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. 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 9, 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 $107.9 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 the IPO consisted of 15,906,236 shares that were outstanding immediately prior to the closing of the IPO. 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 (i) 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; and (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.

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 $9.0 million and $17.4 million for thethree andsix months ended* June 30, 2024*, respectively. The Company had an accumulated deficit of $92.6 million as of* June 30, 2024*. From its inception through* June 30, 2024*, the Company has financed its operations primarily through issuance of convertible promissory notes, convertible preferred stock financings, a term loan, a global license and development agreement (the “J&J License Agreement”) the Company entered in* February 2023with Janssen Pharmaceutica NV,one of the Janssen Pharmaceutical Companies of Johnson & Johnson, and net proceeds of approximately $107.9 million received in April 2024*from the Company's IPO.

As of* June 30, 2024*, the Company had cash, cash equivalents and marketable securities of $218.7 million. The Company believes its existing cash, cash equivalents and marketable securities 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* June 30, 2024*, condensed statements of operations and comprehensive income (loss) and condensed statements of convertible preferred stock and stockholders’ equity (deficit) for thethree andsix months ended* June 30, 2024and2023,* and condensed statements of cash flows for thesix months ended* June 30, 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 andsix months ended* June 30, 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 unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended* December 31, 2023included in the Company’s 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 (*the "Registration Statement").

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2. Summary of Significant Accounting Policies

During thesix months ended* June 30, 2024,there wereno* significant changes to the Company's significant accounting policies as described in the Company's Registration Statement.

Basis of presentation

The Company has prepared the accompanying condensed financial statements in accordance with accounting principles generally accepted accounting principles (“GAAP”) and the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. The financial statements are presented in U.S. dollars. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") promulgated by the Financial Accounting Standards Board ("FASB").

Use of estimates

During thesix months ended* June 30, 2024,there wereno* significant changes to the Company's accounting estimates as described in the Company's Registration Statement.

Recently Issued Accounting Pronouncements

In* November 2023,the FASB issued ASUNo.* 2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures*("ASU2023-07"). This standard requires a public entity to disclose significant segment expenses and other segment items on an interim and annual basis. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024,*with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this guidance on its financial statements.

In* December 2023,the FASB issued ASUNo.* 2023-09, Income Taxes (Topic740*): Improvements to Income Tax Disclosures*("ASU2023-09"). This standard 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, 2024,*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* June 30, 2024*, the Company didnot record an allowance for credit loss related to its investment portfolio.

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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* June 30, 2024and December 31, 2023are money market funds with a carrying value and fair value of $11.3 million and $11.8 million, respectively, based upon a Level1* fair value assessment.

Warrant

Upon the closing of the IPO, the warrant to purchase shares of Series B preferred stock converted to a warrant to purchase shares of Class A common stock, and upon conversion the warrant met the equity classification requirements and was reclassified to equity. The warrant was remeasured to fair value immediately prior to the conversion to a common stock warrant and the Company recognized changes in the fair value of the warrant liability until* April 9, 2024.*

As of* December 31, 2023,the Company had preferred stock warrant liability (included on the balance sheet under other long-term liabilities), which consisted of the fair value of a warrant to purchase Series B convertible preferred stock and was based on significant unobservable inputs, which represent a Level3* measurement within the fair value hierarchy. The Company classified this warrant as a liability on its balance sheets and remeasured to fair value at each reporting date, and the Company recognized changes in the fair value of the warrant liability as a component of other income (expense) in its condensed statements of operations and comprehensive income (loss).

The Company’s valuation of the preferred stock warrant as of* April 9, 2024and December 31, 2023utilized the Black-Scholes option-pricing model. 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.

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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.

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.

The following table summarizes the change in fair value of the preferred stock warrant liability, a Level3 recurring fair value measurement, for thesix months ended* June 30, 2024 (*in thousands):

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

6. Convertible Preferred Stock and Stockholders’** Equity (Deficit)**

Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into 9,177,064 shares of Class A common stock and 6,729,172 shares of Class B common stock. Converted preferred stock outstanding as of the date of the IPO consisted of 15,906,236 shares. Each share of outstanding Series A, Series A-1, Series B, and Series C convertible preferred stock was convertible intoone share of common stock at the option of the holder, subject to certain anti-dilution adjustments.

Convertible Preferred Stock

As of* December 31, 2023,the Company’s Series A, Series A-1, Series B, and Series C convertible preferred stock were classified as temporary equity in the accompanying condensed balance sheet given that a majority of the Company’s board of director seats were held and/or voted upon by convertible preferred stockholders and they could cause certain events to occur requiring redemption of the preferred stock that were outside of the Company’s control. The Company didnot* adjust the carrying values of the convertible preferred stock to the respective liquidation preferences of such shares as the instruments werenot currently redeemable and it wasnot probable that the instruments would become redeemable.

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The authorized, issued, and outstanding shares of convertible preferred stock as of* December 31, 2023*consisted of the following:

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Common Stock

The Company hastwo classes of common stock: 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. As of* June 30, 2024*, of the authorized 200,000,000 shares of Class A common stock,18,994,104 shares of Class A common stock were issued and outstanding, and of the authorized 20,000,000 shares of Class B common stock,6,729,172 shares of Class B common stock were issued and outstanding.

Voting, dividend, and liquidation rights of the holders of the common stock were 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.

Class A common stock reserved for future issuance consisted of the following:

There areno shares of Class B common stock reserved for future issuance.

Stock Options

In* March 2024,the Company's board of directors and its stockholders adopted and approved the2024* Equity Incentive Plan (the*"2024* Plan"). The2024 Plan is the successor of the Company's2012 Equity Incentive Plan (the*"2012* Plan"). However, awards outstanding under the2012 Plan will continue to be governed by their existing terms. The2024 Plan allowed for the issuance of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, and other stock awards to the Company's employees, members of its board of directors, and consultants.

The number of shares initially reserved for issuance under the2024 Plan was 2,700,000. As of* June**30,* 2024, there were 2,824,492 shares of the Company’s common stock reserved and available for issuance under the2024 Plan. The aggregate number of shares reserved for issuance under the2024 Plan will automatically increase on thefirst day of each fiscal year of the Company, commencing in2025 and ending in (and including)2034, by a number equal to the lesser of (a)5% of the aggregate shares of Class A common stock and Class B common stock issued and outstanding as of the last day of the prior fiscal year, or (b) a number of shares of Class A common stock determined by the Company's board of directors.

Under the2024 Plan, the exercise price for options granted under the2024 Plan* may**not* be less than 100% of the fair market value of the Class A common stock on the grant date. Optionees will be permitted to pay the exercise price in cash or, with the consent of the compensation committee (i) with shares of common stock that the optionee already owns, (ii) by an immediate sale of shares through a broker approved by the Company, (iii) by instructing the Company to withhold a number of shares otherwise deliverable upon exercise having an aggregate fair market value that doesnot exceed the exercise price; or (iv) by other methods permitted by applicable law.

The Company's board of directors (or a committee thereof to which the Company's board of directors has delegated authority)* mayamend or terminate the2024* Plan at any time. If the Company's board of directors amends the2024 Plan, it doesnot need stockholder approval of the amendment unless required by applicable law, regulation or rules. The2024 Plan will terminate automaticallyten years after the date when the Company's board of directors adopted the2024 Plan.

In* March 2024,the Company's board of directors and its stockholders adopted and approved the2024* Employee Stock Purchase Plan (the*"2024* ESPP"). The2024 ESPP became effective as of* April 9, 2024.The purpose of the2024* ESPP is to provide eligible employees with an opportunity to increase their interest in the success of the Company by purchasing shares of Class A common stock from the Company on favorable terms and to pay for such purchases through payroll deductions or other approved contributions. The new payroll deduction rate* maybe any whole percentage of the participant’s compensation, butnot* less than 1% nor more than 15%.

As of* June 30, 2024,there were 280,000 shares of the Company’s common stock reserved and available for issuance under the2024* ESPP. The number of shares reserved for issuance under the2024 ESPP will automatically increase on thefirst day of each fiscal year of the Company, commencing in2025 and ending in (and including)2044, by a number equal to the lesser of (i)280,000 shares, (ii)1% of the aggregate shares of Class A common stock and Class B common stock issued and outstanding on the last day of the prior fiscal year, or (iii) a number of shares determined by the Company's board of directors. The number of shares reserved under the2024 ESPP will automatically be adjusted in the event of a stock split, stock dividend or a reverse stock split (including an adjustment to the per-purchase period share limit).

During thesix months ended* June 30, 2024,there wereno shares purchased under the2024* ESPP and the recorded expense wasnot material.

Stock option activity under the2024 Plan and2012 Plan is as follows:

The aggregate intrinsic value of options exercised during the period ended* June 30, 2024* was $0.1 million, determined as of the date of exercise. Options exercisable include options which arenot vested, but are available to be early exercised as of* June 30, 2024*. As of* June 30, 2024,*there were 133,058 options exercisable that are available to be early exercised.

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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 thethree andsix months ended* June 30, 2024* was $13.53 and $13.55 per share, respectively.

There wereno stock options granted during thethree months ended* June 30, 2023.*

The Company recorded $0.9 million and $0.6 million in stock-based compensation in general and administrative and research and development, respectively, for thethree months ended* June 30, 2024.The Company recorded $0.3 million and $0.2 million in stock-based compensation in general and administrative and research and development, respectively, for thethree* months ended* June 30, 2023.*

The Company recorded $1.3 million and $1.0 million in stock-based compensation in general and administrative and research and development, respectively, for thesix months ended* June 30, 2024.The Company recorded $0.5 million and $0.5 million in stock-based compensation in general and administrative and research and development, respectively, for thesix* months ended* June 30, 2023.*

As of* June 30, 2024there was approximately $24.1 million of total unrecognized stock-based compensation related to nonvested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 3.2 years. As of June 30, 2023*there was approximately $2.9 million of total unrecognized stock-based compensation related to nonvested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 1.0 years.

7. Income Taxes

The Company’s interim income tax provision consists of U.S. federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

For thethree andsix months ended* June**30,* 2024, the Company didnot record a U.S. federal or state income tax provision due to current and expected annual net operating losses for the year ended* December 31, 2024.*

As of* June30,* 2023, the estimated annual effective tax rate for2023, exclusive of discrete items, was approximately 1.94% of projected pre-tax income. The estimated annual tax expense consists of a provision for federal and state income taxes. For thethree months ended* June30,* 2023, due to statutory limitations on the ability to utilize research and development credits and net operating losses to offset year to date taxable income, the Company recorded a tax expense of $0.7 million, on a pre-tax income of $42.3 million. For thesix months ended* June**30,* 2023, due to statutory limitations on the ability to utilize research and development credits and net operating losses to offset year to date taxable income, the Company recorded a tax expense of $0.7 million, on a pre-tax income of $37.5 million.

Under Section382 and383 of the Internal Revenue Code ("IRC"), if a corporation undergoes an ownership change (generally defined as a greater than50% change in its equity ownership over athree-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income* maybe limited. The Company has completed an ownership change analysis pursuant to IRC Section382* for the periods prior to* February 9, 2021.On July13,* 2012, * April29,* 2018, * March**15,* 2019, and* February 9, 2021the Company experienced ownership changes. Accordingly, the Company’s ability to utilize net operating loss and tax credit carryforwards attributable to periods prior to February 9, 2021is subject to substantial limitations. An ownership change analysis pursuant to IRC Section382* hasnot been performed for the periods after* February 9, 2021and therefore additional ownership changes mayhave occurred which may*limit the Company’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes.

In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely thannot that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely thannot to be realized. This evidence includes, but isnot limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Based on these factors, including cumulative losses in recent years, the Company continues to maintain a full valuation allowance against its net deferred tax assets as of* June**30,* 2023.

8. 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 J&J License 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 J&J License Agreement allows the Company the option to co-fund a portion of all Phase3 and subsequent development costs for PIPE-307, with such costs 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 J&J License 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 Johnson & Johnson Innovation - JJDC, Inc., 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 License 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 $50.0 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 June 30, 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* June 30, 2024*,no amounts had been recognized related to the Phase2 trial asno additional variable consideration as been received subsequent to the contract modification.

9. Net Loss Per Share

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

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For thethree andsix months ended* June**30,* 2024, net loss is attributable equally to each share of Class A common stock and Class B common stock and is determined based on the weighted average number of the respective class of common stock outstanding. Weighted-average common shares include shares of the Company's Class A common stock and Class B common stock. The basic and diluted net loss per share amounts are the same for Class A common stock and Class B common stock.

For thethree andsix months ended* June 30, 2023,there wereno* shares of Class B common stock outstanding.

The Company’s potentially dilutive securities, which include convertible preferred stock, a common stock warrant, common stock options, common stock reserved under the2024 ESPP, and a preferred stock warrant have been excluded from the computation of diluted net loss per share for thethree andsix months ended* June 30,*2024 as the effect would reduce the net loss per share. Therefore, the weighted-average number of shares of 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 potentially dilutive 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:

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