Stoke Therapeutics, Inc.

1. Nature of the business and basis of presentation

Organization

Stoke Therapeutics, Inc. (the Company) was founded in June 2014 and was incorporated under the laws of the State of Delaware. The Company is a late-stage clinical company dedicated to addressing the underlying causes of severe diseases by upregulating protein expression with RNA-based medicines.

Shelf Registration

In May 2022, the Company filed a universal Shelf Registration statement on Form S-3 (the “2022 Registration Statement”) with the Securities and Exchange Commission (the “SEC”). The 2022 Registration Statement was declared effective by the SEC on May 31, 2022, and contained two prospectuses: a base prospectus, which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $400.0 million of its common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, subscription rights to purchase common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and a sales agreement prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $150.0 million of its common stock that may be issued and sold under a Controlled Equity Offering Sales Agreement (the “Sales Agreement”). As of December 31, 2025, the Company had issued approximately 7.0 million shares of common stock pursuant to the Sales Agreement and the 2022 Registration Statement for net proceeds of $61.0 million.

In April 2024, the Company completed an underwritten public offering of its common stock and issued and sold 5,555,557 shares of common stock at a public offering price of $13.50 per share and issued pre-funded warrants to purchase 3,703,730 shares of common stock at a public offering price of $13.499 per share subject to an exercise price equal to $0.0001 pursuant to the 2022 Registration Statement. The common stock and pre-funded warrants sold resulted in net proceeds of approximately $119.9 million after deducting underwriting discounts, commissions and offering costs.

In October 2024, the Company filed an automatic universal Shelf Registration statement on Form S-3 (the “2024 Registration Statement”) with the SEC. Following the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 in March 2025, the 2024 Registration Statement became ineffective.

In July 2025, the Company filed a universal Shelf Registration statement on Form S-3 (the “2025 Registration Statement”) with the SEC. The 2025 Registration Statement was declared effective by the SEC on July 11, 2025, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $400.0 million of the Company’s common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, subscription rights to purchase common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and a sales agreement prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $150.0 million of common stock that may be issued and sold under the Sales Agreement. The specific terms of any securities to be offered pursuant to the base prospectus will be specified in a prospectus supplement to the base prospectus. As of December 31, 2025, the Company had issued approximately 3.2 million shares of common stock pursuant to the Sales Agreement and the 2025 Registration Statement for net proceeds of $87.8 million.

Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Liquidity

The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. As of the issuance date of these consolidated financial statements, the Company expects that its cash, cash equivalents, marketable securities and restricted cash will be sufficient to fund its operating expenses and capital expenditure requirements through at least twelve months from the issuance date of these consolidated financial statements.

2. Summary of significant accounting policies and recent accounting pronouncements

Basis of presentation and consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), and include the accounts of Stoke Therapeutics, Inc. and its wholly-owned subsidiary. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany transactions between and among the Company and its consolidated subsidiary have been eliminated.

Reclassification

The Company reclassified $1.7 million of Other current assets as of December 31, 2024 to Accounts receivable in its Consolidated balance sheets to conform to the current year presentation.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and disclosure of contingent assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from those estimates.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash in checking, sweep and money market accounts.

Restricted cash

At December 31, 2025, restricted cash consisted of money market accounts collateralizing letters of credit issued as security deposits in connection with the Company’s leases of its corporate facilities.

The following table reconciles cash and cash equivalents and restricted cash per the consolidated balance sheets to the statements of cash flows:

Marketable Securities

Marketable securities consist of government securities and obligations, corporate bonds and commercial paper with original maturities of more than 90 days at the purchase date. Investments are classified as available-for-sale and are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of other comprehensive income (loss). Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determination at each balance sheet date. Marketable securities are classified as current assets or non-current assets based on each security’s time to maturity as of the balance sheet date.

Concentration of credit risk

Financial instruments that potentially expose the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities. The Company maintains its cash, cash equivalents and marketable securities at accredited financial institutions in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement (ASC 820), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier value hierarchy that distinguishes between the following:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3—Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Revenue Recognition under ASC 606

For revenue arrangements accounted for under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract; (ii) determination of whether the promised goods or services are performance obligations; (iii) measurement of the transaction price, including evaluating the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company applies the five-step model to all contracts, including transactions with collaborators or partners, if they are a transaction with a customer.

Performance obligations are promises to transfer distinct goods or services to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own, or whether the required expertise is readily available.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of an arrangement that includes variable consideration and at each reporting period, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount to be received based on which method better predicts the amount expected to be received. If it is probable that a significant reversal of cumulative revenue would not occur, the variable consideration is included in the transaction price. The Company will assess its revenue generating arrangements in order to determine whether a significant financing component exists and conclude that a significant financing component does not exist in any of its arrangements if: (a) the promised consideration approximates the cash selling price of the promised goods and services or any significant difference is due to factors other than financing; and (b) timing of payment approximates the transfer of goods and services and performance is over a relatively short period of time within the context of the entire term of the contract.

Contracts may include pre-commercial milestone payments. At contract inception and at each reporting period, the Company assesses whether achievement of the milestone was most likely and whether it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control are constrained and not included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration arrangements.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes a range of key assumptions to determine the stand-alone selling price, which may include prices observed in comparable market transactions, pricing considered in negotiating the transaction, the estimated costs, plus a reasonable margin, forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of success in achieving various pre-commercial and commercial milestones, to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation.

For performance obligations consisting of licenses, research and development activities, and other promises, the Company utilizes judgment to assess the nature of the performance obligation to determine whether the performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenue when the license is transferred to the customer and the customer is able to use and benefit from the license. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional, including unbilled amounts.

Payment terms and conditions vary by contract type, although terms typically require payment within 30 to 60 days. In instances where the timing of revenue recognition differs from that of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to facilitate financing arrangements.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in the consolidated statement of stockholders’ equity as a reduction of additional paid-in capital.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation. Cost includes the acquisition costs and all costs necessary to bring the asset to the location and working condition necessary for its intended use. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the accompanying consolidated statements of operations and comprehensive loss. Expenditures for normal, recurring or periodic repairs and maintenance related to property and equipment are charged to expense as incurred. The cost for planned major maintenance activities, including the related acquisition or construction of assets, is capitalized if it will result in future economic benefits.

Estimated useful lives for property and equipment are as follows:

Impairment of long-lived assets

The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the assets may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the assets from the expected future cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value is recorded. There wereno impairment losses recognized during the years ended December 31, 2025 and 2024.

Research and development costs

Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, depreciation, third-party license fees, and costs related to third parties engaged to conduct clinical trial and preclinical research development activities.

The Company has entered into various research and development contracts with research institutions and other companies to conduct research on its behalf. These agreements are generally cancellable. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be required in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Stock-based compensation

The Company measures its stock-based awards granted based on the estimated fair values of the awards and recognizes the compensation expense for employees and non-employees over the requisite service period.

Stock options

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock options.

The Company has elected the practical expedient to use the midpoint between vesting date and the contractual term as the expected term for certain awards with service or performance conditions. Stock-based compensation is recognized using the straight-line method. Forfeitures of unvested stock-based awards are accounted for when they occur.

Restricted stock units (“RSUs”)

For RSUs issued to employees, the Company recognizes the grant date fair value of the RSUs on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. RSUs granted typically vest annually over afour-year period but may be granted with different vesting terms.

Performance stock units (“PSUs”)

For PSUs issued to employees, the Company recognizes the grant date fair value of the PSUs on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. PSUs granted typically vest annually over a two-year period but may be granted with different vesting terms. The performance conditions required for achievement are predefined by the Company's Compensation Committee at the time of the grant. The awards only vest, and compensation expense is only recognized, if the performance condition is probable of achievement.

Patent costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as sales, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

Income taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be settled or recovered. 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 and, to the extent it believes, based upon the weight of available evidence 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. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. At December 31, 2025 and 2024, the Company has recorded a full valuation allowance.

Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is considered more-likely-than-not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are recognized in the provision of income taxes; however, the Company currently hasno interest or penalties related to uncertain income tax benefits.

Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company comprises ofone reportable segment, Stoke. As of December 31, 2025, this segment has not generated any product revenue since inception, as it does not yet have approved products for sale.

The Company primarily generates revenue in North America, with its long-lived assets also concentrated in this region, and manages its business activities on a consolidated basis. Decisions concerning the allocation of the Company’s resources are made by the Company’s Chief Operating Decision Maker (“CODM”), which is the Company’s Chief Executive Officer (“CEO”). The CODM views the Company’s operations as a single operating segment which is the business of discovering and developing RNA-based medicines, using the TANGO approach and developing ASOs to selectively restore protein levels.

The CODM assesses performance for the Stoke operations segment and decides how to allocate resources based on net income or loss that is also reported on the income statement as consolidated net income or loss and the measure of segment assets as reported on the balance sheet as total consolidated assets. Net income or loss is used to monitor budget vs actual results as well as assess the general performance of the segment in a given period.

Smaller reporting company status

The Company is a “smaller reporting company,” meaning that its annual revenue was less than $100.0 million during the last completed fiscal year or the market value of the Company's stock held by non-affiliates was less than $700.0 million as of the end of that fiscal year’s second fiscal quarter. The Company expects to continue to be a smaller reporting company until the first quarter of 2027. As a smaller reporting company, the Company may choose to present only the two most recent fiscal years of audited financial statements in its Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Recently issued accounting pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold and certain disclosures of state versus federal income tax expenses and taxes paid. ASC 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company adopted the standard effective January 1, 2025 and there wasno material impact to itsconsolidated financial statements.

In November 2024, the FASB issued ASU 2024-03“Income Statement— Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024-03”). ASU 2024-03 requires disaggregated disclosure of income statement expensesfor public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026. The Company is still evaluating the impact of ASU 2024-03 and has not yet determined whether its adoption will have a material effect on its consolidated financial statements.

3. Fair value measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above and in Note 2. The carrying value of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds. Money market funds are publicly traded mutual funds and are presented as cash equivalents on the consolidated balance sheets as of December 31, 2025 and 2024.

The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy. Marketable securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

There wereno transfers to Level 3 in the periods presented.

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of December 31, 2025:

The following table summarizes the Company’s marketable securities as of December 31, 2024:

The weighted average maturity of the Company’s marketable securities as of December 31, 2025 is approximately 0.81 years.

The Company didnot record an allowance for credit losses as of December 31, 2025 related to our marketable securities. Further, given the lack of significant change in the credit risk of these investments, the Company did not recognize any other-than-temporary impairment losses.

5. Property and equipment, net

Property and equipment, net consisted of the following:

Depreciation expense was $1.8 million and $2.2 million for the years ended December 31, 2025 and 2024, respectively.

6. Accrued and other current liabilities

Accrued and other current liabilities consisted of the following:

7. Commitments and contingencies

Operating leases

The Company determines whether an arrangement is a lease at inception. The Company accounts for a lease when it has the right to control the leased asset for a period of time while obtaining substantially all of the assets’ economic benefits. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. The discount rate used to determine the present value of the lease payments is the Company’s incremental borrowing rate based on the information available at lease inception, as the Company did not have information to determine the rate implicit in the leases. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments (which include initial direct costs and lease incentives). Lease expense is included in operating expenses in the consolidated statements of operations and comprehensive loss. The Company’s lease agreements also contain variable payments, primarily maintenance-related costs, which are expensed as incurred and not included in the measurement of the right-of-use assets and lease liabilities.

In August 2018, the Company entered into an agreement to lease approximately 23,000 square feet of space for a term ofthree years. Lease terms are triple net lease commencing at $0.9 million per year, then with 3% annual base rent increases plus operating expenses, real estate taxes, utilities and janitorial fees. The lease commencement date was December 10, 2018.

In September 2021, the Company entered into an agreement to extend the initial term of the 23,000 square foot lease for a period ofthree years commencing on December 15, 2021 and ending December 31, 2024. In addition, this lease provides for the lease of an additional 15,000 square feet of rentable space beginning on April 1, 2022 and ending on December 31, 2024. In December 2021, the Company recognized a right-of-use asset and operating lease liability of $3.5 million for the 23,000 square feet. On April 1, 2022, the Company recognized a right-of-use asset and operating lease liability of $1.8 million for the 15,000 square feet. This lease expired on June 30, 2025.

In December 2023, the Company entered into an agreement to extend the term of the 38,000 square foot lease for a period oftwo years commencing on January 1, 2025 and ending on December 31, 2026. In December 2023, the Company recognized a right-of-use asset and operating lease liability of $4.1 million.

In December 2018, the Company entered into an agreement to lease 2,485 square feet of space for an initial term ofthree years. The lease includesone renewal option for an additionaltwo years, however, any time after the initial term the landlord may relocate the Company from the premises to a space reasonably comparable in size and utility. As the Company does not have the right to control the use of the identified asset after the initial term, the renewal option was excluded from the lease liability calculation. Lease terms commence at $0.2 million per annum, with 2.5% annual base rent increases plus operating expenses, real estate taxes, utilities and janitorial fees. The lease commencement date was May 1, 2019.

In June 2021, the Company amended the agreement to extend the initial term of the 2,485 square foot lease for a period ofthree years commencing May 1, 2022 and ending April 30, 2025. In addition, the amendment provided for the lease of an additional 2,357 square feet of rentable space beginning on July 6, 2021 and ending on April 30, 2025. In March 2025, the Company further amended this lease to extend the term from April 30, 2025 to June 30, 2025. The amended lease provides the Company with the option to extend the term of the lease for an additional two years. In 2021, the Company recognized a right-of-use asset and operating lease liabilities of $0.7 million for the extension of the lease to April 30, 2025 and a right-of-use asset and operating lease liabilities of $0.8 million for the additional 2,357 square feet of rentable space.

In January 2025, the Company entered into an agreement to lease 7,581 square feet of space for an initial term ofthree years and three months. The lease includestwo renewal options for an additional three years each. Lease terms commence at

$0.7 million per annum, with 2% annual base rent increases plus operating expenses, real estate taxes, and utilities. The lease commencement date was July 8, 2025. In July 2025, the Company recognized a right-of-use asset and operating lease liability of $1.8 million. In September 2025, the Company entered into a sublease agreement for the 7,581 square feet of space for a term equal to the initial term of the original lease. Sublease terms commence at $0.4 million per annum with 2% annual rent increases. As a result of this sublease, the Company recognized a right of use asset impairment of $0.7 million.

Future minimum lease payments under non-cancellable leases as of December 31, 2025, were as follows:

Lease balances as of December 31, 2025 and December 31, 2024 were as follows:

The weighted average remaining lease term and weighted average discount rate of the Company's operating leases as of December 31, 2025 were as follows:

In accordance with Topic 842, lease expense incurred under operating leases was $2.8 million for the year ended December 31, 2025, and $2.8 million for the year ended December 31, 2024.

License and research agreements

In April 2016, the Company entered into an exclusive, worldwide license agreement with the University of Southampton (the “Southampton Agreement”), whereby the Company acquired rights to foundational technologies related to the Company’s TANGO technology. Under the Southampton Agreement, the Company receives an exclusive, worldwide license under certain licensed patents and applications relating to TANGO. Under the Southampton Agreement, the Company may be obligated to make additional payments that are contingent upon certain milestones being achieved, as well as royalties on future product sales. These royalty obligations survive until the latest of (i) the expiration of the last valid claim of a licensed patent covering a subject product or (ii) the expiration of any regulatory exclusivity for the subject product in a country. In addition, if the Company sublicenses its rights under the Southampton Agreement, the Company is required to pay a mid-single digit percentage of the sublicense revenue to the University of Southampton. As of December 31, 2025, the Company had paid $0.7 million under the Southampton Agreement asa result of entering into the Acadia Pharmaceuticals Inc. license and collaboration agreement in January 2022 and recorded a liability of $8.2 million for a sublicense fee expense, due to the Biogen license and collaboration agreement (see Note 8). Additionally, certain licenses under the Southampton Agreement require the Company to reimburse the Univ ersity of Southampton for certain past and ongoing patent related expenses. For the year ended December 31, 2025 these expenses were $0.1 million compared to $0.1 million for the year ended December 31, 2024.

Litigation

The Company may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which it is focused. As of December 31, 2025, the Company had no legal proceedings to which it was a party or to which its property was subject that, in the opinion of management, would have a material adverse effect on its business.

8. License and collaboration agreements

Acadia Pharmaceuticals Inc.

In January 2022, the Company entered into a License and Collaboration Agreement (the “Acadia Agreement”) with Acadia Pharmaceuticals Inc. (“Acadia”) for the discovery, development and commercialization of novel RNA-based medicines for the treatment of severe and rare genetic neurodevelopmental diseases of the central nervous system. The Acadia Agreement focused on the targets SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest. In connection with each target, the Company agreed to collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products. With respect to SYNGAP1, the Company agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith the Company granted to Acadia worldwide, co-exclusive (with the Company) licenses for such licensed products. With respect to MECP2 and the neurodevelopmental target, the Company granted Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets. Effective as of September 3, 2025, Acadia terminated the MECP2 and the undisclosed neurodevelopmental programs under the Acadia Agreement (the “Discontinued Acadia Programs”) and rights to these targets returned to the Company. The collaboration with Acadia with respect to SYNGAP1 remains ongoing.

Pursuant to the terms of the Acadia Agreement, the Company received an upfront payment of $60.0 million from Acadia. Acadia agreed to fund the research for the Discontinued Acadia Programs, and the Company will equally fund with Acadia the research to identify potential licensed products for SYNGAP1. The Company is eligible to receive up to $245.0 million in potential total milestone payments based upon the achievement of certain development, regulatory, first commercial sales and sales milestone events for the SYNGAP1 program, assuming each milestone were achieved at least once. For SYNGAP1 licensed products that the Company is co-developing and co-commercializing, the Company will be responsible for 50% of the development and commercialization costs and will receive 50% of the profits from global commercialization. The Company is provided with a co-development and co-commercialization opt out option relating to the SYNGAP1 target indication at the Company’s discretion. Such opt-out would reduce development and commercialization milestones but would provide the Company with royalties on an escalating basis attributable to net sales milestones. As a result of the termination of the Discontinued Acadia Programs, the Company is no longer eligible to receive the milestones for those programs of up to $662.5 million or any royalties related thereto.

Acadia Agreement accounting

At the commencement of the Acadia Agreement, the Company identified three performance obligations consisting of pre-clinical research activities for each of the three targets, SYNGAP1, MECP2, and the undisclosed neurodevelopmental target. The exclusive or co-exclusive licenses granted to Acadia to conduct pre-clinical research activities on each of the three targets, and participation on each of the respective joint research committees were identified as promised services. However, the licenses granted to Acadia and the research activities were determined to be not distinct from each other, and therefore are considered a combined performance obligation for each of the three targets. Participation on each of the joint research committees was determined to be quantitatively and quantitatively immaterial in the context of the arrangement with Acadia.

The Company is recognizing the transaction price for the pre-clinical research activities for each of the three targets over time as the research services are provided. The transfer of control to Acadia occurs over this time period, and in management’s judgment, is the best measure of progress towards satisfying the performance obligation. An input method is used that measures the cost incurred to date in satisfying each of the three research activities in relation to the estimated total projected cost of each of the research activities to fulfill the respective obligations. The cumulative effect of revisions to estimated costs and/or the transaction price to complete the research performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

Milestone payments that are not within the control of the Company, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. For other milestones, the Company evaluated factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. Milestones that are outside of the Company’s or Acadia’s control will not be recognized until such milestones are achieved. As to the other milestones, to date, no milestone payments have been included in the transaction price due to the uncertainty as to whether these milestones will be achieved. The Company will at the end of each reporting period reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust its estimate of the overall transaction price for each of the research activities on the three targets. Any such adjustments will be recorded on a cumulative catch-up basis.

For the year ended December 31, 2025, the Company recognized revenue related to the Acadia collaboration of $16.1 million. Of this total, $11.5 million is related to license revenue and $4.6 million relates to service revenue.

As of December 31, 2025, the Company had $7.5 million in upfront consideration associated with the Acadia agreement relating to performance obligations that are unsatisfied or partially unsatisfied.

Biogen International GmbH License and Collaboration Agreement

On February 14, 2025, the Company entered into a License and Collaboration Agreement (the “Biogen Agreement”) with Biogen International GmbH (“Biogen”) for the joint development and commercialization of zorevunersen and other compounds targeting the SCN1A gene (the “Licensed Product”). Under the terms of the Biogen Agreement, the Company granted Biogen an exclusive, royalty-bearing license to develop, manufacture, and export licensed products in all territories outside the U.S., Canada, and Mexico (the “Biogen Territory”). In addition, Biogen has the option to exercise an exclusive, royalty-bearing, sublicensable and transferable license for certain future follow-on ASOs directed to SCN1A controlled by the Company.

Under the Biogen Agreement, the parties are jointly developing zorevunersen, with the Company leading global development. The Company and Biogen share global development costs based on an agreed budget. The Company is responsible for 70% of these development costs and Biogen is responsible for the remaining 30% of these development costs.

In connection with the closing of this transaction in February 2025, the Company received an upfront payment of $165.0 million and is eligible to receive development and commercial milestone payments that could total up to approximately $50.0 million and $335.0 million, respectively, if all the specified milestones set forth in the collaboration are achieved. In addition, the Company is eligible to receive tiered, double-digit royalties ranging from the low double-digit to high teen percentages of future net sales on the Licensed Products. As of December 31, 2025 no milestones have been met.

Royalties payable under the Biogen Agreement are subject to standard royalty reductions.

Biogen agreement accounting

At the commencement of the Biogen Agreement, the Company evaluated the Biogen Agreement and determined that it was reflective of a vendor-customer relationship and comprised of the following performance obligations within the scope of ASC 606. As of the Effective Date, the Company identified the following performance obligations in the Biogen Agreement that were evaluated under the scope of ASC 606: (i) an exclusive royalty-bearing sublicensable, transferable license under the licensed intellectual property to exploit Licensed Products in the Biogen Territory, and non-exclusive, royalty-free, sublicensable, transferable license under the licensed intellectual property to develop, manufacture and export any Licensed Products in the Biogen Territory (collectively “IP License” and considered as one performance obligation), and (ii) development services, that are expected to generate data necessary for regulatory approval in the Biogen Territory for the licensed products (“Global Development Activities”).

The IP License is considered functional intellectual property and distinct from the Global Development Activities, as Biogen can benefit from the license on its own or together with other readily available resources. Global Development Activities are considered distinct as they are not expected to significantly modify or customize the initial intellectual property as the Licensed Product is in Phase 3 of clinical development at contract inception.

The Company determined that the initial transaction price under ASC 606 was $243.4 million and is comprised of the non-refundable upfront payment of $165 million and $78.4 million of estimated variable consideration attributed to cost reimbursement in reimbursement for Global Development Activities. The Company utilized the expected value method to estimate the variable consideration for the future reimbursement of the Global Development Activities, and any subsequent adjustments arising from changes in estimates will be recorded on a cumulative catch-up basis in the period of such adjustment.

The Company determined that royalties and sales milestones relate solely to the licenses of intellectual property and are therefore excluded from the transaction price under the sales- or usage-based royalty exception of ASC 606. In addition, the Company estimated the probability, likelihood, and magnitude of a reversal of revenue for the commercial milestone payments and determined that any variable consideration related to commercial milestones was deemed to be fully constrained at inception and therefore excluded from the initial transaction price due to high degree of uncertainty and risks associated with these potential payments as the Company cannot assert that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur.

The Company developed the estimated standalone selling price, at inception, for each of the performance obligations with the objective of determining the price at which we would sell each item if it were to be sold regularly on a standalone basis. The Company developed the estimated standalone selling price for the IP License primarily based on the probability-weighted present value of expected future cash flows associated with the underlying license or activity. In developing such estimates, the Company applied judgment in determining the forecasted revenues, taking into consideration the applicable market conditions and relevant entity-specific factors, the probability of success and the discount rate. The estimated standalone selling price for the Global Development Activities is primarily based on the costs necessary to perform the service plus a reasonable margin. In management’s judgment the above inputs provide a faithful estimate and reflects a consideration that would be received to transfer the promised goods or services in an orderly transaction between unrelated market participants. As such, the estimated standalone selling price reflects the best estimate of the fair value that market participants would pay for each performance obligation on a standalone basis.

The Company allocated the transaction price to the performance obligations on a relative stand-alone selling price basis consistent with the allocation objective of ASC 606.

The IP License performance obligation was satisfied at a point in time upon transfer of the IP License to Biogen. Control of the IP License was transferred on the Effective Date as Biogen could begin to use and benefit from the IP License immediately. For the Global Development Activities performance obligation, the Company measures proportional performance over time using an input method based on costs incurred relative to the total estimated costs of the obligation by determining the proportion of costs incurred as a percentage of total costs the Company expects to expend. This ratio is applied to the transaction price allocated to this performance obligation to arrive at the cumulative revenue that should be recognized at each reporting date. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The following table provides a summary of the transaction price allocated to each performance obligation, in addition to revenue activity for the year ended December 31, 2025 (in thousands):

9. Stock-Based Compensation

In June 2019, the Company’s board of directors and stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”) which became effective on June 17, 2019 and replaced the Company’s 2014 Equity Incentive Plan (the “2014 Plan”). In addition to the shares of common stock reserved for future issuance under the 2014 Plan that were added to the 2019 Plan upon its effective date, the Company initially reserved 2,200,000 shares of common stock for issuance under the 2019 Plan. The number of shares reserved for issuance under the 2019 Plan will increase automatically on January 1 of each of 2020 through 2029 by the number of shares equal to 4% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31, or a lesser number as may be determined by the Company’s board of directors.

In April 2023, the Company’s board of directors adopted the Stoke Therapeutics, Inc. 2023 Inducement Plan, which it amended in June 2025 to add an additional 2,000,000 shares of the Company’s common stock (the “2023 Plan”). As permitted by Nasdaq stock market rules, the Company’s stockholders were not required to approve the 2023 Plan. The Inducement Plan provides for up to 3,000,000 shares of the Company’s common stock under awards granted to newly hired employees. An “award” is any right to receive common stock of the Company through nonstatutory stock options or restricted stock units (“RSUs”).

As of December 31, 2025 there wereno shares available for future issuance under the 2014 Plan,4,209,046 shares were available for future issuance under the 2019 Plan and 630,214 shares were available under the 2023 Plan.

In December 2023, the Company offered employees with outstanding option grants that had an exercise price of greater than $14.00 per share the opportunity to exchange those options for a number of restricted stock units with a fair value equal to the then fair value of the options surrendered. As a result, there was no material incremental compensation expense associated with those RSUs issued in exchange for options. The RSUs vest annually over a period of one to two years. In the aggregate,2,907,127 options were exchanged for 730,602 RSUs. As of December 31, 2025, all of these restricted stock units have vested.

During the years ended December 31, 2025 and 2024, the Company granted options to purchase 4,309,523 and 2,797,612 shares of common stock to certain of its employees, and directors, respectively. The options vest over a period of up tofour years. During the year ended December 31, 2025 and 2024, the Company granted 1,387,842 and 716,000 restricted stock units to its employees. The restricted stock units vest over a period of up tofour years. During the year ended December 31, 2025, the Company didnot grant any performance stock units to its employees.

A summary of stock option activity for awards is presented below:

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at December 31, 2025 and 2024.

The weighted average grant date fair value for stock options granted during the years ended December 31, 2025 and 2024 was $11.53 and $10.00, respectively. The aggregate grant date fair value of stock options granted during the years ended December 31, 2025 and 2024 was $49.7 million and $28.0 million, respectively. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2025 and 2024 was $12.0 million and $8.5 million, respectively.

A summary of restricted unit activity is presented below:

A summary of performance stock unit activity is presented below:

Stock-based compensation

The Company recorded stock-based compensation expense of $32.2 million and $27.5 million during the years ended December 31, 2025 and 2024, respectively. Of the total stock-based compensation recorded during the years ended December 31, 2025 and 2024, $12.4 million and $13.4 million, respectively, is related to restricted stock units and $1.3 million and $2.5 million, respectively, is related to performance stock units.

As of December 31, 2025, there was $54.8 million of unrecognized compensation cost related to unvested stock options granted under the 2019 and 2023 Plans. Compensation expense is expected to be recognized over a weighted average period of 2.8 years as of December 31, 2025. As of December 31, 2025, there was $21.3 million of unrecognized stock-based compensation related to restricted stock units and $0.3 million related to performance stock units. The compensation expense for RSUs and PSUs is expected to be recognized over a weighted average period of 2.7 years.

Stock-based compensation expense recorded as research and development and sales, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss is as follows:

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of stock options. The fair values of the options granted to employees and directors were calculated using the following assumptions for the years ended December 31, 2025 and 2024:

2019 Employee stock purchase plan

In June 2019, the Company adopted the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective on June 18, 2019. The Company initially reserved 315,000 shares of common stock for sale under the ESPP. At December 31, 2025, the Company had 2,608,139 shares available for issuance under the ESPP. The average grant date fair value per share under the ESPP was $11.46 for 2025. The total ESPP stock-based compensation expense for the year ended December 31, 2025 was $0.6 million and for the year ended December 31, 2024 was $0.4 million. The number of shares reserved for issuance under the ESPP will increase automatically on January 1 of each of the first ten calendar years following the first offering date by the number of shares equal to the lesser of 1% of the total outstanding shares of the Company’s common stock as of the immediately preceding December 31 or a lower amount determined by the Company’s board of directors. The aggregate number of shares issued over the term of the ESPP will not exceed 3,150,000 shares of the Company’s common stock.

10. Net loss per share

The following table summarizes the computation of basic and diluted net loss per share of the Company:

As the Company incurred a net loss for the year ended December 31, 2025, as well as the year ended December 31, 2024, all potential dilutive securities—including stock options, RSUs, and PSUs were excluded from the computation of diluted net loss per share. Including these securities would have been antidilutive and would have reduced the net loss per share. As a result, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same for all periods presented.

The Company excluded the following potential shares of common stock, based on amounts outstanding as of December 31, 2025 and 2024, from the computation of diluted net loss per share attributable to common stockholders because their inclusion would have had an anti‑dilutive effect.

11. Income taxes

A reconciliation of the expected income tax expense (benefit) computed using the federal statutory income tax rate the Company’s effective income tax rate is as follows:

During the years ended December 31, 2025 and 2024, state tax in Massachusetts made up the majority of the tax effect in the "State and local income tax" category.

The principal components of the Company’s deferred tax assets and liabilities consist of the following:

The reconciliation tax bill, commonly known as the “One Big Beautiful Bill Act” (OBBBA) was into law July 4, 2025, which is considered the enactment date under U.S. generally accepted accounting principal (GAAP). Based on the OBBBA, the Company will make a method change to accelerate unamortized domestic R&D amounts ratably over the 2025 and 2026 taxable years. As a result of this implementation, the Company's deferred tax assets as of December 31, 2025 reflects the change in tax treatment for these expenditures.

Inaccordance with ASC 740, Accounting for Income Taxes, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and has determined that it is more likely than not that the Company will not recognize the net benefits of federal and state deferred tax assets. A full valuation allowance of

$161.1 million and $165.6 million was established at December 31, 2025 and 2024, respectively. The change in the valuation allowance was a decrease of $4.5 million and an increase of $32.3 million in 2025 and 2024, respectively.

As of December 31, 2025, and 2024, the Company had federal NOL carryforwards of $301.7 million and $242.1 million, respectively, which may be available to reduce future taxable income. The Company's Federal NOLs were generated after December 31, 2018 and carryforward indefinitely. As of December 31, 2025, and 2024, the Company had state NOLs of $329.2 million and $261.5 million, respectively, which may be available to reduce future taxable income. The state NOLs expire at various dates beginning in 2035.

As of December 31, 2025 and 2024, the Company had federal research and development tax credit (“R&D Credit”) carryforwards of $21.3 million and $15.3 million, respectively, and state R&D Credit carryforwards of $10.5 million and $8.4 million, respectively. Both federal and state R&D Credit carryforwards may be available to reduce future tax liabilities and expire at various dates beginning in 2034.

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

The Company applies ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. At December 31, 2025, and 2024 the Company hadno unrecognized tax benefits. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying consolidated statements of operations and comprehensive loss.

The Company files U.S. federal and state income tax returns with varying statute of limitations. As of the year ended December 31, 2025, there is no examination by U.S. tax authorities. Due to the Company’s net operating loss carryforwards, federal income tax returns from incorporation are still subject to examination. The Company files in several state tax jurisdictions and is subject to examination in years ranging from incorporation to 2025. To the extent that the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS and the state tax authorities to the extent utilized in a future period.

For year ended December 31, 2025, the Company had $0.6 million of Federal income taxes paid.

12. Employee benefits

In 2016, the Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements andallows participants to defer a portion of their annual compensation on a pretax basis. The Company matches contributions up to 4% of annual salary for those employees who are participating in the 401(k) Plan. For the year ended December 31, 2025, the Company made matching contributions of $1.1 million and for the year ended December 31, 2024, the Company made matching contributions of $0.8 million.

13. Segment Information

The Company comprises ofone reportable segment, Stoke. As of December 31, 2025, this segment has not generated any product revenue since inception, as it does not yet have approved products for sale.

The Company primarily generates revenue in North America, with its long-lived assets also concentrated in this region, and manages its business activities on a consolidated basis. Decisions concerning the allocation of the Company’s resources are made by the Company’s Chief Operating Decision Maker (“CODM”), which is the Company’s Chief Executive Officer (“CEO”). The CODM views the Company’s operations as a single operating segment which is the business of discovering and developing RNA-based medicines, using the Targeted Augmentation of Nuclear Gene Output (“TANGO”) approach and developing antisense oligonucleotides (“ASOs”) to selectively restore protein levels.

The CODM assesses performance for the Stoke operations segment and decides how to allocate resources based on net income or loss that is also reported on the income statement as consolidated net income or loss and the measure of segment assets as reported on the balance sheet as total consolidated assets. Net income or loss is used to monitor budget vs actual results as well as assess the general performance of the segment in a given period.

The following table reconciles segment direct profit or loss to the Company’s consolidated results:

(1)Includes external research and development and sales, general and administrative expenses associated with programs.

(2)Includes salaries, benefits and other personnel related expenses, including stock based compensation expense, of relevant personnel.

(3)Includes costs incurred for conducting non-program activities related to Company activities.

14. Subsequent events

In January 21, 2026, the Company entered into a new lease for its corporate headquarters and laboratory space with NWALP PHOP Property Owner LLC, located at 245 Fifth Avenue, Waltham, Massachusetts (the “Lease Agreement”), in order to expand our office and laboratory space. The Lease Agreement premises include approximately 98,500 square feet. The Lease Agreement will expire on March 31, 2038, and includestwo options to further extend the Lease for an additional five years at the then-prevailing market rate. The aggregate estimated base rent payments due over the term of the Lease Agreement is approximately $85.5 million. The Company paid a security deposit of $3.0 million in the form of an irrevocable standby letter of credit, which may be reduced over time in accordance with the terms of the Lease Agreement.