NOTE 11—STOCKHOLDERS’ EQUITY (DEFICIT)

K2HV CVR Agreement and Related Warrants

On June 16, 2023, in satisfaction of its obligations to issue the warrant to K2HV’s affiliated holder pursuant to the CVR Agreement, as further described in Note 8, “Borrowing Arrangements and Debt Extinguishment,” the Company issued a warrant to purchase up to 340,222 shares of the Company’s common stock at an exercise price of $5.8785 per share. The warrant is exercisable upon issuance and have a term of ten years. The Company determines whether the warrant should be classified as a liability or equity according to ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Upon issuance of the outstanding warrants, the Company determined that equity classification was appropriate. For warrants classified as equity, the Company records the value of the warrants in additional paid-in capital on the condensed consolidated balance sheet. As of December 31, 2023, there were 340,222 warrants issued related to the CVR Agreement. On June 16, 2023, the warrant was valued at $2.3 million using a Black-Scholes option-pricing model. The Black-Scholes option-pricing model inputs used were: (i) expected dividend yield of 0%, (ii) expected volatility of 80%, (iii) risk free interest rate of 3.77%, and (iv) expected term of 10.0 years.

Private Placement and Related Warrants

On August 1, 2017, the Company entered into a securities purchase agreement with Longitude Venture Partners III, L.P. and certain other accredited investors (the “Longitude Securities Purchase Agreement”), pursuant to which the Company sold an aggregate of 386,204 units (the “Units”) having an aggregate purchase price of $40.0 million (the “PIPE Financing”), each such Unit consisting of (i) one (1) share (the “Shares”) of our common stock and (ii) a warrant (the “Private Placement Warrants”) to purchase 0.5 shares of the Company’s common stock (the “Private Placement”). The Private Placement was pursuant to equity commitment letter agreements entered into by and between the Company and investors in March 2017 and June 2017. The purchase price per Unit was $103.5720. The Warrants are exercisable for a period of seven years from the date of their issuance at a per-share exercise price of $102.6345 (which exercise

price shall be payable in cash or through a cashless exercise mechanic), subject to certain adjustments as specified in the Warrants. As of December 31, 2023, there were warrants outstanding under this agreement to purchase 193,093 shares of the Company’s common stock. The warrants were valued at $16.3 million using the Black-Scholes model and recorded in additional paid-in capital. The Black-Scholes inputs used were: (i) expected dividend rate of 0%, (ii) expected volatility of 147%, (iii) risk free interest rate of 2.07%, and (iv) expected term of 7.0 years. The warrants were exercisable upon issuance and expire August 1, 2024.

In December 2015, the Company entered into an agreement (the “Wedbush Agreement”) with Wedbush Securities Inc. (“Wedbush”), which was subsequently amended in December 2017, related to Wedbush’s services associated with the equity financing under the Longitude Securities Purchase Agreement. As part of the Wedbush Agreement, the Company issued warrants to purchase 3,862 shares of its common stock (the “Wedbush Warrants”). The Wedbush Warrants are exercisable for a period of seven years from the date of their reissuance at a per-share exercise price of $102.6345 (which exercise price shall be payable in cash or through a cashless exercise mechanic), subject to certain adjustments as specified in the Warrants. As of December 31, 2023, there were Wedbush Warrants outstanding to purchase 3,862 shares of common stock. The Wedbush Warrants were valued at $0.4 million using the Black-Scholes model. The Black-Scholes inputs used were: (i) expected dividend rate of 0%, (ii) expected volatility of 108%, (iii) risk free interest rate of 2.3%, and (iv) expected term of 7.0 years. The warrants were exercisable upon issuance and expire December 1, 2024.

In connection with the execution of the Takeda Multi-Target Agreement, the Company entered into a stock purchase agreement with Takeda (the “Takeda Stock Purchase Agreement”). Pursuant to the Takeda Stock Purchase Agreement, following the consummation of the Private Placement, Takeda purchased 194,866 shares of the Company’s common stock, at a price per share of $102.6345, for an aggregate purchase price of $20.0 million.

In November 2019, the Company entered into a Master Collaboration Agreement (“Vertex Collaboration Agreement”) with Vertex Pharmaceuticals Incorporated (“Vertex”), In connection with the execution of the Vertex Collaboration Agreement, the Company entered into a stock purchase agreement with Vertex (the “Vertex Stock Purchase Agreement”). Pursuant to the Vertex Stock Purchase Agreement, Vertex purchased 111,111 shares of the Company’s common stock, at a price per share of $135.00, for an aggregate purchase price of $15.0 million.

July 2023 Private Placement and Related Warrants

On July 12, 2023, the Company entered into a securities purchase agreement (the “July 2023 Purchase Agreement”) with certain institutional and accredited investors (the “July 2023 Purchasers”) which provides for the private placement (the “July 2023 Private Placement”) of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock in two tranches, as described below.

The closing of the initial tranche occurred on July 17, 2023 and consisted of the issuance of (i) 1,617,365 shares of the Company’s common stock and at a price of $7.05 per share and (ii) pre-funded warrants exercisable for up to 1,222,100 shares of the Company’s common stock (the “July 2023 Pre-Funded Warrants”). The price of the July 2023 Pre-Funded Warrants was $7.035 per underlying share of the Company’s common stock, and the exercise price for the Pre-Funded Warrants was $0.015 per underlying share. The Company received approximately $20.0 million in gross proceeds in connection with the closing of the initial tranche and net proceeds, following the payment of related offering expenses, of approximately $18.4 million.

The Company has assessed the July 2023 Pre-Funded Warrants for appropriate equity or liability classification. The July 2023 Pre-Funded Warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company's common stock and (vi) meet the equity classification criteria.

In addition, the July 2023 Pre-Funded Warrants do not provide any guarantee of value or return and do not provide the warrant holders with the option to settle any unexercised warrants for cash outside of the Company's control. The

July 2023 Pre-Funded Warrants also include a separate provision whereby the exercisability of the warrants may be limited if, upon exercise, the warrant holder or any of its affiliates would beneficially own more than 19.99% of the Company’s common stock. The Company valued the pre-funded common stock warrants at issuance, concluding that their sale price approximated their fair value. Accordingly, the July 2023 Pre-Funded Warrants are accounted for as a component of additional paid-in capital at the time of issuance.

For further information regarding the Second Closing of the 2023 Private Placement, please see Note 16, “Subsequent Events” below.

Pursuant to the July 2023 Purchase Agreement, the Company granted to the July 2023 Purchasers certain registration rights, pursuant to which, among other things, the Company agreed to (i) file with the SEC a registration statement on Form S-3 after each of the initial tranche and the second tranche to register for resale the shares of common stock issued (and the shares issuable upon exercise of any pre-funded warrants or Second Closing Warrants issued) in the applicable closing, within 30 calendar days following each closing, and (ii) use its commercially reasonable efforts to have each registration statement declared effective as soon as practicable, and in any event no later than 90 days following the applicable closing date (or 120 days following the applicable closing date if the applicable registration statement is reviewed by the SEC). The registration rights covenants are subject to customary terms and conditions for a transaction of this type, including certain customary cash penalties on the Company for its failure to satisfy specified filing and effectiveness time periods. On August 10, 2023, the Company filed with the SEC a registration statement on Form S-3 (File No. 333-273864) registering for resale up to 2,839,465 shares of the Company’s common stock, which consist of 1,617,365 shares of the Company’s common stock and 1,222,100 shares of the Company’s common stock issuable upon the exercise of the July 2023 Pre-Funded Warrants. Additionally, the July 2023 Purchase Agreement contains customary representations and warranties and agreements of the Company and the July 2023 Purchasers and customary indemnification rights and obligations of the parties. There can be no assurance as to the timing of the closing of the second tranche, or whether the second tranche will close at all. Additionally, there can be no assurance as to whether the proceeds received from the initial tranche, any potential proceeds received in connection with the second tranche, and/or the proceeds from the exercise, if any, of the warrants issued in connection with the July 2023 Private Placement will be sufficient for the Company to maintain compliance with the applicable listing criteria of the Nasdaq Capital Market or will be sufficient for the Company to continue as a going concern.

Public Offerings

On September 25, 2018, the Company closed its underwritten public offering (the “2018 Public Offering”) of 628,666 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 82,000 additional shares of common stock, at a price to the public of $82.50 per share. The net proceeds to the Company from the 2018 Public Offering, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, were approximately $48.1 million.

On November 25, 2019, the Company closed its underwritten public offering (the “2019 Public Offering”) of 460,000 shares of its common stock at a price to the public of $120.00 per share, and 250 shares of newly designated Series A Convertible Preferred Stock (“Series A Preferred Stock”) at a price to the public of $8.00 per share. The offering included the exercise in full by the underwriters of their option to purchase up to 60,000 additional shares of common stock. The net proceeds to the Company from the offering, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, were approximately $53.4 million. Each share of Series A Preferred Stock is convertible to approximately 66 shares of the Company’s common stock, provided that the holder of Series A Preferred Stock will be prohibited from converting the Series A Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution, or winding up, holders of Series A Preferred Stock will receive a payment equal to $0.02 per share of Series A Preferred Stock before any proceeds are distributed to the holders of the Company’s common stock and pari passu with any distributions to the holders of the Company’s Series A Preferred Stock. Holders of Series A Preferred Stock participate in earnings equally with Common Stock shareholders, with the same dividend rate, but do not participate in losses as discussed in Note 2, “Net Loss Per Common Share.” The Series A Preferred Stock has no voting rights, except as required by law and except that the consent of the Series A Preferred Stockholders will be required to

amend the terms of the Series A Preferred Stock. Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature (“BCF”) existed, as the effective conversion price for the Series A Preferred Stock at issuance was less than the fair value of the common stock which the preferred shares are convertible into. The BCF based on the intrinsic value of the date of issuances for the Series A Preferred Stock was $0.7 million.

In July 2020, the Company raised gross proceeds of approximately $50.0 million and net proceeds of $48.5 million through at-the-market sales (“ATM”) of its common stock pursuant to its ATM facility. The Company sold approximately 0.24 million shares of the Company’s common stock at a purchase price of $180.00 per share and 0.03 million shares at a purchase price of $190.50, in each case the market price at the time of sale. These sales constituted the full available dollar amount under the Company’s current ATM facility, and with such completion, this ATM facility terminated.

On August 7, 2020, the Company filed with the SEC a registration statement on Form S-3 for $300.0 million of securities (the “Shelf Registration Statement”), inclusive of a $100.0 million ATM program. This Shelf Registration Statement is in replacement of the Company’s existing registration statement on Form S-3 and incorporates the unsold balance remaining thereto. The SEC declared the Shelf Registration Statement effective on August 17, 2020 and the Company may make sales of securities from time to time, depending on market conditions, pursuant to the Shelf Registration Statement.

In February 2021, the Company completed a public offering of 0.4 million shares of common stock at an offering price of $189.75 per share. The net proceeds to the Company were $71.1 million, after deducting underwriting discounts, commissions and other estimated offering expenses paid by the Company.

Subsequent Common Stock Warrants

On February 28, 2018, in connection with the Perceptive Credit Facility, the Company issued warrants to purchase 12,666 shares of the Company’s common stock with an exercise price of $143.69 per underlying share (the “2018 Warrants”). The 2018 Warrants are exercisable for a period of seven years from the date of issuance, subject to certain adjustments as specified in the Warrants. The 2018 Warrants were classified as equity and recorded in additional paid-in capital. They were valued at $1.5 million using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model inputs used were: (i) expected dividend rate of 0%, (ii) expected volatility of 105%, (iii) risk free interest rate of 2.8%, and (iv) expected term of 7.0 years.