Neurogene Inc

To the Shareholders and the Board of Directors of Neurogene Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Neurogene Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of statements of operations, changes in convertible preferred stock and stockholders’ equity (deficit), and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Reverse Merger Acquisition — Accounting Conclusions — Refer to Note 1, 3, 4 and 10 to the financial statements.

Critical Audit Matter Description

The reverse merger between Neoleukin Therapeutics, Inc. (“Neoleukin”), one of Neoleukin’s wholly owned subsidiaries, and Neurogene Inc. (“Neurogene”) was accounted for as a reverse asset acquisition pursuant to ASC 805, Business Combinations, as Neoleukin did not meet the definition of a business under ASC 805 but it did represent a group of assets. The initial accounting conclusions related to the reverse merger involved determining: (1) the accounting acquirer and accounting acquiree; (2) whether the transaction should be accounted for as a business combination or an asset acquisition; and (3) whether contingent consideration liabilities associated with the Contingent Value Rights (CVRs) should be accounted for as a derivative at fair value or recognized when payments are probable and estimable as defined by ASC 450, Contingencies.

Given the significant judgment required by management in concluding that Neurogene is the accounting acquirer in the reverse merger transaction, the transaction be accounted for as a reverse asset acquisition, and the accounting for the contingent consideration liabilities associated with the CVRs, the audit procedures performed to evaluate the reasonableness of management’s conclusions related to these accounting conclusions required a high degree of auditor judgment, including the need to involve professionals in our firm with the appropriate expertise in accounting for business combinations and derivatives.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating the reasonableness of management’s accounting conclusions related to the determination of the accounting acquirer and accounting for the transaction as a reverse asset acquisition and accounting for contingent consideration liabilities associated with the CVRs included the following, among others:

· We obtained and read the Agreement and Plan of Merger (the “Merger Agreement”).

· With the assistance of professionals in our firm with expertise in accounting for business combinations, we evaluated the Company’s accounting conclusions for the reverse merger, including determining whether Neurogene should be the accounting acquirer and whether the transaction should be accounted for as a reverse asset acquisition based on the terms of the Merger Agreement.

· With the assistance of professionals in our firm with expertise in accounting for business combinations and derivatives, we evaluated the Company’s accounting conclusions for contingent consideration liabilities associated with the CVRs.

Accrued research and development expenses— Refer to Note 3 and Note 9 to the financial statements

Critical Audit Matter Description

The Company incurs certain research and development expenses from third-party contract research organizations. The Company accrues expenses for preclinical studies and clinical trial activities performed by its vendors based upon estimates of the proportion of work completed. The Company determines estimates of the work completed under the contracts based on review of the contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers to determine stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Given the judgement required by management to estimate the extent of services performed and the associated expenses incurred as it relates to research and development costs incurred, performing audit procedures to evaluate accrued research and development expenses required a high degree of auditor judgement and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accrued research and development expenses included the following, among others:

· We evaluated publicly available information (such as press releases and investor presentations) and board of directors' materials regarding the status of research and development activities.

· We selected a sample of vendors and tested the related accrual of research and development expenses by:

◦Confirming the completeness of the terms and conditions of research and development service agreements directly with the vendor.

◦Obtaining and reading the related contracts to understand key provisions and agree them to the Company's analysis.

◦Obtaining and inspecting third-party documents such as status reports and other correspondence received from the vendors related to the services provided and comparing them to the Company's schedule of estimated expenses incurred to date.

◦Inspecting meeting minutes between the Company's finance team and clinical and manufacturing operations and corroborating the progress of research and development activities through inquiry with the Company's clinical operations personnel.

◦Examining invoices received from vendors and cash disbursements, where applicable, made subsequent to the balance sheet date and inquiring of clinical operations to corroborate the applicable service period in order to evaluate completeness of the accruals.

/s/Deloitte & Touche LLP

Seattle, WA

March 18, 2024

We have served as the Company's auditor since 2023.

To the Stockholders and the Board of Directors of Neurogene Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Neurogene Inc. (the Company) as of December 31, 2022, the related statements of operations, changes in convertible preferred stock and stockholders’ deficit and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued research and development expenses

Description of the Matter

As more fully described in Note 3 to the financial statements, the Company records accrued liabilities for estimated costs of research and development (“R&D”) activities based upon the estimated cost of services provided but not yet invoiced. As of December 31, 2022, accrued clinical costs and other R&D costs were $1.8 million. The accrued costs included estimated clinical trial and other R&D costs incurred but not invoiced under certain significant R&D service agreements with organizations that conduct R&D activities on behalf of the Company (“Accrued R&D Costs”). The Company accrues for these costs based on several factors, such as information obtained from vendors and estimates of the work completed under the service agreements. Auditing the Company's accounting for Accrued R&D Costs was complex because the Company’s analysis is dependent upon data obtained from external third-party service providers who often act as intermediaries to those performing the underlying services. The determination of the accrual when the Company has either not been invoiced or has not received information regarding actual costs incurred requires evaluation of the stage of completion of the services.

How We Addressed the

Matter in Our Audit

To test the Accrued R&D Costs, our audit procedures included, among others, i) confirming the completeness of the terms and conditions of certain significant R&D service agreements directly with the vendor; ii) testing the completeness and accuracy of the Company’s accrual models through verification of significant inputs, such as costs incurred and invoices paid, to the terms and conditions of the underlying agreements and information from the Company’s internal personnel and vendors; iii) meeting with personnel outside of the accounting department to discuss the basis for assumptions used in estimating cost of services provided but not yet invoiced; and iv) performing a hindsight analysis of invoices received subsequent to the balance sheet date.

Valuation of common stock

Description of the Matter

As discussed in Note 3 and Note 14 to the financial statements, the Company accounts for stock options granted to employees and non-employees at fair value using Black-Scholes Option pricing model. The valuation of common stock, among other inputs, was used to determine the fair value measurement for stock-based awards granted. The Company's common stock was not publicly traded on the dates which the stock-based awards were granted and required management to estimate its value with the assistance of an unrelated third-party valuation firm using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation. Auditing the Company's valuation of common stock was complex and required auditor's judgment due to significant assumptions which included, among others, discount for lack of marketability and probability weighting the likelihood of achieving a liquidity event for the holders of the Company’s common stock. The Company recognized $1.3 million in stock-based compensation expense for the year ending December 31, 2022.

How We Addressed the

Matter in Our Audit

To test the valuation of common stock, our audit procedures included, among others, assessing the competence of the third-party valuation firm and the valuation methodologies by considering the Company’s equity structure, the proximity of sales of convertible preferred stock to investors in arm’s length transactions, and possible exit scenarios used in estimating the fair value of the common stock. We also evaluated whether the calculations supporting the estimate were applied in accordance with acceptable approaches and mathematically accurate, evaluated the reasonableness of the discount for lack of marketability used in the valuation and performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value resulting from changes in the assumptions. Internal valuation specialists assisted us in performing these procedures. In addition, we assessed the appropriateness of comparable companies used to determine multiples used in market approach estimates applied to Company financial data.

/s/Ernst & Young LLP

We served as the Company’s auditor from 2019 to 2023.

Stamford, Connecticut

August 18, 2023, except for the effects of the exchange ratio disclosed in Note 1, sub-section titled Reverse Merger and Pre-Closing Financing, as to which the date is March 18, 2024.