Metagenomi Therapeutics, Inc.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We previously operated as a Delaware limited liability company under the name Metagenomi Technologies, LLC (“Metagenomi LLC”). On January 24, 2024, we completed a series of transactions pursuant to which Metagenomi LLC merged with and into its wholly-owned subsidiary Metagenomi, Inc., a Delaware corporation, with Metagenomi, Inc. continuing as the surviving corporation (the “Reorganization”). In connection with the Reorganization, (i) all of the outstanding common unitholders of Metagenomi LLC received shares of common stock of Metagenomi, Inc., (ii) all of the outstanding redeemable convertible preferred unitholders of Metagenomi LLC received shares of redeemable convertible preferred stock of Metagenomi, Inc. with the same rights and privileges and (iii) certain holders of profits interests in Metagenomi LLC received shares of common stock or unvested restricted common stock in Metagenomi, Inc. as determined by the applicable provisions of the Amended and Restated Limited Liability Company Agreement in effect immediately prior to the Reorganization. In connection with the Reorganization, by operation of law, Metagenomi, Inc. acquired all assets of Metagenomi LLC, and assumed all of its liabilities and obligations. The Reorganization was a non-taxable transaction to Metagenomi, Inc. for U.S. income tax purposes.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

As part of our strategy, we have entered into license and collaboration agreements with third parties for one or more of our programs or product candidates we may develop. For example, in September 2025, we entered into the Acuitas License Agreement to license certain Acuitas LNP technology, including LNP patents, formulation processes, and analytical characterization methods for manufacturing products that incorporate our company's proprietary genome editing constructs formulated with Acuitas LNP technology, to research, develop, sell, and commercialize certain licensed products in connection with a single target. In November 2022, we entered into a Collaboration and License Agreement with Ionis to research, develop and commercialize investigational medicines using our genome editing technologies. Refer to Note 7, “Significant Agreements”, in our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to the terms of the agreements between us and our collaborators.

Previous wording

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

Current wording

To date, all of our revenue consists of collaboration revenue, earned from collaboration agreements with Moderna (prior to the termination of the Moderna Agreement), Ionis and Affini-T (prior to the termination of the Affini-T Agreement). These agreements may include the following types of promised goods or services: (i) grants of licenses; (ii) performance of research and development services and (iii) participation on joint research and/or development committees. They also may include options to obtain licenses to our intellectual property or to extend the term of the research activities. Our revenues under such collaboration agreements were $25.2 million and $52.3 million for the years ended December 31, 2025 and 2024, respectively.

Previous wording

For additional information about our revenue recognition policy related to our collaboration agreements, refer to Note 2 in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

For additional information about our revenue recognition policy related to our collaboration agreements, refer to Note 2, “Summary of Significant Accounting Policies”, in our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support development of our platform and our continued research activities. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with being a public company. We also expect our intellectual property expenses to increase as we expand our intellectual property portfolio.

Current wording

We anticipate that our general and administrative expenses will increase in the future to support our increased research and development activities. We also expect to continue to incur costs associated with being a public company and maintaining controls over financial reporting, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Previous wording

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

Current wording

Prior to the Reorganization, Metagenomi LLC was taxed under the provisions of Subchapter K — Partners and Partnerships of the Internal Revenue Code. Under those provisions, Metagenomi LLC did not pay federal or state corporate income taxes on its taxable income. Instead, each member included net operating income or loss for Metagenomi LLC on its individual return. After the Reorganization and name change, Metagenomi Therapeutics, Inc. is a corporation for tax purposes and is subject to income taxes.

Previous wording

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

Current wording

As of December 31, 2025, we had net operating loss carryforwards of $175.3 million and $213.5 million for federal and state income tax purposes, respectively, available to reduce future taxable income, if any. The federal net operating loss carryforwards do not expire. State net operating loss carryforwards begin expiring in 2037. As of December 31, 2025, we had $3.3 million federal research and development credit carryforwards, which begin expiring in 2045. As of December 31, 2025, we had state research and development credit carryforwards of $6.1 million, which do not expire.

Previous wording

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes our consolidated entities’ historical operating losses and forecast of future losses, we have provided a full valuation allowance against the deferred tax assets resulting from the tax loss and credits carried forward.

Current wording

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes our entities’ historical operating losses and forecast of future losses, we have provided a full valuation allowance against the deferred tax assets resulting from the tax loss and credits carried forward.

Previous wording

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

Current wording

Collaboration revenue decreased $27.1 million for the year ended December 31, 2025, as compared to the prior year, primarily driven by a $18.7 million decrease in revenue related to the Moderna Agreement due to the recognition of all remaining deferred revenue upon termination of the Agreement during the year ended December 31, 2024, a $5.8 million decrease in revenue related to the Ionis Agreement due to the timing of work performed and a $2.6 million decrease in revenue related to the Affini-T Agreement.

Previous wording

General and administrative expenses were $32.0 million for the year ended December 31, 2024, compared to $28.8 million for the year ended December 31, 2023. The increase of $3.2 million was primarily related to an increase of $3.8 million in stock-based compensation expense in addition to $0.7 million in other employee-related expenses, as a result of increased headcount and the issuance of annual equity awards to existing employees, an increase of $0.8 million in facilities and allocated overhead, offset by a decrease of $2.1 million in professional services and consulting costs.

Current wording

General and administrative expenses decreased $5.2 million for the year ended December 31, 2025, as compared to the prior year, primarily related to decreases of $2.5 million in professional services and consulting costs primarily as more of this work is now performed in-house, $1.3 million in employee-related expenses and $0.3 million in stock-based compensation expense primarily due to a decrease in headcount and $1.1 million in facilities and allocated overhead.

Previous wording

Total other income, net, decreased by $12.9 million, from $18.3 million for the year ended December 31, 2023 to $5.3 million for the year ended December 31, 2024. The decrease in other income, net, was primarily due to a net change in the fair value of our long-term investment in Affini-T in which the Company recognized a loss of $9.2 million during the year ended December 31, 2024, and a gain of $2.9 million during the year ended December 31, 2023.

Current wording

Total other income, net, increased $2.8 million for the year ended December 31, 2025, as compared to the prior year, primarily due to a net change in the fair value of our long-term investment in Affini-T in which the Company recognized a loss of $1.3 million during the year ended December 31, 2025 compared to a loss of $9.2 million during the year ended December 31, 2024, partially offset by a $5.3 million decrease in interest income.

Previous wording

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

Current wording

Benefit from income taxes decreased by $5.5 million for the year ended December 31, 2025, as compared to the prior year. The benefit for income taxes for the year ended December 31, 2025 was primarily due to a return to provision adjustment related to the prior year return. The benefit from income taxes for the year ended December 31, 2024 was primarily due to our intention to elect to carry back the 2024 research and development credit to the prior year, in addition to a return to provision adjustment related to the prior year return.

Previous wording

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

Current wording

Since our inception, we have historically funded our operations primarily through sales of our redeemable convertible preferred units and convertible promissory notes, which generated approximately $351.7 million in aggregate gross proceeds, in addition to net proceeds of approximately $80.7 million received in February 2024 upon the closing of our IPO. Additionally, through December 31, 2025, we received approximately $120.0 million in upfront cash payments from collaboration and licensing agreements.

Previous wording

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

Current wording

We have incurred significant operating losses since inception and we expect to continue to incur substantial losses for the foreseeable future. Our net losses were $87.9 million and $78.1 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $310.9 million.

Previous wording

the impact of the COVID-19 pandemic, as well as other factors, including inflation, economic uncertainty and geopolitical tensions, which may exacerbate the magnitude of the factors discussed above.

Current wording

the impact of health epidemics, pandemics, and other widespread outbreaks of contagious disease, as well as other factors, including inflation, economic uncertainty and geopolitical tensions, which may exacerbate the magnitude of the factors discussed above.

Previous wording

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

Current wording

As of December 31, 2025, we had $160.8 million in cash, cash equivalents and available-for-sale marketable securities. Based on our current operating plan, we estimate that our existing cash, cash equivalents and available-for-sale marketable securities will be sufficient to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources” and “Risk Factors—Risks Related To Our Financial Position and Need for Additional Capital.” We expect that we will require additional funding to continue our current research development activities; develop, maintain, expand and protect our intellectual property portfolio; further develop our platform; and hire additional research, clinical and scientific personnel. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize our products.

Previous wording

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

Current wording

Net cash used in operating activities was $88.9 million for the year ended December 31, 2025 and consisted primarily of our net loss of $87.9 million and changes in our net operating assets and liabilities of $22.1 million, partially offset by net non-cash charges of $21.1 million. The net change in our operating assets and liabilities consisted primarily of a decrease of $21.1 million in deferred revenue as we recognized revenue based on work performed under our collaboration agreements, a decrease of $5.6 million in operating lease liabilities due to recurring payments under the existing lease agreements and a decrease $1.6 million in accrued expenses and other current liabilities, partially offset by a decrease of $4.3 million in prepaid expenses and other current assets primarily due to a decrease in other current assets as we received our 2023 tax refund, an increase of $1.1 million in accounts payable and a decrease of $1.0 million in accounts receivable. The net non-cash charges consisted primarily of $11.9 million in stock-based compensation expense, $5.3 million of depreciation expense, $5.3 million in non-cash lease expense, a $1.3 million charge related to the fair value of our investments in Affini-T and a $0.5 million loss on the write-off of fixed assets, partially offset by $3.0 million in amortization of discounts on available-for-sale marketable securities.

Previous wording

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

Current wording

Net cash provided by investing activities for the year ended December 31, 2025 was $103.5 million primarily due to net maturities of available-for-sale securities of $104.1 million, partially offset by purchases of property and equipment of $0.6 million.

Previous wording

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

Current wording

As of December 31, 2025, we leased our office and laboratory space under three lease agreements and one vivarium lease agreement. Remaining lease obligations under our non-cancelable leases were $53.5 million as of December 31, 2025, including $10.2 million payable through December 31, 2026 and $43.3 million for the remainder of the leases’ terms. For additional information on our leases and timing of future lease payments refer to Note 8, “Commitments and Contingencies”, in our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in Part II, Item 8 of this Annual Report on Form 10-K.

Current wording

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2, “Summary of Significant Accounting Policies”, to our financial statements included elsewhere in Part II, Item 8 of this Annual Report on Form 10-K.

Previous wording

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

Current wording

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

Previous wording

Metagenomi, Inc., our wholly-owned subsidiary, accounts for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the accounting and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets will not be realized. We assess the need for a valuation allowance against our deferred tax assets based on all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, results of recent operations, and our historical earnings experience by taxing jurisdiction. Significant judgment is required in making this assessment.

Current wording

Metagenomi Therapeutics, Inc. accounts for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the accounting and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets will not be realized. We assess the need for a valuation allowance against our deferred tax assets based on all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, results of recent operations, and our historical earnings experience by taxing jurisdiction. Significant judgment is required in making this assessment.