Contineum Therapeutics Inc

1. Organization and Basis of Presentation

Organization and Nature of Operations

Contineum Therapeutics, Inc. (the “Company”), is a clinical stage biopharmaceutical company focused on discovering and developing novel, oral small molecule therapies for neuroscience, inflammation and immunology indications with high unmet need. The Company, formerly named Sirocco Therapeutics, Inc. (“Sirocco” or “legacy Sirocco”), Inception3, Inc. (“Inception”) and Versense Pharmaceuticals, Inc. (“Versense”), was incorporated in the state of Delaware in2009 as Versense. Versense changed its name to Inception on* October25,* 2011, and commenced active operations on* July13,* 2012. In* May 2018,Inception changed its name to Sirocco. A separate entity named Pipeline Therapeutics, Inc. (“legacy Pipeline”) was founded and incorporated in the state of Delaware on May9,* 2017. On* May7,* 2019, legacy Sirocco acquired legacy Pipeline in a merger transaction (the “Merger”). As of* December**31,* 2019, legacy Pipeline was a wholly owned subsidiary of legacy Sirocco. In* January 2020,legacy Pipeline was merged into legacy Sirocco and ceased to exist, and legacy Sirocco changed its name to Pipeline Therapeutics, Inc. In November 2023,*Pipeline Therapeutics, Inc. changed its name to Contineum Therapeutics, Inc.

Reverse Stock Split

On* April**1,* 2024, the Company filed an amendment to itsfourth amended and restated certificate of incorporation as amended and effected a1-for-5.5972 reverse stock split of its capital stock. All share and per-share amounts presented in the financial statements and related notes have been retroactively adjusted to reflect the reverse stock split.

Initial Public Offering

On* April**5,* 2024, the Company closed its initial public offering (“IPO”), pursuant to which it issued and sold an aggregate of 6,875,000 shares of its common stock at a public offering price of $16.00 per share and on* April 19, 2024,the Company issued and sold 548,682 additional shares of its common stock to the underwriters of the IPO pursuant to the partial exercise of their option to purchase additional shares, resulting in net proceeds of approximately $108.0 million, after deducting underwriting discounts, commissions and other offering expenses. Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into Class A common stock or Class B common stock, as applicable. Converted redeemable convertible preferred stock outstanding as of the date of IPO consisted of 15,906,236 shares that were outstanding as of March 31, 2024 (see Note6*). Following the closing of the IPO, no shares of redeemable convertible preferred stock were authorized or outstanding.

In connection with the closing of its IPO, on* April 9, 2024,the Company’s certificate of incorporation was amended and restated to authorize 220,000,000 shares of common stock of which 200,000,000 are designated as Class A common stock and 20,000,000 of which are designated as Class B common stock; (ii) eliminate all references to the previously existing series of preferred stock; (iii) authorize 10,000,000 shares of undesignated preferred stock that maybe issued from time to time by the Company’s board of directors inone* or more series.

The unaudited condensed financial statements as of* March 31, 2024,including share and per share amounts, donot* give effect to the IPO and related actions as it closed subsequent to* March**31,* 2024.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all its resources to research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations. The Company incurred a net loss of $8.4 million for thethree months ended* March 31, 2024*. The Company had an accumulated deficit of $83.6 million as of* March 31, 2024*. From its inception through* March 31, 2024*, the Company has financed its operations primarily through issuance of convertible promissory notes, convertible preferred stock financings, a term loan and a license agreement (the “J&J License Agreement”) the Company entered in* February 2023*with Johnson & Johnson Innovative Medicine (formerly Janssen Pharmaceutica NV), an affiliate of J&J.

As of* March 31, 2024*, the Company had cash, cash equivalents and marketable securities of $117.9 million, which doesnot include net proceeds from the IPO. Management believes its existing cash, cash equivalents and marketable securities and net proceeds received from its IPO will be sufficient to support operations for at least12 months from the issuance of these unaudited condensed financial statements.

As the Company continues to pursue its business plan, it expects to finance its operations through both public and private sales of equity, debt financings or other commercial arrangements, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements withthird parties. However, there can beno assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company doesnot obtain additional funding, it* mayneed to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Further, if the Company raises funds through licensing or other similar arrangements withthird* parties, it* maybe required to relinquish valuable rights to its technology, future revenue streams, research programs or drug candidates or maybe required to grant licenses on terms that may**not* be favorable to it and/or* may*reduce the value of its common stock

Unaudited Interim Condensed Financial Statements

The condensed balance sheet as of* March 31, 2024*, condensed statements of operations and comprehensive loss, condensed statements of convertible preferred stock and stockholders’ deficit and cash flows for thethree months ended* March 31, 2024and2023* and related notes to condensed financial statements are unaudited. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s financial position, results of operations and cash flows for the periods presented. The condensed results of operations for thethree months ended* March 31, 2024* arenot necessarily indicative of the results to be expected for the full year or for any other future annual or interim period. The condensed balance sheet as of* December 31, 2023* included herein was derived from the audited financial statements as of that date. These interim condensed financial statements should be read in conjunction with the Company’s audited financial statements.

5

2. Summary of Significant Accounting Policies

During thethree-month period ended* March**31,* 2024, there wereno changes to our significant accounting policies as described in our registration statement on Form S-1, as amended (FileNo. 333-278003) as filed with the Securities and Exchange Commission (SEC) pursuant to Rule424(b) of the Securities Act of1933, as amended, on* April 1,2024 and declared effective by the SEC on April 4, 2024.*

Recently Issued Accounting Pronouncements

In* December 2023,the FASB issued ASUNo.* 2023-09, “Improvements to Income Tax Disclosures.” ASU2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU2023-09 is effective for public entities with annual periods beginning after* December 15, 2024and for private businesses for annual periods beginning after December 15, 2025,*with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements.

3. Marketable Securities

The Company invests its excess cash in marketable securities, including debt securities, commercial paper, asset-backed securities, yankee debt and U.S. government agency securities.

The following table summarizes the amortized cost and fair value of the Company’s marketable securities by major investment category (in thousands).

The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, current and expected future economic conditions. As of* March 31, 2024*, the Company didnot record an allowance for credit loss related to its investment portfolio.

6

4. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes athree-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that arenot active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little orno market activity).

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

The carrying amounts of the Company’s financial instruments, including cash, cash equivalents and marketable securities, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to their short maturities. Included in cash and cash equivalents at* March 31, 2024and December 31, 2023are money market funds with a carrying value and fair value of $11.9 million and $11.8 million, respectively, based upon a Level1* fair value assessment.

Preferred Stock Warrant Liability

The preferred stock warrant liability (included on the balance sheet under other long-term liabilities) consists of the fair value of a warrant to purchase Series B convertible preferred stock (see Note6) and was based on significant unobservable inputs, which represent a Level3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrant utilized the Black-Scholes option-pricing model. Upon the closing of the IPO, the warrant to purchase shares of Series B preferred stock became a warrant to purchase shares of Class A common stock.

7

The quantitative elements associated with the Company’s Level3 inputs impacting the fair value measurement of the preferred stock warrant liability include the fair value per share of the underlying Series B convertible preferred stock, the remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The most significant assumption in the Black-Scholes option-pricing model impacting the fair value of the preferred stock warrant is the fair value of the Company’s Series B convertible preferred stock as of each remeasurement date. The Company determines the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its convertible preferred stock as well as additional factors that the Company deems relevant. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrant.

The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrant. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The Company classifies this warrant as a liability on its balance sheets that it remeasures to fair value at each reporting date, and the Company recognizes changes in the fair value of the warrant liability as a component of other income (expense) in its statements of operations and comprehensive loss. The Company will continue to recognize changes in the fair value of the warrant liability until the warrant is exercised, expires or qualifies for equity classification.

Significant increases or decreases in any of these inputs in isolation would result in a significantly different fair value measurement. An increase in the risk-free interest rate, and/or an increase in the remaining contractual term or expected volatility, and/or an increase in the fair value of the convertible preferred stock would result in an increase in the fair value of the warrant.

Roll-Forward of Level 3 Financial Instruments

A reconciliation of the Level3 financial instruments from* December 31, 2023to March 31, 2024* is as follows (in thousands):

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

6. Convertible Preferred Stock and Stockholders’** Deficit**

Under its Amended and Restated Certificate of Incorporation dated* April**10,* 2023, the Company had a total of 56,571,107 shares of capital stock authorized for issuance, consisting of 39,630,511 shares of common stock, par value of $0.001 per share, and 16,940,594 shares of convertible preferred stock, par value of $0.001 per share. Shares of authorized convertible preferred stock are designated as 1,768,607 shares of Series A convertible preferred stock,1,429,286 shares of Series A-1 convertible preferred stock,3,362,377 shares of Series B convertible preferred stock and 10,362,324 shares of Series C convertible preferred stock.

Convertible Preferred Stock

As of* March 31, 2024and December 31, 2023,the Company’s Series A, Series A-1, Series B, and Series C convertible preferred stock have been classified as temporary equity in the accompanying balance sheets given that a majority of the Company’s board of director seats are held and/or voted upon by convertible preferred stockholders and they could cause certain events to occur requiring redemption of the preferred stock that are outside of the Company’s control. The Company hasnot* adjusted the carrying values of the convertible preferred stock to the respective liquidation preferences of such shares as the instruments are currentlynot redeemable and the Company believes it isnot probable that the instruments will become redeemable at this point in time. Adjustments to increase the carrying values to the respective liquidation preferences will be made if and when it becomes probable that an event would occur obligating the Company to pay such amounts.

8

The authorized, issued, and outstanding shares of convertible preferred stock as of* March 31, 2024* consist of the following:

Series C Convertible Preferred Stock

The Company’s convertible preferred stock as of* March 31, 2024*has the following characteristics:

1) Dividends

Holders of the Series A and A-1 convertible preferred stock, in preference to any distributions to the holders of common stock, shall be entitled to receive non-cumulative cash dividends at an annual rate of $0.45 and $0.62 per share, respectively. Holders of the Series B convertible preferred stock, in preference to any distributions to the holders of common stock, Series A, and Series A-1 stock, shall be entitled to receive non-cumulative cash dividends at an annual rate of $0.78 per share. Holders of the Series C convertible preferred stock, in preference to any distributions to the holder of common stock, Series A, Series A-1 and Series B convertible preferred stock shall be entitled to receive non-cumulative cash dividends at an annual rate of $1.18 per share. Such dividends are payable only when and if declared by the Company’s board of directors.

No such dividends have been declared or paid through* March 31, 2024*.

2) Preference on Liquidation

The holders of the Series A, Series A-1, Series B, and Series C convertible preferred stock are entitled to receive liquidation preferences upon the liquidation, dissolution or winding-up of the Company at the greater of1) the Series A, Series A-1, Series B, and Series C convertible preferred stock original issue prices of $5.60, $7.86, $9.52, $15.00 per share, respectively, plus all accrued and declared but unpaid dividends or2) the amount that would have been payable had all shares been converted to common stock immediately prior to such liquidation, dissolution or winding up of the Company. Liquidation payments to the holders of the Series A and Series A-1 convertible preferred stock have priority and are made in preference to any payments to the holders of common stock. Liquidation payments to the holders of the Series B convertible preferred stock have priority and are made in preference to any payments to the holders of common stock, Series A and Series A-1 convertible preferred stock. Liquidation payments to the holders of the Series C convertible preferred stock have priority and are made in preference to any payments to the holders of common stock, Series A, Series A-1, and Series B convertible preferred stock.

After full payment of the liquidation preference to the holders of the Series A, Series A-1, Series B and Series C convertible preferred stock upon the liquidation, dissolution or winding-up of the Company, the remaining assets, if any, will be distributed ratably to all holders of common stock.

3) Conversion Rights

Each share of outstanding Series A, Series A-1, Series B, and Series C convertible preferred stock is convertible intoone share of common stock at the option of the holder, subject to certain anti-dilution adjustments. The conversion rate for the convertible preferred stock is determined by dividing the applicable original issue price, as adjusted for stock splits, by the applicable conversion price. The conversion price is initially the original issue price for such series of convertible preferred stock, but is subject to adjustment for dividends, stock splits, and other distributions. The conversion rate at* March 31, 2024* for the Series A, Series A-1, Series B, and Series C convertible preferred stock was 1:1.

Each share of Series A, Series A-1, Series B, and Series C convertible preferred stock will be automatically converted into common stock at the then effective conversion rate (i) immediately upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of1933, as amended, covering the offer and sale of common stock for the account of the Company in which the gross cash proceeds to the Company are at least $50.0 million or (ii) upon written request for such conversion from the Requisite Investors (defined under the terms of the convertible preferred stock as at least 60% of the holders of preferred stock).

4) Redemption Rights

The holders of Series A, Series A-1, Series B and Series C convertible preferred stock donot have any redemption rights.

5) Voting

The holder of each share of Series A, Series A-1, Series B and Series C convertible preferred stock generally vote together with the shares of common stock as a single class, but also have class vote approval rights as provided by the Company’s certificate of incorporation or as required by applicable law.

9

Common Stock

As of* March 31, 2024*, of the authorized 39,630,511 shares of common stock,2,384,446 shares of Class A common stock are issued and outstanding. No shares of Class B common stock are outstanding. The Company hastwo classes of common stock: the Class A common stock and Class B common stock. Class A common stock hasone vote per share and Class B common stock hasno votes per share.

Voting, dividend, and liquidation rights of the holders of the common stock are subject to, and qualified by, the rights, preferences and privileges of the holders of the convertible preferred stock. The holders of the common stock are entitled toone vote for each share of common stock held at all meetings of stockholders.

Common stock reserved for future issuance consisted of the following:

Stock Options

In2012, the Company adopted the2012 Equity Incentive Plan (the “Plan”), which allowed for the issuance of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock, restricted stock units, and other stock awards (collectively “Stock Awards”). The Plan was established to secure and retain the services of the group of persons eligible to receive Stock Awards and to provide additional incentives to its employees, directors, and consultants of the Company. Under the Plan, the Company can offer ISOs to employees and NSOs to employees, non-employee directors, and consultants. The Plan allows the Company to issue stock awards for shares of its common stock up to a total of 3,429,327 shares, subject to appropriate adjustments for stock splits, combinations and other similar events for issuance pursuant to awards made under the Plan.

Under the Plan, the exercise price of each ISO shall be established in the sole discretion of the Company’s board of directors (or any of the committees of the Company’s board of directors); provided, however, that (i) the exercise price per share for an ISO shallnot be less than the fair market value for shares of the Company’s common stock on the date of grant and (ii) the exercise price per share of an ISO granted to an optionee who on the date of the grant owns stock possessing more than 10% stockholder of the Company shallnot be less than 110% of the fair market value of a share of its common stock on the date of grant and the option shallnot be exercisable after five years from the date of grant.

The options that are granted under the Plan are exercisable at various dates as determined upon grant and terminate withinten years of the date of grant, unless the optionee owns 10% or more of the common shares at which point the expiration period is 5 years, or upon the employee’s termination (whereupon the terminated employee hasninety days after termination to exercise vested options from the date of termination). The vesting period generally occurs over four years.

Stock option activity under the Plan is as follows:

The aggregate intrinsic value of options exercised during the period ended* March 31, 2024* was $0.3 million, determined as of the date of exercise. Options exercisable includes options which arenot vested, but are available to be early exercised as of* March 31, 2024*.

10

The Company estimated the fair value of stock options using the Black-Scholes valuation model. The Company accounts for any forfeitures of options when they occur. Previously recognized compensation expense for an award is reversed in the period that the award is forfeited. The fair value of stock options was estimated using the following weighted-average assumptions:

The weighted-average grant-date fair value per share of stock options granted during the period ended* March 31, 2024* was $13.66 per share, respectively. The Company recorded $0.4 million and $0.4 million in stock-based compensation expense in general and administrative and research and development, respectively, for the period ended* March 31, 2024*. The Company recorded $0.3 million and $0.2 million in stock-based compensation expense in general and administrative and research and development, respectively, for the period ended* March 31, 2023.*

As of* March 31, 2024* there was approximately $9.2 million of total unrecognized stock-based compensation expense related to awards granted under the Plan, which is expected to be recognized over a weighted-average period of approximately 1.3 years.

7. License Agreement

In* February 2023,the Company entered into the J&J License Agreement, pursuant to which the Company granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE-307 in all indications. The agreement allows the Company to elect, at its sole discretion and cost, to conduct a Phase2* trial of PIPE-307 for patients with multiple sclerosis. After such trial, J&J* may,at its sole discretion, further develop PIPE-307 for patients with multiple sclerosis. Additionally, upon J&J deciding to conduct afirst* Phase3 clinical trial for a product using PIPE-307, the agreement allows the Company the option to co-fund a portion of all Phase3 and subsequent development costs for PIPE-307, with such cost capped annually. If the Company opts to fund such development costs, then the royalties the Company is eligible to receive will increase. Pursuant to the terms of the agreement, the Company received an upfront, non-refundable and non-creditable payment of $50.0 million upon transferring the license and know-how, existing inventory and manufacturing technology. The Company is also eligible to receive approximately $1.0 billion in non-refundable, non-creditable milestone payments. Additionally, the Company is eligible to receive tiered royalties in the low-double digit to high-teen percent range on net sales of products containing PIPE-307.

The Company sold approximately 1.7 million shares of series C convertible preferred stock to JJDC, an affiliate of J&J, at $15.00 per share, for an aggregate purchase price of approximately $25.0 million, in* April 2023.*The Company determined that this preferred stock purchase was at fair value as other new investors purchased shares of preferred stock at the same price.

The Company concluded that J&J represented a customer and applied relevant guidance from ASC606 to evaluate the appropriate accounting for the J&J License Agreement. The Company evaluated the J&J agreement and concluded that it had promises to transfer a license of functional intellectual property, know-how, existing inventory and manufacturing technology (each of which was determined to be a distinct performance obligation). Control of the promised goods was transferred to J&J in thesecond quarter of2023, and the $50 million upfront payment was recognized in* May 2023upon satisfaction of the performance obligations. The remaining consideration consists of future contingent milestone-based payments and sales-based royalties. As of March 31, 2024*, all variable consideration under the J&J License Agreement was fully constrained.

In* August 2023,the Company elected to conduct a Phase2* trial using PIPE-307 for patients with multiple sclerosis, which was considered a contract modification under the accounting guidance that added promised goods or services that are distinct at a price that is below the standalone selling price. Therefore, the Company accounted for the modification as a termination of the existing contract and creation of a new contract. Accordingly, the amount of consideration to be allocated to the remaining performance obligations consists of future contingent milestone-based payments and sales-based royalties, all of which were constrained. The only remaining performance obligation is the promise to conduct the Phase2 trial as the other performance obligations had been satisfied prior to the modification date. Accordingly, the variable consideration allocated to the Phase2 trial will be recognized as the study is completed using a cost-based measure of progress and when the amounts areno longer probable of a significant reversal. As of* March 31, 2024*,no amounts had been recognized related to the Phase2 trial.

8. Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

11

The Company’s potentially dilutive securities, which include convertible preferred stock, preferred stock warrants, common stock issued upon early exercise of stock options, common stock subject to repurchase, common stock options, and the investor rights and obligations liability, have been excluded from the computation of diluted net loss per share for thethree months ended* March 31, 2024and2023* as the effect would reduce the net loss per share. Therefore, the weighted-average number of shares common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common securities, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

9. Subsequent Events

The Company’s board of directors approved aone-for-5.5972 reverse stock split of its issued and outstanding common and preferred stock, effective on* April 1, 2024.*Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the effects of the reverse stock split. Shares of common stock underlying outstanding stock options and preferred stock warrants were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

On* April 4, 2024,the Company’s registration statement on Form S-1 (FileNo.* 333-278003) relating to its initial public offering (“IPO”) of its common stock was declared effective by the SEC and the shares of its common stock began trading on the Nasdaq Global Select Market (Nasdaq) on* April 4, 2024.The public offering price of the shares sold in the IPO was $16.00 per share. The IPO closed on April 9, 2024,pursuant to which the Company sold 6,875,000 shares of common stock, for gross proceeds of approximately $110.0 million. On April 19, 2024,*the underwriters elected to partially exercise the over-allotment option purchasing 548,682 shares for gross proceeds of an additional $8.2 million.

12