversion of Preferred Stock into common stock, as well as the exercise of both outstanding and available for grant stock options consisted of the following:

On January 31, 2025, the Company completed its IPO and as a result, all 6,671,174 shares of Class A, Class B, and Class C Common Stock were converted into an equal number of shares of common stock. See Note 1 for further details.

2016 Stock Incentive Plan

The Company’s 2016 Stock Incentive Plan, as amended (the “2016 Plan”), provides for the Company to grant stock options and restricted stock awards to employees, officers, directors and consultants of the Company. The 2016 Plan is administered by the Board or, at the discretion of the Board, by a committee of the Board. The exercise prices, vesting and other restrictions are determined at the discretion of the Board, or its committee if so delegated.

The Company grants equity classified stock options for the purchase of Class B common stock. Stock options granted under the 2016 Plan with service-based vesting conditions typically vest over four years based on continuous service and expire afterten years. The total number of shares of Class B common stock that may be issued under the 2016 Plan was 7,267,926 shares as of December 31,2024, of which 1,577,469 shares remained available for future issuance as of December 31,2024. Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future grant under the 2016 Plan.

The exercise price for stock options granted may not be less than the fair value of Class B common stock as determined by the Board as of the date of grant. The Board values the Company’s Class B common stock taking into consideration the most recent sales of the Company’s preferred stock, results obtained from contemporaneous third-party valuations and additional factors the Company deems relevant and which may have changed since the date of the most recent valuation through the date of grant.

Stock Option Cancellation and Regrant

On March 2, 2023, and in accordance with the terms of the Company’s 2016 Plan, the Board approved a stock option cancel and regrant (the “2023 Cancel and Regrant”), wherein 2,273,054 previously granted stock options to acquire shares of the Company’s common stock that were issued from December 2019 through December 2022 to 85 grantees were canceled and regranted at the price of the Company’s common stock valuation on March 2, 2023. As of that date, the Company’s common stock fair value was $7.50 pershare.

Aside from the reduced strike price, all regranted options kept the same terms and conditions of the canceled stock options, including vested amounts and vesting schedules. Upon the cancel and regrant, the Company recognized additional stock-based compensation from vested options of $0.4 million and a total of $0.4 million as unvested options continued to vest during the year ended December 31, 2023. The Company will recognize an additional $1.1 million stock-based compensation expense from the date of the modification through the third quarter of 2027, based on the requisite service period, as the remaining unvested options continue to vest.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option pricing model to determine the grant-date fair value of stock options granted:

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class B common stock for those stock options that had exercise prices lower than the fair value of the Company’s Class B common stock. The total intrinsic value of options exercised during the twelve months ended December 31, 2024 and 2023 werenot significant.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2024 and 2023 was $6.92 per share and $4.26 per share, respectively. The total fair value of shares vested during the years ended December 31,2024 and 2023 was $3.1 million and $2.5 million, respectively.

The following table summarizes the non-vested stock options that were outstanding as of December 31,2024 and 2023:

Stock-Based Compensation Expense

Stock-based compensation expense related to the stock options was included in the Company’s statements of operations and comprehensive loss as follows:

As of December 31, 2024, total unrecognized stock-based compensation expense related to the unvested stock-based awards was $13.7 million, which is expected to be recognized over a weighted-average period of 8.6 years.

Employee Benefit Plan

The Company maintains a 401(k) retirement plan (the “401(k) Plan”) for the benefit of eligible employees. Each participant may elect to contribute up to 100% of his or her compensation to the 401(k) Plan each year, subject to certain Internal Revenue Service limitations. Under the terms of the Plan, the Company matches 100% of the first 6% of employee contributions. During the years ended December 31,2024 and 2023, the Company contributed $2.2 million and $1.2 million, respectively, to the 401(k) Plan.

Income Taxes

During the years ended December 31, 2024 and 2023, the Company didnot record income tax benefits for the net operating losses (“NOLs”) incurred or for the research and development tax credits generated in each year, due to its uncertainty of realizing a benefit from those items. The Company does not have any foreign operations and therefore has no foreign income taxes.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

The Company’s net deferred tax assets consisted of the following:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2024, the Company had U.S. federal net operating loss carryforwards of $175.1 million, which may be available to reduce future taxable income, of which $11.5 million expire at various dates beginning in 2035 while the remaining $163.6 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31,2024, the Company had state net operating loss carryforwards of $42.2 million, which may be available to reduce future taxable income, of which $38.4 million expire at various dates beginning in 2029, while $3.8 million do not expire. As of December 31,2024, the Company also had U.S. federal and state research and development tax credit carryforwards of $4.0 million and $3.4 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2036 and 2032, respectively, with $3.0 million of state research and development tax credits carrying forward indefinitely.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382 of the Code, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382 of the Code, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before their utilization.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception, results of recent commercial operations, and projected future taxable income and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2024 and 2023. Management reevaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets related primarily to the increase in NOL carryforwards and research and development tax credit carryforwards and were as follows:

As of December 31, 2024 and 2023, the Company had unrecognized tax benefits of $1.4 million and $1.1 million, respectively, none of which would affect the effective tax rate due to the existence of the valuation allowance. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31,2024 and 2023, the Company hadno accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statements of operations and comprehensive loss. The Company does not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

The changes in the Company’s unrecognized tax benefits are summarized as follows:

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. As of December 31, 2024, and 2023, there were no pending tax examinations and the Company currently is not under tax examination in any tax jurisdiction. The Company is open to future tax examination under statute by the IRS from 2021 to present and by most state tax authorities from 2020 to present. However, to the extent allowed by law, the taxing authorities may have the right to examine periods where NOLs and research and development credits were generated and carried forward, and make adjustments to the amount of the NOL and research credits carryforwards.

Net Loss Per Share

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding, including all potentially dilutive common shares. The impact of all potentially dilutive shares which are anti-dilutive are excluded from the calculation of net loss per share. Potentially dilutive common stock equivalents are comprised of convertible preferred stock, calculated using the if-converted method, stock options to purchase Class B common stock, warrants to purchase Series C Preferred Stock and warrants to purchase Class B common stock, each calculated using the treasury stock method. Potentially dilutive securities not included in the calculation of diluted net loss per share, are as follows (in common stock equivalent shares):

The following table sets forth the computation of basic and diluted net loss per share attributable to Class A, Class B, and Class C common stockholders:

Leases

In May and November 2023, the Company entered intotwo separate lease agreements for a total of approximately 8,500 square feet of office space in San Diego, California. These leases will expire in July 2025 and February 2027. The larger of the two leases has one option to extend the lease term for an additional five years. Theoption to extend the lease term was not included in the right-of-use asset and lease liability as it was not reasonably certain of being exercised.

In September 2024, the Company amended its lease for office space and a manufacturing facility in Irvine, California to includetwo renewal options. The Company is reasonably certain it will exercise one of these options, extending the lease term from May 2027 to June 2032, which has been factored into the lease liability. As the amendment only resulted in the extension of the lease term, it did not meet the criteria to be accounted for as a separate contract. Accordingly, the right-of-use asset and lease liability were remeasured as ofthe effective date of the amendment, resulting in the recording of an additional right-of-use asset and lease liability of $3.8 million.

In October 2024, the Company entered into a lease agreement for an additional office suite to expand its office space in San Diego, California, which expires in March 2027. As a result, the Company recognized operating lease right-of-use asset and associated operating lease liability of $0.2 million on the balance sheets in 2024.

The components of lease expense were as follows:

Cash paid for amounts included in the measurement of operating lease liabilities was $1.3 million and $1.1 million, respectively, for the years ended December 31,2024 and 2023.

The weighted-average remaining lease term and discount rate were as follows:

Future lease payments under non-cancellable leases as of December 31,2024 were as follows:

18. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business.

The Company believes there is no litigation pending that could have, individually, or in the aggregate, have a material adverse effect on the results of its operations, financial condition or cash flows.

Xeris Agreements

In May 2024, the Company and Xeris Pharmaceuticals, Inc. (“Xeris”) entered into a collaboration and license agreement (“Collaboration and License Agreement”). Under the Collaboration and License Agreement, the Company received a worldwide, exclusive, royalty-bearing, sublicensable license under certain patent rights and know-how related to Xeris’ proprietary non-aqueous formulation technology and technology developed during the collaboration (“Xeris Technology”) to develop and commercialize glucagon products that are reformulated using the Xeris Technology and developed by Xeris under a development plan under the Collaboration and License Agreement for use in a pump product or system for glycemic control (“Glucagon Products”) in the field of chronic glycemic control in diabetes mellitus, excluding single-dose, one-time use form for treatment of severe hypoglycemia and diagnostic uses (“Field”). The Company also received a worldwide, exclusive, sublicensable manufacturing license under the Xeris Technology to manufacture Glucagon Products in the Field following a future manufacturing transfer date to be agreed with Xeris and subject to a separate commercial supply agreement.

In consideration for the licenses and other rights granted to the Company under the Collaboration and License Agreement, the Company paid Xeris a one-time payment of $0.5 million, which was included as a component of research and development expenses in the Company’s unaudited condensed statements of operations and comprehensive lossand the Company will pay Xeris a one-time milestone payment of $3.0 million upon its achievement of a certain development milestone event. The milestone was achieved and the payment of $3.0 million was made in November 2024. In addition, the Company is required to pay Xeris tiered royalties of low double-digit percentages based on net sales of Glucagon Products by the Company or its sublicensees, subject to certain customary reductions. The Company’s obligation to pay Xeris royalties will commence, on a Glucagon Product-by-Glucagon Product and country-by-country basis, on the first commercial sale of such Glucagon Product in such country and expire on the later of (i) ten years after the first commercial sale of such Glucagon Product in such applicable country; (ii) expiration of the last valid claim of a specified patent right licensed by Xeris covering such Glucagon Product in such country; and (iii) expiration or termination or regulatory exclusivity for such Glucagon Product in the applicable country.

In connection with entering into phase 2 of the collaboration, during the twelve months ended December 31, 2024, under its clinical supply arrangement the Company ordered clinical material totaling $0.9 million for phase 2 clinical trials and has paid a deposit equal to 30% of the estimated clinical material costs, which is recognized in prepaid expense and other current assets in the unaudited condensed balance sheets.

19. Related Party Transactions

Boston University

Edward Damiano, Ph.D., the Co-Founder and Executive Chairman of the Company, was affiliated with Boston University (“BU”) during the execution and amendments of key agreements and currently serves as a volunteer research professor. Under the agreements, BU and Dr. Damiano are entitled to a specified percentage of royalties from net sales of licensed products.

In December 2015, the Company executed hardware and software license agreements withthe Trustees of BUunder which the Company received exclusive, non-transferable, sublicensable, worldwide, royalty-bearing licenses to certain patent rights and copyrights.

The Company incurred $2.2 million and $0.5 million of royalties expense under the Control Algorithm Agreement during the year ended December 31,2024 and 2023, respectively, which was included as a component of cost of sales in the Company’s statements of operations and comprehensive loss.

Under the agreements, the Company is responsible for all costs related to the amendment, prosecution and maintenance of the licensed patent rights. During the years ended December 31, 2024 and 2023, the Company paid BU $0.2 million and $0.2 million, respectively, for reimbursed legal costs in connection with the agreements.

As of December 31, 2024 and 2023, $0.7 million and $0.3 million, respectively, was due to BU from the Company.

20. Subsequent Event

2025 Equity Incentive Plan

On January 21, 2025, the Company’s board of directors adopted and the Company’s stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”), which became effective on the date immediately preceding the date on which the Company’s registration statement was declared effective by the SEC. The 2025 Plan replaced the 2016 plan (see Note 13), as the Company’s board of directors has determined to not make additional grants under the 2016 Plan following the closing of the IPO. However, the 2016 Plan will continue to govern outstanding equity awards granted under the 2016 Plan. The 2025 Plan allowed the Company to grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards. The number of shares initially available for issuance under awards granted pursuant to the 2025 Plan is 12,016,744.